🏗️ Construction & Infrastructure Contracts (FIDIC): A Legal Guide for Global and Indian Projects

In the world of large-scale infrastructure development, whether it’s an international airport, a metro rail network, or a power plant, clear and comprehensive contracts are essential. Enter the FIDIC contracts—globally recognized standard forms for construction and engineering works. These contracts are extensively used in international EPC (Engineering, Procurement, and Construction) projects, ensuring consistency, risk allocation, and enforceability across borders.

In India, where infrastructure is a cornerstone of national development, FIDIC contracts are increasingly used in projects funded by multilateral agencies like the World Bank, ADB, and JICA. However, they also need to align with Indian laws—especially civil, revenue, and land acquisition regulations. This blog offers a deep dive into the FIDIC contract system, its templates, core clauses, and its intersection with Indian legal frameworks.

What are FIDIC Contracts?

FIDIC stands for the Fédération Internationale Des Ingénieurs-Conseils (International Federation of Consulting Engineers). It has developed a suite of standardized contract templates used globally for construction, plant installation, design-build, and EPC projects.

🔧 Commonly Used FIDIC Books:

FIDIC Book	Usage	Key Characteristics
Red Book	Construction Projects	Employer provides design; used in traditional construction works.
Yellow Book	Plant & Design-Build	Contractor is responsible for both design and construction.
Silver Book	EPC / Turnkey Projects	High-risk projects; contractor bears more risks and obligations.

Key Clauses in FIDIC Contracts (with International & Indian Relevance)

1️⃣ Performance Guarantees

Contractors are typically required to submit a performance security, often in the form of a bank guarantee, to ensure proper execution of the contract.

Under Indian contract law, particularly the Indian Contract Act, 1872, such guarantees are enforceable, provided they are explicit and unconditional.

Practical Tip: Ensure that guarantees comply with both FIDIC terms and RBI/Banking guidelines for cross-border bank guarantees in India.

2️⃣ Force Majeure (Clause 19 in FIDIC)

This clause excuses the contractor or employer from liability due to unforeseeable events like war, natural disasters, or pandemics.

In India, force majeure is recognized under Section 56 of the Indian Contract Act, which deals with frustration of contract.

Indian Angle: Indian courts often examine whether the event was truly unforeseeable and whether all alternatives were exhausted. In public infrastructure projects, state government notifications regarding force majeure (e.g., during COVID-19) are also considered legally binding.

3️⃣ Dispute Resolution and Arbitration (Clause 20)

FIDIC contracts usually provide for international arbitration under recognized forums like:

• ICC (International Chamber of Commerce)
• LCIA (London Court of International Arbitration)

The parties can also opt for Dispute Adjudication Boards (DABs) or Dispute Avoidance/Adjudication Boards (DAABs) for pre-arbitration resolution.

Under Indian law, particularly the Arbitration and Conciliation Act, 1996, foreign arbitral awards are enforceable in India under the New York Convention.

Practical Tip: If the project is based in India, choose a seat of arbitration wisely—many prefer Singapore or Delhi for neutrality and enforceability.

4️⃣ Governing Law Clause

FIDIC allows the parties to choose the governing law. For Indian projects, it is generally advisable to align with Indian laws unless the funding agency insists otherwise.

Indian courts recognise choice of law clauses, but in public projects, the contract must also adhere to statutory and regulatory frameworks applicable in India.

Indian Legal Considerations in Infrastructure Contracts

While FIDIC templates offer standardisation , they must be customised to fit Indian regulatory frameworks, especially in land-intensive or government-funded projects.

Civil and Construction Law (Contract Execution & Liability)

1. Governed by the Indian Contract Act, 1872

All infrastructure and construction contracts in India—including those based on FIDIC templates—are legally enforceable under the Indian Contract Act, 1872. This law provides the basic framework for:

1. Offer and acceptance
2. Lawful consideration
3. Performance of contracts
4. Breach and remedies
5. Force majeure and frustration of contract (Section 56)

Key Point: Even if the FIDIC contract is international in format, it must not violate the foundational principles of Indian contract law.

2. Public Works Contracts: GFRs and CPWD Manuals

When a government agency or PSU (Public Sector Undertaking) is a party to the contract, additional rules apply:

1. GFR (General Financial Rules): Issued by the Ministry of Finance, these are mandatory for procurement, project implementation, and payment processes in public projects.
2. CPWD Manual: The Central Public Works Department issues detailed manuals covering construction procedures, material quality, safety, billing, etc.

These govern:

1. Tendering and bidding procedures
2. Contractor eligibility
3. Payment terms and penalties
4. Departmental supervision and audit

Practical Note: FIDIC-based contracts for public works must be modified to align with CPWD and GFR provisions to avoid audit objections or delays.

3. Tender Laws, Transparency Norms & Anti-Corruption Laws

Public infrastructure projects must adhere to:

1. The Manual for Procurement of Works (by Ministry of Finance)
2. The Prevention of Corruption Act, 1988
3. Guidelines from CVC (Central Vigilance Commission)

This ensures:

1. Open, competitive bidding
2. Prevention of favouritism or collusion
3. Blacklisting of non-compliant contractors

Example: If an EPC contract is awarded without a transparent tender, it can be challenged in courts under public interest litigation (PIL).

Land Acquisition and Revenue Laws

Acquiring land for infrastructure projects—especially highways, railways, pipelines, and power plants—is a high-risk and legally complex phase.

1. RFCTLARR Act, 2013

This landmark legislation ensures:

1. Fair compensation to landowners (at least 2x–4x the market rate)
2. Consent of 70–80% landowners for PPP or private projects
3. Rehabilitation and Resettlement (R&R) of displaced families

It applies to both urban and rural land acquisition and is binding on both state and central government projects.

Relevance to FIDIC: Contracts must define whether the Employer or Contractor is responsible for acquiring land and managing delays due to acquisition hurdles.

2. State-specific Land Revenue Codes

Each state in India has its own Land Revenue Code regulating:

1. Classification of land (agricultural, commercial, forest, government)
2. Mutation, conversion, and allotment of land
3. Dispute resolution over title or possession

For example:

1. Gujarat Land Revenue Code, 1879
2. Maharashtra Land Revenue Code, 1966

Why this matters: Failure to convert land or get clear titles can stall projects indefinitely. Contractors should not bear these risks unless explicitly agreed.

3. Environmental and Forest Clearances

Under the Environment (Protection) Act, 1986, and Forest Conservation Act, 1980, infrastructure projects must:

1. Obtain Environmental Impact Assessment (EIA)
2. Secure forest clearance if the project affects forest land
3. Get Coastal Regulation Zone (CRZ) clearance if near coastlines

Delays in obtaining these clearances can affect project timelines—hence, FIDIC contracts should allocate this risk clearly (usually to the Employer).

 Construction Regulations & Building Codes

Apart from legal and contractual compliance, all infrastructure works must meet technical, structural, and labor-related regulations.

1. National Building Code (NBC) of India

Issued by the Bureau of Indian Standards (BIS), the NBC sets out the minimum standards for:

1. Structural safety
2. Fire safety
3. Plumbing and sanitation
4. Building materials and workmanship
5. Earthquake and wind resistance

It is not a law but is enforced through local bye-laws, especially in urban and industrial areas.

Tip: FIDIC contracts must incorporate NBC standards and IS codes in the technical specifications and BOQs (Bill of Quantities).

2. Labour Laws for On-site Work

Infrastructure contractors must comply with:

1. The Building and Other Construction Workers (BOCW) Act, 1996 – regulates welfare, working hours, and safety of workers
2. Contract Labour (Regulation & Abolition) Act, 1970 – registration of labor contractors and compliance tracking
3. Employees’ Provident Fund and ESI Acts – social security

Non-compliance can lead to site stoppage, penalties, and even cancellation of contracts in government projects.

3. Municipal and Planning Permissions

All construction projects must obtain:

1. Zonal clearances (residential, industrial, institutional)
2. Height restrictions (especially near airports or defense installations)
3. NOC from Urban Development Authority
4. Road and access permits from PWD/NHAI

Special permissions may be needed if the site is:

1. Near national highways (NHAI rules)
2. Within city limits (Municipal Building Bye-laws)
3. In eco-sensitive zones (MOEFCC guidelines)

Construction without permissions can be demolished or fined, and delay penalties may arise unless such risks are contractually assigned to the Employer.

Why Use FIDIC in Indian Infrastructure Projects?

✅ Globally accepted by lenders and funding institutions
✅ Pre-balanced risk allocation between employer and contractor
✅ Facilitates transparency and accountability
✅ Promotes dispute avoidance with DAB/DAAB
✅ Easily adaptable to Indian laws with legal vetting

Final Thoughts

FIDIC contracts offer a well-structured foundation for executing complex infrastructure projects across the globe. However, in India, one must go a step further to harmonize FIDIC templates with Indian contract law, land acquisition rules, and public procurement procedures.

Whether you’re an EPC contractor, a public body, or an international investor, it’s essential to customise the FIDIC contract with legal guidance that considers both international best practices and domestic realities.

Need Legal Assistance!
For tailored advice on drafting, vetting, or negotiating FIDIC-based EPC contracts in India, or to ensure compliance with land and construction laws, connect with our infrastructure and contract law experts at Narendra Madhu Associates .