Eskom v Framatome (2025)
Neutral citation: Eskom Holdings SOC Ltd v Framatome and Another (5201/23) [2025] ZAWCHC 296
NEC contract topics: Option W1, instruction by the adjudicator to the project manager, assessment of compensation events
Form of contract: NEC3 Engineering and Construction Contract (June 2005 edition with amendments) Main Option A, X1, W1
Main areas of law: Construction contract law; interpretation and enforcement of adjudicator’s decisions under NEC3 contracts; jurisdictional scope and powers of adjudicators; contractual dispute resolution mechanisms; applicability of natural justice principles in adjudication.
Background and the Dispute
Eskom and Framatome entered into an NEC3 Engineering and Construction Contract (June 2005 edition with amendments) Main Option A (priced contract with activity schedule), for the replacement of steam generators at the Koeberg Nuclear Power Station. The contract included secondary option clause X1 for inflation adjustment and dispute resolution under option W1. Initially concluded with Areva NP in 2014, the contract was ceded to Framatome in 2018. Eskom’s decision in March 2022 to postpone the replacement works in Unit 2 during outage 225 led to Framatome’s notification of a compensation event. This was acknowledged by the project manager and designated as a compensation event CN-CE-334. Disputes arose from the assessment of this event and related assumptions. Framatome initiated adjudication proceedings for disputes 118 and 119, the former relating to the project manager’s nil assessment under clause 64.
The adjudicator issued a merits decision on 15 December 2022. He held that the postponement and instruction to stop work constituted a compensation event under clauses 60.1(2) and 60.1(4). Paragraphs 24.4 to 24.7.1 directed a reassessment by the project manager before 15 February 2023, failing which a meeting would be convened and the adjudicator would settle the quantum. Eskom objected, claiming the adjudicator’s decisions and instructions exceeded his jurisdiction, infringed natural justice, and were functus officio. Nonetheless, the parties engaged in meetings and correspondence, culminating in a further decision on 18 March 2023, determining the quantum compensation.
Legal Issues
The court was required to consider whether the adjudicator exceeded the scope of his powers under clause W1.3 of the NEC3 contract. Eskom contended that the adjudicator:
• Acted beyond jurisdiction by issuing instructions to the project manager.
• Deferred part of his decision in breach of clause W1.3(8).
• Engaged in procedures not contemplated by the contract.
• Was functus officio1 after issuing the merits decision.
• Breached principles of natural justice by failing to request submissions on key matters.
• Failed to issue a reasoned decision regarding the quantum.
Framatome opposed these claims, maintaining the adjudicator acted within his powers under clause W1.3(5) and followed a permissible staged process. It also disputed that any breach of natural justice had occurred and denied that functus officio applied.
Judgment
The court rejected Eskom’s application, holding that the adjudicator acted within the broad inquisitorial powers granted under clause W1.3(5). The instructions to the project manager and subsequent procedures were necessary steps in reaching a final decision on quantum and did not exceed jurisdiction.
The court held that functus officio does not apply where the adjudicator explicitly reserves the issue of quantum for later determination. The judge found that clause W1.3(8) did not impose a rigid and inflexible timeline beginning immediately after the four-week information period. The adjudicator’s role permitted engagement beyond this period to resolve disputes properly. The project manager, though not a party to the contract, was integral to contract performance and fell within the adjudicator’s review powers. The court emphasised that adjudication is not strictly adversarial but allows proactive intervention, especially when resolving compensation issues.
On the claim of breach of natural justice, the court noted Eskom’s own refusal to participate further in the process and held that it could not assert audi alteram partem2 rights it had voluntarily waived. The court also rejected the contention that the decision lacked reasons, finding that the adjudicator had provided a detailed rationale for accepting Framatome’s revised calculations and had addressed the evidential and procedural context fully. The application was dismissed with costs. Framatome’s counter-application for payment was granted in accordance with the adjudicator’s decision.
NEC contract learning points and implications for the construction industry
The judgment provides authoritative clarification on the interpretation of clause W1.3 within NEC3 contracts. It affirms the broad procedural discretion afforded to adjudicators, particularly under W1.3(5), which includes powers to issue instructions and to take steps necessary to reach a decision. The court rejected a formalistic reading of W1.3(8), favouring a commercially sensible interpretation consistent with the purpose of adjudication as an interim, expedient dispute resolution mechanism.
The decision confirms that adjudicators may structure decisions in stages where appropriate, and functus officio does not arise until the final determination of all parts of the dispute. Parties must actively engage in adjudication and cannot later claim procedural unfairness having chosen not to participate. The judgment emphasised that the adjudicator’s powers are “broadly inquisitorial” and not limited to binary dispute resolution. This includes giving directions to the project manager that are incidental to the adjudication process. Such directions are not “instructions” in the sense that a project manager would give under clause 14.3. The adjudicator may require actions to facilitate resolution of the dispute, but he cannot enforce or override the project manager's contractual discretion. While the adjudicator’s interaction with the project manager is permissible under W1.3(5), such directions are only valid where clearly ancillary to the dispute and not an attempt to compel substantive contract performance.