The International Federation of Consulting Engineers ("FIDIC") has recently produced a test edition of a new set of Conditions of Subcontract for Construction for Building and Engineering Works Designed by the Employer (the "Test Edition"). The new standard form is intended to be used with the FIDIC main contract Conditions (the Red Book) produced in 1999 (the "Main Contract"). This Test Edition has been put forward for comments with a view to producing a final edition in the near future.
This is the first subcontract to be produced by FIDIC since 1994 when FIDIC produced a subcontract for use with the old, 1987, edition of the FIDIC Red Book (the "1994 Edition") and has been written on the same basis as that edition in that the overall intention of the Subcontract is that the Subcontractor will assume the duties and obligations of the Contractor under the Main Contract that relate to the Subcontract Works. The Subcontract also includes pay-when-paid conditions although it recognises that in certain jurisdictions (including the UK) such conditions are not enforceable. Alternative Particular Conditions have therefore been added for parties to select in order to comply with local law.
We set out in the attached summary comments on some of the principal clauses in the General and Particular Conditions of the Test Edition. In some cases, there are clauses in the 1994 Edition which are not reproduced in the Test Edition and we also refer to these.
There will inevitably be some terms which will appear to subcontractors to present a substantial alteration to the previous risk allocation. Amongst these may be the fitness for purpose obligation is Sub-clause 4.1, the extended programming requirements in Sub-clause 8.4 and the pay- when- paid provision in sub-clause 14.6. It is likely that one of the areas where substantial negotiation will be expected is the cap on liability under Sub-clause 17.3. Subcontractors may also seek to obtain the ability to continue with their referral of a Subcontract dispute to the Subcontract Dispute Adjudication Board whilst the Main Contract Board is considering the same issue. This would, however, conflict with the overall "back to back" philosophy of the new Subcontract.