Construction projects are inherently complex and structured, often involving diverse parties, tight timelines, and substantial budgets. In today’s high-stakes construction projects, disputes are inevitable; however, how they are handled can determine the success or failure of multi-million-dollar ventures. To manage inevitable conflicts, the FIDIC (Fédération Internationale des Ingénieurs-Conseils) agreements have evolved dramatically, from litigation towards collaborative processes like adjudication and finally toward mediation. This shift reflects a growing emphasis on resolving disputes efficiently, maintaining project momentum, and preserving long-term relationships. Below, we trace this evolution, presenting Sub-Clause 21 in its entirety, before demonstrating how mediation naturally integrates into the FIDIC framework.

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To understand how mediation emerged, it is essential to revisit the early mechanisms of disputes management. Historically, under the 1999 FIDIC editions, a Dispute Adjudication Board (DAB) was introduced to deliver fast, interim decisions during project execution, reducing obstruction and reliance on costly arbitration. These boards often encouraged settlement before formal rulings, introducing a conciliation-like element informally into proceedings.

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By 2017, the Dispute Adjudication Board became a Dispute Avoidance/Adjudication Board (DAAB). The DAAB role was explicitly expanded to include helping parties avoid disputes. This shift signified FIDIC’s intention to proactively manage differences through dialogue, creating space for structured collaboration—like mediation—before matters escalate. The 2017 amendments introduced, through the Clause21, a structured reference for dispute resolution procedures, creating a clear pathway from notice to adjudication, “amicable settlement”, and ultimately arbitration.

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The text of Sub-Clause 21.3 and Sub-Clause 21.4 (summarized for clarity) reads as follows:

Sub-Clause21.3 [Dispute Avoidance/Adjudication Board]: The DAAB shall be in place from the beginning of the contract. Its role is not limited to adjudication but also includes dispute avoidance. The DAAB may invite the Parties to attempt to resolve issues amicably before rendering a decision.

Sub-Clause21.4 [Amicable Settlement]: If a Party is dissatisfied with the DAAB’s decision, it may issue a Notice of Dissatisfaction. In such case, the Parties shall attempt to settle the dispute amicably before referring it to arbitration.

In summary, Clause 21 of the FIDIC 2017 Red Book sets out a comprehensive Ulti-tiered approach to dispute resolution. It begins with the notification of claims, followed by the proactive role of the Dispute Avoidance/Adjudication Board (DAAB) to either prevent disputes from arising or to adjudicate them swiftly when they do. If disagreements persist, the clause insists on a phase of amicable settlement before moving forward to arbitration. This layered structure reflects FIDIC’s philosophy of balancing efficiency with fairness, ensuring that disputes are addressed early and constructively.

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Here lies the missing link: while Sub-Clause 21.3 introduces the DAAB’s facilitative and preventive role, Sub-Clause 21.4 institutionalizes the obligation for the parties to attempt “amicable settlement.” Although FIDIC does not explicitly name mediation, this structured and confidential process where a neutral third party facilitates dialogue, and negotiation serves as the perfect entry point for resolving disputes. This amicable settlement phase essentially acts as a mandatory cooling-off period, requiring parties to attempt resolution before escalation.

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By agreeing to appoint a neutral mediator within the amicable settlement window (commonly 28 to 56 days), parties can structure the process, fulfill their obligation and maximize the chance of resolving the dispute without escalation. In this sense, Sub-Clause 21.4 provides legal grounding to mediation within the FIDIC hierarchy, turning what could otherwise be a passive obligation into an active and results-oriented procedure.

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When carefully examined, Sub-Clause 21.3 represents more than a procedural step; it is a subtle but deliberate gateway to consensual dispute resolution. The DAAB role is to issue a decision that is binding but not final, which means parties must comply immediately, yet they retain the right to challenge the outcome. This creates an intermediate space between compliance and final resolution, a space that is uniquely suited for mediation.

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Together, Sub-Clause 21.3 and 21.4 form a continuum: the DAAB first encourages resolution through dialogue, and if its decision is contested, the “amicable settlement” obligation seamlessly opens the door to mediation as the natural next step.

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In practice, this structured approach often prevents disputes from escalating unnecessarily. A party dissatisfied with a DAAB decision may hesitate to move directly to arbitration because of its costs, length, and adversarial nature. In this context, mediation emerges as a pragmatic alternative, allowing parties to reassess their positions, preserve confidentiality, and negotiate a mutually beneficial solution without jeopardizing the project timeline.

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For example, consider a dispute where a contractor claims additional costs due to unforeseen ground conditions. The DAAB might issue a binding but not final decision awarding part of the claim. The employer, dissatisfied, issues a Notice of Dissatisfaction under Sub-Clause 21.4. Rather than rushing to arbitration, both parties agree to mediation. In just few sessions, they reach a creative settlement covering payment terms and project adjustments, preserving the project’s timeline and saving millions in arbitration costs. This example illustrates how mediation gives real substance to the “amicable settlement” requirement and is increasingly recognized as best practice in large-scale international projects.

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This is particularly relevant in international construction projects, where disputes often revolve around variations, delays, or unforeseen site conditions. Instead of litigating technical disagreements through formal channels, parties can move toward a facilitated dialogue with the DAAB’s encouragement. Many practitioners now view this sub-clause as the hinge that operationalizes mediation within the FIDIC framework, making it an essential feature of modern project dispute management and not an optional accessory.

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The insertion of mediation in the FIDIC dispute resolution ladder is not merely symbolic; it produces tangible value for all stakeholders. First and foremost, mediation helps preserve commercial and contractual relationships, restores trust and fosters cooperative problem-solving, which is indispensable when contractors and employers must continue working together until project completion.

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Mediation also significantly reduces costs and delays compared to arbitration or litigation. By resolving disagreements in weeks rather than years, parties avoid project stagnation and financial drain. This efficiency is fully aligned with FIDIC’s philosophy of ensuring that disputes do not derail the works.

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Moreover, mediation enhances the legitimacy of outcomes. Unlike arbitral awards, which impose a solution, mediated agreements are co-created by the parties themselves. This voluntary character increases compliance rates and reduces the risk of future disputes over the same issues. Within the FIDIC structure, mediation complement the DAAB’s preventive and adjudicative roles rather than competing with them.

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Ultimately, by embracing mediation at the stage opened by Sub-Clause 21.3 and solidified by Sub-Clause 21.4, FIDIC users are not simply following a procedure; they are adopting a culture of proactive dispute management. This represents a decisive step toward a more collaborative and sustainable future in the global construction industry.

The evolution from litigation and arbitration to negotiation, adjudication, and ultimately mediation reflects a broader shift in the construction industry: one toward collaboration, efficiency, and dispute prevention. Clause 21, particularly through the interplay of Sub-Clauses 21.3 and 21.4, serves as the pivotal mechanism enabling this transformation. By understanding and leveraging the DAAB and the mediation pathway, project stakeholders can not only resolve disputes effectively while fostering long-term relationships and project success. FIDIC’s approach demonstrates that the future of dispute resolution lies not in adversarial battles, but in structured, cooperative, and creative problem-solving. In this way, FIDIC not only manages disputes, but it also redefines them. The journey from dispute boards to mediation shows that in construction, collaboration is no longer just a choice; it is the new standard for success.

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