FIDIC Contracts in Georgia

Everyone operating in the construction industry heard a word “FIDIC” at least once. In Georgia, construction industry participants associate the word with contracts.

“FIDIC” is the French acronym of “Fédération Internationale Des Ingénieurs – Conseils”, International Federation of Consulting Engineers. FIDIC is a global representative for the consulting engineering industry, promoting the business interests of firms supplying technology-based intellectual services for built and natural environments alike.

FIDIC is well known for its work drafting standard form Conditions of Contract for the worldwide construction industry, particularly in the context of higher value international construction projects. FIDIC contracts are endorsed by many multilateral development banks ("MDBs").

The different forms of contract within the FIDIC suite are organized around the extent of design and other responsibilities assumed by the Employer and the Contractor. The best known of the FIDIC contracts are the Red Book (building and engineering works designed by the Employer) and the Yellow Book (M&E, building and engineering works designed by the Contractor). The Green Book as the short form of contract, the Silver Book for turnkey contracts and the White Book for consultancy services are also widely used. The Pink Book is the MDB Harmonized Edition of the Red Book and is used for the projects financed by MDBs.

FIDIC contracts are not readily available for use and should be adopted to parties’ and specific project’s needs and governing law requirements. Any FIDIC Contract should be considered within the governing law framework that require specialized legal knowledge.

The first edition of the Red, Yellow and Silver Books dates back to 1999 and is succeeded by the updated second edition that was unveiled in December 2017. The updated White Book was published also in spring of 2017.

The former 1999 editions are still in use by the industry. FIDIC is now in the process of securing multiple deals that will see MDBs adopting the use of FIDIC standard contracts (mainly 2017 editions). Under the terms of these agreements, FIDIC grants a non-exclusive license to refer to the major FIDIC contract for projects they finance, and the documents will be used as part of the MDBs’ standard bidding documents. For the present moment, such agreements are concluded with several banks, including the World Bank and EBRD.

In Georgia, historically construction industry participants used very short forms of contracts leaving its terms open for default rules. There is no single time-honored standard form of construction contract.

The demand for the standard forms, especially FIDIC, has grown with the increase of foreign investment in the country, as, first of all, international financial institutions require to use internationally recognized standard forms in financed projects and, second, industry participants are comfortable to use familiar forms with fair and balanced risk allocation. As a result, nowadays, FIDIC standard forms are widely used in Georgia for both public and private construction projects.

With FIDIC forms gaining popularity in Georgia, English became a barrier for employing local experienced professionals. Project participants used the FIDIC forms without having a good understanding of its terms. Unofficial translations came into use and people start using all different terminology. In 2015, FIDIC licensed the Municipal Development Fund of Georgia to translate the 1999 Red Book into Georgian language and distribute the official translation. In summer of 2017, the official translation was presented during FIDIC Business Days in Georgia by the Georgian Association of Consulting Engineers (ACEG). The license is now transferred to ACEG and the publications are available for sale on ACEG and FIDIC websites. The license to translate and distribute other FIDIC forms, including new 2017 editions, is granted to ACEG that intends to start translation in the near future.

For the public projects financed by the MDBs, the Pink Book is mainly used by the government agencies. The Green Book is used for the small-scale projects. Other books are also widely used for the private projects.

Recently in Georgia we see tenders for major infrastructure projects announced under the 2017 editions. As the new editions are relatively new and not widely used worldwide yet, it is a challenge to be met by the industry.