For a number of years, the International Federation of Consulting Engineers ("FIDIC") has produced standard forms for international construction and engineering contracts. It has recently expanded its range of contracts by publishing a new Model Representative Agreement, colloquially known as the "Purple Book".
The Model Representative Agreement is intended to be used where a consulting firm (referred to as the "Consultant") appoints a representative (referred to as the "Representative") to perform certain services (referred to as the "Representative Services") on its behalf in a foreign country. The Representative Services might be general marketing and business development-related services or project-specific services, or both.
It may appear curious that FIDIC considered it necessary to complement its suite of construction and engineering- focused contracts with the relatively focused Model Representative Agreement. However, the continuing growth of the international construction market means that many consulting firms may be looking to promote themselves, and ultimately win and conduct work, in jurisdictions in which they have no presence or in which they may face difficulties in establishing a local presence. Such firms are likely to enter into arrangements with local firms for the latter to represent them and assist them in:
- identifying business opportunities;
- bidding for projects; and
- possibly, performing some services in connection with successful bids.
The Purple Book would be suitable for such arrangements.
In addition, FIDIC has included anti-corruption provisions in the Model Representative Agreement. These provisions are intended to assist a Consultant in ensuring that it complies with the anti-corruption legislation in its home jurisdiction, although they appear to have been drafted with the more onerous requirements of the UK Bribery Act in mind (as opposed to the more traditional, but still stringent, legislation which continues to apply in many jurisdictions in the West).
The Model Representative Agreement is a simple document, although this does not detract from its utility. Its main features (in its unamended form) are:
- The Consultant appoints the Representative to perform the Representative Services in a specific country for a fixed term.
- The Representative Services are divided into two parts: "Normal Representative Services", which relate to general business development services; and "Project-Specific Representative Services", which cover services to be performed in connection with specific projects. Of course, additional services may be added by the parties.
- The Representative is expressly stated not to be an agent of the Consultant.
- The Representative's remuneration is calculated by reference to the work done in connection with each project, up to a maximum percentage of the Consultant's total fees on that project. However, the Agreement includes a pay-when-paid clause, meaning that the Consultant is only obliged to pay the Representative when it is successful on a bid and subsequently paid by its client. Although there is provision for the Representative to be paid for work done in anticipation of a bid being accepted, such payments must then be deducted from future invoices.
- The Representative must comply with the Consultant's "integrity policy" and "code of conduct" (templates for which have been included by FIDIC). It is also required to comply with all applicable laws, is prohibited from offering any bribe or facilitation payment and is subject to various other anti-corruption provisions.
- The Representative must obtain the Consultant's permission before engaging any subcontractor or employee for the specific purpose of performing any of the Representative Services.
- The Representative must not act for any competitor of the Consultant or for its own benefit in connection with any specific project.
- Any dispute which cannot be resolved at a meeting held in good faith must be referred to mediation and then, if the mediation is unsuccessful, to ICC arbitration.
In conclusion, the new FIDIC Purple Book may be helpful for consulting firms seeking to appoint representatives in foreign markets. However, the remuneration structure and extensive anti-corruption provisions, which go beyond what is required in many jurisdictions, are unlikely to be acceptable to many potential representatives and may require significant amendment.