REUTERS | Yves Herman

Enforceability of dispute adjudication board’s decision in FIDIC Contracts

There have now been four court judgments in Singapore relating to the enforceability of a dispute adjudication board’s (DAB) decision under the FIDIC Red Book form of contract.

The latest judgment is PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation, which was handed down on 27 May 2015, and is discussed in greater detail here. It now appears that the way should be clear for the contractor to enforce the DAB’s decision, but it has taken it nearly seven years to reach this point.

What lessons can be drawn from this saga?

The DAB and enforcement

DAB’s were introduced into FIDIC’s rainbow suite of contracts with the primary aim of ensuring prompt payment to the contractor of interim instalments of the contract price, notwithstanding that the underlying dispute would eventually be finally determined in other proceedings.

It has to be said that the six and half year wait in this case to enforce the DAB’s decision hardly represents “prompt” payment. In jurisdictions where statutory adjudication is not in force, this issue may present real problems for contractors and provide a windfall for employers. The Singapore Court of Appeal’s decision (reached by a majority) should now enable the contractor to enforce the interim award in Singapore in the same manner as a judgment.

Where are we now?

The Singapore Court of Appeal’s decision is likely to have persuasive effect in other jurisdictions and certain headline points emerge:

  • Unlike the earlier Court of Appeal in Singapore, this court has decided that the issue of prompt payment alone can be referred to arbitration without needing to refer the merits of the underlying dispute.
  • This court has decided that, even where (as in Singapore) local legislation only provides for enforcement of awards that finally dispose of an issue, then an award made in relation to the issue of prompt payment (whether interim, partial or final) can be enforced. It also decided that such an award is not “provisional”. The provisions of the Singapore International Arbitration Act are in fact very similar to the UNCITRAL Model Law, which has been adopted in many jurisdictions.
  • Even if a partial award has been made in the arbitration on the underlying dispute subsequent to the interim award on prompt payment, this does not affect enforcement of the interim award, since the true effect of such a partial award is a step of the process of reaching a final award.
  • As a practical matter, enforcement of an award on prompt payment should be sought in the jurisdiction where the paying party has assets.
  • Although the FIDIC form of contract does not make provision for enforcement of DABs’ decisions where no notice of dissatisfaction is given, that does not preclude the receiving party from seeking enforcement of a decision by way of interim award. However, the FIDIC Guidance Memorandum of 2013 (where adopted) puts the matter beyond doubt and treats both binding and non-binding decisions equally.

Watch this space!

Even now, the contractor may not be home and dry. If the employer has assets in Singapore, the current judgment may be sufficient to be effective. If there are no assets in Singapore, the contractor will have to enforce the interim award in either the employer’s country of incorporation or elsewhere where the employer has assets. This will take time and it may be that further partial awards or even the final award in the underlying dispute will be issued by the arbitrators in the meantime.

Herbert Smith Freehills LLP Michael Mendelblat

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