Notify Now or Forever Hold Your Peace - Notices of Dissatisfaction under FIDIC and NEC

By Jeremy Glover, Partner, Fenwick Elliott

Under certain forms of contract, including FIDIC and the NEC Form, if a party wishes to preserve the right to challenge an adjudicator’s or dispute board’s decision, they must serve a valid notice of dissatisfaction.  Under subclause 1.1.57 of the 2017 FIDIC Yellow Book, a Notice of Dissatisfaction or “NOD” is defined as being:

The Notice one Party may give to the other Party if it is dissatisfied, either with an Engineer’s determination under Sub-Clause 3.7 [Agreement or Determination] or with a DAAB’s decision under Sub-Clause 21.4.

It is a little more than that as the giving of the notice is also a pre-condition to arbitration. In other words, if a valid notice is not served, you lose the right to challenge the determination or decision, which becomes final and binding. For example, in the recent English case of The Metropolitan Borough Council of Sefton v Allenbuild Ltd1, the NEC2 Form provided that: 

“93.1 If after the Adjudicator

• notifies his decision …

… a Party is dissatisfied, that Party notifies the other Party of his intention to refer the matter which he disputes to the tribunal. It is not referable to the tribunal unless the dissatisfied Party notifies his intention within four weeks of

• notification of the Adjudicator's decision or

• the time provided by this contract for this notification if the Adjudicator fails to notify his decision within that time

whichever is the earlier.”

NODs under the NEC Form

Allenbuild gave notice of its dissatisfaction with the adjudicator's decision by letter, dated 7 February 2022, stating: 

“We hereby give notice under clause 93.1 of Allenbuild's dissatisfaction with the Adjudicator's Decision.

This Notice of Dissatisfaction relates to the entirety of the Adjudicator's Decision including all of the Adjudicator's conclusions, reasoning, and decisions.

As a consequence of this Notice of Dissatisfaction, the Adjudicator's Decision shall not become final and binding.

Allenbuild reserves all of its rights in relation to this matter including the right to refer the dispute which is the subject of the Adjudicator's Decision to the tribunal for final determination under clause 93 …”

The question for the court was whether this was sufficient to include a challenge to the adjudicator’s jurisdiction. Allenbuild said that, because the NOD stated that it "relates to the entirety of the Adjudicator's Decision including all of the Adjudicator's conclusions, reasoning and decisions", it had the effect of preventing that decision from becoming final and binding, and left open any challenges on any basis whatsoever both in relation to the enforceability of the decision or a final determination on the merits of the matters decided.  

The courts in England had previously considered what level of detail was necessary to ensure that the NOD was valid in two cases from last year.

In Transport for Greater Manchester v Kier Construction Ltd2, Kier, the successful party, argued that a NOD served by TfGM was invalid because it was not detailed enough. The NOD said that the adjudicator had: 

“erred in law and in his interpretation and application of the express terms of contract between the parties in a number of fundamental respects.” 

Mrs Justice O’Farrell made the general comment that:

“The Contract did not stipulate the form of words that had to be used, or the level of detail that was required in any notice of dissatisfaction. The purpose of the notice was to inform the other party within a specified, limited period of time that the adjudication decision was not accepted as final and binding. A valid notice would have to be clear and unambiguous so as to put the other party on notice that the decision was disputed but did not have to condescend to detail to explain or set out the grounds on which it was disputed.”

Applying those principles, the Judge continued that: 

“The letter of 29 November 2019 was a valid notice of dissatisfaction for the purposes of clauses W2.3(11) and W2.4. The words: 'it is clear that he has erred in law and in his interpretation and application of the express terms of contract between the parties in a number of fundamental respects' were sufficient to make clear that TfGM did not accept, and was dissatisfied with, the Adjudicator's decision. The words: 'TfGM's … intention to seek formal resolution to reverse the outcome of the Decision' were sufficient to inform Kier that it intended to refer the disputed adjudication decision to the Court.”

In Prater Ltd v John Sisk & Son (Holdings) Ltd3, a different issue was raised.  Was there a distinction between a challenge to an adjudicator's decision on the underlying merits of the dispute and to the adjudicator's jurisdiction? Deputy Judge Buehrlen QC said:

“[Counsel] also argued that what clauses W2.3(11) and W2.4(2) of the Subcontract contemplate is a rehearing of the underlying merits of the dispute not a challenge to the jurisdiction of the adjudicator. However, there is no such carve out in the relevant contractual provisions. Clause W2.4(2) is concerned with circumstances in which a party is dissatisfied with the decision regardless of the grounds for that dissatisfaction. Further, the parties have agreed that the decision will be binding unless and until revised by the Tribunal. 'Revised' must include a declaration that the decision is not enforceable or otherwise binding for jurisdictional reasons. Moreover, the provisions cannot be limited to a dispute as to the underlying merits of the decision because clause W2.3(11) provides that in the absence of a notice of dissatisfaction being served within four weeks of the notification of the Adjudicator's decision, the decision becomes final. Accordingly, if the dissatisfied party wants to challenge the decision for want of jurisdiction, he must serve a notice stating his intention to refer the matter to the tribunal.”

Allenbuild argued that, for a NOD to be valid, it need only set out that the decision was disputed. Such a notice did "not have to condescend to detail to explain or set out the grounds on which it was disputed". 

Sefton agreed that, whilst a notice of dissatisfaction need not descend into the details of the substantive challenge, the issue of the validity of an adjudication decision (or jurisdiction of the adjudicator) was of a fundamentally different character from its merits. Whatever is being referred to the Tribunal needs to be spelt out. Here, there was no need for any particulars of the substantive dispute to be spelt out at this stage (that will be for the notice of arbitration and beyond) but whether or not the decision was valid was a matter of an entirely different character, particularly where the existence of a valid adjudication decision is the first step in the resolution of any dispute, and a precondition to the bringing of an arbitration.

Allenbuild’s NOD was a challenge to the substance of the adjudicator's decision; in other words, what the adjudicator decided, not the fairness of the procedure or the jurisdiction of the adjudicator to make the decision. 

HHJ Hodge QC said that:

“Whilst a notice of dissatisfaction need not descend into the details of any substantive challenge to an adjudicator's decision, the issue of the validity of such a decision is of a fundamentally different character from its substantive merits; and a notice of dissatisfaction needs to make it clear whether a challenge is being made to the validity of an adjudicator's decision on jurisdictional grounds, instead of, or in addition to, a challenge to its substantive merits.”

Here, the NOD, on its true construction, did not make it clear that a challenge was being made to the validity of the adjudicator's decision, on jurisdictional grounds, in addition to a challenge to its substantive merits. Allenbuild had lost the right to make that challenge. 

NODs under the FIDIC Form

The 1999 and 2017 FIDIC Forms have different requirements. As you would expect, the 2017 Form sets out what a party is required to do in far more detail than the 1999 Form. This was deliberate, being designed to prevent disputes about whether or not a NOD was valid. 

Under the 1999 From, the NOD had to state that it was given under subclause 20.4 and then “set out the matter in dispute and the reason(s) for dissatisfaction.” It went on to make it clear that neither Party shall be entitled to commence arbitration of a dispute unless a valid NOD had been given.

Under the 2017 Yellow Book, both the Engineer’s determination under subclause 3.7 and the DAAB’s decision under subclause 21.4 will become final and binding if no NOD is provided4.

If either Party was dissatisfied with the DAAB’s decision, they must give a NOD to the other Party and the Engineer within 28 days. The NOD must also state that it is a “Notice of Dissatisfaction with the DAAB’s Decision” and set out the matter in Dispute and the reason(s) for dissatisfaction.

Subclause 21.4.4 also states that if the dissatisfied Party is dissatisfied with only part(s) of the DAAB’s decision, provided those parts are clearly identified in the NOD, those parts shall be deemed to be severable from the remainder of the Decision which will become final and binding. Theoretically, this provides the opportunity for the Parties to focus on the matters that are really in dispute and to finally resolve those that are not.

This subclause wording ‘‘neither Party shall be entitled to commence arbitration of a dispute unless a notice of dissatisfaction has been given in accordance with” appears in both the 1999 and 2017 Forms.  In other words, in order to commence arbitration, a NOD must be submitted that complies with the subclause, i.e. that provides reasons. A Party is, therefore, unable to validly commence arbitration if it does not submit a compliant NOD within the prescribed time period, here 28 days. Failure to do so will cause the DAAB’s decision to become final and binding.

Conclusions

It is obviously a matter of some importance to understand and follow the contractual requirements for the NOD under the NEC, FIDIC or, indeed, any form, and the recent English NEC court cases provide a valuable reminder as to the care needed when drafting any NOD. A failure to follow the contract will result in the decision or determination in question becoming binding, something which will apply to challenges both to the merits and any jurisdictional objection. 

Finally, care to needs to be taken to ensure the NOD is sent to the right parties and at the right addresses. Under the 2017 Form, the FIDIC NOD must go to the Engineer; there is no such requirement in the 1999 Form. In the Kier case, communications had been sent to the “last address notified by the recipient for receiving communications”. Was that the last notified address set out in the contract or the contact details for the parties’ solicitors who had been acting in the adjudication? The court held that the details exchanged during the adjudication had become the last address notified under the contract. If there is room for doubt, consider sending the NOD to more than one address.

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• 1. [2022] EWHC 1443 (TCC)
• 2. [2021] EWHC 804 (TCC)
• 3. [2021] EWHC 1113 (TCC)
• 4. This was not the case with the 1999 Red and Yellow Books, although it did apply to the Employer’s determination under subclause 3.5 of the 1999 Silver Book .