Following this popular webinar, we have collated the questions asked during the event, and we are delighted to share the answers with you.
We hope you will find them insightful.
Does ‘cost’ include or exclude profit?
Generally, in standard forms and bespoke contract types used across the Middle East, cost will exclude profit. The FIDIC definition of Cost provides that:
“Cost means all expenditure reasonably incurred (or to be incurred) by the Contractor, whether on or off the Site, including overhead and similar charges but does not include profit.”
In spite of having arbitration agreement or ADR clearly defined in a contract, can parties still choose to litigate in UAE?
It is up to the parties to agree on which dispute resolution mechanism they want to use to resolve their dispute. However, if arbitration was chosen, but the arbitration condition did not fulfil the legal requirement to be valid, then the dispute may be referred to courts unless the parties completed the legal requirements missing from the arbitration clause.
How can you analyse the loss of time and productivity on site during the COVID-19 pandemic?
The analysis of critical delays caused by COVID events, should be the same as the analysis of all relevant delay events under the contract type. Where the contract prescribes a specific delay analysis methodology to be used, a contractor should comply with this requirement. Where the contract is silent on the delay analysis methodology, a contractor may use an industry standard method contained in the SCL Protocol for example.
Similarly, for disruption or loss of productivity claims relating to COVID-19 events, we would recommend that a contractor follows an international standard methodology, with consideration to the unique circumstances of each project.
How does a Subcontractor's baseline programme which was not approved/responded by the client throughout the project tenure stand in the UAE court when delay analysis is carried on using the same?
Whether it is litigation or arbitration, the court experts and the arbitral tribunals evaluate the delays based on the factual events (the planned intent vs what actually happened during the construction of the works).
In many cases, ‘approved’ baselines are often disputed therefore it is the responsibility of a contractor to prove the baseline programme that was used to record and monitor progress, and which was submitted to the employer at regular intervals during the project execution. This would be considered the most appropriate baseline programme for the delay analysis regardless of any approval.
To what extent will a UAE Court apply the contractual mechanism for dealing with delay and EOT as agreed between the parties in their contract over Art. 249 of the Civil Transactions Law?
Courts usually respect and apply the conditions of an agreement in normal situations and try to maintain the agreement as it is. Article 249 is a general article that deals with emergency circumstances as defined by the law.
Therefore, if the delay events in an EOT claim are categorised as emergency circumstances as defined by the law, the court will consider applying the article of the law to the possible extent that it does not amend the agreement.
However, if the delay events were normal events that could occur in any project and do not have an exceptional nature, the court may refrain from using article 249 and rely only on the agreement conditions.
Would the UAE Court also enforce notification requirements, time limits, or other prerequisites stated in the contract rather than taking a general assessment in accordance with Art. 249?
It all depends on the nature of the delay events. As said before, article 249 deals with emergencies as defined by the law. If the delay events are normal and do not include the requirements to be categorised as emergency circumstances, then the court will not apply this article and enforce the agreement conditions and the requirements therein.
It is important to note here that before the court starts examining whether it will enforce the agreement over the law, or the law over the agreement, it will require a report describing the issues in the project from a technical point of view.
Therefore, the report would significantly affect the court direction and the way the court will interpret the agreement conditions. Also note, the higher court precedents in the UAE has established that the court is the ultimate interpreter of an agreement condition, therefore, the court will interpret the agreement conditions based on its understanding to the issues raised in the project.
Do you think contractors can make loss of productivity claims and delay claims under Article 249?
If the loss of productivity and delay causes can be categorised as emergency circumstances, then a contractor can use article 249 to claim for loss of productivity and delay.
When undertaking an APAB analysis, it is very important to have a correct baseline programme. Where the project has been subject to various changes issued under EI, do we need to amend the baseline to make it the right programme considering the final scope of works carried out by contractor?
Ideally any change or variation that counts for an extension to the time for completion and approved between the contracting parties as a variation to the original scope of work should go through the approved contractual change management process and be reflected in the baseline with an amendment to the contractual completion date.
When disputes occur and the parties opt for AP v AB – the as-planned programme (the baseline – whether it is revised or not) is compared against the as-built programme, i.e. the programme of works including the actual work performed on site with all changes and variations in order to analyse the cause and effect.
Is there any obligation to an employer to approve the baseline program?
This is a general industry practice. In the FIDIC 1999, sub clause 8.3 [programme] – it is stated that "unless the Engineer within 21 days from receiving a programme gives notice to the Contractor stating the extent to which it does not comply with the Contract, the Contractor shall proceed in accordance with the programme,…”
The FIDIC 1999 Red book does not state that the Employer/Engineer should approve, but it explicitly mentioned that if the programme does not comply with the Contract he shall give notice and if it did comply, the Contractor shall proceed based on this intended plan. The Employer will therefore rely upon this programme to plan its activities.