Understanding Unrelated Dispute: In a high-speed rail tunnel project, the Employer hires a Main Contractor (Track Contractor) to handle all track installation work. The Main Contractor then hires a Track Designer (Subcontractor) to design the track layout, including alignment, rail type, and other technical specifications. The smooth execution of the project depends on timely coordination between all parties involved, including civil engineering teams, designers, and installers.
Unrelated Dispute: Track Designer’s Internal Delay
Issue Arises
- The Track Designer (Subcontractor) is responsible for providing the track design and alignment specifications on time. However, due to internal resource issues, they fail to deliver the final design package as per the agreed schedule.
- This delay affects the planned track installation schedule, which depends on the timely completion of the design.
- The Main Contractor (Track Contractor) is frustrated because they cannot begin track installation without the finalized design. However, this problem has nothing to do with the Employer or the Main Contract. It is purely an issue between the Main Contractor and the Subcontractor.
- The Track Contractor faces scheduling conflicts, as their workforce and equipment were planned based on an assumed delivery timeline for the design. Rescheduling track installation can result in inefficiencies, additional mobilization costs, and potential penalties under the Main Contract if the delay cascades further.
Why This is an Unrelated Dispute
- The Employer is not involved in this issue because the problem originates from the Subcontractor’s internal delays in completing the design.
- The delay is not caused by any issue in the Main Contract (e.g., no site conditions, construction delays, or Employer-driven design changes affecting the Subcontractor’s ability to submit the design on time).
- The Employer has no obligations regarding this delay because it is strictly a problem within the Subcontract.
- Even though the delay affects the Main Contractor’s ability to proceed with track installation, the Employer is not required to intervene because the issue is confined to the Subcontractor’s failure to meet their contractual obligations.
Resolution Path
- The Main Contractor may demand compensation from the Subcontractor for late delivery of the design and any resulting delays.
- The Subcontractor might argue that the delay was caused by unforeseen technical challenges or lack of coordination within their own team.
- The Employer remains outside this dispute because the issue does not affect the Employer’s obligations under the Main Contract.
- If the delay results in financial losses for the Main Contractor, they may enforce contractual penalties or liquidated damages against the Subcontractor as per the terms of the Subcontract.
How This Can Become a Related Dispute
Issue Arises Due to Dependency on Other Parties
In some cases, the Track Designer (Subcontractor) depends on information from the Employer or another Main Contractor (such as the Civil Contractor) to complete their design. For example:
- The Employer is responsible for providing the final tunnel alignment and clearance dimensions, but delays in delivering this information cause the Track Designer to miss their own deadlines.
- The Civil Contractor is responsible for finalizing tunnel structural works, which include providing accurate placement of embedded track components, but their delay causes the Track Designer to adjust or hold back their design.
- Due to these dependencies, the Track Designer is unable to submit their work on time, delaying the Track Contractor’s installation schedule.
- The Track Designer may argue that they could not finalize the design because they were waiting on critical structural information from the Civil Contractor, which was necessary to determine rail bed gradients, load distribution, and embedded fixture placements.
- The Track Contractor may also argue that their schedule depended on a coordinated handover from the Civil Contractor, which was delayed, impacting the entire track installation timeline.
Why This Becomes a Related Dispute
- The delay no longer originates solely from the Track Designer but is linked to missing information from the Employer or the Civil Contractor.
- The Main Contractor (Track Contractor) now has a claim against the Employer for not providing necessary data on time.
- The Track Designer (Subcontractor) can argue that their delay is excusable because they were waiting for information outside their control.
- Since the delay originates from the Employer or another Main Contractor, it impacts the Main Contract and Subcontract, making it a Related Dispute.
- If the Civil Contractor failed to provide the necessary information on time, the Employer may need to mediate the dispute to avoid project-wide disruptions.
Resolution Path
- The Track Contractor may submit a claim to the Employer for time extensions or compensation due to the delay caused by missing information.
- If the claim is accepted, the Subcontractor may also receive relief through an extension of time or cost adjustments.
- If the Employer rejects the claim, the Main Contractor may still hold the Subcontractor accountable, leading to a dispute that must be resolved between them.
- The dispute resolution process may involve arbitration or adjudication to determine whether the Subcontractor should be excused for the delay.
- In some cases, the dispute may escalate further, requiring involvement from a dispute adjudication board (DAB) or external arbitration to determine responsibility and financial liability.
- The contractual chain may necessitate a “pass-through” claim mechanism, where the Subcontractor’s dispute is directly tied to the resolution of the Main Contractor’s claim against the Employer.
References
- FIDIC Yellow Book 2019 Conditions of Subcontract for Plant and Design-Build
- FIDIC Yellow Book 1999 Conditions of Contract for Plant and Design-Build
- Particular Conditions (PC) of FIDIC 2019 – Clause 20.6 Summary:
- If a dispute arises, either party can issue a Notice of Dispute.
- The dispute will be classified as either:
- Unrelated Dispute, handled under Sub-Clause 20.7.
- Related Dispute, handled under Sub-Clause 20.8.
- If unclear, the Contractor has 14 days to notify the Subcontractor if they believe it’s a Related Dispute. The Subcontractor has 7 days to object.
- If there is disagreement, a pre-arbitral referee will decide within 21 days.
- Regardless of classification, the Subcontractor must continue working while the dispute is resolved.
Key Takeaway
- If the Track Designer’s delay is caused by their own internal issues, it remains an Unrelated Dispute, affecting only the Main Contractor and the Subcontractor.
- If the delay originates from missing information from the Employer or another Main Contractor (such as the Civil Contractor), it becomes a Related Dispute because the issue stems from the Main Contract.
- Understanding whether a dispute is related or unrelated helps determine how it should be resolved and whether the Employer is involved in the claim process.
- Proper risk management and contract drafting are crucial in mitigating such disputes. Subcontracts should clearly define dependencies on external parties and establish fair mechanisms for time extensions and compensation in cases of related disputes.
This distinction between unrelated and related disputes is critical in high-value infrastructure projects, where project timelines and cost control depend on smooth interactions between multiple contracting parties.