FIDIC, the International Federation of Consulting Engineers, publishes standard form contracts that are widely used in international construction projects. Within these FIDIC contracts are specific principles known as the “FIDIC Golden Principles”. These are intended to provide balanced risk allocation between the parties and support successful project outcomes.
‘FIDIC – know your risks’ was discussed at our February 2023 webinar, with guest speakers Maria Fisentzou of FTI Consulting and Karen Gough of 39 Essex Chambers. Click here to view the webinar recording and presentation.
Background on FIDIC
First formed in 1913, FIDIC publishes several suites of contracts for various types of projects:
- The Red Book for building and engineering works
- The Yellow Book for design-build projects
- The Silver Book for turnkey EPC projects
- The Green Book for short-form contracts
These model contracts reflect best practices and aim to equitably share responsibilities between employers and contractors. They represent FIDIC’s drive to standardise and improve global construction contracting.
Overview of the Golden Principles
The FIDIC Golden Principles uphold fair and sustainable policies in the client-contractor relationship:
- Balanced sharing of project risks – Risks should be allocated to the party best able to manage them. Excessive risk transfer leads to higher prices and disputes.
- Clear and fair contract terms – Vague, biased, or unenforceable terms generate conflicts. Contracts should be clear, comprehensive, and fair.
- Transparency in the tender process – Tenderers need access to all relevant information to prepare responsive bids. Lack of transparency undermines competition.
- Right to be paid for work performed – Payment schedules and processes should be clear and reliable. Non-payment severely affects contractor cashflow.
- Dispute avoidance and timely resolution – Differences should be discussed openly and resolved promptly. Unresolved disputes lead to inefficiency and claims.
- No unfair contract termination – Termination rights and procedures must be justified and equitable. Unfair termination destroys trust and provokes disputes.
By following these principles, FIDIC contracts foster cooperation and satisfaction for all parties, avoiding adversarial relationships.
We discussed FIDIC issues in our webinar session on 31 March 2022: ‘African Procurement and FIDIC Issues’ with Dr Tett Walters and Karen Gough. Click here to watch the recording of this interesting session and continue learning about FIDIC.
Key Clauses that Uphold the Golden Principles
FIDIC contracts contain many specific clauses aligned with the Golden Principles:
- Shared risks for unforeseeable conditions – If subsurface or geotechnical conditions differ materially from available data, contracts provide for equitable adjustments.
- Limited liability for both parties – Liability caps protect from catastrophic risks outside a party’s control. Unlimited liability stifles competition and innovation.
- Third-party dispute resolution – Provisions for dispute boards, adjudication, and arbitration encourage impartial settlement of differences.
- Defined duties for supervision and cooperation – Clearly delineated responsibilities promote collaboration and accountability.
- Restrictions on unilateral termination – Terminations must follow prescribed procedures, allowing time to rectify issues.
By incorporating the FIDIC Golden Principles into standardised contracts, FIDIC has greatly influenced international norms for construction projects. These time-tested principles bring balance, clarity, and fairness to the contractor-client relationship, supporting successful project outcomes.
When properly applied, the principles can significantly reduce disputes and foster a spirit of partnership on construction undertakings.
For guidance on FIDIC contracts or resolving construction disputes, contact the legal team at Barton Legal. Call 0113 202 9550 or visit our website at https://bartonlegal.com/ to schedule your consultation.
Find more valuable learning content on FIDIC matters in our September 2023 webinar: ‘Why the Emerald Book – A New International Form of Contract for Underground Works?’ with Martin Smith – Matrics Consult Ltd (UK) and Giorgiana Tecuci – Tecuci & Păltineanu Avocaţi (Romania). View the webinar and presentation here.