Dispute Settlement Procedures in FIDIC Pink Book 2010

General Introduction

Recently, many Employers, Contractors, and Engineers have expressed their interest in the dispute settlement procedures in FIDIC Pink Book 2010. These interests originated from the characteristics of projects that use FIDIC Pink Book 2010, which is the substantial sponsorship provided by multilateral development banks and large financial institutions for these types of projects.

This also means that when participating in dispute settlement procedures in FIDIC Pink Book 2010, each Party must be extra cautious and pay more attention than usual.

Compliance with the dispute settlement procedures in  FIDIC Pink Book 2010 not only ensure the consistency of the requests but also harmonizes the instruction with respect to the purchase, tender, and contract management of sponsors.

The structure of this article “Dispute Settlement Procedures in FIDIC Pink Book 2010” consists of two fundamental parts. Aside from providing a flowchart along with detailed procedures, throughout this article, CNC has included additional information pertaining to practical application of Dispute Settlements in FIDIC Pink Book 2010, especially dispute settlements via a Dispute Settlement Board.

Diagram 1 – Dispute Settlement Procedures in FIDIC Pink Book 2010

Legal basis:

Article 3.5 [Decision], Article 20 [Claims, Dispute, Arbitration]

The procedures for appointing members of a Dispute Settlement Board (Step 3)

Diagram 2: The procedures to Appoint members of DB in FIDIC Pink Book 2010

Legal Basis:

Clause 20.2 [Appointment of Dispute Settlement Board Members], Clause 20.3 [No Dispute Settlement Board is Established]

Things to be mindful of pertaining to the procedures for appointing members of a Dispute Settlement Board (Step 3.1)

1. Timing of the appointment of members of a Dispute Settlement Board

Appointment Timing: Immediately upon the Commencement of Work[1]. Which means:

• The Dispute Settlement Board of FIDIC Pink Book 2010 is a “permanent” Dispute Settlement Board, ever-present and available to settle disputes and disagreements throughout the execution of the Contract; and
• The cost of maintaining a Dispute Settlement Board is an issue that concerns Both Parties

>>>> See more on the members of the Dispute Settlement Board here

2. Method for appointing members of a Dispute Settlement Board

The appointment of members of a Dispute Settlement Board may be performed via two methods at any point in time, including:

• First Method: Both Parties jointly appoint members of a Dispute Settlement Board[2], or
• Second Method: Either of the parties or Both Parties requests a certain organization (for instance the “International Chamber of Commerce” (ICC)) to appoint the members of a Dispute Settlement Board.[3]

The First Method involves both Parties taking action by themselves or through the assistance of a third party which offers services pertaining to nominating, performing candidate background checks, exploring conflicts of interest, and miscellaneous consulting services.

The Second Method involves any organization that possesses authority over the appointment of Dispute Settlement Board members which must consult with both Parties prior to any appointment[4].

3. Flaws of Vietnamese Law pertaining to Dispute Settlement Boards

Of particular concern is that the use of Dispute Settlement Boards has not, yet, been legislated in Vietnam.

Aside from that the fact that there are a few mentions of use of Dispute Settlement Boards in Article 45.2, Degree No. 37/2015/ND-CP to resolve disputes through amicable resolution, Vietnamese Law doesn’t have any other stipulation regarding Dispute Settlement Boards.

Which means:

Dispute Settlement Boards have not, yet, been entirely recognized and acknowledged under Vietnamese Law.

The criteria required to become a Dispute Settlement Board member, according to the Dispute Settlement Board Agreement Clause, Dispute settlement principles, including fees,..etc. to establish and operate a Dispute Settlement Board are applied based on practical experience or practices worldwide.

Whether the decision (if any) of a Dispute Settlement Board is an award or not and whether or not such decision is recognized and enforced in Vietnam is an issue that has yet to be addressed.

4. Flaws of Dispute Settlement Board established by foreign entity

As mentioned in Diagram 1 (Step 4), Decisions of a Dispute Settlement Board ARE NOT the final judgement. Any party is entitled to (i) send Notice of Disagreement/Dissatisfaction to the other Party pertaining to the Decision of the Dispute Settlement Board; (ii) or in cases involving no notice being sent, the Decision of the Dispute Settlement Board IS NOT the final judgement, and each Party is entitled to bring the case to Arbitration.

Therefore, the establishment of a Dispute Settlement Board through a foreign entity (for instance ICC) may potentially lead to a myriad of problems, including the recognition and enforcement of the establishment of a Dispute Settlement Board.

Similarly, if the Arbitration Panel requests either party to execute the Decision of a Dispute Settlement Board, it is possible that such requests are unenforceable until the Arbitration Panel issues the final award.

5. Regarding amicable resolution under Vietnamese Law.

In accordance with Degree No. 27/2017/ND-CP, amicable resolutions are more advantageous in comparison to dispute resolution via a Dispute Settlement Board.

Accordingly, both parties are legally bound to the results of amicable resolutions in accordance with civil law[5].

However, the amicable resolution method is based on the principle of voluntary spirit[6]. As such:

If either of the parties disagree with the dispute settlement through amicable resolution, this method shall not be applied.

Either party, or the Conciliator may cancel the amicable resolution in accordance with Article 17, Degree No. 22/2017/ND-CP at any time.

Succinctly, amicable resolution is the only dispute settlement method pertaining to construction contracts currently supported under Vietnam law.

 >>>> See more on the 7 methods for Contract Disputes Resolution here

Contact

Opinions and suggestions regarding the content of this article are warmly welcomed by CNC.  Any individual or organization in need of CNC’s legal support, may contact us via following contact information:

CNC VIETNAM LAW FIRM COMPANY LIMITED

Address: 28 Mai Chi Tho Street, An Phu Ward, Thu Duc City, Ho Chi Minh City, Vietnam

Phone: (84) 28-6276-9900

Hotline: (84) 916-545-618

Email: contact@cnccounsel.com

Website: cnccounsel.com

 

In charged by

Mr. Le The Hung | Managing Partner

Phone: (84) 916 545 618

Email: hung.le@cnccounsel.com

 

Or

 

Ms. Kieu Nu My Hao | Legal Assistant

Phone: (84) 028 6276 9900

Email: hao.kieu@cnccounsel.com

 

Disclaimers:

This article is prepared or used for the purpose of introducing or updating cilent on information about matter and/or the developments of legal perspective in Vietnam. The information contained within this article does NOT constitute an advice of any kind and could be subjected to changes without prior notice.

[1] Clause 20.2 [Appointment of Member of Dispute Settlement Board], Part A [Contract Data].

[2] Clause 20.2 [Appointment of Member of Dispute Settlement Board], paragraph 3, General Conditions of Contract.

[3] Clause 20.3 [No Dispute Settlement Board is Established], paragraph 2/last, General Conditions of Contract.

[4] Clause 20.3 [No Dispute Settlement Board is Established], paragraph 2/last, General Conditions of Contract.

[5] Article 15.2 [Amicable Resolution Results], Article 16 [Recognition of the Amicable Resolution Results], Degree No. 22/2017.

[6] Article 4 [Principles of Dispute Settlement through Amicable Resolution], Article 6 [Requirement to settle disputes through Amicable Resolution].