CIOB – Construction Claims in the UAE

23 November 2016
Nicholas Gould and Ahmed Ibrahim
Introduction

• How to minimise claims on your project.

• Putting your claim together.
• Claims for extensions of time and money.
• Typical heads of financial claim.
• Getting your notice of claim right, and time bar Clauses.
• What is a fully detailed claim?
• Applicable UAE law.
• A brief overview of dispute resolution in the UAE.
Typical Risks And Claims

• Design, and concept design.

• Assumption (deeming) of responsibility for accuracy of
Employer Requirements.
• Performance and “fitness for purpose”.
• Single point responsibility.
• Lump-sum price.
• Procurement (supply, installation, design, permissions,
permits etc.).
• Adverse site conditions.
• Change, variations.
• Delay and liquidated or delay damages.
• Defective works and retention.
• PAYMENT?
Managing A Project – 5 Steps for Success

1. Setting up the project.

2. Running the project.
3. Managing change.
4. Dispute avoidance.
5. Dispute management/resolution.

Note also the core pervasive skills

Pervasive skills

1. Technical. The technical management and construction

of the project to the specification and design.
2. Good communication. This means keeping the
appropriate organisations informed about the project and
the proactive management of the project.
3. Use the contract. Carrying out the work and
communicating in accordance with the contract.
1. Setting up the project

• Follow the specification, ERs. CPs, specifications and

drawings; seeking clarification and instructions in good
time.
• Schedule the project, including design periods, approvals,
procurement and lead in.
• Apply the contract.
• Appoint the DAB:
• Consider alternatives; expert determination, DRB,
CDB, project mediator.
• Role of the Engineer or ER.
2. Running the project

• Programme:
• Clause 8.3 – within 28 days of Commencement of
Works.
• Order and timing; design, documents, procurement,
manufacture, delivery, construction, erection and
testing.
• Supporting report, method and execution, labour
resource.
• Progress meetings.
• Payment procedure – Clause 14.
• Process and substantiation.
3. Managing change

• Contract Price.
• Instructions and Variation Clause 13 (change).
• Notices:
• Time – Clause 8.3;
• Money – Clause 14;
• Claims – Clause 20.1.
• Method of measurement.
• Evaluation.
• Determination – Clause 3.5.
• Employer’s claims – Clause 2.5.
4. Dispute avoidance

• Valuing change as it occurs – time and money.

• Making use of updated programmes, progress reports and
valuations.
• Progress meetings.
• Steering committee meetings.
• Risk registers.
• Planned date for completion –v- Time for Completion.
• DAB visits.
Claims For Time And Money

• Contract or no contract?
• Right and obligations;
• Restitution.
• Breach or contract provisions?
• Breach and damages;
• Claims under the contract for loss, expense, damage.
• Time:
• FIDIC Clause 8 (beware Clause 20.1 [Claims]).
• Money:
• FIDIC Clause 20.1 (and Clause 14 [Payment] and 3.5
[Determinations].
• Time and money:
• NEC Clause 60;
• FIDIC Clause 2.5 [Employer’s Claims].
UAE code dealing with contract

• The general rule is that “contract is primary law of the

parties.” [Article 243(2) – Civil Code.]

• Contracts must be performed in a manner that is

consistent with good faith. [Article 246 – Civil Code].

• A contract is NOT limited to what it expressly provides for.

Consider implied provisions by law, custom and the nature
of the transaction.

• In contract’s interpretation, give weight to the true meaning

and mutual intention of the parties. [Article 258 and 265(2)
– Civil Code.]
Time, Delay And Delay Damages

• Commencement and completion obligations.

• Relevance of a programme or project schedule.
• Extension of Time Clause:
• Notice(s);
• Events (variations, employer default etc);
• Evaluation:
• Was there an event; AND
• Did the event have an impact on the date for
completion?
• Non-completion.
• Damages for delay:
• Liquidated (as opposed to unliquidated);
• Delay damages;
• Penalties.
UAE law relating to [delay damages]

• No specific provision for the obligation to complete the works in

time.

• Article 877 of the Civil Code sets the general obligation of

carrying out the works according to the contract terms and
conditions.

• In case of delay, the employer should, in principle, be

compensated - either the contract is terminated or not [Article
272 – Civil Code].

• Consider: force majeure, unforeseen circumstances, exceptional

cases. [Compare and contrast Articles, 273, 249 and 359 of Civil
Code].
Financial Claim: Typical Heads of Claim

• Typical heads of claim:

• Variations – direct cost (consider also on site and off
site overhead, and profit);
• Disruption (cause and effect);
• Prolongation costs (on site overheads);
• Off site overheads/management time;
• Extended insurance, bond etc;
• Cost escalation (indices or as damages);
• Profit;
• Finance charges and/or interest;
• Delay penalty or liquidated damages;
• Performance liquidated damages;
• Actual damages.
Damages: General Principles

• Damages at Common law; Hadley v Baxendale [1854] 9 Ex 341:

• 1st limb – naturally arising;
• 2nd limb – reasonable contemplation.
• Burden of proof is on the claimant.
• What really caused the loss?
• Remoteness – consequential losses.
• Profit.
• Wasted expenditure.
• Global claims – cause, proof and culpability:
• Crosby v Portland (1967) 5 BLR 126;
• Doyle v Laing (2002) CILL 1870.
Damages under UAE law

Liquidated or unliquidated?

Article 390 gives effect to the agreed LDs, BUT Article 390(2) is a
room for “actual loss” argument to increase or decrease.

Three element for unliquidated damages:

• Contractual breach;
• Loss; and
• Causal link.

Damages: loss plus lost profit [Article 292 – Civil Code].

Indirect and consequential loss is not covered.
Concurrent delay or contributing factors [Articles 287 and 290].
Profit, Finance Charges And Interest

• Profit:
• As contractual percentage;
• As damages;
• UAE; damages.
• Finance charges and interest:
• Under the contract;
• As damages;
• UAE; up to 12% [Articles 76, 77 and 88 of the Commercial
Transactions Code].
• Compare to Al Sharia law, for example in Qatar or KSA
[general damages]
Notices And Time Bar Provisions

• Contractual notices: condition precedent or not?

• Very common now for notice provisions to be included in a
contract.
• Commonly expressed as being a “condition precedent” to any
entitlement to time or money (also known as “time bar”).
• Requirements as to timing, form and content.
• A condition precedent Clause must clearly state consequences
of failure to comply.
• A bar to bring a claim and/or waiver of right to a claim.
• Waiver.
 FIDIC Sub-Clause 20.1

Ensure that all applicable notices are served.

• Sub-Clause 20.1 provides:
− Contractors’ claims for additional time or payment need to be made,
“not later than 28 days after the date on which the contractor
became aware (or should have become aware) of the event or
circumstance giving rise to the claim”;
− Any claim for time or money will be lost if it’s not made within that
time limit;
− Particulars supporting the claim must be provided;
− A fully detailed claim needs to be provided within 42 days of the
date on which the contractor became aware (or should have
become aware); and
− The Engineer must respond within 42 days.
• Any claims which are “interim” need to follow this procedure.
• A final claim must be submitted within 28 days of the end of the claim
event.
• Payment certificates should reflect any accepted substantiated claims.
Time bars: the law

Common law
• Bremer Handelgesellschaft mbH v Vanden Avenne Izegem nv
[1978] 2 Lloyd’s Rep. 113.
• Multiplex v Honeywell [2007] TCC, Mr Justice Jackson.
• Obrascon Huarte Lain SA v Her Majesty’s Attorney General for
Gibraltar [2014] Mr Justice Akenhead.

UAE position
• Freedom of Contract: Art 243 (2) but consider Art 487.
• Clear words are given a clear meaning: Art 265(1) of the UAE
Civil Code.
• Good faith obligation: Art 246 (1) of the UAE Civil Code.
• Unlawful exercise of rights: Art 106 of the UAE Civil Code.
• Unjust enrichment: Art 318 and 319 The UAE Civil Code.
Proving Your Claim; Evidence

Identification of relevant facts and supporting evidence will

include:
• Collating and reviewing relevant progress, resource and
costs records;
• Ensuring that any ongoing progress, resource and/or costs
records which will be useful in supporting your position are
being recorded;
• Initial input from key personnel involved;
• Collating any relevant technical information;
• Identifying key factual and legal issues which will
ultimately determine your liability/entitlement;
• Considering whether external experts (e.g. Delay analysts)
or legal issues require input from external legal Counsel.
5. Dispute management

Notices, claims and beyond

• Notices – serve them in time - time bar!
• Follow up with substantiated claims.
• Emphasis is on the resolution of disputes during the
construction phase.
• Maintain communication with engineer/employer.
• Develop short presentations to explain the claim.
• Seek to agree the detail and some claims.
• Seek to agree a global settlement.
• Consider formal dispute resolution.
Dispute Resolution

• Adjudication:
• NEC Option W;
• Dispute Adjudication Board.
• Arbitration:
• ICC, LCIA, SIAC;
• DIAC;
• DIFC-LCIA.
• DIFC court.
• UAE court:
• Use of experts;
• Attachment orders.
Questions

Prof. Nicholas Gould

Partner, Fenwick Elliott LLP
Visiting Professor, King’s College London
ngould@fenwickelliott.com

UK - Aldwych House, 71-91 Aldwych, London WC2B 4HN

UAE - Office 1A, Silver Tower Cluster I, Jumeirah Lakes Towers, Dubai

www.fenwickelliott.com