An Overview of FIDIC Contracts From the Perspective of Turkish Law

Abstract

Due to their high costs, technical complexity and lengthy construction processes, international construction projects necessitate detailed and balanced contractual arrangements between the parties. In this context, the standard contract forms developed by the Fédération Internationale des Ingénieurs-Conseils (“FIDIC”) (International Federation of Consulting Engineers) aim to reduce the risk of disputes by clearly and fairly defining the rights and obligations of the parties.

With the increasing presence of the Turkish construction sector in global markets, the applicability of FIDIC contracts in Türkiye and their compatibility with the Turkish legal system have gained significance. This study aims to evaluate the general characteristics of FIDIC contracts within the framework of Turkish law.

Keywords: FIDIC, FIDIC Contracts, Construction Contracts, Turkish Code of Obligations, Employer, Contractor

I. INTRODUCTION

FIDIC prepares standard construction contracts that regulate, in a uniform and equitable manner, the rights and obligations of all parties involved in the construction sector (employer, contractor, subcontractor, consultant engineer). Accordingly, such contracts published by FIDIC (“FIDIC Contracts”) have come to be applied in numerous countries and have been widely adopted by the stakeholders of the construction industry.[1]

In recent years, parallel to the general trend in the international construction sector, it has been observed that FIDIC Contracts have been increasingly used in Türkiye by both private and public sector employers and contractors. While FIDIC Contracts essentially reflect the characteristics of the Anglo-Saxon legal system, and particularly English law, Turkish law forms part of the Continental European legal system. Therefore, there exists the possibility of encountering problems in the interpretation of FIDIC Contracts under Turkish law due to the differences between these legal systems.[2]

According to the provision contained in all FIDIC Contracts, the parties are free to determine, by mutual agreement, the law governing the contract. The legal system chosen as the governing law will fill the gaps in areas not regulated by the FIDIC Contracts; however, the provisions of the FIDIC Contracts have no effect against the mandatory rules of the governing law.[3] Therefore, in projects based on FIDIC Contracts, it is necessary to determine the governing law with due care when drafting the particular conditions of the contract and to introduce provisions designed to minimize interpretative divergences in line with that legal system.

II. THE GENERAL FRAMEWORK OF FIDIC CONTRACTS

A. The History and Fundamental Principles of FIDIC Contracts

FIDIC (Fédération Internationale des Ingénieurs Conseils), established in Switzerland in 1913 with founding member countries France, Belgium, and Switzerland, refers to the “International Federation of Consulting Engineers.” Membership in FIDIC is limited to a single organization from each country, and today FIDIC has become an international professional association with members from more than 100 countries. In Türkiye, FIDIC has been represented by the Turkish Consulting Engineers and Architects Association (Türk Müşavir Mühendisler ve Mimarlar Birliği – TMMMB), which became a member of the Federation in 1987.

Since 1913, FIDIC and its members have played a significant role in supporting, guiding, and contributing to the advancement of the engineering, construction, and infrastructure sectors. FIDIC has not only represented the countries of its member associations but has also become the voice of the consulting engineering sector in an increasingly globalized world. For instance, FIDIC has established partnerships with the World Bank and other multinational development banks operating in different regions, and these lending institutions have required the use of FIDIC Contracts as a condition for extending credit to contracting parties.

Although FIDIC was initially established with the aim of creating an international association of consulting engineers and promoting global cooperation in the construction sector, over time its primary mission has evolved towards the development of international standard forms of contract across various branches of engineering.

The first FIDIC Contract was published in 1957, and over time, adapted versions have been developed for different types of projects. These contracts have subsequently undergone revisions by FIDIC to reflect changing circumstances, technological advances, and the evolving needs of the industry. At the “International Contract Users Conference” held in London in December 2017, the updated editions of the three contracts that had been in use since 1999 (namely, the Red Book, the Yellow Book, and the Silver Book, as discussed under Section B) were introduced. In the 2017 editions, significant amendments were introduced with respect to achieving a balanced allocation of risk, expanding the powers of the engineer, eliminating uncertainties concerning time provisions, and establishing a more hybrid system regarding the governing law. Finally, the revised versions of the 2017 FIDIC Contracts were published in November 2022 and entered into force as of 1 January 2023.

The most fundamental feature of these standard contracts published by FIDIC is that they allocate risk between the contracting parties in a fair and balanced manner. Accordingly, FIDIC has adopted as a core principle the implementation of its contracts in a more equitable, balanced, and predictable way.

B. FIDIC Contract Types and Institutional Framework

Each of the FIDIC Contracts has been drafted by taking into account the specific characteristics of different international construction projects, and the FIDIC Contracts, which have gained worldwide recognition, have been categorized under six main headings, each of which has over time evolved into a distinct book. The FIDIC Contracts are distinguished by the colors of their covers, and the fundamental differences among them arise primarily in the determination of the obligations of the employer and the contractor.

i. Red Book (Conditions of Contract for Construction): It is used in projects where the design is carried out by the employer and the construction is undertaken by the contractor. The Red Book, which has the widest application in the field of construction in Türkiye, sets forth the fundamental principles of tendering and construction contracts.

ii. Yellow Book (Conditions of Contract for Plant – Design Build): It is preferred in projects where the contractor undertakes both the design and the construction.

iii. Silver Book (Conditions of Contract for EPC/Turnkey Projects): It is designed for projects in which the Contractor undertakes all engineering, procurement, and construction works and delivers a turnkey facility to the Employer. It imposes a high level of risk on the contractor. This form is typically used in complex construction projects such as infrastructure works—including highways and bridges—as well as power plants.

iv. Green Book (Short Form of Contract):  It is used for small-scale projects or projects where the works are simple or repetitive in nature. It is preferred for facilities with a contract price of less than USD 500,000 and an expected completion period of six months.

v. Gold Book (Conditions of Contract for Design, Build and Operate Projects): It is preferred for investment projects requiring substantial capital. In contrast to the build-operate-transfer model under Turkish law, the contractor is not obliged to provide the financing necessary for the construction.

vi. White Book (Client/Consultant Model Services Agreement): It is preferred for employer/consultant service agreements.

An examination of FIDIC Contracts reveals that their content is generally structured upon a specific framework. FIDIC Contracts consist of 8 main sections and 2 principal parts. The first part sets out the general conditions of the contract, while the second part contains the particular conditions, which are drafted in consideration of the specific characteristics of each project. Nevertheless, the general and particular conditions of FIDIC Contracts are of a recommendatory nature for the parties to construction contracts and do not carry any binding legal effect. Accordingly, there is no obligation to apply the general conditions as they stand, and the contracting parties are free to regulate the provisions contained therein under the particular conditions.

In addition, the doctrine emphasizes that, as FIDIC does not possess a supranational character, the provisions of FIDIC Contracts should not be regarded as mandatory in nature. Accordingly, it is argued that specifying the governing law and the competent courts applicable to FIDIC Contracts would be beneficial.[4]

III. AN EVALUATION OF FIDIC CONTRACTS FROM THE PERSPECTIVE OF TURKISH LAW

A. The Position of Construction Contracts in Turkish Law

Although there is no specific regulation on construction contracts under Turkish legislation, in terms of their legal nature, construction contracts are considered one of the most common types of contracts for work, which are regulated under Articles 470–486 of the Turkish Code of Obligations No. 6098 (“TCO”). A contract for work is defined in Article 470 of TCO as a contract whereby the contractor undertakes to produce a work, and the employer undertakes to pay a price in return.

In recent years, very large and complex investments have been made in Türkiye across various sectors by both domestic and foreign investors. Foreign investors and international financing institutions tend to prefer contract forms that they have previously used in other projects, and in the field of construction, this form is generally encountered as the FIDIC Contracts. However, it should be noted that FIDIC Contracts are not only used in international projects but are also applied in smaller-scale, local projects.[5]

B. Some Distinctions Between FIDIC Contracts and Turkish Legal Practice

i.           Force Majeure

FIDIC Contracts have been developed on the basis of the Anglo-Saxon legal system and have been particularly influenced by the practices of the United Kingdom. While the principle of the sanctity of contract is recognized as a fundamental rule in the Anglo-Saxon legal system, Turkish law—belonging to the Continental European legal tradition—adopts the principle of pacta sunt servanda, which provides a comparatively more flexible approach. This structural divergence becomes particularly apparent in the assessment of circumstances affecting the performance of contractual obligations, such as force majeure. In this context, the determination of the legal system governing the contract may also have significant implications for the interpretation of concepts such as force majeure.

Although the effects of force majeure have been examined under various provisions of TCO, the concept itself has not been explicitly defined. Therefore, in Turkish law, the notion of force majeure has gained clarity only to the extent explained in doctrine and case law, and the parties are free to regulate it contractually within this framework. Under Turkish law, as a consequence of the principle of pacta sunt servanda, the parties are obliged to perform their contractual obligations in accordance with the agreed undertaking. However, in circumstances such as force majeure, it cannot be expected that the parties will remain strictly bound by the contract. Accordingly, it may be stated that situations like force majeure constitute an exception to the principle of pacta sunt servanda.[6]

On the other hand, the FIDIC Red Book contains more detailed provisions regarding force majeure compared to the TCO and prescribes stricter and clearer rules for such circumstances. Indeed, pursuant to the principle of sanctity of contract, it is assumed that the parties accept all risks arising from the contract before entering into it, and contractual obligations are regarded as absolute. For this reason, since a party cannot be released from its contractual obligations even when performance becomes onerous or even impossible, protective provisions addressing changing circumstances are incorporated into the contracts. In this context, the purpose of regulating the force majeure clause in such detail under the FIDIC Contract is to release one of the parties from its contractual performance in the event of unforeseeable consequences or an unexpected occurrence beyond the control of the parties.[7]

ii.          Time Limitations

In FIDIC Contracts, requests for time extensions are subject to strict rules in order to ensure uniformity in international practice. Although the TCO does not contain any specific provision regarding additional time to be granted to the contractor or any time limitations, the FIDIC Red Book provides detailed regulations concerning both the causes and consequences of delay, as well as the allocation of responsibility for such delay between the parties.

On the other hand, under Turkish law, in the absence of specific statutory regulation, the parties to a contract may freely determine their rights and obligations pursuant to the principle of freedom of contract set forth in Article 26 of the TCO, provided that such arrangements do not contravene mandatory rules of law, morality, public order, or personal rights. Where both contracting parties are merchants, the thresholds for determining the validity or acceptability of contractual provisions are higher. Accordingly, under the Turkish legal system, contractors acting as prudent merchants are expected to be aware of all circumstances that may affect not only the contractual provisions but also the duration of the contract. In this context, it is generally accepted in Turkish jurisprudence that time-related limitations stipulated in contracts concluded between the parties are deemed valid and binding upon them.

In this context, although there is no explicit legal regulation in Turkish law regarding time limitations or time extensions, the generally accepted approach in both local court decisions and international practice is that if the contractor fails to notify the other party of its requests for time extensions or additional payments in accordance with the time limits specified in the contract and with supporting information and documents, it may lose its right to assert such claims. Therefore, in general, compliance with time limit provisions is considered a prerequisite for the right to make a claim.

iii.   The Concept of “Engineer”

Unlike the classical contractual structure generally established between the employer and the contractor under the framework of the TCO in the Turkish legal system, FIDIC Contracts also involve a third party, namely the engineer. The engineer is appointed by the employer and, throughout the duration of the contract, holds the authority to supervise, inspect, and make decisions in technical, administrative, and financial matters on their own behalf. Although not a party to the contract, the engineer plays an active role in its implementation.

Within the systematic framework of FIDIC Contracts, the role of the engineer is not limited to supervising the implementation of the works, but also encompasses functions such as preparing progress payments and contributing to the resolution of disputes. However, since the engineer is appointed by the employer and acts on its behalf, this raises certain debates concerning the principle of impartiality, particularly in disputes that may arise with the contractor. From the perspective of the Turkish legal system, if the Contractor has not been previously informed about the acts carried out by the engineer, such acts are deemed binding on the employer. In this regard, the scope of the engineering function extends beyond a purely technical role and carries the potential to produce legal consequences.

iv.        Penal Clause

In FIDIC Contracts, where the contractor fails to complete the works within the period stipulated in the contract, the contractor is required to pay the employer compensation for delay; however, there is no explicit definition as to whether such compensation -under Turkish law- constitutes liquidated damages or a penal clause.  On the other hand, since penal clauses and liquidated damages are regulated separately under Turkish law and entail different legal consequences, it is important, when drafting the particular conditions of FIDIC Contracts, to include clear provisions that take this distinction into account and that are in conformity with the parties’ intentions and the purpose of the contract.

v.          Language of the Contract

The original language of FIDIC Contracts is English. Although TMMMB has translated the 1999 editions of the Red Book, the Yellow Book, and the Silver Book into Turkish, the 2017 editions and subsequent versions have not yet been translated. Nevertheless, since the terminology used in FIDIC Contracts is predominantly derived from the Anglo-Saxon legal system, it is difficult to expect the Turkish translations to fully reflect the essence of certain legal terms. Therefore, it is advisable to conduct a detailed examination of the English text of the FIDIC Contract to be used for a specific project.

Another important aspect with respect to the language of the contract arises from Law No. 805 on the Mandatory Use of Turkish in Economic Enterprises (“Law No. 805”). Pursuant to Law No. 805, where both parties to the contract are Turkish, the contract must be drafted in Turkish, and even if it is prepared in two languages, the Turkish text shall prevail. Under Law No. 805, contracts concluded in violation of this law are not recognized in favor of the contracting parties, which may create problems in projects where financing is provided by foreign investors.[8]

IV. CONCLUSION

FIDIC Contracts are an important instrument in the international construction sector, ensuring standardization and balancing risks between the parties. With the growth of the Turkish economy, the number of large-scale and technically complex projects undertaken by both domestic and foreign investors across various sectors has been increasing. Within these projects, the construction sector has been gaining an increasingly larger share in terms of investment volume; in this context, FIDIC Contracts have become a frequently preferred framework for both investors and institutions providing project financing. Consequently, the widespread use of FIDIC Contracts in Türkiye necessitates a detailed analysis of their provisions from the perspective of Turkish law and the adaptation of conflicting regulations to the local legal system through particular conditions.

In light of the foregoing, a FIDIC Contract subject to Turkish law will be assessed under Articles 26-27 of the TCO. Accordingly, although the principle of freedom of contract applies, where Turkish law is the governing law, the FIDIC Contract must not contravene mandatory rules of the law, morality, public order, or personal rights, nor may it have an impossible subject matter. Otherwise, the partial or entire invalidity of the provisions of the FIDIC Contract may arise.[9]

For FIDIC Contracts to be effectively implemented in Türkiye, it is necessary to increase training programs for lawyers, engineers, and project managers. In order to ensure consistency in translation and interpretation, official Turkish versions of FIDIC texts should be prepared, and Turkish-language resources providing a detailed explanation of FIDIC contractual documents should be expanded. Furthermore, the wider use of adapted versions of FIDIC Contracts in public projects would be beneficial.

REFERENCES

1.         Aslı Budak, Türk Eser Sözleşmesi Hukuku Işığında FIDIC Sözleşmesi, Uluslararası İnşaat Sözleşmeleri ve Uyuşmazlık Çözüm Yolları, April 2018.

2.         Mahmut Alper Kılıç, Effect of Force Majeure on Wage Payment Obligation in Construction Contracts under the FIDIC Red Book 1999 and the Turkish Code of Obligations, Terazi Hukuk Dergisi, Volume 17, Issue 186, February 2022.

3.         Ogeday Çuhadar, The Fundamental Obligations of the Employer in FIDIC Conditions of Contracts for Construction, August, 2010.