COVID-19 crisis in the Baltics is nearly overcome, although a concern of its potential return remains vivid. Elsewhere in the world, there are countries which have defeated the virus, and countries still recording a daily toll of thousands of newly infected. The impact of COVID-19 has led to many unresolved disagreements between the parties of construction projects, and it is likely to cause similar situations in the future also.
The International Federation of Consulting Engineers (Fédération Internationale Des Ingénieurs-Conseils – FIDIC) has responded to COVID-19 impact by issuing two guidelines prepared by the organization at the record speed.
FIDIC COVID-19 Guidelines to Users of FIDIC Standard Forms of Works Contract can serve as a useful reference source for employers and contractors who have entered contracts based on the FIDIC standard forms but are not yet experienced long-term users of FIDIC forms.
The cornerstone of all FIDIC contracts is search for mutually beneficial solutions and avoidance of disputes. In the context of COVID-19, the guidelines discourage adversarial attitudes and urge the employers to make timely and adequate payment for works so that the contractors can maintain a project cashflow. Compliance with the underlying general principles of FIDIC is essential with a view of the disputes potentially ending up before the Dispute Avoidance / Adjudication Boards (a mandatory stage of dispute settlement under the FIDIC contract forms) and subsequently before the arbitration panels. In view of the complexity of the construction projects, the lack of good faith of a party may significantly alter the balance in favour of the opposite party, particularly when the dispute is reviewed by the FIDIC-qualified adjudicators.
The guidelines contain descriptions of some of the most often met situations and the relevant Clauses of FIDIC contracts that may be applicable. For example:
- the right to an extension of the time for completion due to unforeseeable shortages in the availability of personnel or goods caused by epidemic or governmental actions;
- the right to an extension of the time for completion and reimbursement of additional costs, if caused as a result of changes in laws.
The above provisions may be applicable provided the contractor is in a position to demonstrate that the relevant factual circumstances have ensued.
The definition of force majeure contained in FIDIC contracts in part differs from the pre-conditions for force majeure circumstances developed under the case-law of the Latvian courts. Therefore, it is essential to carry out analysis of the special conditions of the contract in the context of Latvian laws. Nevertheless, reference to the specific provisions of the FIDIC contracts concerning unforeseen circumstances or changes in laws is likely to be more easier and appropriate than an attempt to invoke force majeure provisions.
Employers shall bear in mind that any restrictions of access to a site, or any other delay, prevention or impediment of the contractor caused by the employer (if such cannot be justified by force majeure circumstances) may give rise for the contractor to request both an extension of time and reimbursement of additional costs.
Finally, it is essential for the parties to be reminded of necessity to follow the procedures set forth in the FIDIC contracts for presenting claims or variations. Failure to give timely notices may irreversibly deprive of the right to apply for an extension of time or reimbursement of costs.
FIDIC COVID-19 Guidelines on On-site Working and Project Team Organisation contain lists of the risks to be assessed and recommendations for action. The review of the lists will allow to ascertain that the risk prevention measures have been taken, or at least that the necessity for introduction of such measures has been duly assessed.