Between Stability and Bias in the Field of Construction and Infrastructure in Romania

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Authors: Razvan Vlad and Horia Radulescu

“A judge…is easy to be had, but to get an impartial judge, is a thing so difficult,” Margaret Cavendish

Almost two years have passed since the infrastructure and construction field in Romania became acquainted with Government Decision no. 1/10.01.2018 (“GD 1/2018”), which approved the general and special conditions for certain categories of public/sectorial procurement contracts (i.e. the values of which exceed EUR 5 million and which were tendered after January 11, 2018) related to publicly funded investment objectives.

Under the former legislation (i.e. Government Decision no. 1405/2010), the structure of the contracts was FIDIC based but, due to the evolution of the practice (as acknowledged by the contracting authorities), the final clauses significantly departed from such rules, at least in terms of procedural aspects.

As a result, the new contract requirements (the “New Contract”), which were approved by means of GD 1/2018, had, at the time of their enactment, the primary purpose of stabilizing some aspects of uncertainty, which allegedly seemed to affect the contracts concluded between employers and contractors under the FIDIC rules.

Even though one might appreciate that such stability has been reached, due to the fact that GD 1/2018 provides that only a limited number of clauses might be amended, thus shortening the negotiation period and theoretically rendering the execution of the contract easier and more accessible; in fact, such improvements were significantly overshadowed by the removal of the DAB procedure from the contractual mechanism for solving disputes and by transferring to the Supervisor (the former Engineer from the FIDIC contracts) the attributes and role that such procedure held under the former legislation.

Nevertheless, the taking over of the attributes of the DAB procedure by the Supervisor does not represent the only major way in which the New Contract departs from the provisions of the old FIDIC rules in respect to the claims/dispute resolution procedure. The New Contract also introduces a more rigid approach with respect to the procedure for filing claims.

Therefore, either of the parties to an infrastructure/construction contract concluded in accordance with the provisions of GD 1/2018 is subject to a 30-day period for notifying its claim to the other party, term which is calculated as of the occurrence of the event on which the claim is based (in comparison with the provisions of the FIDIC rules, where the Contractor was required to file the claim within maximum 28 days from having become aware of the event giving rise to its claim).

After the submission and final substantiation of such claim, the Supervisor may then analyze the grounds of the claim, namely verify whether: (i) the notification, substantiation and content of the claim comply with the contractual provisions; and (ii) the sub-clauses specified in the claim have any contractual basis. Depending upon the fulfilment of both criteria mentioned above, the Supervisor may either admit (case in which the Supervisor shall also render a decision) or reject in principle the claim. Irrespective of the measures undertaken by the Supervisor, either party may file a notice of dissatisfaction with respect to such measure, followed by mediation and arbitration, in accordance with Sub-Clause 70 [Dispute and arbitration] of the New Contract.

Even if, at a first glance, it seems that the New Contract aims at bringing efficiency and celerity to the procedure of solving disputes between employers and contractors by eliminating the DAB procedure from the old FIDIC rules, hence solving beforehand a pressing issue that  usually burdens infrastructure/construction contracts (i.e. long lasting and financially burdensome dispute resolution), the realistic result is reflected in the alteration of the contractual balance and it may lead to weakening, to a considerable extent, the contractor’s position.

In such respect, under the provisions of GD 1/2018, contractors have not hesitated to question and draw the attention to the fact that they have been deprived of an objective contractual mechanism (i.e., the DAB procedure) which used to act as an impartial filter between the designation of the Engineer and the dispute and arbitration phase.

Note should be made that the member/members of the DAB were, in fact, individuals who were outside the contractual performance and agreed by both parties (contractor and employer) prior to / during the execution of the contract to decide upon one or several  disputes; hence, both parties worked under the correct assumption that the adjudicator/s is/are impartial. Obviously, this is not the case of the Supervisor, who is still subordinated to the Employer in all contractual matters save for rendering its decision.

To such extent, it should be underlined that in its capacity as decision taker, the Supervisor should meet the highest standards of objectivity and professionalism. However, by analyzing the provisions of GD 1/2018, it appears that in reality, supervisors are notably intertwined with, if not fully subordinated to, the employers mainly because supervisors are defined under the New Contract as “the economic operator or team within the Employer, designated by the Employer”. Therefore, it would be rather difficult to imagine a Supervisor who strips off any duties towards the Employer and, as a result, renders a decision with outmost impartiality by also considering the position and arguments of the contractor.

For such reasons, one could question, at least at a theoretical level, the fairness and accuracy with which the Supervisor fulfills its role in deciding whether the claims brought before it by the contractor (which, generally, are claims alleging Employer’s failure or default in performing the contract) have any legal grounds.

Therefore and finally, considering the fact that only few contracts have been executed under the provisions of GD 1/2018, or at least, because the number of disputes arising out of such agreements is limited, for the time being it may be concluded that only time and the evolution of the practice will say whether the removal of the DAB procedure was a step forward in the development of the infrastructure/construction field in Romania or the Romanian legislator took a haphazarded leap of faith which will create, rather than solve, future problems arising out of infrastructure related contracts.

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