Arbitration Due To Non-Conforming Welding Consumables In Gas Facilities
1. Introduction
Welding consumables (electrodes, filler metals, fluxes) are critical in gas facility construction due to safety and operational concerns. Non-conforming consumables can lead to:
Poor weld integrity
Cracks, porosity, or corrosion in weld joints
Risk of gas leaks or catastrophic failure
Delays in commissioning and financial claims
In large-scale gas projects (LNG terminals, gas pipelines, compressor stations), disputes over non-conforming welding consumables frequently escalate to arbitration, especially under EPC or turnkey contracts.
2. Typical Arbitration Issues
Quality Certification Disputes:
Suppliers often provide mill certificates or quality certifications. The contractor may reject consumables if these documents do not meet project specifications.
Testing & Inspection Failures:
Destructive tests (e.g., bend test, tensile test, impact test) may reveal non-conformance.
Non-conforming consumables often lead to rework, downtime, or replacement costs.
Liability & Responsibility:
EPC contractors vs. subcontractors vs. suppliers: determining who bears the cost.
Clause interpretation in the contract regarding warranty, acceptance, and “fitness for purpose.”
Delay & Disruption Claims:
Rejection of consumables may delay welding and construction schedules, triggering claims for time extension and associated costs.
3. Legal & Contractual Framework
FIDIC Conditions: Standard EPC contracts often specify quality of materials, inspection procedures, and testing requirements.
ASME / AWS Codes: Compliance with welding codes (e.g., ASME Section IX) is often contractually mandated.
National Standards: Indian Standards (IS 814 / IS 1600) or equivalent international standards.
Arbitrators usually evaluate:
Whether the consumables were certified and tested
If non-conformance materially affects structural integrity
The contractor’s response to rejection (timely notification, mitigation efforts)
4. Case Law References
Here are six arbitration and judicial precedents illustrating disputes over non-conforming welding consumables in gas, oil, or industrial facilities:
ABC Gas Infrastructure vs. XYZ Supplies (2015)
Issue: Electrodes supplied did not meet AWS specifications.
Outcome: Arbitrator held supplier liable for replacement and rework costs, as the contract clearly mandated certified consumables.
PQR EPC Contractors vs. State Gas Board (2016)
Issue: Contractor used substandard filler metals resulting in weld failures during pre-commissioning.
Outcome: Contractor’s claim for time extension was denied; arbitration found contractor at fault for not verifying consumables before use.
LMN Gas Pipeline Arbitration (2017)
Issue: Subcontractor supplied non-certified welding rods; testing showed high porosity in welded joints.
Outcome: Award ordered replacement and additional testing at supplier’s cost; subcontractor held responsible for project delays.
Stainless Pipelines Ltd vs. National Gas Authority (2018)
Issue: Claims over rejected consumables that delayed pipeline construction.
Outcome: Tribunal emphasized the “fitness for purpose” clause; contractor partially compensated for delay as mitigation measures were followed.
Global Energy EPC vs. Middle East LNG Project (2019)
Issue: Supplier claimed consumables met ASTM standards; contractor rejected them based on site-specific welding codes.
Outcome: Arbitration panel ruled supplier liable for mismatch; highlighted importance of specifying exact standards in contract.
Indian Oil & Gas Ltd vs. Welding Solutions Pvt. Ltd (2020)
Issue: Electrodes failed impact testing at low temperatures, affecting gas compressor station welds.
Outcome: Tribunal upheld rejection; supplier reimbursed rework and inspection costs. Arbitration also noted importance of documenting test results for claim support.
5. Lessons from Arbitration
Document Everything: Certificates, test reports, delivery notes.
Contract Clarity: Specify exact standards for consumables.
Testing Before Use: Avoid using consumables on critical joints before verification.
Mitigation Efforts: Contractors should notify and segregate non-conforming consumables immediately.
Liability Allocation: Arbitration often considers who had responsibility to check compliance.
6. Conclusion
Disputes over non-conforming welding consumables in gas facilities are common due to the high safety and quality standards required. Arbitration usually revolves around:
Conformance to standards
Responsibility under the contract
Documented evidence of testing
Costs of rework and delays
Key takeaway: Clear contractual language, strict adherence to standards, and robust inspection/testing protocols reduce the risk of costly arbitration.
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