“Understanding Clause 14.15: Navigating Multi-Currency Payments in FIDIC Contracts

General Overview:

Clause 14.15 in the FIDIC Yellow Book 1999 addresses the currencies in which payments under the contract are to be made. This clause is particularly relevant in international construction projects where multiple currencies might be involved, necessitating a clear and structured approach to financial transactions.

Key Components:

1. Currency Specification: The clause specifies that the Contract Price shall be paid in the currency or currencies named in the Appendix to Tender. This is crucial for setting clear expectations about the financial transactions in the contract.
2. Local and Foreign Currency Provisions:
   • If the Accepted Contract Amount is expressed only in Local Currency, the proportions or amounts of Local and Foreign Currencies, along with the fixed exchange rates, are as stated in the Appendix to Tender.
   • This provision ensures that the payment structure is clear and agreed upon by both parties, reducing the risk of disputes over currency issues.
3. Specific Payment Conditions:
   • Payments under various sub-clauses (like Provisional Sums and Adjustments for Changes in Legislation) are made in the applicable currencies and proportions.
   • This component of the clause provides guidance on how specific types of payments should be handled in terms of currency.
4. Damages and Other Payments:
   • The clause outlines how damages specified in the Appendix to Tender should be paid, ensuring that these are handled in a manner consistent with the agreed-upon currency arrangements.
   • It also covers other payments to the Employer by the Contractor, specifying the currency in which these should be made.
5. Balancing Excess Amounts:
   • If the Contractor owes more in a particular currency than what is due from the Employer, the Employer can recover this balance from payments in other currencies.
   • This part of the clause helps in balancing financial obligations and ensures fairness in the settlement of accounts.
6. Exchange Rates:
   • If no rates of exchange are stated in the Appendix to Tender, they are determined by the central bank of the Country as of the Base Date.
   • This provision is crucial for contracts involving multiple currencies, as it provides a standard method for determining exchange rates, reducing the risk of disputes.

When is This Clause Applicable?

• Clause 14.15 is applicable in contracts where payments are to be made in multiple currencies.
• It is particularly relevant in international contracts where different parties may prefer or require payments in different currencies.

Process Flow:

1. Contract Review: Initially, the contract documents, particularly the Appendix to Tender, are reviewed to identify the specified currencies for payment.
2. Payment Allocation: Based on the contract, payments are allocated in the specified currencies for different contract elements (like work done, damages, etc.).
3. Exchange Rate Determination: If required, exchange rates are determined as per the clause’s provisions.
4. Financial Transactions: Payments are then made according to the specified currencies and exchange rates.
5. Balancing Accounts: In cases where there are excess amounts in any currency, adjustments are made as per the clause.

Purpose and Implications:

Clause 14.15 of the FIDIC Yellow Book 1999 outlines the currencies in which the Contract Price is to be paid, as specified in the Appendix to Tender. This clause is crucial for managing the financial aspects of international contracts, where multiple currencies may be involved. It provides a clear framework for currency allocation, exchange rates, and payment methods, ensuring financial clarity and reducing currency-related risks.

Primary Aspects:

1. Currency Specification: Payments are made in the currency or currencies named in the Appendix to Tender.
2. Local and Foreign Currencies: If the Accepted Contract Amount is in Local Currency only, the proportions or amounts of Local and Foreign Currencies, along with fixed exchange rates, are as stated in the Appendix to Tender.
3. Payments and Deductions: Specific clauses detail how payments and deductions are to be made in different currencies.
4. Damages Payment: Damages specified in the Appendix to Tender are paid in the currencies and proportions stated therein.
5. Payments by the Contractor: Payments to the Employer by the Contractor are made in the currency in which the sum was expended by the Employer.
6. Excess Amounts: If the Contractor owes more in a particular currency than what is due from the Employer, the Employer can recover this balance from payments in other currencies.
7. Exchange Rates: If no rates are stated in the Appendix to Tender, the rates prevailing on the Base Date determined by the central bank of the Country are used.

Expert Opinion: Experts emphasize the importance of this clause in providing a structured approach to handling multi-currency transactions in international projects. It helps in mitigating risks associated with currency fluctuations and ensures that both parties have a clear understanding of the financial obligations in various currencies.

Interaction of Clause 14.15 with Other Clauses

1. Interaction with Sub-Clause 14.3 [Application for Interim Payment Certificates]:

• Direct Linkage: Clause 14.15 directly references sub-paragraphs (a) to (d) of Sub-Clause 14.3, specifying that payments and deductions under these sub-clauses should be made in the currencies and proportions outlined in Clause 14.15.
• Shared Effect: This interaction ensures that interim payments, including adjustments for changes in cost and legislation, are made in the agreed currencies, maintaining consistency and clarity in financial transactions.

2. Interaction with Sub-Clause 13.5 [Provisional Sums] and Sub-Clause 13.7 [Adjustments for Changes in Legislation]:

• Currency Allocation: Payments and deductions under these sub-clauses are to be made in the applicable currencies and proportions as per Clause 14.15.
• Harmonized Financial Management: The interaction facilitates the management of provisional sums and legislative adjustments in a manner that aligns with the overall currency provisions of the contract.

3. Interaction with Sub-Clause 14.2 [Advance Payment]:

• Advance Payment Adjustments: While Clause 14.15 does not directly reference Sub-Clause 14.2, the management of advance payments and their repayments would inherently follow the currency stipulations of Clause 14.15.
• Ensuring Consistency: This ensures that all financial transactions, including advance payments, are consistently managed in the specified currencies.

4. Interaction with Clause 20 [Claims, Disputes, and Arbitration]:

• Financial Claims and Disputes: Any financial claims or disputes arising under the contract would need to consider the currency provisions of Clause 14.15.
• Dispute Resolution Clarity: This interaction is crucial for resolving financial disputes, as it provides a clear basis for the currencies in which any settlements or awards should be made.

5. Interaction with Sub-Clause 14.10 [Statement at Completion] and Sub-Clause 14.11 [Application for Final Payment Certificate]:

• Final Settlements: These clauses, dealing with the final settlement and payment certification, would need to align with the currency provisions of Clause 14.15.
• Final Payment Consistency: The interaction ensures that the final settlement is made in accordance with the predetermined currency arrangements, avoiding confusion at the contract’s conclusion.

Main Points to Keep in Mind When Employing Clause 14.15 [Currencies of Payment]

1. Identify Specified Currencies: Understand the specific currencies named in the Appendix to Tender for payments. This is crucial for all financial transactions under the contract.
2. Proportions and Exchange Rates: Be aware of the proportions or amounts of Local and Foreign Currencies and the fixed rates of exchange, especially if they are stated in the Appendix to Tender.
3. Payments Under Specific Sub-Clauses: Recognize that payments and deductions under certain sub-clauses, such as Sub-Clause 13.5 [Provisional Sums] and Sub-Clause 13.7 [Adjustments for Changes in Legislation], are to be made in the applicable currencies and proportions as outlined in Clause 14.15.
4. Damages Payment Terms: Understand that payment of damages specified in the Appendix to Tender should be made in the currencies and proportions specified therein.
5. Recovery of Excess Amounts: Be aware that if any amount payable by the Contractor to the Employer in a particular currency exceeds the sum payable by the Employer to the Contractor in that currency, the Employer may recover the balance from sums payable in other currencies.
6. Base Date Exchange Rates: If no rates of exchange are stated in the Appendix to Tender, the rates prevailing on the Base Date, determined by the central bank of the Country, will be used.
7. Consistency in Financial Transactions: Ensure that all financial transactions, including interim and final payments, adhere to the currency stipulations of Clause 14.15 for consistency and clarity.
8. Contractual Alignment: All financial aspects of the contract should align with the currency provisions of Clause 14.15 to avoid discrepancies and misunderstandings.
9. Preparation for Currency Fluctuations: Be prepared for potential impacts due to currency fluctuations, especially in long-term projects where currency values can significantly change over time.
10. Contractual Compliance: Ensure strict compliance with the currency provisions to avoid financial disputes or contractual breaches.

Essential Factors in Implementing Clause 14.15 [Currencies of Payment]

1. Understanding Contractual Specifications: Thoroughly comprehend the currency specifications outlined in the Appendix to Tender. This includes knowing which currencies are to be used for different types of payments.
2. Adherence to Proportions and Exchange Rates: Strictly follow the proportions or amounts of Local and Foreign Currencies and the fixed rates of exchange as stated in the contract, particularly if specified in the Appendix to Tender.
3. Application of Correct Currency for Specific Payments: Apply the correct currency for payments and deductions under various sub-clauses, such as Sub-Clause 13.5 [Provisional Sums] and Sub-Clause 13.7 [Adjustments for Changes in Legislation].
4. Management of Damages Payments: Ensure that damages payments are made in the currencies and proportions specified in the Appendix to Tender.
5. Balancing and Recovery of Excess Amounts: Be capable of managing situations where the amount payable by the Contractor to the Employer in a particular currency exceeds what is payable by the Employer to the Contractor in that currency.
6. Utilization of Base Date Exchange Rates: If no rates of exchange are stated in the Appendix to Tender, use the rates prevailing on the Base Date as determined by the central bank of the Country.
7. Financial Planning and Risk Management: Plan financially for the project, taking into account potential currency fluctuations and their impact on project costs and payments.
8. Contractual Compliance: Ensure all financial transactions comply with the currency provisions of Clause 14.15 to avoid disputes or misunderstandings.

Sequence of Interactions Related to Clause 14.15

1. Contract Review: Initially, review the contract, focusing on the Appendix to Tender to identify the specified currencies for payments.
2. Establishment of Currency Proportions and Exchange Rates: Determine the proportions or amounts of Local and Foreign Currencies and establish the fixed rates of exchange as per the contract.
3. Application of Currencies in Payments: Apply the appropriate currencies for different types of payments, such as provisional sums, adjustments for changes in legislation, and other deductions as per the relevant sub-clauses.
4. Management of Damages Payments: When damages are to be paid, ensure they are made in the specified currencies and proportions.
5. Recovery of Excess Amounts: In cases where there’s an imbalance in the amounts payable between the Contractor and Employer in a particular currency, manage the recovery of excess amounts from other currency payments.
6. Reference to Base Date Exchange Rates: If no specific rates of exchange are mentioned, refer to the rates prevailing on the Base Date for currency conversions.
7. Ongoing Financial Management: Throughout the project, manage financial transactions in accordance with the currency stipulations of Clause 14.15, adjusting for any currency fluctuations.
8. Final Reconciliation and Payments: At the project’s conclusion, ensure that all final payments and reconciliations adhere to the currency requirements of the contract.

Flowchart

Detailed Explanation:

1. Start: Review Contract for Currency Specifications:
   • Begin by reviewing the contract to identify the specified currencies for payment and any related conditions.
2. Determine Currency Proportions and Exchange Rates:
   • Establish the proportions of local and foreign currencies and determine the exchange rates, either as stated in the Appendix to Tender or as agreed by both parties.
3. Apply Correct Currency for Payments and Deductions:
   • Ensure that payments and deductions are made in the correct currencies and proportions as per the contract terms.
4. Manage Damages Payments in Specified Currencies:
   • Handle payments related to damages in the currencies and proportions specified in the Appendix to Tender.
5. Recover Excess Amounts in Different Currencies:
   • If the amount payable by the Contractor in a specific currency exceeds what is payable by the Employer in that currency, the Employer may recover the balance from sums payable in other currencies.
6. Use Base Date Exchange Rates if Not Specified:
   • If no exchange rates are specified in the contract, use the rates prevailing on the Base Date as determined by the central bank of the Country.
7. Ongoing Financial Management and Compliance:
   • Continuously manage financial aspects in compliance with the contract’s currency requirements.
8. Final Reconciliation and Payments in Contract Currencies:
   • Conduct final reconciliation and ensure that all payments are made in the contract currencies.
9. End:
   • The process concludes once all financial transactions are completed in accordance with the contract’s currency specifications.

In Clause 14.15 [Currencies of Payment] of the FIDIC Yellow Book 1999, the focus is primarily on specifying the currencies and proportions for payments under the contract. The clause outlines clear guidelines and conditions for currency usage, rather than presenting decision points. Here’s a breakdown of the key aspects:

1. Specification of Currencies: The clause details how payments should be made in the currencies named in the Appendix to Tender. This is a straightforward specification, not a decision-making point.
2. Proportions and Exchange Rates: It mentions the proportions or amounts of local and foreign currencies and the exchange rates to be used. These are typically predefined in the contract and do not involve active decision-making during the contract execution.
3. Payment of Damages and Other Payments: The clause specifies how damages and other payments to the Employer by the Contractor should be made. Again, these are based on predefined terms and do not involve decision-making during the process.
4. Recovery of Excess Amounts: It allows the Employer to recover excess amounts in a particular currency from payments in other currencies. While this could involve some decision-making, it’s more about applying the contract terms rather than making choices.
5. Base Date Exchange Rates: If no rates are specified, the clause directs the use of rates prevailing on the Base Date. This is a fallback provision and doesn’t involve decision-making.

This diagram details the sequence of interactions related to Clause 14.15, focusing on the roles of the Contractor, Engineer, and Employer. It outlines the steps from the submission of the Statement for Interim Payment to the final settlement of payment in the specified currencies. The diagram also includes the process for issuing the Final Payment Certificate and the final payment settlement.

Structured Checklists

1. Checklist for Proficient Execution and Deployment of Clause 14.15

Task	Description	Responsible Party	Status (✓/✗)
Review Appendix to Tender	Confirm currency details as per contract	Contractor
Determine Payment Proportions	Establish proportions for Local and Foreign Currencies	Contractor
Verify Fixed Rates of Exchange	Check rates against those stated in the Appendix or central bank rates	Contractor
Payment Allocation	Allocate payments under Sub-Clauses 13.5 and 13.7 in specified currencies	Contractor
Damages Payment	Ensure payment of damages in specified currencies and proportions	Contractor
Employer Expenses	Pay Employer in currency of expenditure or as agreed	Contractor
Balance Recovery	If applicable, recover excess amounts from other currency payments	Employer
Record Keeping	Maintain detailed records of all currency transactions	Contractor

2. Checklist for Applying and Overseeing Clause 14.15

Task	Description	Responsible Party	Status (✓/✗)
Contract Review	Ensure Clause 14.15 is in line with contract terms	Engineer
Monitoring Payments	Oversee payment distributions as per contract	Engineer
Exchange Rate Verification	Confirm exchange rates are as per Appendix or central bank	Engineer
Compliance Check	Ensure Contractor’s compliance with currency allocations	Engineer
Financial Auditing	Regular audits of currency transactions	Engineer
Dispute Resolution	Address any discrepancies in currency payments	Engineer

3. Checklist to Guide and Monitor the Execution of Clause 14.15

Task	Description	Responsible Party	Status (✓/✗)
Initial Contract Review	Confirm currency details in contract	Contractor & Engineer
Regular Monitoring	Ongoing checks of currency allocations in payments	Contractor & Engineer
Documentation	Keep accurate records of all currency transactions	Contractor
Discrepancy Management	Address and resolve any currency-related issues	Contractor & Engineer
Final Settlement Review	Ensure final payment is in accordance with Clause 14.15	Contractor & Engineer
Audit Compliance	Periodic audits for adherence to the clause	Engineer