Stephanie Balsys presentation. Networking that was made jointly by DRBF and Artyushenko & Partners law firm (Kazakhstan) in Almaty (Kazakhstan) - DAB in Construction, April 25, 2018. Details are here https://a-p.legal/en/2018/05/01/report-on-our-networking-on-april-25-2018/

1. DB Decisions: enforcement internationally
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Stephanie Balsys
April 2018

2. 2
Agenda
1. DB determinations
• types
• nature
2. Enforceability
• Practicalities
• Interim stage
• Arbitral award stage
• Basis for enforcement (general)
3. Treatment of DBs and DB decisions around the world
4. Lessons
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3. DB determinations
3
Types
• Recommendation
• Decision
Nature
• Binding and final
• Binding and not final / “interim” or “provisionally” binding
• Principle: “pay now, argue later”
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4. Practicalities: interim stage
4
DB decision in your favour but counterparty is non-compliant? What next?
• Check dispute resolution clause: arbitration clause or jurisdiction of the courts?
• Courts can step in and order specific performance of obligation to comply
• Commonly, arbitration clause (FIDIC)
• Arbitral tribunals may not have jurisdiction to order specific performance
• Arbitral tribunal cannot re-open the merits of a DB decision at interim stage
• At final hearing it can
• Breach of contract claim and / or specific enforcement?
• Irreparable harm / financial inconvenience?
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5. Practicalities: interim stage
5
Facing an arbitration claim to enforce a DB decision? How can you resist
enforcement?
• Lack of jurisdiction of the tribunal (procedural breach / manifest error)
• Breach of natural justice?
• Stay pending final hearing? -
(1) a “good arguable case” that DB decision is wrong; and
(2) prima facie case that paying party will be unable to repay, if tribunal’s interim award
is later reversed
• As an alternative: request that any payment made is paid into escrow / court
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6. Practicalities: arbitral award stage
6
Arbitral award in your favour? What next?
• Seek enforcement in local courts
• “New York Convention” states – 159 states incl. Kazakhstan,
Russia, UK, America, France, Italy, Germany, Uzbekistan,
Ukraine…
• Some legal regimes will not give effect to DB decisions or to
arbitral awards based on DB decisions
• Awards labelled as “interim” are not enforceable in several
jurisdictions
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7. General: basis for enforcement
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Jurisdiction of the tribunal
• Pursuant to contract
• Arbitral terms of reference
Power of the tribunal
• Local / procedural law
• Does tribunal have power to order the remedy sought?
• Applicable law
• Is the remedy sought available under the law of the contract?
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8. Historic difficulties
8
• Uncertainty in courts and tribunals re: nature of DB and DB decisions
• Results broadly divided:
• Refusal to enforce “binding and not-final” decisions (Romania and UAE)
• Enforcement of DB decisions whether “final and binding” or “binding and not-
final” (Singapore and South African courts)
• Other approaches:
• Referral to DB is a pre-condition of arbitrating (English court and Switzerland)
• Persuasive nature of DB decisions (English court, A v B)
• DB can refuse to permit a party’s referral of a DB decision to arbitration, court
will not step in (Namibia)
• Non-compliance with DB decision is / is not referable to arbitration (Singapore
court)
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9. Around the world
9
• South Africa
Tubular Holdings (Pty) Ltd v DBT Technologies (Pty) Ltd (3 May 2013)
Esor Africa (Pty) v Bombela Civils Joint Venture (Pty) Ltd (12 February 2013)
• United Arab Emirates
Dubai Court of Cassation, Petition No. 274 of 2013, dated 19 January 2014
• ICC Case No 10619
ICC Bulletin Vol 19/No 2 2008 (2009), at 85 to 91
• Singapore
Persero 2011 (SHC); July 2014 (SCA); 2015 (SCA)
• Namibia
Roads Authority v. Kuchling (A 188/2015) [2016] NAHCMD 32 (22 February 2016)
• Romania
January 2017
• England
Peterborough City Council v Enterprise Managed Services Ltd [2014] EWCA 3193 (TCC); A v. B (SM Burton)
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10. FIDIC 1999: “Mind the Gap”
10
“FIDIC cl. 20.4 to 20.7:
"...what has been described as 'the gap' in those sub-clauses, which arises
when the DAB has made a decision and one party has given a notice of
dissatisfaction - with the result that the DAB's decision, whilst binding, is
not final. The problem then is that if the unsuccessful party refuses to
comply with the decision of the DAB, as it is required to do by sub-clause
20.4.4, the only remedy (it is said) available to the other party is to refer the
dispute occasioned by the refusal to comply to yet another adjudication. This
can have the effect, [it is] submitted, that the party in default can embark on a
course of persistent non-compliance with DAB decisions and thereby deprive
the other of any effective remedy.“
Sir A Edwards-Stuart, Peterborough
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11. What does FIDIC say?
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• FIDIC 1 April 2013 Guidance Memorandum:
“International arbitral tribunals have been divided over whether, in the event of a
failure to comply with a DAB decision …. Which is “binding” but not “final”, the failure
itself may be referred to arbitration without Sub-clause 20.4 [Obtaining Dispute
Adjudication Board’s Decision] and Sub-clause 20.5 [Amicable Settlement] being
applicable to the reference…”
The recommendation:
(1) include wording making provision for security where payment due
(2) include express ability to refer non-compliance directly to arbitration
• FIDIC Suite 2017: avoids difficulties
“The decision shall be binding on both Parties, who shall promptly comply with it
whether or not a Party gives a NOD [notice of dissatisfaction] with respect to
such decision under the Sub-Clause”
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12. Lessons
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• Check which terms are incorporated: how do they provide for
enforceability? Should drafting be supplemented?
• Check dispute resolution clause (court / arbitration?)
• Check choice of law: don’t underestimate importance of local law.
• Persero (2015) gives strong guidance but note there is no coherent
international body of opinion re: enforceability of DB decisions.
• Under certain types of contract (pre-2017 FIDIC) there can be a
highly complex legal argument (“the Gap”) re: enforceability of DB
decisions – but note FIDIC 2017 suite.
• Generally, in principle (and subject to local law), DB decisions can be
enforceable by arbitral awards even if a NoD has been served.
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13. Questions
13
Stephanie Balsys
Stephanie.balsys@withersworldwide.com
+44 (0) 207 597 6370
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14. Our firm
14
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15. Withers was founded in
1896. We have been
trusted advisors to
successful people and
businesses with complex
legal needs for over a
hundred years, in good
times and bad.
160+1000+
Firm founded People Partners
1896 53
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Since 1896 we have been
trusted advisors to successful
people and businesses with
complex legal needs, in good
times and bad.
We champion our clients'
interests, locally and globally,
from offices across the US,
Europe and Asia-Pacific. We
are proud to help many of our
clients use their success to
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Our locations
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