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Romanian government approves new mandatory FIDIC conditions for Romanian infrastructure projects

1st March, 2018, By : Cristina Popescu, Source : C/M/S/ Law-Now, http://www.cms-lawnow.com/

 

The Romanian government recently issued Decision no. 1/2018 (the “Decision”) approving the short form agreement as well as the general and specific conditions (the “Model Agreement”) to be used by contracting authorities in Romania for procurement of works or design and works.

Previous model agreements, issued by the Romanian Ministry of Transportation in Order 600, generated widespread criticism among national and international contractors working in Romania and deterred international contractors from bidding on tenders organised under Order 600. As a result, the European Commission requested Romanian authorities to reconsider Order 600 in order to be granted European financing for infrastructure projects.

 

The Model Agreement is mandatory for construction or design and construction projects, valued at over EUR 5m, funded from public sources. In effect, the Model Agreement is akin to a significantly amended FIDIC Red Book 1987 agreement.

Bidders in public procurement procedures will not have the option of amending the Model Agreement. Contracting authorities are also only allowed to make amendments on fewer than 10 of the Model Agreement’s sub-clauses. Significant changes include:

Payment terms

The Model Agreement stipulates a 30-day payment term starting from the issuance of the payment certificate by the Engineer – half the payment term provided in Order 600.

Engineer

The Model Agreement does not specifically provide for the independence of the Engineer. Moreover, the definition of the Engineer allows the Engineer to be an employee of the beneficiary. The Engineer is granted authority to settle parties’ claims and it is bound to issue a decision allowing or dismissing the claim “in principle” within 30 days from the receipt of a fully documented claim. After a further 30-day period (including 15 days of attempts  to amicably settle the dispute) the Engineer must issue a final decision. Parties have 10 days to submit a notice of dissatisfaction.

Arbitration

The Model Agreement does not provide for a Dispute Adjudication Board, but leaves room for mediation. It also provides a 90-day cooling off period before the dispute is referred to arbitration.

All disputes will be resolved by the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania.

The seat of arbitration will be Bucharest and the arbitration will be conducted in Romanian.

The current arbitration clause is regarded as an improvement on the previous one, which had referred all disputes to administrative courts in Romania which are notoriously slow and overloaded.

Transitional provisions

Despite replacing Order 600, the Decision does not repeal it; the Decision only applies to newly approved/launched procurement projects. Order 600 will continue to apply to some major infrastructure projects that were launched under its purview

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