11 December 2018

The enduring impartial FIDIC Engineer – one full circle?

By:Chau Ee, LEE  Zhang Zhuoxian

Following the long-awaited launch of the latest FIDIC  suite of contracts in December 2017, what better time than now to revisit the institution of the FIDIC Engineer.

1987/1988/1992 FIDIC 4th Red Book 

Certain FIDIC contracts involve “the Engineer”, who has a defined role to play including acting as the contract administrator, and sometimes as the arbiter of disputes. However, going as far back as FIDIC 4th Edition, the Engineer's role envisaged in that form of contract was always criticised - the Engineer's neutrality is often questioned, given that the Engineer is paid by the employer.

Of course, the Engineer in FIDIC 4th is considered as impartial, not least given that Sub-Clause 2.6 [Engineer to Act Impartially] states that the Engineer shall exercise his discretion "impartially within the terms of the contract and having regard to all the circumstances."  Such discretion is required in regard to giving his opinion or consent, expressing his satisfaction or approval, or otherwise taking action, which may affect the rights and obligations of the employer or the contractor.

1999 FIDIC Red Book

The FIDIC 1999 Red Book had however sought to bring about a fundamental change to the Engineer's role. Under Sub-Clause 3.1 [Engineer's Duties and Authority] of the FIDIC 1999 Red Book, it states that, “whenever carrying out duties or exercising authority, specified in or implied by the Contract, the Engineer shall be deemed to act for the Employer”. 

In Part I General Conditions of this book, the employer's personnel is defined in Sub-Clause 1.1.2.6 [Parties and Persons] to include the Engineer and his assistants. Therefore, the Engineer can no longer be considered as ‘friendly’ or impartial.

Since the Engineer is "deemed to act for the employer" it is hardly surprising then that Sub-Clause 16.2(b) [Termination by Contractor] entitles the contractor to terminate a contract in the event that the Engineer fails, within 56 days after receiving a statement and supporting documents, to issue the relevant payment certificate.

Significantly, Sub-Clause 3.5 [Determinations] then proceeds to dismiss any notion that the Engineer is indeed partial. It espouses that the Engineer is under a contractual duty to exercise "fair determination" in circumstances where there is a particular Sub-Clause which requires him to act in accordance with Sub-Clause 3.5 - what may not be too apparent is that there are 25 such Sub-Clauses where the Engineer is bound to act in accordance with Sub-Clause 3.5!

What the term "fair determination" means is often subject to much conjecture. This is probably at the point when the Engineer moves from being the employer's agent to an independent consultant to both the employer and the contractor. In this way, the Engineer did indeed become less impartial.  

Yet, it is worth highlighting that this Sub-Clause 3.5 determination by the Engineer is still subject to revision under Sub-Clause 20 [Claims, Disputes and Arbitration] of the 1999 FIDIC Red Book.

2017 FIDIC Red Book

After a lapse of almost two decades, times are changing for the Engineer.

Sub-Clause 3.5 of the 1999 FIDIC Red Book is now the newly-worded Sub-Clause 3.7 [Agreement or Determination] of the 2017 FIDIC Red Book. Among other revisions to the old Sub-Clause 3.5, significantly the Engineer is now required to “act neutrally” and “shall not be deemed to act for the Employer”. As before with the term "fair determination" in the old Sub-Clause 3.5, there will no doubt be much divergence as regards what “act neutrally” actually means, unfortunately.   

What is fair to say however is that a number of these new provisions were introduced with a view (or at the very least) to having the Engineer make a return to its old form – one of independence and impartiality - the FIDIC Engineer has come one full circle.

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