Are ‘binding’ DAB

Taner Dedezade
Corbett & Co
International

decisions enforceable?
Construction Lawyers
Ltd, London

Four say YES: Three say NO:

• The arbitral tribunal in ICC Case 10619 • The Court of Appeal in Singapore (CRW
considered that it was simply the law of v PGN) say NO in relation to a final award
the contract. (and upheld the High Court’s decision to
• This reasoning appears to have been set aside the arbitral tribunal’s award, which
followed in the DBF case. was enforced by way of a final award) but,
• A sole arbitrator in ICC Case 16948/GZ, said obiter, suggest that as long as the merits
a final award was OK (this is contrary to the are placed before the arbitral tribunal,
Court of Appeal in Singapore’s guidance). in principle, an interim or partial award
• A sole arbitrator in ICC Case 15751/JHN enforcing should be possible.
considered that a party should be required • A sole arbitrator in ICC Case 16119/
to pay that sum decided by the DAB and GZ suggests that a partial final award
interest from the date when payment was and consequently also a final award are
due by way of damages for breach.

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inappropriate devices to allow enforcement money. The employer issued an NOD and
but suggests, obiter, that an interim award failed to pay the sum determined as due by
might be effective. the DAB. The contractor applied directly to
• The sole arbitrator in ICC Case 16949/GZ the ICC arbitral tribunal for a final award
concluded that damages could not include enforcing the DAB’s decision on the basis
the sum adjudged as due by the DAB and that there had been a breach of the fourth
so declined to enforce. paragraph of Sub-Clause 20.4. NB the
contractor did not first refer the failure to
pay as a second dispute to the DAB, nor did
The problem
the contractor refer the merits to arbitration.
The fourth paragraph of Sub-Clause 20.4 A majority of the arbitral tribunal gave a
of the FIDIC 1999 Red Book provides: ‘The final award finding the sum awarded by the
[DAB’s] decision shall be binding on both DAB to be due without considering the merits.
Parties who shall give effect to it unless The contractor applied to set aside the arbitral
and until it shall be revised in an amicable award. The High Court set aside the award on
settlement or an arbitral award.’ the basis that failure to pay (the second
If no ‘notice of dissatisfaction’ (NOD) is dispute) did not go to the DAB prior to
issued under Sub-Clause 20.4 within 28 arbitration. Other obiter comments were also
days of receiving the DAB’s decision, that made by Judge Ean in relation to whether the
decision becomes ‘final and binding’. The arbitral tribunal could enforce without a
General Conditions make express consideration of the merits. The contractor
provision via a referral to arbitration for appealed to the Court of Appeal and the
the enforcement (specific performance) appeal was dismissed on the basis that:
of DAB decisions that are final and binding ‘There appears to be a settled practice, in
in Sub-Clause 20.7. arbitration proceedings brought under
By contrast, the ‘general conditions’ make sub-cl 20.6 of the 1999 FIDIC [Red Book],
no provision permitting the enforcement of for the arbitral tribunal to treat a binding
binding DAB decisions, that is DAB but non-final DAB decision as immediately
decisions where a notice of dissatisfaction enforceable by way of either an interim or
has been given by a party. Professor Nael partial award pending the final resolution
Bunni identifies this as a gap in the contract of the parties’ dispute. What the Majority
conditions in his article ‘The Gap in Sub- Members did in the Arbitration – viz,
Clause 20.7 of the 1999 FIDIC Contracts summarily enforcing a binding but non-
for Major Works’ [2005] ICLR 272 and final DAB decision by way of a final award
suggests that: without a hearing on the merits – was
• there is no remedy offered by Clause 20 of unprecedented and, more cr ucially,
the 1999 FIDIC Red Book, other than that entirely unwarranted under the 1999 FIDIC
of treating the non-compliant party as being [Red Book].’
in breach of contract and, accordingly, The Court of Appeal reasoned that:
liable for damages; and • A reference to arbitration under Sub-Clause
• Sub-Clause 20.7 of the 1999 FIDIC Red Book 20.6 in respect of a binding DAB decision
is of no assistance to the aggrieved party in this is in the form of a rehearing so that the
scenario as it applies only to DAB decisions entirety of the parties’ dispute(s) can finally
that have become final and binding. be resolved afresh.
• Sub-Clause 20.6 requires the parties fi nally
Singapore Court of Appeal to settle their differences in the same
arbitration, both in respect of the non-
On 13 July 2011, the Singapore Court of compliance with the DAB decision and in
Appeal dismissed an appeal of the decision respect of the merits of that decision. In
of the High Court in the case of CRW Joint other words, Sub-Clause 20.6 contemplates
Operation v PT Perusahaan Gas Negara (Persero) a single arbitration where all the existing
TBK [2011] SGCA 33. differences between the parties arising
The case concerned a pipeline project from the DAB decision concerned will be
under the FIDIC 1999 Red Book. Various resolved. This observation is consistent
disputes arose that were referred to the DAB. with the plain phraseology of Sub-Clause
The DAB decided, inter alia, that the 20.6, which requires the parties’ dispute in
‘employer’ owed the contractor a sum of respect of any binding DAB decision that

14 ConstruCtion Law internationaL Volume 6 issue 3 october 2011

 has yet to become final to be ‘finally settled breach of contract, the consequences of
by international arbitration’. such breach would hardly be a claim for
• Sub-Clause 20.6 clearly does not provide damages of the same amounts already
for separate proceedings to be brought by awarded’. The arbitrator then went on
the parties before different arbitral panels to admit under Article 19 of the ICC
even if each party is dissatisfied with the Rules the introduction of a new claim –
same DAB decision for different reasons. namely the merits that were not initially
placed before the arbitral tribunal. The
arbitrator would then proceed in the final
Four more ‘binding’ DAB
award to determine what payment was due
enforcement cases
to the claimant.
The author’s firm has dealt with four other In the other two cases (ICC Case 16119/GZ
ICC cases in which the contractor pursued the and ICC Case 15751/JHN), the contractor
employer in arbitration for the sums ordered sought a partial final award (and specifically
by the DAB to be paid to it. not an interim award) with the merits of the
• Two sole arbitrators concluded that the sum DAB decisions to be finally adjudicated in
determined to be due by the DAB was due a final award. In the first of these cases, the
as damages for breach of Sub-Clause 20.4. sole arbitrator declined to make a partial
• Two sole arbitrators declined to award final award enforcing an order to pay. In the
any monetary sum concerning the DAB’s second, the sole arbitrator did make a partial
binding decision. final award enforcing an order to pay.
All four cases are unreported, were determined • In ICC Case 16119/GZ, the sole arbitrator
by different sole arbitrators and were under declined to order payment of the sums
the FIDIC 1999 Red Book. In all four, one adjudged to be due by the DAB for the
or both parties issued a valid NOD and the following reasons:
employer failed to pay the sums adjudged to ‘Failure to comply with the DAB’s
be due by the DAB. The failure to pay was decisions is a breach of contract. The
taken to the DAB prior to applying to the appropriate method of enforcing a
arbitral tribunal for enforcement in all cases DAB’s decision is therefore by way
apart from ICC Case 16119/GZ. of an action for breach of contract.
In two of the cases (ICC Case 16948/GZ and The DAB decisions are binding as a
ICC Case 16949/GZ), the contractor opted to matter of contract (fourth paragraph
seek a final award (ie the merits were not for of Sub-Clause 20.4) although they are
determination by the arbitral tribunal). In not final as notices of dissatisfaction
the first case, the sole arbitrator made a final have been submitted by both Parties.
award and, in the second, a different sole The DAB decisions enjoy this binding
arbitrator concluded that there should be no character unless and until revised by
enforcement of the DAB’s decision. the final award. As the DAB decisions
• In ICC Case 16948/GZ, the sole arbitrator, are binding, the sums recognized
in a final award, ordered the employer under those decisions are due and
to make an immediate payment of the payable until the revision of those
sums determined to be due by the DAB decisions in the Final Award. Whilst
plus interest and costs on the basis that the decisions are binding, they are not
‘the Employer was liable for all damages final. The DAB decisions are not final
resulting from or in connection with the and any payment awarded by those
failure to perform on time or in accordance decisions may be revised and reversed.
with the terms of the agreement or not to Therefore, the Sole Arbitrator cannot
perform at all [the employer’s breach of issue any final award ordering the
the fourth paragraph of Sub-Clause 20.4]... payment of the sums decided by the
the Claimant has the right to receive the DAB. By necessity, the payment ordered
amount which the DAB considered was due’ should be provisional or temporar y.
(paragraph 134). The partial award requested cannot
• In ICC Case 16949/GZ, the sole arbitrator definitively determine the payment
declined to make a final award (the merits issues and, consequently, any order
were not in front of him) on the basis for payment at this stage must be
that ‘though non-compliance with DAB provisional. It goes against the essence
decisions No 2 and 3 would amount to a of a final award to make an order that

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feature article

could be revisited and reversed in a hereby made is not one of a conservatory

further award.… In conclusion the or interim measure, strictu sensu but rather
payments awarded under the DAB’s one of giving full immediate effect to a
decision will be revisited by the Sole right that a party enjoys without discussion
Arbitrator and cannot be the subject on the basis of the Contract and which the
of a final partial award and again the parties have agreed shall extend at least
subject of the final award.’ until the end of the arbitration. For the
• In ICC Case 15751/JHN, the sole arbitrator second thing, the will of the parties shall
determined that: prevail over any consideration of urgency
‘it seems to me that the better solution or irreparable harm or fumus boni juris
in an appropriate case is that if a Party is which are among the basics of the French
obliged to pay a sum of money under a référé provision.’
Decision of a DAB in respect of which an
NOD has been served and he has failed
to do so in breach of Sub-Clause 20.4, Difficult issues
that party should be required to pay that The difficult issues that these cases raise
sum and interest from the date when include the following:
payment was due by way of damages for 1. Should an arbitral tribunal make an
breach of Sub-Clause 20.4, not by way of interim, partial or final award enforcing
enforcement of the decision nor by way a DAB’s decision?
of pre-judging the underlying substantive 2. Should the basis of the award be breach
dispute. I consider the present to be an of contract or specific performance?
appropriate case and will so order.’ 3. Should there be a single arbitration –
For convenience, I also set out the reasoning that is, should the merits be placed
in ICC Case 10619: before the arbitral tribunal?
‘the question now arises as to whether 4. Does the failure to pay need to go to the
and on what legal basis this Tribunal DAB first?
may adjudicate the present dispute by an As can be seen from the cases above, arbitral
interim award… there is no reason why tribunals and courts have taken different
in the face of such a breach the Arbitral approaches and there is still no clear guidance
Tribunal should refrain from an immediate on the best way to plug the gap. A detailed
judgment giving the Engineer’s decisions consideration of all of these issues is not
their full force and effect. This simply is possible in this short article.
the law of the contract. In this respect,
this Tribunal wishes to emphasise that
neither the provisions of Article 23 of the Taner Dedezade is a Barrister at Corbett & Co
ICC Rules, nor the rules of the French International Construction Lawyers Ltd, London. He
NCPC relating to the référé provision are can be contacted at [email protected].
relevant. For one thing, the judgment to be

16 Construction Law International Volume 6 Issue 3 October 2011