1st ICC Africa Regional Arbitration Conference Notice and Time Bar Provisions in the Context of Claims, Counterclaims and Set-Offs Kwadwo Sarkodie Partner +44 20 3130 3335 ksarkodie@mayerbrown.com 21 June 2016

Notice provisions/requirements: Introduction Notice provisions/requirements: Form and content The effect of a time bar Illustrations – FIDIC: Notification of Contractor’s claims: Sub-Clause 20.1 English courts’ approach in Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar Notification of Employer’s claims: Sub-Clause 2.5 Privy Council judgment in NH International v National Insurance Property Development Company Limited Other approaches/considerations

Introduction (contd.) Notice provisions: Timing requirements? Awareness of event Expressed as a condition precedent? Form/content of notice: detail particularity Requirement for particulars (with/following notice)?

FIDIC: Sub-Clause 20.1 – Contractor’s Claims Sub-Clause 20.1 requires the Contractor to notify its claims: “If the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment ... the Contractor shall give notice to the Employer, describing the event or circumstance giving rise to the claim.” [first paragraph] It also specifies a longstop date for giving of the notice: “…The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance.” [first paragraph] “Within 42 days after the Contractor became aware (or should have become aware) of the event or circumstance giving rise to the claim … the Contractor shall send to the Engineer a fully detailed claim which includes full supporting particulars of the basis of the claim and of the extension of time and/or additional payment claimed…” [fifth paragraph]

Effect of Sub-Clause 20.1 Sub-Clause 20.1: Notice requirement usually construed as comprising a condition precedent (the common law approach): “If the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended ... and the Employer shall be discharged from all liability in connection with the claim…” [second paragraph] Therefore risk of claim being barred for non-compliance. Provision of particulars: “If the Contractor fails to comply with this or another Sub-Clause in relation to any claim, any extension of time and/or additional payment shall take account of the extent (if any) to which failure has prevented or prejudiced proper investigation of the claim ...” [ninth paragraph] other legal approaches (civil, Sharia) will be considered later

The prevention principle: Time Bar Provisions The prevention principle: Peak Construction (Liverpool) Limited v McKinney Foundations Limited (1970) 1 BLR, p111 Employer prevented from recovering liquidated damages if it is responsible for the matters which prevented timely completion Is avoided if there is a valid extension of time provision, properly operated Applies even if: Employer is only responsible for part of the delay The Contractor would not in any event have been able to complete on time Results in time at large: general, rather than liquidated, damages for delay

Effect of the prevention principle: The Effect of a Time Bar Effect of the prevention principle: Contractual notice requirement, expressed as time bar/condition precedent? Delay caused by fault of the Employer Contractor seeks extension of time, but has failed to give timely notice Can Employer rely on the notice provision to bar the Contractor’s claim?

Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar [2014] EWHC 1028 English TCC judgment – April 2014. Construction of a new dual carriageway, and a vehicle tunnel and pedestrian subway under the Gibraltar Airport runway. Contract based on the FIDIC Yellow Book. Judge had to consider operation of Sub-Clause 20.1 (see next slide).

Obrascon – Discussion of Sub-Clause 20.1 Compliant notice held to be a condition precedent to the Contractor’s claims – therefore severe consequences for failure Form/content of notices: High degree of formality not necessarily required – some flexibility of approach was warranted in view of the harsh consequences Nevertheless important to have regard to the stipulations/ requirements set out in the Contract Timing of notices – Is notice to be given when: the variation is instructed; or (if later) the Contractor actually undertakes the work?   Decision of the TCC (appeal dismissed by CA) in

FIDIC – Sub-Clause 2.5 – Employer’s claims Effect of Employer’s non-compliance with notice requirements under Sub-Clause 2.5: Sub-Clause 2.5 of the FIDIC form and notices of claim: “If the Employer considers himself to be entitled to any payment under any Clause of these Conditions or otherwise in connection with the Contract ... the Employer or the Engineer shall give notice and particulars to the Contractor...” [first paragraph] As to the time for giving notice, Sub-Clause 2.5 provides: “The notice shall be given as soon as practicable after the Employer became aware of the event or circumstances giving rise to the claim.” [second paragraph]

Effect of Sub-Clause 2.5 Effect of Employer’s non-compliance with notice requirements under Sub-Clause 2.5: As to details to be given, Sub-Clause 2.5 provides: “The particulars shall specify the Clause or other basis of the claim, and shall include substantiation of the amount and/or extension to which the Employer considers himself to be entitled in connection with the Contract.” [third paragraph] Sting in the tail of Sub-Clause 2.5: “The Employer shall only be entitled to set off against or make any deduction from an amount certified in a Payment Certificate, or to otherwise claim against the Contractor, in accordance with this Sub- Clause.” [fourth paragraph]

NH International v National Insurance Property Development Company Limited (“NIPDEC”) (2015) On Appeal from Trinidad & Tobago Court of Appeal to the UK’s Privy Council – judgment August 2015 Construction of the new Scarborough Hospital in Tobago Contract based on the FIDIC Red Book and concerned Sub-Clauses 2.4 and 2.5 (found in similar terms in the Yellow and Silver Book forms) Privy Council required to consider the operation of Sub- Clause 2.5

NIPDEC – Comparison between Sub-Clauses 2.5 and 20.1 Sub-Clause 20.1 specifies a longstop date for the giving of notice: “…The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance.” [first paragraph] Includes express language to spell out the consequences of non- compliance with the notice provisions: “If the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim.” [second paragraph] Compare with language at end of Sub-Clause 2.5: “The Employer shall only be entitled to set off against or make any deduction from an amount certified in a Payment Certificate, or to otherwise claim against the Contractor, in accordance with this Sub-Clause.” [fourth paragraph] Why important? Other claims and cross claims between the parties

NIPDEC – Discussion of Sub-Clause 2.5 Conclusions in the NIPDEC case: “Its [Sub-Clause 2.5] purpose is to ensure that claims which an employer wishes to raise, whether or not they are intended to be relied on as set- offs or cross-claims, should not be allowed unless they have been subject of a notice, which must have been given ‘as soon as practicable’.” “...the natural effect of the closing part of clause 2.5 is that in order to be valid, any claim by an Employer must comply with the first two parts of the clause, and that this extends to, but, in the light of the word ‘otherwise’ is not limited to, set-offs and cross claims”. Where the Employer fails to notify a claim per Sub-Clause 2.5: "the back door of set off or cross-claims is as firmly shut to it as the front door of an originating claim”

NIPDEC – Discussion of Sub-Clause 2.5 (contd.) Sub-Clause 2.5 does not preclude the Employer from raising an abatement argument: e.g. that the work for which the Contractor is seeking payment was poorly carried out such that it does not justify the payment sought. The Privy Council did not provide any definition of “as soon as practicable”: but in the absence of a longstop, the requirement for an Employer’s claim notice has the potential to be more demanding than that for a Contractor’s under FIDIC forms. The case was remitted to the arbitrator to disallow sums which: (i) were not subject of notification in accordance with Sub-Clause 2.5; and (ii) could not be characterised as abatement claims.

NIPDEC and Engineer’s Determinations Under FIDIC, the claims machinery applicable to Employer’s claims leads directly into the Determination process As noted under Sub-Clause 2.5: “The particulars shall specify the Clause or other basis of the claim, and shall include substantiation of the amount and/or extension to which the Employer considers himself to be entitled in connection with the Contract.” [third paragraph] Immediately after the provision of such particulars: “The Engineer shall then proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) the amount (if any) which the Employer is entitled to be paid...” [third paragraph] “The Employer shall only be entitled to set off against or make any deduction from an amount certified in a Payment Certificate, or to otherwise claim against the Contractor, in accordance with this Sub-Clause.” [fourth paragraph] The NIPDEC decision may encourage Employers to delete Sub-Clause 2.5 from FIDIC contracts. Employers with claims need to notify and particularise in accordance with the FIDIC claims machinery No notification in accordance with Sub-Clause 2.5 = no right of claim or right to set off by Employer No defence to Contractor’s claims when they come in

Other Approaches/Considerations Good faith Civil law Sharia law Alternative common law approaches

Speaker details Kwadwo Sarkodie, Mayer Brown International LLP Partner, Construction & Engineering Group Kwadwo’s practice focuses on dispute resolution and risk management in complex construction and infrastructure projects in the UK and in emerging markets. Kwadwo has extensive experience acting for clients in DABs, international arbitrations (ICC, LCIA, UNCITRAL and ICSID) and court proceedings in various jurisdictions.