FIDIC AGREEMENTS

Part One

Discussing the development of the construction sector as an economic pillar in the Republic of North Macedonia is inherently complex due to its notable fluctuations. Despite this, there appears to be a consistent upward trajectory in this sector, with enduring and unwavering interest demonstrated by the exploration of new avenues for construction, both within the capital city and across the wider state territory.

An intriguing aspect of deliberation concerning construction as an endeavor is the formal and practical regulation of relationships among the entities involved in this field.

Macedonian legislation boasts an effective Building Law, treated as a comprehensive legal framework, encompassing vital aspects of the industry and offering clarity in its application. However, the construction contract, as a business-legal arrangement, falls under the purview of the Law on Obligations. This categorizes it as a Service Agreement, explicitly designating one party, namely the Contractor, and mandating a written form. While the legislator provides overarching regulations and underscores crucial elements of the construction contract, particular emphasis is placed on the responsibilities of various stakeholders in the construction process, including designers, contractors, and supervisory authorities.

Yet, important questions arise: Do industry participants advocate for and adhere to uniformity in regulating rights and obligations during construction, or do they prefer flexibility and autonomy in this regard? Are standardized models of construction agreementseven considered and applied? Moreover, do stakeholders contemplate the potential risks associated with uniformity versus the advantages of flexibility in governing contractual relationships within the construction sector?

In discussions concerning standardization in construction, the application of FIDIC agreementsoften takes precedence.

The CОNCEPT of FIDIC Contracts

FIDIC, formally known as the International Federation of Consulting Engineers, primarily aims to establish international general conditions for use within the construction domain. These conditions practically serve as a tool in international construction contracts, finding widespread application across jurisdictions. The objective of standardization and the formulation of general conditions or forms is primarily to establish equitable and balanced relationships, ensuring a fair distribution of risks and benefits for all contractual parties. When employing FIDIC contracts, it is implicitly understood that rights and obligations are applied without bias, maintaining parity between parties.

In essence, from FIDIC’s general conditions emerges the need to establish several fundamental principles. Through a meticulous analysis and examination of these conditions over the years by a dedicated committee within the Federation, the aim has been to identify indispensable principles that limit potential abuses or prevent them altogether – essentially, establishing “sacred” rules known as the “FIDIC Golden Principles (GPs)”.

The GPs essentially provide guidelines on HOW and TO WHAT EXTENT the general conditions (GCs) or standard terms provided for in FIDIC agreementscan be modified when the application of Special Conditions (SCs) becomes necessary due to factors arising from the peculiarities of different jurisdictions or the construction itself. Practically, the GPs set the “ultimate boundary” for when a particular General Condition can be altered, provided that the parties are willing to regulate their relationship in accordance with the FIDIC terms and how the contract would be considered compatible with them.

In any case, the FIDIC Golden Principles (GPs) are founded on several fundamental pillars:

The terms in construction agreements must be harmonized and equitable for both contractual parties.
Conditions in construction agreements must be balanced, ensuring that neither party has an unfair advantage over the other.
There should be fair and balanced risk and reward allocation for the contractual parties’ obligations.
Adequate and appropriate compensation, coupled with a reasonable timeframe for fulfilling contractual obligations, is essential.
Ensuring the best value for the construction investment is paramount.
Promoting and fostering mutual trust and collaboration among the contractual parties is crucial.
Minimizing opportunities for disagreement and disputes between the contractual parties is imperative.

Considering all of the above, the following are the 5 GOLDEN PRINCIPLES OF FIDIC CONTRACTS:

GP1 – The terms in construction agreements must be aligned and fair for both contractual parties, meeting the specific project requirements.

GP2 – Particular Conditions should be clear and precise, ensuring clarity for all contractual parties involved.

GP3 – Particular Conditions should maintain a balance in risk and reward, ensuring that neither party gains an undue advantage over the other.

GP4 – Deadlines outlined in agreements should be reasonable and feasible for both parties, allowing for realistic project completion schedules.

GP5 – In the event of disagreements, unless conflicting with national jurisdiction, resolution should be sought through the Dispute Avoidance/Adjudication Board, ensuring a temporary binding decision that serves as a prerequisite for arbitration.

In conclusion, while the promotion of FIDIC agreements is more prevalent in the public sector in North Macedonia, their implementation in the private sector therein remains limited. Perhaps a more robust promotional strategy coupled with incentives for adopting FIDIC principles is needed. The desire for uniformity in formal provisions among stakeholders in the construction sector stems from the belief that it offers greater legal certainty. Considering that FIDIC principles are rooted in global best practices, their widespread adoption could significantly enhance the construction industry’s efficiency and effectiveness.