Purpose
The clause aims to encourage both parties to resolve disputes amicably, avoiding the need for arbitration. Various methods such as direct negotiation, conciliation, and mediation are suggested.
Notice of Dissatisfaction
If a notice of dissatisfaction has been given under Sub-Clause 20.4, both parties should attempt to settle the dispute amicably before proceeding to arbitration.
Implications for Parties
Contractors are likely to be more flexible in negotiations, while Employers, especially those in public service, may be more constrained due to responsibilities concerning public funds.
Confidentiality
The success of amicable settlement procedures often depends on confidentiality and mutual acceptance of the procedure by both parties.
Time Frame
Parties have 56 days after a notice of dissatisfaction is given to attempt an amicable settlement.
Procedure
The clause does not specify a procedure for amicable settlement, leaving it to the parties to arrange their negotiations.
Documentation
It’s crucial to ensure that any discussions between the parties are clearly referenced to Clause 20.5 and that detailed records are maintained.
Next Steps
If no attempt at amicable settlement is made within the 56-day period, arbitration proceedings may commence.
Real-World Instances and Case Studies Concerning Clause 20.5 Amicable Settlement
1. The Courtesy Trap – FIDIC’s Sub-Clause 20.5
This case study discusses the intricacies of Clause 20.5 Amicable Settlement and how it encourages parties to resolve disputes amicably, possibly through direct negotiation, conciliation, mediation, or other forms of alternative dispute resolution. It emphasizes the importance of maintaining detailed records of any discussions between the parties. Read more
2. The Gap in Sub-Clause 20
This study focuses on the complexity of the dispute resolution procedure in Clause 20 of the 1999 FIDIC contracts. It suggests that understanding the clause is easier when using flow charts, implying that Clause 20.5 is a part of a larger, intricate system. Read more
3. FIDIC’s Sub-Clause 20.5 – A Condition Precedent to Arbitration
This article discusses the legal implications of Clause 20.5, particularly how it serves as a condition precedent to arbitration. It notes that the clause does not specify the consequences of failing to negotiate for 56 days, leaving it open to interpretation. Read more
4. The 2017 FIDIC Dispute Resolution Procedure
While this study primarily focuses on the 2017 FIDIC Yellow Book, it provides insights into how Clause 20.5 has evolved over time. It compares the clause’s equivalent in the 1999 and 2017 versions, highlighting the role of the Dispute Adjudication Board (DAB) in amicable settlements. Read more
5. J Murphy & Sons Ltd v Beckton Energy Ltd
This case involves a heavily amended FIDIC Yellow Book 1999 and discusses how Clause 20.5 was applied in a specific contractual context. It serves as a cautionary tale for parties considering amending standard FIDIC clauses. Read more
These case studies offer a diverse range of perspectives on Clause 20.5 Amicable Settlement, from its legal implications to its practical applications in various contractual contexts.
Flowchart
Detailed Explanation of the Dispute Resolution Process Flowchart
- Start: Dispute Arises
- Overview: The process is initiated when a conflict or disagreement surfaces between parties involved in a project. This could be related to any aspect of the project, such as contractual obligations, work quality, timelines, etc.
- Importance: Recognizing the onset of a dispute is crucial for timely and effective resolution.
- Identify Dispute
- Overview: Parties involved acknowledge and clearly define the nature of the dispute. This step involves understanding the root cause and the specific issues at hand.
- Importance: Proper identification is key to addressing the dispute effectively and guides the choice of resolution method.
- Refer to DAB
- Overview: The dispute is formally referred to the Dispute Adjudication Board (DAB), a neutral body established to resolve such conflicts.
- Importance: The DAB serves as an impartial entity to assess the dispute and make a decision, which helps prevent escalation.
- Unsatisfied with DAB Decision?
- Overview: After the DAB renders a decision, parties assess their satisfaction with the outcome.
- Decision Points:
- Yes (Unsatisfied): Move to invoke Clause 20.5 for further resolution.
- No (Satisfied): Accept the DAB’s decision and implement it, concluding the process.
- Invoke Clause 20.5
- Overview: If either party is dissatisfied with the DAB’s decision, Clause 20.5 is invoked, which calls for an attempt at an amicable settlement.
- Importance: This clause provides an opportunity for the parties to resolve their differences through negotiation, avoiding more formal dispute mechanisms.
- Negotiate for 56 Days
- Overview: Parties engage in negotiations for a period of 56 days. This period is aimed at finding a mutually acceptable solution.
- Importance: This timeframe allows for thorough discussions and deliberations to reach an amicable agreement.
- Reach Agreement?
- Overview: At the end of the negotiation period, parties evaluate whether they have reached a satisfactory agreement.
- Decision Points:
- Yes (Agreement Reached): The agreement is implemented, and the process ends.
- No (No Agreement): The dispute moves to arbitration for resolution.
- Implement Agreement or Proceed to Arbitration
- Overview: Depending on the outcome of negotiations, the parties either implement the agreed-upon solution or proceed to arbitration.
- Importance: This step ensures that the dispute is resolved either through mutual consent or through a formal arbitration process.
- End
- Overview: The process concludes, either with the implementation of a mutually agreed solution or the initiation of arbitration proceedings.
- Importance: This final step marks the closure of the dispute resolution process, allowing the parties to move forward, either by continuing their contractual relationship or by seeking a formal resolution through arbitration.
Sample Letters
Scenario 1: Initiating Amicable Settlement Process
Subject: Initiation of Amicable Settlement Process Under Clause 20.5
Dear [Engineer’s Name],
We refer to the Dispute Adjudication Board’s decision dated [Date] concerning [Dispute Subject]. As we are not satisfied with the decision, we would like to invoke Clause 20.5 Amicable Settlement as per the FIDIC Yellow Book 1999.
We propose to meet on [Proposed Date] at [Location] to discuss and hopefully resolve this matter amicably. Kindly confirm your availability.
Best regards, [Your Name] [Your Position]
Scenario 2: Confirming Agreement Reached
Subject: Confirmation of Agreement Reached Under Clause 20.5 Amicable Settlement
Dear [Engineer’s Name],
We are pleased to confirm that an agreement has been reached during our meeting on [Date] under Clause 20.5 Amicable Settlement. We will proceed with the agreed actions by [Agreed Deadline].
Best regards, [Your Name] [Your Position]
Scenario 3: Proceeding to Arbitration
Subject: Proceeding to Arbitration Following Unsuccessful Amicable Settlement Under Clause 20.5
Dear [Engineer’s Name],
Despite our best efforts, we were unable to reach an amicable settlement during our meeting on [Date]. As per Clause 20.5 Amicable Settlement, we will now proceed to arbitration.
Best regards, [Your Name] [Your Position]
Checklists
Checklist 1: Proficient Execution and Deployment of Clause 20.5
| Step | Action | Responsible Party | Deadline | Notes |
|---|---|---|---|---|
| 1 | Review DAB Decision | Contractor/Engineer | ASAP after DAB Decision | Ensure you understand the DAB’s findings. |
| 2 | Decide to Invoke Clause 20.5 | Contractor/Engineer | Within 28 days of DAB Decision | Make a formal decision to proceed with amicable settlement. |
| 3 | Notify Other Party | Contractor/Engineer | Within 7 days of Decision | Send a formal letter invoking Clause 20.5. |
| 4 | Schedule Meeting | Contractor/Engineer | Within 14 days of Notification | Agree on a date, time, and location. |
| 5 | Prepare for Meeting | Contractor/Engineer | Before Meeting | Gather all relevant documents and prepare arguments. |
| 6 | Conduct Meeting | Contractor/Engineer | As Scheduled | Aim for an amicable resolution. |
| 7 | Document Outcome | Contractor/Engineer | Immediately after Meeting | Record any agreements or next steps. |
Checklist 2: Applying and Overseeing Clause 20.5
| Step | Action | Responsible Party | Deadline | Notes |
|---|---|---|---|---|
| 1 | Monitor DAB Decisions | Contractor/Engineer | Ongoing | Keep track of all DAB decisions that may require amicable settlement. |
| 2 | Assess Feasibility | Contractor/Engineer | After Each DAB Decision | Evaluate if Clause 20.5 is appropriate. |
| 3 | Consult Legal Team | Contractor/Engineer | Before Invoking Clause | Ensure legal compliance and strategy. |
| 4 | Follow Procedure | Contractor/Engineer | During Process | Adhere to the steps outlined in Clause 20.5. |
| 5 | Review Outcomes | Contractor/Engineer | After Each Settlement | Analyze the effectiveness and fairness of the settlement. |
Checklist 3: Guide and Monitor the Execution of Clause 20.5
| Step | Action | Responsible Party | Deadline | Notes |
|---|---|---|---|---|
| 1 | Initiate Clause 20.5 | Contractor/Engineer | As Needed | Start the process by notifying the other party. |
| 2 | Set Agenda for Meeting | Contractor/Engineer | Before Meeting | Clearly outline discussion points. |
| 3 | Assign Mediator (Optional) | Contractor/Engineer | Before Meeting | Decide if a neutral third party is needed. |
| 4 | Execute Meeting | Contractor/Engineer | As Scheduled | Conduct the meeting and strive for resolution. |
| 5 | Monitor Timelines | Contractor/Engineer | Ongoing | Ensure all deadlines are met. |
| 6 | Document and File | Contractor/Engineer | After Process | Keep records of all communications and outcomes. |
FAQ’s
What is Clause 20.5 Amicable Settlement?
Clause 20.5 Amicable Settlement is a provision in the FIDIC Yellow Book 1999 that outlines the procedure for resolving disputes amicably between the Contractor and the Employer. This clause is invoked if either party is dissatisfied with the decision of the Dispute Adjudication Board (DAB).
When Can Clause 20.5 Be Invoked?
This clause can be invoked within 28 days after receiving the DAB’s decision. If either party wishes to proceed with amicable settlement, they must notify the other party in writing.
What is the Timeframe for Amicable Settlement?
Once Clause 20.5 is invoked, the parties have 56 days to negotiate and attempt to reach an amicable settlement. If no agreement is reached within this period, either party may proceed to arbitration.
What Happens During the 56-Day Period?
During this period, the parties usually schedule meetings to discuss the dispute in detail. They may also involve legal advisors or mediators to facilitate the negotiation process.
Can Clause 20.5 Be Skipped?
No, Clause 20.5 is a mandatory step before proceeding to arbitration, unless both parties mutually agree to waive this requirement.
What Should Be Documented During the Amicable Settlement Process?
It’s crucial to document all communications, offers, counteroffers, and any agreements reached. This documentation may be referred to in subsequent arbitration or legal proceedings.
What Happens if an Agreement is Reached?
If an agreement is reached, it should be documented and signed by both parties. The agreed actions are then implemented according to the terms of the agreement.
What Happens if No Agreement is Reached?
If no agreement is reached within the 56-day period, either party has the right to proceed to arbitration to resolve the dispute.
Can the 56-Day Period Be Extended?
The 56-day period can only be extended by mutual agreement between the parties involved.
How Does Clause 20.5 Interact with Other Clauses?
Clause 20.5 is often closely related to other clauses dealing with dispute resolution, such as Clause 20.4 (DAB’s Decision) and Clause 20.6 (Arbitration).
Additional Frequently Asked Questions (FAQs)
What is an arbitration agreement?
An arbitration agreement is a legal contract between two or more parties agreeing to resolve any disputes through arbitration rather than through litigation in court. This agreement can be a standalone contract or a clause within a larger contract. It specifies the rules, venue, and manner in which the arbitration will be conducted, and it is generally binding on all parties involved.
What is the difference between mediation and arbitration?
Both mediation and arbitration are forms of alternative dispute resolution, but they serve different purposes and have different implications:
Mediation: In mediation, a neutral third party, known as a mediator, facilitates a discussion between the disputing parties to help them reach a mutually agreeable solution. The mediator does not make a decision for the parties but rather assists them in negotiation. Mediation is generally non-binding unless the parties agree to a settlement.
Arbitration: In arbitration, a neutral third party, known as an arbitrator, hears the evidence and arguments presented by the disputing parties and makes a decision. Unlike mediation, arbitration is usually binding, and the arbitrator’s decision is enforceable by law.
What is binding arbitration?
Binding arbitration is a form of arbitration where the decision made by the arbitrator is final and legally binding on all parties involved. This means that the parties waive their right to a court trial and agree to abide by the arbitrator’s decision. The decision can be enforced in a court of law if necessary.
What is the difference between arbitration and mediation?
While both are alternative dispute resolution methods, the key difference lies in the role of the third-party facilitator and the binding nature of the decision:
Arbitration: The arbitrator makes a binding decision based on the evidence and arguments presented.
Mediation: The mediator facilitates discussion and negotiation but does not make a binding decision.
What is an arbitration clause?
An arbitration clause is a section within a contract that specifies that any disputes arising out of the contract will be resolved through arbitration rather than litigation. This clause outlines the rules, venue, and procedures that will be followed in the event of a dispute.
What is arbitration in law?
In law, arbitration is a legal technique for resolving disputes outside the court system. Parties involved in a dispute present their case to a neutral third party, known as an arbitrator, who then makes a decision that is usually binding. Arbitration is often faster, less formal, and less expensive than litigation.
