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In the case of Al-Waddan Hotel Ltd v Man Enterprise SAL (Offshore)  EWHC 4796 (TCC), the issue before England’s High Court was whether the Employer in a construction contract could rely on his own failure to appoint an engineer, to prevent the main contractor commencing arbitration proceedings, where the contract contained a term requiring an engineer’s decision as a condition precedent to commencing arbitration.
The Claimant employer (the “Employer”) and Defendant contractor (Contractor) entered into a contract (Contract) under the Conditions of Contracts for Works of Civil Engineering Construction, Part 1, 4th Edition 1987 (FIDIC) and the Employer appointed an engineer. Clause 67.1 of the Contract stipulated that in the event of any disputes between the parties in connection with or arising from the Contract or execution of works, the parties shall first refer such dispute to the Engineer who shall give notice of his decision to the parties within a period of 84 days. If either party was dissatisfied with the Engineer’s decision or if the Engineer failed to give notice of his decision within the prescribed period, then either party could apply within a specified time for arbitration.
The Contractor applied to the Engineer in respect of non-payment of certain contractual items, who replied by letter saying that its own contract with the Employer had expired and he would not therefore act on the application. Correspondence between the Contractor and Employer followed, but there was no evidence of any intention on the Employer’s part to reappoint or replace the Engineer. An arbitrator was subsequently appointed who ruled in the Contractor’s favour. The Employer disputed the arbitrator’s jurisdiction, arguing that:
The Court dismissed the Employer’s appeal and confirmed the arbitrator’s jurisdiction. The Court held that it was well established that under the FIDIC form, Clause 67.1 was a condition precedent to arbitration. However, in this case, the dispute could be referred to arbitration directly (despite that condition precedent not being fulfilled) because both the “refusal approach” and “hindrance or prevention approach” had come into play, as follows:-
Whilst the conclusion of the Court is not a surprise, given the specific facts of this case, as a matter of interpretation of Clause 67.1, it is difficult to see why the Contractor could dispense with the agreed 84 days waiting period before proceeding to arbitration. To err on the side of caution, strict compliance with the contractual timetable is preferred, unless there is some urgency in commencing arbitration.
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