Analyzing Termination for Convenience Provisions under Common Law FIDIC Using a Civil Law Perspective

Abstract

The Egyptian government is investing massive sums of money in several large-scale infrastructure projects that are executed by international contractors. Most contracts for such projects are based on the standard conditions of contract for international projects published by the International Federation of Consulting Engineers (FIDIC). However, the economy in Egypt is currently facing some instability and challenges. Due to that, an employer may prefer to include a clause that entitles the employer to bring the contract to an end for the employer’s own convenience. Although Egypt is a civil law jurisdiction, the FIDIC contract is based on legal concepts rooted in the common law system. Thus, international contractors—who use the FIDIC contract in Egypt—must understand how the FIDIC’s termination for convenience provision is interpreted and applied in a civil law country. To do so, a multistep methodology was utilized. First, the paper separately studies provisions of termination for convenience under the FIDIC 1999 Red Book [FIDIC (CONS)], and similarly under the Egyptian Civil Law (ECL). Second, the authors critically analyze the application of the studied provision of the FIDIC (CONS) in the context of the ECL as the applicable law of the contract. On the basis of the analysis, it is concluded that conditions related to the employer’s entitlement to termination for the employer’s convenience in the FIDIC (CONS) resemble those in the ECL; however, the conditions in the ECL are more advantageous to the contractor due to the existence of the provision for loss of profit in the compensation for damages to which the contractor would be entitled under such termination and the absence of such provision under the FIDIC (CONS). Moreover, the paper provides some recommendations for amendments to be made to the Egyptian Civil Code (ECC) and to the FIDIC (CONS) in relation to the termination for convenience provision. This research should help international contractors understand how the FIDIC’s termination for convenience provisions apply to their projects in Egypt. This would minimize, as much as possible, disputes associated with and/or resulting from such provision. Further, this study is beneficial to other Middle East countries since most of them follow civil law jurisdictions that are heavily influenced by the ECL.