What is the risk allocation for taxes and duties under the unamended FIDIC Yellow Book (Second Edition 2017)?

Position at the time the Contract is entered into:

(a) At the time the contract is entered into, the risk for taxes and duties sits with the Contractor.

(b) The FIDIC Yellow Book provides for the Contractor to be paid a fixed lump sum (the "Contract Price"). The Contractor is deemed to have taken taxes and duties into account in arriving at the Contract Price.

(c) The Contractor's liability for taxes and duties is set out in Sub-Clause 1.13(b), which states that: "the Contractor shall… pay all taxes, duties and fees, and obtain all other permits…as required by the laws in relation to the execution of the Works".

Position if taxes or duties change after the Contract is entered into:

(a) The risk allocation for taxes and duties can only be adjusted in the case of a Change in Law.

(b) Sub-Clause 14.1(b) states "the Contractor shall pay all taxes, duties and fees required to be paid by the Contractor under the Contract, and the Contract Price shall not be adjusted for any of these costs, except as stated in Sub-Clause 13.6 [Adjustments for Changes in Laws]".

(c) Sub-Clause 13.6(a) requires the Contract Price to be adjusted (up or down) if there is a change in the Laws of the Country after the contract's Base Date which increases Cost:

(i) Laws is defined widely (Sub-Clause 1.1.49) and is likely to cover a change in taxes and duties.

(ii) However, Country is defined narrowly as just the country in which the Site is located, where the Permanent Works are to be executed (Sub-Clause 1.1.21). As a result, an increase in export duties from a third-party country would not be covered.

(d) Any adjustment up or down will have to follow the claims notification procedure in Sub-Clause 20.2 [Claims For Payment and/or EOT], requiring a notice to the Engineer within 28 days of becoming aware (or when the Contractor should have become aware) of the change in Law (Sub-Clause 20.2.1). Details of the claim must follow within 84 days of becoming aware (or when the Contractor should have become aware) of the change in Law (Sub-Clause 20.2.4). Any claim not notified within those time limits will be time barred.