The Court Of Appeal In Persero II: How To Enforce 'Binding But Non-final' Dispute Board Decisions Under The FIDIC Form Of Contract

PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2015] SGCA 30

This article is a follow-up to two International Quarterly ("IQ") articles on the Persero series of cases, the first of which followed the Persero I Court of Appeal decision in Issue 01, 2011, and the second followed the Persero II High Court decision in Issue 12, 20141. As promised we have continued to monitor the progress of this influential series of cases, and we set out below our conclusions on the enforcement of non-final DAB decisions following the latest (and final) decision by the Court of Appeal in Persero II.

Introduction

The 1999 FIDIC Suite of Contracts2 includes a dispute resolution mechanism that was designed to give the parties quick, costeffective and immediately binding awards through the Dispute Adjudication Board ("DAB") mechanism at Clause 20 of the Conditions of Contract.

However, an apparent oversight in the drafting of Clause 20 has left many parties with an entirely different experience from that intended by the FIDIC drafters, and even today there is no settled pathway to enforce a DAB decision where the non-complying party has prevented the decision from becoming "final".3

A DAB decision will become final if neither party provides written notification of their dissatisfaction with the decision within 28 days of receiving it (pursuant to Sub-clause 20.4). It is therefore a straightforward matter for either party to ensure a DAB decision remains "nonfinal".

Both final and non-final DAB decisions are immediately binding on the parties. However, final decisions cannot be appealed, and if a party fails to comply with a final decision Sub-clause 20.7 expressly allows the other party to refer to arbitration the discrete issue of non-compliance in order to enable the DAB decision to be enforced as an arbitral award.

Although the FIDIC drafters have stated that their intention was that non-compliance with "non-final" DAB decisions be enforceable in the same manner as "final" decisions,4 there is no express provision in the Conditions of Contract to allow it. This has led to debate as to how to enforce a binding but non-final DAB decision.

The issue has been dealt with in a multitude of ways by DABs, arbitral tribunals and legal commentators. However, because DABs and arbitration are private, there has been very little guidance from the courts.

For this reason there has been widespread interest in a series of cases involving this issue in Singapore, the "Persero" series, which culminated in the decision of the Singapore Court of Appeal in PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2015] SGCA 30, the reserved judgment being issued on 27 May 2015.

In a split decision, the Majority of the Court of Appeal found that binding but non-final DAB decisions could be submitted directly to arbitration on the discrete question of noncompliance.

While the Majority's decision is on face value a victory for contractors seeking the protection of a security of payment regime, the result is bittersweet. Interim enforcement of the DAB...