Monday, September 7, 2009

Focus On: Clause 67 Still Causing Issues in Engineering Sector

It is over 28 years since the Standard Documents for Building and Civil Engineering Works (Third Edition) were introduced - and yet, after all these years, they still create legal issues which necessitate analysis and discussion.

For parties who have differences of opinion in respect of a contract governed by the Third Edition, it is inevitably clause 67 which is scrutinized.

Clause 67 states that any issue shall be referred to the Engineer who must give a written decision to the Employer and Contractor within 90 days of being requested to do so by either party. The Engineer's written decision is final if the aggrieved party fails, within 90 days from receipt of the Engineer's decision, to state in writing (to the Engineer and the other party) that it requires arbitration.

Moreover, if the Engineer fails to render his written decision within 90 days of being requested to do so, the aggrieved party must write to the Engineer and the other party in the 90 days following the expiry of the first 90-day period, stating that arbitration is required.

The above sounds straightforward but - in reality - things move less smoothly.

Before writing to the Engineer for a decision, the aggrieved party should draft in detail all the arguments for its position, and the request should be very precise and state exactly that which is sought from the Engineer. A failure in this regard would make it all too easy for an Engineer to make a decision refusing the request, especially as clause 67 does not require the Engineer to give reasons for his decision.

It should also be noted that clause 67 does not give room for maneuver, or for friendly talks between the parties. Basically, once you request an Engineer's decision, you are under the auspices of the procedural machinery set out in clause 67. You really have no option but to adhere to that contractual machinery.

Having said that, there is nothing to stop an aggrieved party from trying to find an amicable settlement after having rendered a notice requiring arbitration. Clause 67 does not specify any time-frames beyond the time when the aggrieved party renders its written notice requiring arbitration, although of course the aggrieved party cannot delay indefinitely. This scenario inevitably gives a window of opportunity for the parties to negotiate after the arbitral notice has come into existence.

In essence, an aggrieved party invoking clause 67 should remember the following:

a) do not violate any of the time periods stated in clause 67,

b) make sure that the requests to the Engineer give all the detailed reasoning and documents underpinning the request,

c) the requests themselves must be precise and very well-drafted, and

d) the time to hold friendly talks is only after you have rendered an arbitral notice.

In all of the above, lawyers can give cost-effective advice as the chances of avoiding a full-blown arbitration are much higher if legal input is obtained (behind the scenes, without the other party's knowledge) right from the start of the clause 67 process. The friendly talks after the arbitration notice of course also can take place without involvement of lawyers.