International engineering federation FIDIC (the International Federation of Consulting Engineers) has launched its Golden Principles to set out the essential characteristics of its general conditions of contract that should not be amended if the contract is to be regarded as a genuine FIDIC contract.
In a bid to safeguard the integrity of FIDIC contracts and to ensure that employers, contractors and the public are not misled about what is and what isn’t a bone fide contract, the FIDIC Golden Principles outline the essence of a contract and articulate those essential characteristics of FIDIC’s general conditions that should not be amended if it is to be recognised as a FIDIC contract.
The Golden Principles are the output of the work of a FIDIC task group (TG15) which looked at the essential characteristics of FIDIC contracts that must not be amended if it is to be recognised as a genuine contract. Task group chair Husni Madi, who is also the CEO of Jordan-based Shura Construction Management, explained the thinking behind the principles.
“More and more frequently, FIDIC has been experiencing applications of ‘FIDIC contracts’ where significant changes to the General Conditions are made by means of replacing, changing or omitting parts of the wording through the Particular Conditions,” said Madi. “The replacements and changes introduced have lately been found to be substantial and of such extent, that the final contract no longer represents the FIDIC principles, and thus are jeopardising the FIDIC brand and misleading tenderers and the public.
“That’s why the FIDIC contracts committee set up a special task group to identify which contractual principles of each form of contract FIDIC considers to be inviolable and sacrosanct. These principles are now referred to as the FIDIC Golden Principles and are available as a free download from the FIDIC website. Put simply, it’s not a FIDIC contract without the Golden Principles,” Madi said.
The Golden Principles were launched at the Asia Pacific Contract Users’ Conference in Hong Kong on 25 June 2019. The 12-page guide, They (First Edition 2019), outline the five Golden Principles and explains in detail the reasoning behind each of them.
In order to promote acceptance and understanding:
- the GPs are formulated at a conceptual level to encapsulate the essence of a contract;
- each GP expresses a single, readily understood and generally accepted concept;
- the GPs are limited to the minimum number necessary for completeness.
The guide makes the point that minor additions or grammatical changes to the wording of a General Conditions sub-clause that do not alter the intent are not a breach of the GPs. However, such cosmetic changes should only be made for good reasons, the guide advises. All five Golden Principles are listed below.
The Golden Principles
GP1: The duties, rights, obligations, roles and responsibilities of all the contract participants must be generally as implied in the General Conditions, and appropriate to the requirements of the project.
GP2: The Particular Conditions must be drafted clearly and unambiguously.
GP3: The Particular Conditions must not change the balance of risk/reward allocation provided for in the General Conditions.
GP4: All time periods specified in the contract for contract participants to perform their obligations must be of reasonable duration.
GP5: Unless there is a conflict with the governing law of the contract, all formal disputes must be referred to a Dispute Avoidance/Adjudication Board (or a Dispute Adjudication Board, if applicable) for a provisionally binding decision as a condition precedent to arbitration.