International Construction Law Review
PERSERO II: “PAY NOW, ARGUE LATER” IN THE CONTEXT OF DAB DECISIONS – WHAT APPROACH BEST ADVANCES THE PURPOSE OF THE FIDIC’S SECURITY OF PAYMENT REGIME?
Frédéric Gillion
Partner, Pinsent Masons LLP1
1. INTRODUCTION
It is now firmly established in international arbitration circles that binding but not final decisions made by a Dispute Adjudication Board (“DAB”) can be enforced by the winning party if the other party fails to comply with the decision in breach of sub-clause 20.4 of the FIDIC Conditions of Contract. The Singapore High Court has recently confirmed this in PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation (Indonesia)2
(“Persero II”) and this is a welcome decision in this regard.
What is not clear, however, is what the winning party is meant to do in practice in order to enforce those binding but not final DAB decisions. The High Court in Persero II examines two possible approaches:
- “The two-dispute approach”, whereby the winning party refers solely to arbitration the narrow dispute relating to the other party’s failure to comply with the DAB decision, being a separate dispute in its own right, ie a breach of sub-clause 20.4, distinct from the underlying dispute; or
- “The one-dispute approach”, whereby the winning party refers to arbitration both the other party’s failure to comply with the DAB decision and the merits underlying the DAB decision at the same time, on the basis that the recalcitrant party’s breach of sub-clause 20.4 is “simply another aspect of that primary dispute”3.
Christopher Seppälä – legal advisor for the FIDIC Contracts Committee – in his detailed commentary of the Persero II decision4 – endorses the conclusion of the High Court that “the one-dispute approach best advances the objective of the Red Book’s security of payment regime”5.
For reasons that follow, the author respectfully disagrees with that conclusion, as this one-dispute approach would unnecessarily complicate
1 The views expressed herein are entirely those of the author and not necessarily those of the firm. The author is grateful to Estee Tan, Associate at Pinsent Masons LLP, for her comments on this paper.
2 Judgment of the High Court of Singapore dated 16 July 2014 (the “2014 High Court decision” or the “Persero II decision”) [2014] SGHC 146.
3 2014 High Court decision, paragraph 60.
4 Christopher Seppälä “Singapore contributes to a better understanding of the FIDIC Disputes Clause: the second Persero case” [2014] ICLR 4.
5 2014 High Court decision, paragraph 176.
Pt 1] Persero II
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