Using FIDIC forms for mining projects

New FIDIC Red, Yellow and Silver Books

In December, new editions of the Red, Yellow and Silver Books were launched at FIDIC’s annual conference in London. African users will need to wait until October and the next Africa Conference in Lusaka to get the low-down from FIDIC itself.

Many of the changes made to the contracts reflect the amendments that we had already commonly sought to include when drafting and negotiating on behalf of Employers/customers when negotiating FIDIC forms. Many of the amendments are simply good contract management and the inclusion of these in the standard forms should speed up putting in place these contracts. For our readers who are keen to get up to speed, we were at the launch and have produced our own summary.

Why FIDIC for mining?

The benefits of using an industry standard form include their status (FIDIC is over 100 years old and its Red Book dates back to 1957), the facts that they were drafted by internationally acclaimed experts, have been tried and tested around the world (the 1999 editions have been around for almost two decides) and they are well respected.

Overall we think that the updated drafts will enhance the use of the FIDIC Silver, Red and Yellow Books (the most common that we tend to see) on mining projects.

Considerations for mining contracts 

Mining contracts have to be drafted to match the specifics of the given project. It is important to bear in mind the differences between a mining contract and a construction contract. Bespoke amendments to standard forms are therefore necessary.

The obvious example is how the contractor gets paid. Another example would be the plant typically used for the required operations, the large earthmoving equipment involved and the spare parts that are needed when servicing both; these may well be provided by the employer.

The finer detail needs to be fleshed out in the employer’s requirements documentation - but care must be taken with these multi-authored documents; last year, in the Højgaard case, the UK Supreme Court found the contractor liable to comply with a fitness for purpose type obligation that was “tucked away” in a technical schedule to the contract, despite obligations in the agreement itself to exercise reasonable skill and care.

English law on the interpretation of contractual terms

Højgaard is generally viewed as another example of a return, in emphasis, to the literal meaning of contract provisions following the Supreme Court's decision in Arnold v Britton (2015).

As far as the new contracts are concerned, the new forms include many more new definition and a broader interpretation clause that defines words including “may”, “shall” and “consent” – presumably to facilitate interpretation by non-native English speaking users. 

Mining contracts: a collaborative approach to risk management

It is often claimed that a collaborative approach is essential in mining projects. Clearly, there are benefits in allowing the employer to participate in a number of areas including the location of operations, plant maintenance, stock control and procurement.

Reciprocity and Contractual and Project Management Mechanisms

The new forms contain more detailed procedures, as well as new ‘tools’ (such as the NEC-style ‘early warning system’ aimed at encouraging issues to be aired and tackled early on). Clauses have been expanded by FIDIC in an attempt to achieve reciprocity between the parties. In addition, a wider role for the engineer will require more active project management and there is also new role altogether – the Site-based 'Engineer's Representative', who is to be on site for the entire duration of the works.

While these features seem positive ones, the greater procedural requirements being placed on the parties (including new 'deeming' provisions that are aimed at keeping the project on track) will expose both parties to greater potential liability - for example, the failure to comply with notice provisions (and serve them on time) has grave consequences.

Dispute avoidance and resolution

Given the very nature of mining projects, the scope for differences of opinion and conflicts to arise is wide and the provisions relating to the management of disputes become more important. The new forms have expanded their clauses and the key features now include the following:

  • The employer’s claims are no longer part of Clause 2 and have been carted back to Clause 20 where they are now dealt with in the same way as the contractor’s claims. The forms include a new Clause 21; the parties’ ‘day-to-day’ claims have been separated from their disputes.
  • New provisions emphasise the engineer’s/employer's representative's neutrality; when dealing with claims, there is now a more structured step-by-step procedure, with time limits.
  • Particularly worthy of being noted is the Dispute Avoidance/Adjudication Board (‘DAAB’) which used to be the plain Dispute Adjudication Board (‘DAB’). This has to be constituted at the outset, as a permanent board, for the duration of the project. Its role has also been broadened to include dispute avoidance, which is new theme across the new forms. The procedure to obtain the DAAB's decision and a party's failure to comply with such decision have also been clarified.

Mining sector, watch this space: on the horizon … the ‘Emerald’ Book

Ahead of us, on the horizon, we look forward to welcoming an addition to FIDIC’s suite - a tunnelling contract (FIDIC’s new ‘Emerald’ Book) designed to manage the geological, geotechnical and structural risks specific to sub-surface projects. We hope this new form will be launched towards the end of this year and will report on it.

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