FIDIC Update: Termination and the Employer’s Obligations under the Red Book
By Mike R. Stewart, Mary E. Lindsay, and Nita Mistry, K&L Gates, London
A Privy Council case last year provided some important guidance on the provisions in the FIDIC Red Book in relation to Employer’s financial arrangements and claims. Whatever your perspective might be, when negotiating or managing a contract based on the FIDIC Books, employers and contractors should be aware of the Privy Council’s findings in NH International (Caribbean) Ltd v National Insurance Property Development Company Ltd (Trinidad and Tobago)  UKPC 37.
National Insurance Property Development Company Ltd (Trinidad and Tobago), the Employer, employed NH International (Caribbean) Ltd, the Contractor, to construct a hospital in Tobago under a contract in the form of the FIDIC Red Book.
On 2 November 2006, the Contractor terminated the contract pursuant to Clause 16.2. The Employer did not agree the termination was valid but the parties proceeded as if the contract had been terminated. A number of issues arose during the Engineer’s assessment of the work to the date of termination and these matters, including the validity of the termination, were referred to arbitration.
The arbitrator’s decisions in relation to Clauses 2.4 and 2.5 and Clause 16.1 were later appealed first to the High Court and the Court of Appeal in Tobago and then to the Privy Council.