Eugen Sarbu, attorney-at-law
As is well known, arbitral awards are generally confidential. For the purposes of this case study, we examined judgments rendered by the Romanian Courts of Appeal over recent years in proceedings seeking to set aside arbitral awards concerning price adjustment under public procurement contracts.
Our review identified several recurring issues arising in arbitral disputes relating to price adjustment in public procurement contracts, which are discussed below.
1. The Arbitral Tribunal’s Choice of the Price Adjustment Formula
The arbitral tribunal’s choice of the price adjustment formula does not constitute grounds for setting aside an arbitral award. Such matters concern the interpretation of the contract and do not amount to an amendment of the contract by the tribunal. Accordingly, they cannot justify an action for annulment.
”Having examined the content of the arbitral award, the Court finds that the arbitral tribunal did not amend the contract, as alleged by the claimant, but merely attributed legal effect to its contractual provisions. Furthermore, the Court notes that neither the manner in which the claimant structured its arguments nor the tribunal’s interpretation of the contractual clauses or assessment of the evidence falls within the scope of Article 364(1)(f) (…).”
”According to the arguments advanced in the application to set aside the award, the claimant’s dissatisfaction concerns the arbitral tribunal’s choice of the contractual price adjustment formula, despite the fact that both the contract concluded by the parties and the evidence submitted (including the correspondence exchanged between the parties and their agreement dated 19 December 2012) established a different factual situation. As regards the alleged breach of the rules governing evidence, the Court finds that this complaint concerns neither a violation of mandatory procedural nor substantive legal provisions, but rather the arbitral tribunal’s assessment of the evidence during its deliberations and the factual findings derived therefrom.” (Bucharest Court of Appeal, Judgment No. 256/2016 of 19 September 2016)
”The alleged misinterpretation of a contractual clause is fundamentally different from the infringement or incorrect interpretation of a mandatory rule of law. Consequently, the applicant’s criticisms do not fall within the scope of Article 608(1)(h) of the Romanian Code of Civil Procedure. Contractual interpretation differs from statutory interpretation. The expression ‘binding force of law’ in Article 1270(1) of the Civil Code merely signifies that contracts are binding upon the parties; it does not equate contractual provisions with legislation. Moreover, Article 1270 of the Civil Code contains default rather than mandatory rules.
Accordingly, issues concerning the contractual price, the method by which it was determined, the contractual procedure applicable to price adjustment, whether the price was fixed or adjustable, whether additional works were performed, whether such works were included in the payment schedule, or the treatment of contingencies and unforeseen expenses, all assessed in light of the specific contractual provisions and the findings of the Dispute Adjudication Board decisions, cannot be reviewed in setting-aside proceedings.” (Bucharest Court of Appeal, Judgment No. 116/2023 of 17 November 2023)
2. The Selection and Assessment of Evidence Falls Within the Exclusive Authority of the Arbitral Tribunal
Equally well established is the principle that the selection of the evidence on which an arbitral award is based (and the decision to disregard evidence considered irrelevant) is a matter falling exclusively within the Arbitral Tribunal’s discretion and therefore cannot be challenged in setting-aside proceedings:
”The mere fact that the Tribunal attributed probative value to one item of evidence while disregarding others does not constitute a breach of Article 364(i).” (Bucharest Court of Appeal, Judgment No. 256/2016 of 19 September 2016).
3. The Decisive Importance of Expert Evidence in Price Adjustment Arbitration
An arbitral award based primarily on an expert report is not affected by any ground for setting aside. It falls within the expert’s mandate to provide the Arbitral Tribunal with the technical analysis required to identify the works covered by the price adjustment addendum and to determine the corresponding amount of the adjustment:
”The claimant essentially argued that the Arbitral Tribunal had failed to take into account the provisions of Government Decision No. 68/2015, the award being based exclusively on the expert report without examining the applicability of Government Decision No. 68/2015. The claimant further argued that the contract value accepted under Addendum No. 4, which incorporated Government Decision No. 68/2015, amounted to an amendment of the Letter of Acceptance.” (Bucharest Court of Appeal, Judgment No. 195/2020 of 27 October 2020).
4. Price Adjustment and the Amendment of the Letter of Acceptance
The amendment of the Letter of Acceptance following the admission of claims relating to price adjustment does not constitute a ground for setting aside an arbitral award. The Letter of Acceptance is not a mandatory rule of substantive law within the meaning of Article 608(1)(h) of the Romanian Code of Civil Procedure, rather, it forms part of the parties’ contractual arrangements:
”As regards the claimant’s argument concerning the amendment of the Letter of Acceptance, the Court finds that this issue does not fall within the category of substantive legal rules and therefore cannot trigger the application of Article 608(1)(h) of the Romanian Code of Civil Procedure.” (Bucharest Court of Appeal, Judgment No. 195/2020 of 27 October 2020).
5. The Manner in Which GO No. 15/2021 Was Incorporated into the Parties’ Contract Cannot Be Reviewed in Setting-Aside Proceedings
”The criticisms concerning the merits of the dispute, namely whether the contractual price adjustment mechanism was modified by Government Ordinance No. 15/2021, do not fall within the exhaustive statutory grounds on which an arbitral award may be set aside. Consequently, such arguments cannot be examined in light of the legal provisions governing the setting aside of arbitral awards. Accordingly, pursuant to Article 613 of the Romanian Code of Civil Procedure, the grounds relied upon in support of the application to set aside the award are unfounded and must therefore be dismissed.” (Craiova Court of Appeal, Judgment No. RJ 7235538d5/2023 of 1 March 2023).
6. The Relationship Between the Price Adjustment Clause and the Claims Procedure Under GD No. 1/2018
One decision delivered in 2023 deserves particular attention because it highlights the interaction between the price adjustment mechanism contained in the standard public works contract approved by GD No. 1/2018 and the contractual claims procedure established by the same model contract.
In that case, the Arbitral Tribunal held that a claim for price adjustment had to be submitted through the contractual claims procedure provided for under Clause 69 of GD No. 1/2018. In our view, however, such an interpretation overlooks the fundamental distinction between contractual claims and price adjustment.
Under GD No. 1/2018, the claims procedure is designed to compensate the contractor for additional costs arising from unforeseen events occurring during contract performance. By contrast, the price adjustment mechanism serves a different purpose. It applies automatically to each Statement of Works and merely updates the value of costs already included in the contract. It does not compensate for new events giving rise to additional categories of expenditure.
For this very reason, the contractual architecture established by GD No. 1/2018 expressly provides, in Sub-Clause 50.1(b), that each Statement of Works shall include the amounts resulting from the application of Clause 48 governing price adjustment.
Unfortunately, such an erroneous interpretation of GD No. 1/2018 cannot constitute grounds for setting aside an arbitral award, as it concerns the Arbitral Tribunal’s interpretation and application of supplementary contractual provisions rather than the infringement of mandatory legal rules. Consequently, the error could not be corrected in the setting-aside proceedings.
The Bucharest Court of Appeal held:
”Accordingly, the Arbitral Tribunal’s finding that the parties agreed both on a contractual price revision clause and on a contractual mechanism under which the contractor forfeits its entitlement to request a price revision if it fails to submit a claim within 30 days from the occurrence of the relevant event does not contravene any mandatory rule of law. The applicant has failed to identify any statutory provision requiring the mandatory revision of the price of a public procurement contract following increases in the cost of construction materials or prohibiting the forfeiture of the contractor’s right to seek such adjustment where that consequence has been expressly agreed in the contractual provisions reproduced from the standard form of agreement annexed to Government Decision No. 1/2018.
The Court therefore concludes that the challenged arbitral award does not infringe the mandatory provisions of Article 1270 of the Romanian Civil Code and that none of the other legal provisions relied upon by the claimant require the revision of the contract price or prohibit a contractual mechanism under which the contractor forfeits its right to seek price adjustment if such adjustment is not requested within the time limit agreed by the parties.” (Bucharest Court of Appeal, Judgment No. 113/2023 of 2 November 2023).
7. The Employer’s Refusal to Replace the Contractual Price Adjustment Formula with the More Favourable Formula Introduced by Special Legislation
A further issue addressed in recent arbitral case law concerns the Employer’s refusal to replace the price adjustment formula contained in GD No. 1/2018 with the formula introduced by GEO No. 64/2022.
Article 44(3) of GEO No. 64/2022 requires the application of the adjustment formula established by the Ordinance whenever its financial impact exceeds by more than 5% the financial impact resulting from the application of the formula set out in Sub-Clause 48 of the standard public works contract approved by GD No. 1/2018.
Recent arbitral practice has raised the question whether the Contractor is entitled to terminate the contract unilaterally where the Employer refuses to amend the contractual price adjustment mechanism in accordance with the mandatory provisions of the special legislation.
In the cases reviewed, the Bucharest Court of Appeal upheld the Arbitral Tribunal’s conclusion that the breach of a statutory obligation does not, in itself, justify unilateral termination of the contract. According to the Court, unilateral termination may be based only on the breach of a contractual obligation and not on the breach of a statutory obligation.
From an economic perspective, however, this approach is open to criticism. The extraordinary price adjustment mechanisms introduced in 2021-2022 were enacted precisely because the Romanian legislature acknowledged the unprecedented escalation of construction costs. The explanatory memoranda accompanying both legislative acts expressly recognise that, absent such adjustment mechanisms, many public procurement contracts could no longer be performed under economically sustainable conditions.
Against that background, denying a contractor the right to suspend performance or terminate a contract where the Employer refuses to implement a mandatory statutory price adjustment effectively compels the contractor to continue performing a contract which, according to the legislature itself, has become economically unsustainable. Such an interpretation appears difficult to reconcile with the very purpose of GO No. 15/2021 and GEO No. 64/2022, namely the restoration of the contractual economic equilibrium disrupted by exceptional market conditions. (Bucharest Court of Appeal, Judgment No. 41/2025 of 30 April 2025, and Judgment No. 61/2025 of 1 July 2025).
Conclusions: Price Adjustment in Public Procurement Contracts Is Becoming an Increasingly Specialised Area of Arbitration
Recent case law confirms an important procedural reality: errors relating to the merits of the dispute cannot be corrected through setting-aside proceedings.
The Romanian Courts of Appeal have consistently rejected challenges directed against the Arbitral Tribunal’s interpretation of contractual provisions or its application of the legislation governing price adjustment, holding that such criticisms concern the merits of the dispute rather than the limited statutory grounds for setting aside an arbitral award.
This jurisprudence underscores the importance of conducting arbitral proceedings in a manner that combines a thorough command of arbitral procedure with an equally strong understanding of the highly specialised legal framework governing price adjustment in public procurement contracts.
Failing such expertise, there is a real risk of misinterpreting the relationship between GD No. 1/2018 and the subsequent emergency legislation governing price adjustment, particularly GO No. 15/2021 and GEO No. 64/2022; or, even more significantly, of conflating the automatic contractual mechanism for price adjustment with the claims procedure and the associated time-bar provisions.
Once such an interpretation is adopted by the Arbitral Tribunal, the setting-aside court will generally be unable to correct it.
The case law also highlights the decisive importance of expert evidence in price adjustment disputes. The outcome of such proceedings depends to a significant extent on the proper presentation of technical and quantum evidence and on the manner in which that evidence is presented to the appointed experts. Expert evidence must therefore be prepared meticulously, comprehensively and in a highly structured manner.
In this field, theoretical legal submissions alone are seldom sufficient. Success requires the ability to translate complex project documentation into legally relevant arguments specifically tailored to the contractual price adjustment mechanism. Equally important is ensuring that the expert report provides the Arbitral Tribunal with a rigorous technical and economic analysis capable of supporting a legally sound, balanced and equitable decision.