Legal update ––––– June 2014

International Construction
Modernising construction contracts
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FIDIC's 1987 Red Book vs the 1999 Red Book
Construction contracts for major projects in the UAE are
commonly based on one of the International Federation
of Consulting Engineers (Fédération Internationale des
Ingénieurs-Conseils) (FIDIC) forms of contract.
Historically, over the past 20 years or so, the most
commonly used FIDIC form of contract has been the
Conditions of Contract for Works of Civil Engineering
Construction, Fourth Edition (1987 Red Book), which is
still regarded by many employers and contractors as the
preferred starting point for any new construction
contract. But is this still the best approach?
The 1999 Red Book
Published by The "Conditions of Contract for Construction for Building
Trowers & Hamlins
and Engineering Works Designed by the Employer"
Trowers & Hamlins LLP (1999 Red Book) is one of the three standard forms of
3 Bunhill Row
London
contract for major works produced by FIDIC in 1999. It
EC1Y 8YZ is often referred to as the "new Red Book". The 1999
t +44 (0)20 7423 8000
Red Book is, worldwide, the most commonly used
f +44 (0)20 7423 8001 standard form of contract for construction and
www.trowers.com
engineering works where most (or all) of the works are
to be designed by (or on behalf of) the employer.
Old vs new
The general intention was for the 1987 Red Book to be
superseded by the 1999 Red Book, and it has been our
experience that clients and contractors are becoming
more and more familiar with the newer document.
However, the 1987 Red Book is still widely used in the
Middle East region, including the UAE.
When considering which form of contract to use, it is
important to note that, although the 1999 Red Book
embodies most of the concepts and principles of the
1987 Red Book, the latter has been designed to
address some of the criticisms aimed at the earlier
contract. Some of the main differences are as follows:
 A simpler format – the 1999 Red Book contains 20
clauses (and 163 sub- clauses) arranged in a more
logical way than the 1987 Red Book, relating to the
discrete issues of a construction contract. The 1999
Yellow and Silver Books also have 20 clauses, with
the same terms being used where appropriate,
making it relatively easy to see the differences
between them. This compares to 72 clauses (and
194 sub-clauses) that make up the 1987 Red Book.

Trowers & Hamlins LLP is a

limited liability partnership
The other two standard forms of contract produced that  A change in concept – in the older forms of FIDIC
registered in England and year are (i) the "Conditions of Contract for Plant and contracts, the choice of contract was essentially
Wales with registered
number OC337852 whose Design Build" (Yellow Book) and (ii) the "Conditions of determined by the discipline of engineering required.
registered office is at 3
Bunhill Row, London EC1Y Contract for EPC/Turnkey Projects" (Silver Book). The 1987 Red Book was for civil engineering and
8YZ. Trowers & Hamlins
LLP is authorised and
the concurrent Yellow Book was for electrical and
regulated by the Solicitors
Regulation Authority. The
mechanical works. In the 1999 suite of contracts, the
word "partner" is used to distinction is based more on who designs the works
refer to a member of Trowers
& Hamlins LLP or an and whether the employer appoints an engineer to
employee or consultant with
equivalent standing and administer the contract.
qualifications or an individual
with equivalent status in one
of Trowers & Hamlins LLP's  A redefinition of the engineer's role – for example,
affiliated undertakings. A list
of the members of Trowers & under the 1987 Red Book, any dispute had to be
Hamlins LLP together with
those non-members who are
referred first to the engineer for his decision, before
designated as partners is
open to inspection at the
it could be referred to arbitration. The 1999 Red
registered office. Book introduces a new requirement for claims to be
Trowers & Hamlins LLP has determined by the engineer and then a Dispute
taken all reasonable
precautions to ensure that Adjudication Board (DAB) before they may be
information contained in this
document is accurate but
referred to arbitration. In addition, under the 1987
Source: Fotolia
stresses that the content is
not intended to be legally
Red Book, the engineer was required to exercise the
comprehensive. discretion granted to him impartially within the terms
Trowers & Hamlins LLP
recommends that no action
be taken on matters covered
in this document without
taking full legal advice.
International Construction Legal update June 2014

of the contract. Under the 1999 Red Book, the It is understandable that employers and contractors
engineer is deemed to act for the employer. familiar with the 1987 Red Book are reluctant to move
away from what they know. However, as highlighted in
 Introduction of DABs – as mentioned above, a new this article, the 1999 Red Book is in many ways a better
step has been added in the 1999 Red Book's starting point than the 1987 Red Book and, in time,
dispute resolution procedure with disputes being everybody will be expected to adopt the newer forms of
referred to a DAB prior to arbitration. The DAB in the contract. Taking into consideration the Abu Dhabi
1999 Red Book is a standing DAB, appointed at the Government Conditions of Contract, that time may be
outset of the project (28 days after the sooner rather than later.
commencement date unless otherwise stated).
For advice on construction contracts, please contact us.
 Time limits for claims – the 1999 Red Book imposes
strict time limits on claims by the contractor, which Written by Daniel Page.
must be commenced no later than 28 days after the
contractor became aware, or should have become June 2014 © Trowers & Hamlins
aware, of the event or circumstance giving rise to For more information please contact
the claim. Although this is clearly of benefit to the
employer, it also encourages the contractor to be Michael O'Reilly
more alert to potential claims and to act upon such Partner
claims more promptly, promoting a better claims t +971 4 302 5152
management process which ultimately benefits both e moreilly@trowers.com
parties.
Cheryl Cairns
 Introduction of new terminology – the 1999 Red Partner
Book adds several new terms which makes the t +971 4 302 5134
contract easier to use. For example, there is a e ccairns@trowers.com
definition of what constitutes "unforeseeable"
physical obstructions or conditions, adding clarity to Eric Teo
an often contested term. Partner
t +971 4 302 5116
The public sector position e eteo@trowers.com
The 1999 Red Book has not yet become the default
choice of construction contract within the public sector Paula Boast
in the UAE. Many government departments, such as the Partner
Roads and Transport Authority (RTA) and the Dubai t +973 17 515 626
Municipality (DM), have their own conditions of contract e pboast@trowers.com
which are still based on the 1987 Red Book (in these
examples, with amendments to realign additional risks Daniel Page
and obligations). Senior Associate
t +971 4 302 5125
However, there are signs that use of the 1999 Red e dpage@trowers.com
Book is gaining momentum. For example, subject to
limited exceptions, Abu Dhabi Government departments Nesreen Osman
that procure construction projects in the Emirate are Associate
obligated to use the Abu Dhabi Government Conditions t +971 4 3025 110
of Contract for construction or design and build e nosman@trowers.com
contracts, which were introduced by Law No. 21 of 2006
and implemented by Executive Decision No. 1 of 2007. Robyn Waller
These are based on the 1999 Red and Yellow Books Solicitor
respectively, although they have also been amended to t +971 (0)4 3025 132
reallocate risk as between the employer and the e rwaller@trowers.com
contractor.

Conclusion
There is an increasing use and acceptance of the 1999
Red Book (and of the Yellow and Silver Books also
released in 1999), although it is still common to
encounter parties adopting the original or derivative
versions of the 1987 Red Book.