Entes Industrial Plants Construction & Erection Contracting Co Inc v. Ministry of Transport and Communications of the Kyrgyz Republic
UNCITRAL · Investment (ICSID and treaty) · Kyrgyz Republic · 29 Sep 2015
Why it matters
This award is significant for its detailed analysis of prolongation costs under FIDIC-based contracts, including the treatment of winter breaks, lost days, and head office overheads. It provides guidance on the quantification of delay costs using the 'bottom-up' method and the allocation of costs between excusable and compensable delays. The case also illustrates the application of UNCITRAL rules in a complex, multi-claim construction arbitration.
Summary
The dispute arose from a contract for the rehabilitation of the Bishkek-Osh Road in Kyrgyzstan, funded by a Japanese loan. The contract, based on FIDIC Civil Engineering Conditions, had a completion date of 3 December 2002, but the works were completed 1,043 days late on 12 October 2005. The Contractor (Entes) made five extension of time (EOT) requests, partially granted by the Engineer. The Engineer's determination allowed only 150 days as compensable, awarding US$1,161,870.19. Dissatisfied, Entes commenced UNCITRAL arbitration in Bishkek. The Tribunal had to decide on prolongation costs for each EOT, winter breaks, lost days, head office overheads, and several other claims (interest on late payments, guardrails, VAT, road tax, equipment damage, Interakt case, road grader case, and debts of a nominated subcontractor). The Tribunal applied Kyrgyz law and the FIDIC conditions. It found that delays due to design changes, additional works, and political unrest were compensable, but winter breaks were not (as they were foreseeable). The Tribunal used a 'bottom-up' method to quantify prolongation costs, focusing on directly impacted resources. It awarded US$16,275,156.88 for prolongation costs, US$59,506 for interest on late payments, and US$53,968.71 for guardrails, with interest from 13 May 2006. Other claims were dismissed. The Tribunal allocated costs equally between the parties, noting the Claimant's partial success and the modification of its position during the hearing.
The detail
Parties: Entes Industrial Plants Construction & Erection Contracting Co Inc v. Ministry of Transport and Communications of the Kyrgyz Republic
Case number: italaw/cases/4700
Outcome: The Tribunal awarded the Claimant US$16,275,156.88 for prolongation costs, US$59,506 for interest on late payment, and US$53,968.71 for guardrails, with interest at one-month LIBOR plus 2% from 13 May 2006. Other claims were dismissed. Each party bears its own costs and shares tribunal costs equally.
Quantum: US$16,388,631.59
Applicable law: UNCITRAL Arbitration Rules (1976); FIDIC Civil Engineering Conditions (GCC); Kyrgyz Civil Code; Contract governed by law of Kyrgyz Republic
Issues in play: The case involved the interpretation of FIDIC clauses on compensable delay and quantification of prolongation costs, as well as the application of Kyrgyz law on time bars and contractual notice requirements.
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