International Construction Law Review
THE COURTESY TRAP - FIDIC’S SUB-CLAUSE 20.5 - AMICABLE SETTLEMENT AND EMIRATES TRADING
ANDREW TWEEDDALE*
I. INTRODUCTION
The “courtesy trap” was a phrase coined by Professor Tibor Varady.1 The “trap”, as Professor Varady explains, is that a party can be delayed from resolving its dispute by litigation or arbitration by the requirement to pursue amicable settlement discussions and alternative dispute resolution (ADR) processes until all these steps fail. On the one hand it may be argued that these steps are cost effective methods of resolving disputes; on the other hand they can create both procedural and jurisdictional problems where one party is determined not to negotiate and wants to delay the commencement of the arbitration.
In the 1999 FIDIC forms of contract there are a number of obligations and/or condition precedents that require a party to give notice of a claim (sub-clauses 20.1 and 2.5), refer the claim to the engineer (sub-clauses 20.1 and 3.5) and then submit the dispute to a dispute adjudication board (“DAB”) (sub-clause 20.4). If either party gives a notice of dissatisfaction relating to the DAB’s decision then sub-clause 20.5 provides that:2
“Where notice of dissatisfaction has been given under sub-clause 20.4 above, both Parties shall attempt to settle the dispute amicably before the commencement of arbitration. However, unless both Parties agree otherwise, arbitration may be commenced on or after the fifty-sixth day after the day on which notice of dissatisfaction was given, even if no attempt at amicable settlement has been made.”
The issue that this article addresses is whether sub-clause 20.5 is a condition precedent to the commencement of an arbitration or whether it is an obligation, the breach of which will not affect the jurisdiction of the arbitral tribunal to resolve the dispute. The guidance section of the FIDIC Red Book 1999 does not assist. It merely states:
“Sub-clause 20.5 Amicable Settlement
The provisions of this sub-clause are intended to encourage the parties to settle a dispute amicably, without the need for arbitration: for example, by direct negotiation, conciliation, mediation, or other forms of alternative dispute resolution.3 Amicable
* Andrew Tweeddale is a solicitor-advocate, chartered arbitrator, and director of Corbett & Co. International Construction Lawyers Ltd. He can be contacted at andrew.tweeddale@corbett.co.uk
1 Varady T, “The Courtesy Trap: Arbitration ‘If No Amicable Settlement Can Be Reached’”, Journal of International Arbitration, Volume 14 (1997) Number 4, pp 5–12.
2 This provision is found in the Red, Yellow and Silver Books.
3 For a thorough discourse of the various types of ADR procedure see The FIDIC Forms of Contract, 3rd Edition, Bunni N, Blackwell publishing, 2005 at pp 439 to 460.
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