FIDIC CONTRACTS 26 October 2020

• WHAT IS THE MEANING OF FIDIC?

FIDIC refers to the "Fédération Internationale des Ingéniurs Conseils" in other words, the "International Federation of Consulting Engineers" which was established in Lausanne, Switzerland in 1913.  France, Belgium, and Switzerland are founding members of FIDIC. Only one organization from each country can become a member of the federation and today the federation is an international professional organization with members from 78 countries. Association of Turkish Consulting Engineers and Architects (ATCEA) affiliated with the federation in 1987 and became Turkey's representative in the federation.

The purpose of establishing FIDIC, a professional organization, is to develop the international consultancy profession and to adapt it to constantly changing needs. In this context, FIDIC organizes annual international meetings and training, prepares documents concerning each member of the sector and conducts these studies interactively with the relevant institutions. However, the main importance of the federation is that it produces worldwide contractual standards in the fields of construction, mechanical and electrical engineering. 

• FIDIC CONTRACTS

Today, legal relations established in the international arena are rapidly developing and diversifying. It has become a necessity to ensure consensus between parties belonging to different nations and legal systems in construction works that are carried out frequently. Thus, the need to create international standard type contracts arose. This type of contract, which is called FIDIC today, was prepared jointly by the "International Federation of Consulting Engineers" and "International Federation of Building and Public Works" and published in 1957. Documents and standard type contracts that have been used for many years have been developed and revised over time, especially to meet the developing technology and needs in the last decade.

There are several types of FIDIC Contracts, such as the Red Book, the Yellow Book, the Silver Book, and the Green Book, to regulate questions such as who will bear the risk during the construction process, who will prepare the design, and who will undertake the management of the contract etc. The main differences between the books arise in determining the obligations of the employer and the contractor. The Red Book, which is most-widely used in construction works in Turkey, was updated in 1999 by FIDIC. The Red Book sets out the basic principles of tender and construction contracts and foreseen that the project of the work will be prepared by the employer and the contractor will have the construction work done.

Besides the Red Book; the Yellow Book for construction and design contracts, the Silver Book for turn-key projects where the final cost and certainty of time are important for the employer, the Green Book for contracts with a tender price not exceeding 500,000 USD, the White Book for employer and consultancy service agreements, and the Golden Book has been developed with a long operating period for investment projects with large capital needs.

In addition, FIDIC Contracts have added the "engineer" side, which can be qualified as a technical advisor, to the contract parties, which are defined as employer and contractor in the Public Procurement Law No. 4734 under Turkish practice. The engineer is appointed by the employer. The engineer has the authority to supervise and make decisions on his behalf in technical, administrative, and financial matters during the contract, but is not a party to the contract between the employer and the contractor.

All FIDIC Contracts has two parts consisting of General Conditions and Special Conditions. The General Conditions regulate issues such as the employer's liability and the engineer's liability, which apply to all construction contracts. On the other hand, Special Conditions include variable conditions such as the geological and socio-economic conditions at the place of work, the limits of the employer's desire to intervene in the job and the delivery of all or part of the work. The point that should be emphasized is that the General and Special Conditions of FIDIC are advisory to those who will be a party to the construction contracts and they do not have any binding legal value. Therefore, parties that draw up a construction contract based on FIDIC Contracts do not need to accept the General Conditions as they are. However, since the FIDIC specifications regulate the provisions to be subject to the construction contract, which is a private law contract, it may be possible to change the contract and specifications at every stage of the work, provided that the parties agree on the same.

• FIDIC CONTRACTS IN PRACTICE

Today, international tenders in many countries are held by the FIDIC specification, as both the World Bank and other credit institutions request the implementation of the FIDIC specification for the works they finance. Since the 1970s, construction companies in Turkey have been opting for construction contracts according to FIDIC provisions when they participate in international tenders.

In Turkey, there are some technically and financially large-scale, overseas projects carried out with FIDIC contracts. These can be listed as the Marmaray Project, Baku-Tbilisi-Ceyhan Pipeline, Istanbul-Ankara Highway project.

Besides, some institutions such as the Undersecretariat of Treasury - Central Finance and Contracts Unit; Ministry of Science, Industry, and Technology - Competitive Sectors Program; Ministry of Environment and Urbanization - Department of EU Investments; the Ministry of Transport - Transport Operational Program are based on FIDIC contracts in their construction projects.

• DISPUTE RESOLUTION METHODS IN FIDIC CONTRACTS

The role of engineers in dispute resolution was restricted with the amendments made in 1999. Accordingly, in the case of disagreements that do not reach a complete conflict, engineers will deal with possible demands, but in case of a conflict, alternative solutions will be used.

Each of the parties can apply to the Dispute Resolution Board (DRB) for the resolution of the dispute. DRB is responsible for resolving all contractual disputes. However, it is stated in Article 20 of the Red Book that this board is not an arbitration committee. The decision of the Dispute Resolution Board regarding is binding unless it is changed later by another method, but it does not have a final verdict. If one of the parties notifies the DRB of dissatisfaction within 28 days or if the DRB does not decide within 84 days, the parties may apply for an amicable solution. If the friendly negotiations fail, the dispute will be referred to arbitration (Art. 20/6).

If the binding and final DRB decisions are not implemented, one of the parties may refer the dispute to arbitration. In such a case, there is no need for a new DRB decision or friendly negotiations. (m. 20/7)

As a rule, it is stipulated that disputes arising from FIDIC Contracts will be brought to the International Court of Arbitration. However, it is also possible for the parties to envisage another arbitration mechanism.