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The FIDIC Golden Principles

6 August 2019

FIDIC’s 1999 suite of contracts are the most widely used construction contracts globally. Their nature is of a suite of contracts applying fair and balanced risk allocation between the parties. That said, the standard contracts are often amended, by parties, that the material characteristics of the contracts are lost – their nature.

There are two distinct parts of the FIDIC contracts. The General Conditions of Contract (“GCC”) and the Particular Conditions of Contract (“PCC”). GCC are the standard terms applicable to contract. Incorporated in the GCC is the nature of a FIDIC contract of fair and reasonable risk allocation. Under the PCC, parties have the right to amend the GCCs, as they see fit. The introduction of the golden principles is FIDIC’s way of limiting the amendments effected by parties and thereby changing the nature of the contract.

FIDIC has now set out five golden principles to address the excessive amending of the contracts, and to ensure their nature is retained, despite the amendments effected. These principles are as follows:

  • the duties, rights, obligations, roles and responsibilities of all the contracting parties must be generally as implied in the GCC, and appropriate to the requirements of the project.
  • the PCC must be drafted clearly and unambiguously.
  • the PCCs must not change the balance of risk/reward allocation provided for in the GCCs.
  • all time periods specified in the contract for contracting parties to perform their obligations must be of reasonable duration.
  • all formal disputes must be referred to a Dispute Avoidance/Adjudication Board (or DAB, if applicable) for a provisionally binding decision as a condition precedent to arbitration.

Minor amendments of the GCC that do not change the nature of the contracts will not be considered as a breach of these golden principles. Another reason FIDIC introduced these golden principles is to protect the integrity of their contracts used around the world. It is unknown whether the adoption of the golden principles will be successful. However, FIDIC can certainly count on contractors and subcontractors alike to support these proactive steps which aid in protecting their interests in an already unequal contractual relationship with employers.

Author: Tsele Moloi, Associate.