Blog
Blog » THE FIDIC IN HUNGARY – INDEPENDENCY AND IMPARTIALITY OF ENGINEER AND DB MEMBERS IN COURT PRACTICE
THE FIDIC IN HUNGARY – INDEPENDENCY AND IMPARTIALITY OF ENGINEER AND DB MEMBERS IN COURT PRACTICE
12 March 2019
To what extent shall the engineer be independent and impartial under FIDIC construction contracts? Are the same standards applicable to the members of the dispute board? Do they have an obligation of disclosure? We address these questions in the light of the Hungarian court practice.
Engineer: fairness but not independency
Is the Engineer required to be impartial and independent?
This was the main question in a dispute before the Court of Appeal of Budapest, where the Engineer company was fully owned by the Employer, and the Contractor was seeking for the invalidity of their service contract.
In the contractor’s views the Engineer should have been independent and impartial; it is a common requirement in construction business.
However, the FIDIC-based contract did not contain such requirements in relation with the Engineer, so the Court rejected the claim, and held that according to FIDIC, the legal disputes arising from the contractual relationship shall be decided by the Dispute Board, so the role of the Engineer does not include decision-making between the parties.
The Court determined that the central role of the Engineer in FIDIC contracts has transformed compared to the original terms and conditions, and now he does not have important competency in relation with legal disputes; he is not required to be independent.
The abovementioned transformation of the Engineer’s role also had an effect on the requirement of impartiality. The Engineer is basically employed and paid by the Employer; however, traditionally he had to be impartial if a dispute was arisen. This regulation was widely debated because of the practical controversies, so the FIDIC terms have changed and now “the Engineer shall make a fair determination”.
Dispute Board’s members: independency and impartiality
A similar question was disputed in relation with the members of the Dispute Board (DB) in another case before the Court of Appeal of Budapest.
The Contractor was seeking for the invalidity of the DB’s decision in a counterclaim, because the president of the DB was in personal and business relationship with the Employer, and the contractor was not officially notified about that. The Employer responded that every party knew about the nature of their relationship, so the official notification was not necessary.
However, the Court found that the president of the DB has to clarify his relationships before his nomination and shall be impartial and independent of the Employer, the Contractor and the Engineer according to the FIDIC terms and conditions.
The parties’ contract provided that every member shall promptly disclose any fact or circumstance which might appear inconsistent with his warranty and agreement of impartiality and independence. The Court stated that the parties’ knowledge of the relationship between a party and a DB member does not exempt the DB member from the obligation of proper disclosure.
Summary
These decisions reflect the different roles of the Engineer and the Dispute Resolution Board.
The FIDIC clearly provides that only the Dispute Board is authorized to make decisions in legal disputes, however, these disputes could be arisen from the activity of the Engineer. In practice it means that the members of the DB have to be independent and impartial, but these qualities are not expected from the Engineer who shall make “fair determination” of the circumstances.
-
CJEU DECISION IN A GDPR-RELATED CASE: DOES THE VIOLATION OF THE GDPR AUTOMATICALLY CONSTITUTE NON-MATERIAL DAMAGE?
Does the infringement of the data subjects’ rights by the controller give automatically rise to compensation? Can the controller be exempted from liability solely on the basis that the damage was the result of the fact that its employee did not comply with its instructions? What are decisive criteria to determine the amount of damages? In this article we analyse the fresh decision of the CJEU which addressed the previous questions.
Read more » -
HUNGARY – PERSONAL SCOPE EXTENSION OF JURISDICTION CLAUSE TO NON-SIGNATORY UNDER BRUSSELS IBIS
Does the principle of independence of the choice-of-court agreement require that parties shall expressly transfer the dispute resolution clause in case of transfer of the main contract? When can the personal scope of a jurisdiction agreement be extended to a non-signatory? A Hungarian appellate court decided upon these questions under the Brussels Ibis Regulation in a recent judgment
Read more » -
SETTING ASIDE ARBITRAL AWARDS IN HUNGARY
Given that there is no right of appeal in arbitration proceedings, it is important to be aware of what other legal remedies are available to you against an arbitral award. According to the Hungarian Arbitration Act, the parties may request the competent state court to set aside the award, which is a “mandatory” remedy, which cannot be waived by the parties in advance.
Read more »