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09 May 2017 | Dubai
Legal Briefings

At the FIDIC International Contract Users Conference in London late last year,
the pre-release of FIDIC's Yellow Book ("Second Edition") was revealed, with
the objective of it being officially released late in 2017. FIDIC also announced
that revised versions of the Red Book and Silver Book would follow later this
year, but no further details have been provided at this stage.

Many would agree that the Yellow Book, which is now 17 years old, was due for a refresh. The proposed
changes, however, are very extensive. While the contract remains lump sum, the length of the General
Conditions has almost doubled, and there is a marked emphasis on contract administration procedures
(such as the addition of a new "advance warning" mechanism and more streamlined claims and dispute
resolution procedures). This sees a shift in the role of the Engineer who will be required to take a more
proactive and engaged approach throughout the duration of the Project to knuckle out and resolve issues
at an early stage.

We set out the highlighted changes below:

1. The role of the Engineer

There is a new role for an “Engineer’s Representative”, who is based on Site throughout the duration
of the Project.

The Engineer is not required to obtain the Employer’s consent before making a Determination.

New sub-clause 3.7, which is headed “Agreement or Determination”, reflects the fact that the
Engineer is under a positive obligation to encourage agreement of claims.

If the Engineer fails to make a Determination within the stated time limits, then they are deemed to
have rejected a claim, permitting referral to the Dispute Avoidance Board.

When acting to seek to reach an Agreement or to make a Determination, the Engineer has a duty to
encourage the Parties to settle claims, and is said not to be acting for the Employer but to be acting
“neutrally” between the Parties. We note however that "neutrally" is not defined.

be different in some important respects. both the Employer and the Contractor must give notice of a claim within 28 days of becoming aware of the event or when they ought to have become aware of the event. As FIDIC reviews and rewrites its 1999 rainbow of contracts. of course. adversely affect the Works. this is a material exposure for the Contractor. in order to minimise disputes (or avoid them altogether). Employers should note this bolstered administrative requirement. This replicates similar mechanisms found in FIDIC Gold Book and NEC3. explaining the event and the quantum of the claim. which sets out the requirement for either party to inform the Engineer of any foreseeable event (known or probable) which may. the implications for the market here are likely to be profound. 5. FIDIC contracts are used on projects throughout the Middle East. Obviously. 4. an Employer was only required to give notice and particulars of a claim to the contractor "as soon as practicable" once he became aware of an event or circumstance which gave rise to a claim. and instead sub- clause 20. 2.1 divides claims into the following categories: Claims for payment and extensions of time. However. Advance Warning There is a new clause 8. and the final version may. increase the Contract Price or cause a delay. . Now. taking a very different approach to contract management. Claims The distinction between Employer claims and Contractor claims has now been removed. Conclusion The Second Edition remains a draft. setting out the particulars. and Other claims. Previously. it is clear that the new contract will be longer and more complex than the First Edition.4. It is hoped that more detail will be provided as to the process that will be followed once the advance warning mechanism is activated. The Employer is now also required to provide a detailed analysis of its claim. 3. There will be greater emphasis on the Employer and the Contractor engaging in dialogue with one another throughout the course of the Project. among other things. Caps The Second Edition requires the Contractor to give a general indemnity to the Employer against "any errors in the design of the works and other professional services which results in the works not being fit for the purpose" and that indemnity is not subject to the overall liability cap.

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