One of the participants in the construction process carried out under FIDIC contract terms is the engineer, acting as the contract administrator. The engineer’s task is to take the necessary steps to ensure that the contract is performed correctly and on time. Among other things, the engineer can issue a determination on how to handle a matter. When can the engineer do this?
The contract engineer is not a party to a FIDIC construction contract. Under the FIDIC contract terms, the parties to the contract are the investor (referred to as the “employer”) and the contractor, who agree to appoint the engineer (although it is the employer that nominates the engineer, and the contractor usually has no say in who or what company performs this role) and authorise the engineer to take certain actions in implementation of the contract between them.
The engineer’s authority is not unlimited. He is not authorised to take any and all actions he finds appropriate under the circumstances, but only actions based on the agreement of the parties, in accordance with Sub-Clause 3.1 (1999 Red Book and Yellow Book): “The Engineer may exercise the authority attributable to the Engineer as specified in or necessarily to be implied from the Contract.”
This principle is particularly relevant to one of the most significant powers granted to the engineer, that of issuing determinations. Under Sub-Clause 3.5, a determination may be issued in cases where it has been expressly indicated that the engineer should proceed in accordance with that sub-clause (“Whenever these Conditions provide that the Engineer shall proceed in accordance with this Sub-Clause 3.5 to agree or determine any matter…”).
Thus, the engineer’s determination may only be issued in contractually specified cases related to claims by the employer, claims by the contractor, or other situations enumerated in the clauses arranged thematically in the body of the contract. Typically, the authority to issue a determination by the engineer is formulated as follows: “The Engineer shall proceed in accordance with Sub-Clause 3.5.”
Nothing in the FIDIC contract terms provides a basis for the engineer to make determinations in situations where he deems it appropriate but has no express authority to do so—for example, in the matter of contract interpretation, or resolution of disputes or differences between the parties’ positions on matters not entrusted to the engineer’s judgment.
If the engineer issues a determination in a situation not resulting from an express delegation, the determination is issued without the authority of the parties and therefore does not constitute a determination binding on the parties, and consequently does not affect the situation of the parties to the contract, including the scope of their rights and obligations. Such a finding by the engineer may only be treated as a non-binding position of a third party. Only the acts of the engineer performed on the basis of the authority granted to him by the parties to the contract are binding.
When the engineer’s position is not binding between the contracting parties, the procedure for challenging it provided for in Sub-Clause 3.5 will also not apply. Under that provision, the determination may be challenged by either party under Clause 20 on dispute resolution. However, as an unauthorised determination is not issued pursuant to Sub-Clause 3.5, the procedure provided there for challenging it does not apply either.
Dr Hanna Drynkorn, attorney-at-law, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners