Application
of FIDIC Contracts
in Kazakhstan

The EPC contract is a common form of contract worldwide and is used for construction projects. EPC is an acronym for Engineering, Procurement and Construction.

The EPC contract usually regulates the legal relationship between the Employer and the Contractor. It also serves as a means of managing risk and determining the interests of the parties to the project.

The EPC contract is characterised by its comprehensive approach. This means that the contract covers all stages of the project and defines the roles of all those involved in the project.

Thus, the EPC contract covers the following main works:

• Engineering – surveying, design and approval works;
• Procurement – selection and procurement of materials and equipment for the whole project;
• Construction – construction, installation and commissioning works.

The EPC contract is a rather complex and multi-page document that provides different provisions for the execution of the project.

From the point of view of Kazakhstan civil legislation, the EPC contract is a mixed contract. As the contract provides for elements of various contracts. However, the current legislation of Kazakhstan does not provide for the concept and regulation of an EPC contract as such.

In Kazakhstan, EPC contracts are being introduced into construction practice gradually. According to established practice, in Kazakhstan the most common form of EPC contracts is the FIDIC form of contract. This form is universal for use under the legislation of almost any country (FIDIC contracts contain concepts of English law). Therefore, FIDIC contracts are used throughout the world in the implementation of major construction projects, including in Kazakhstan.

FIDIC is an acronym for “Fédération Internationale des Ingénieurs-Conseils”. The FIDIC model contract forms were developed by this federation, which was founded in 1913 in France. Initially, the federation included only France, Switzerland and Belgium. However, the federation currently includes over 50 countries .

Over the years, the federation has become popular all over the world because of its work in creating model contract forms for the construction and engineering industries .

The very first model contract form was created in 1957. It was called The Form of contract for works of civil engineering construction (The Red Book). It has become a tradition that FIDIC contracts are popularly known by the colour of the cover .

FIDIC contracts now cover a wide range of projects and procurement methods. Therefore, almost any international contractor or consultant is often dealing with FIDIC contract terms and conditions.

FIDIC forms

Over the years FIDIC has consistently improved on its contracts. The organisation has added new forms of contract, replaced previous ones and updated important terms. The table below provides a brief overview of FIDIC contracts to date:

Contents of the Red Book:

• General conditions;
• Guidance for the preparation of the particular conditions;
• Forms of tender and contract agreement;
• Dispute adjudication agreement.

Contents of Contract Book:

• General conditions;
• Guidance for the preparation of the particular conditions;
• Forms of tender and contract agreement;
• Dispute adjudication agreement.

Contents of Contract Book

• General conditions;
• Guidance for the preparation of the particular conditions;
• Forms of tender and contract agreement;
• Dispute adjudication agreement.

Despite the complexity of the documentation constituting the FIDIC contract, the purpose of each of the documents is justified in terms of regulation/detail of the relationship between the parties, resolution of conflicts, deadlines for performance, payment for work performed, identification and correction of defects, determination of penalties, performance of individual project milestones, etc. Moreover, the existence of Special conditions allows the specificities of the relevant legislation to be taken into account so that the signed contract will be enforceable for both the Employer and the Contractor.

However, despite the current principle of freedom of contract in Kazakhstan and the fact that FIDIC forms are adaptable to the conditions of national law, it must be taken into account that, under Kazakhstan law, the essential terms of the contract must be defined in the contract itself, but not in the appendices. Therefore, in practice, entities combine the provisions of the general part, the special part and the relevant appendices in order to have a complete document. This approach may be justified if the contract is governed by Kazakhstan law (where both parties to the contract are Kazakhstani legal entities) and disputes are litigated in Kazakhstan. In all other cases, attention must be paid to amendments in the FIDIC form of contracts and to the established practice of the relevant arbitration regarding non-compliance with the FIDIC form.

Tender documentation is also part of the FIDIC contract. However, according to Kazakhstan law, the tender documentation is not part of the contract. Therefore, it is not legally correct to refer in the contract to the provisions of the tender documentation (material conditions of the contract). Moreover, certain elements of the tender documentation in the context of Kazakhstan law are the basis for the conclusion of the contract, but not the contract itself. At the same time, these elements do not constitute a preliminary contract. Therefore, in order to avoid conflict with Kazakhstan law, it is necessary to specify all material conditions in the contract itself without reference to the tender documentation.