FIDIC's colourful "rainbow suite" of standard form contracts are the most widely used international construction contracts in the world. But do you need to be aware of the grey areas that may apply in certain jurisdictions because of local laws or customs?
FIDIC Contracts – Background
FIDIC is a French acronym meaning the 'International Federation of Consulting Engineers' and is an organisation that serves the professional interests of consulting engineers. Its contracts are drafted by a contract committee and reviewed by experts from various jurisdictions, making them highly versatile and adaptable to different legal systems.
FIDIC contracts consist of general conditions, guidance for the preparation of particular conditions, annexes, and various forms of securities and agreements. The contracts are available in different versions, known as the "rainbow suite." The Red Book, first published in 1957, is the oldest edition and is typically used for employer designed projects. The Yellow Book (mechanical and electrical works) and Silver Book (for EPC and turnkey projects), designed by contractors, have undergone major revisions and second editions were published in 2017. The suite of contracts is completed by the Pink Book (multilateral development bank edition), the Green Book (for short form contracts), the Blue-Green Book (for dredging and reclamation works), and the Emerald Book (for underground works).
Importance of Particular Conditions
Particular conditions play a crucial role in FIDIC contracts, as they ensure consistency with applicable laws and project specific requirements. These conditions may modify the general conditions or introduce additional provisions necessary to comply with local laws, such as the governing law of the contract, laws of the site or country, procedural law and extraterritorial laws. In addition, it may be necessary or desirable to include such modifications for the specific requirements of the site or works or for the employer's preferences.
Regardless of the wording of the contract, it must be executed in accordance with applicable law, which raises some potential issues that a court or arbitrator may construe differently to the rulings expected.
Special Provisions - Examples
Where FIDIC General Conditions are incompatible or inconsistent with the governing law of the Contract, it would be desirable to include additional special provisions (Part B of the 2017 Edition). For example:
- In Brazil, the contract would need to exclude indirect damages and the time for notification of claims to be consistent with statutory limitations;
- For projects in Italy, acknowledgement may need to be made that the contract has been completed by expert parties fully aware of the content and the implications.
Where FIDIC General Conditions are incompatible or inconsistent with the law of the Site / Country, examples of special provisions are:
- In China, the construction contract cannot materially change the bidding documents and proposals and the defects period cannot be more than two years.
In a small number of cases where FIDIC General Conditions are incompatible or inconsistent with the laws of the seat of the arbitration or relevant laws on dispute determination, special provisions made need to be included in these examples:
- In Brazil, the engineer's or DB's decision is not final and binding;
- In the Czechia, the DB's decision is not enforceable.
Conclusion
FIDIC contracts serve as the industry standard for international construction projects. Their versatility allows for effective use in both common law and civil law jurisdictions. Particular conditions are vital for ensuring compliance with local laws and for the ultimate success of a project's unique requirements.
Further Reading
The International Application of FIDIC Contracts: A Practical Guide provides readers with detailed guidance and resources for the preparation of the Particular Conditions that will comply with the requirements of the applicable laws that apply to the site where the work is carried out, and for the governing law of the contract, for a number of the jurisdictions in which FIDIC contracts are used.
The book, edited by Dr Donald Charrett and authored by experts from various jurisdictions, covers topics related to the legal environment, governing law constraints, special provisions, desirable provisions, and applicable legislation in each jurisdiction.
This topic was discussed in our webinar 'FIDIC Grey Areas and Governing Law" in November 2020, with Dr Donald Charrett of Expert Determination Chambers and Malith Mendis, a FIDIC Certified Trainer. Click here to view the webinar and presentation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.