Resolution Of Disputes In Construction Of Infrastructure Projects Under FIDIC Regime Through Arbitration In Pakistan

• Published date: 22 September 2020
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Arbitration & Dispute Resolution, Construction & Planning
• Law Firm: Farooq, Khan & Mirza, Advocates & Corporate Counsel
• Author: Babbar A. Khan and Jawad Malik

1. Introduction

The Arbitration Act of 1940 is the only legislation that applies to domestic arbitrations in Pakistan. Construction works are regulated by the general and particular conditions of Fédération Internationale Des Ingénieurs-Conseils (from French, the International Federation of Consulting Engineers) more commonly known as the FIDIC construction contract. In Pakistan the oft used version is the 1987 amended upto 1992 edition (also known as the Red Book) for Government funded projects, whereas the preferred version for international funding institution (such as Asian Development Bank and World Bank) is the 2010 Multi Development Bank Harmonized edition (also known as the Pink Book). The Pakistan Engineering Council (PEC) has further given sanctity to the 1987 Red Book by modifying and adopting the particular conditions specifically for Pakistan and publishing the same as the PEC Standard Forms of Civil Works Contract 11 July 2007. Currently the PEC is in the process of upgrading the same by modifying the 2017 Red Book. Furthermore, the FIDIC regime in Pakistan is also endorsed by the Constructors Association of Pakistan, whose members undertake 85% of the Infrastructure Development Projects in Pakistan.

The disputes in construction of infrastructure projects under FIDIC regimes are decided through dispute resolution mechanism where the ultimate, and arguably, the most cardinal stage is the arbitration. Arbitration is one of the most significant methods of alternate methods of dispute resolution around the world which has also found traction during the last two decades in Pakistan Additionally, with the advent of the global Belt Road Initiative of which Pakistan partakes through the China Pakistan Economic Corridor, specialized principles and concepts of the construction dispute resolution regime have already been entrenched in the legal jurisprudence of the country. Advancements in the construction sector can be seen with the number of specialized professionals both with a legal as well as Engineering background who act as counsels as well as arbitrators. Some of these legal practitioners have been elevated to the highest judicial offices during the last decade, thereby resulting in a more organized development of the construction contract principles in Pakistan.

2. Dispute Resolution Mechanism Under Different FIDIC Contracts

All popular FIDIC Standard Conditions provide for alternate methods of dispute resolution that provide different stages and mechanisms for effective and expeditious resolution of disputes through experts in the construction sector. A number of different dispute resolution clauses from different FIDIC Standard Conditions are mentioned below to discuss the dispute resolution mechanism in different FIDIC Standard Conditions of contracts for construction projects:

1. The fourth edition of FIDIC Standard Conditions of contracts was first published in 1987 and was subsequently amended in 1988 and 1992 and it provides for a dispute resolution mechanism in clause 67 of the FIDIC Standard Conditions. Pursuant to clause 67 any dispute between the parties pertaining to the agreement must be referred in the first place to the supervisory individual called the 'Engineer', for his 'Determination' Thereafter, the dissatisfied party places the matter before the...