FIDIC around the world – March 2022

Thursday 7 April 2022

Australia

Clive Luck
​​​​​​​Clayton Utz, Perth, Australia

In this questionnaire, references to FIDIC clauses are references to clauses in the 1999 Red Book.

1. What is your jurisdiction?

Australia

2. Are the FIDIC forms of contract used for projects constructed in your jurisdiction? If yes, which of the FIDIC forms are used, and for what types of projects?

FIDIC forms are rarely used for domestic projects in Australia. Parties most often use a version of an Australian Standards Contract due to the local construction industry’s familiarity with these forms. For complex projects, bespoke contracts are often used instead, particularly where alternative means of project financing are utilised. Where FIDIC forms are used by Australian companies this is often for offshore projects, particularly in Africa or Asia, where one or more of the contracting entities are not domiciled in Australia.

3. Do FIDIC produce their forms of contract in the language of your jurisdiction? If no, what language do you use?

Yes. The English versions are used.

4. Are any amendments required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what amendments are required?

FIDIC forms are, for the most part, operative in Australia without requiring major amendments. However, regard should be had to the Security of Payment legislation (SOP Legislation) across Australian states and territories, as they may imply terms into construction contracts where the agreed drafting is silent or limited on the particular issue.

These implied terms may include, with specific respect to FIDIC forms: a requisite notice period of at least five business days before a party can have recourse to performance security (see FIDIC Sub-Clause 4.2); accounting requirements and prohibitions against setting-off with respect to retention moneys (FIDIC Sub-Clauses 14.3 and 14.9); notice-based time bars having no effect if declared unfair (FIDIC Sub-Clause 20.1); and progress payments becoming payable, at most, 20 business days after the payment claim is made in case of a head contractor and 25 business days in case of a sub-contractor (FIDIC Sub-Clause 14.7). FIDIC contracts should therefore be amended for compliance with applicable SOP Legislation.

Note that not all construction contracts are covered by the SOP Legislation. Contracts relating to certain types of construction work including (with limitations) home building work, mining activities and relating to work on a watercraft are excluded.

5. Are any amendments common in your jurisdiction, albeit not required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what (non-essential) amendments are common in your jurisdiction?

It is difficult to identify common amendments because FIDIC Conditions of Contract are rarely used in Australia. However, academic consideration highlights some potential areas of amendments.[1] For example, FIDIC Sub-Clause 17.6 (Limitation of Liability) includes an indirect and consequential loss exclusion, with the meaning of ‘indirect and consequential loss’ not otherwise defined. As the meaning of indirect or consequential loss is relatively unsettled in Australia, it would be desirable for parties using the FIDIC contracts in Australia to include an expanded and clear definition of what the parties consider to be indirect and consequential losses.

6. Does your jurisdiction treat Sub-Clause 2.5 of the 1999 suite of FIDIC contracts as a precondition to Employer claims (save for those expressly mentioned in the sub-clause)?

There are no decisions from Australian courts specifically addressing Sub-Clause 2.5 of the FIDIC contracts. However, the prima facie position is that courts or arbitral tribunals in Australia would give effect to the parties’ agreement on a notice provision like Sub-Clause 2.5 which sets out a condition precedent in express mandatory terms. This is subject to the court or arbitral tribunal examining the specific circumstances of the case. It may be held that such a clause is inoperative if, for example, there exists evidence of a waiver or estoppel, or the clause is declared unfair pursuant to the SOP Legislation (see question 4).

7. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to Contractor claims for additional time and/or money (not including Variations)?

There are no decisions from Australian courts specifically addressing Sub-Clause 20.1 of the FIDIC contracts. Similar clauses in the more frequently used Australian Standards Contract require notice to be given, but also state that the failure to give notice will neither bar nor invalidate any claim. Where this position is amended to dictate a condition precedent which favours the Employer, refer to question 6 of this questionnaire as to how courts in our jurisdiction would treat it.

8. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to Contractor claims for additional time and/or money arising from Variations?

Refer to questions 6 and 7.

9. Are dispute boards used as an interim dispute resolution mechanism in your jurisdiction? If yes, how are dispute board decisions enforced in your jurisdiction?

While sometimes used, unless provided for in a bespoke contract, dispute boards are not a typical interim dispute resolution mechanism in Australia. A rapid statutory adjudication process is instead available to parties to qualifying construction contracts pursuant to the relevant SOP Legislation.

10. Is arbitration used as the final stage for dispute resolution for construction projects in your jurisdiction? If yes, what types of arbitration (ICC, LCIA, AAA, UNCITRAL, bespoke, etc) are used for construction projects? And what seats?

The Australian Standards Contract typically include an arbitration agreement as the final stage for resolution of disputes under construction contracts. Where an arbitration is specified, it may take place under a variety of rules including UNCITRAL, Australian Centre for International Commercial Arbitration (ACICA), Resolution Institute and, in international contracts, ICC, LCIA, SIAC, and HKIAC.

11. Are there any notable local court decisions interpreting FIDIC contracts? If so, please provide a short summary.

There is only one notable court decision in the Supreme Court of Queensland that has dealt with the interpretation of FIDIC contracts: Sedgman South Africa (Pty) Ltd v Discovery Copper Botswana (Pty) Ltd [2013] QSC 105.

The relevant FIDIC contract was ‘EPC/Turnkey Projects, 1st Edition 1999’. The parties agreed that the contract would be governed by the laws of Queensland. The primary issue for consideration was the operation of the interim payment regime in the contract. The contractor claimed that they were entitled to an interim payment under the contract as the employer failed to respond to a notice for payments claimed within the contractually stipulated time.

The court held, on proper construction, that the contractor was not entitled to payment of the sum claimed simply due to the employer’s failure to respond to its claim within the period of seven days provided in clause 14.6 of the contract as (on the facts) there was a genuine dispute of the contractor’s claim which required determination under the dispute resolution provisions in the contract. This is because clause 14.6 did not state that amounts became due by the operation of that clause, but instead operates in respect of payments which are due by other terms of the contract, by providing that they are not to be withheld except in the circumstances which it defines.

Further, the court held that the evident purpose of the employer’s notice provision in clause 14.6 is to provide information to the contractor of any amount likely to be paid in response to the contractor’s claim and the basis for any difference.

The employer also made a cross-application for a stay of the court proceedings which the court rejected – citing the principles discussed by Lord Mustill in the UK House of Lords decision in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 – that the dispute resolution provisions in the contract first required the dispute to be adjudicated by a dispute board prior to it being referred to arbitration.

12. Is there anything else specific to your jurisdiction and relevant to the use of FIDIC on projects being constructed in your jurisdiction that you would like to share?

A research report published by the University of Melbourne in June 2014 titled ‘Standard Forms of Contract in the Australian Construction Industry’[2] found that FIDIC contracts were only used in two per cent of projects across Australia, and observed that those projects were relatively high value (greater than AUD100m), in private sector infrastructure (both mining and non-mining) and process engineering projects. Little subsequent empirical analysis of the use of FIDIC contracts in Australia appears to have been undertaken.

 

[1] Reece Allen, ‘Internationalisation of the Australian Construction Market: Case for Using FIDIC Contracts’ (Conference Paper, Society of Construction Law Australia National Conference 2015); Toby Shnookal, ‘Standard Form Contracting – the Role for FIDIC Contracts Domestically and Internationally’ (Conference Paper, Society of Construction Law Conference 2010).

[2] Prof John Sharkey AM, Matthew Bell, Wayne Jocic, Remi Marginean.

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