Do Fidic Rule Apply In Construction Contracts In Uae?

Since a very long time, FIDIC (The International Federation of Consulting Engineers) is commonly used a standard for international construction and engineering contracts and is very frequently used in UAE. It mainly governs the construction works within the country and in GCC. 

FIDIC has a different
category known as Rainbow suite for varied projects or contracts. The
suite includes Res book for building and engineering works, a yellow book for design-build,
a silver book for EPC contracts and the
green book for short projects which was released
in 1999.

Almost post two decades, FIDIC
committee has released the second edition
of three principal contracts that are Red, Yellow and Silver book. The amendments
in these contracts are the recent topics of construction industry. The
Construction Lawyers in Dubai have written this article to enlighten the
readers about a few notable changes in
the FIDIC current edition. The rationale
behind the rigorous amendment in the rainbow suit is to meet the demands of the
users and the industry, considering the rapid change in the technology.

Significant Changes

One can witness considerable revisions in the yellow, silver
and red book. The extensive nature of these contracts is due to detailed provisions regarding contract administrations
rather than just superficial change. One should carefully read each clause of
the concerned book considering the length of the provision it may invite unnecessary misinterpretations. Some of the
notable changes in the FIDIC rules are outlined
below:

1.      Notice

A clear heading stating “Notice” and
the subject for issuing such notice shall
be highlighted, whenever a party issues a notice,
concerning the new amendment. The
intention behind this amendment is to reduce the disputes in relation to notices
issued by parties where parties argue about the recommendations
in the progress report is considered as notice of a claim.

2.      Disputes

In consonance with the predecessor of
the rainbow suite to appoint Dispute
Adjudication Board (DAB). The functions DAB starts from the beginning of the
contract until the completion of the project. The Board is required to visit
the site throughout the term of the agreement
to ensure smooth functioning of the project. As the name suggests, DAB is
appointed to resolve or avoid disputes between the parties. Even though appointment DAB can prevent parties from
strenuous disputes, it is still
considered as a costly affair to have DAB
on board. However, under the new amendment, appointing Dab is a preliminary
requirement for parties which earlier they were happy to disavow.

3.      Duties of
Engineers

A pivotal role was
played by engineers in
the old Rainbow suite, and the same
position has been maintained in the new
suite with some additional responsibilities.
FIDIC update is almost 50% more of its predecessor with one significant aim to
achieve more structured and clear
procedures to avoid uncertainty. Coming back to the duties of the engineer,
below are several new duties under the new Yellow book:

·        
The engineer will continue to act as an employer,
and according to the new amendment,
Engineer is not required to permission from the employer prior to making a determination;

·        
There is a new role of Engineer’s representative, who
must be present at the site throughout the project period;

·        
Engineer under the term “Agreement” is obligated to
encourage the terms of the agreement. They may further, if required, provide
consultation to parties in this regards;

·        
Should the engineer fails to make a determination in the relevant period, the matter will be referred
to DAB;

·        
Engineer is a neutral party and should not be biased.

A great emphasis can be witnessed from the wordings of the new
contract on the duties of engineers that is to prevent the claims from becoming
disputes leading towards harmony between the parties.

Warnings

Another consequential feature of the rainbow suite is the authority given
to DAB to issue advance warnings or prior
notice of a potential issue. This feature is to with
a view to amicably settle the matters between the parties and with a
hope that parties will work in harmony to resolve the dispute rather than
escalating it to something serious.

The gold book allows the parties to
inform an other party in advance regarding
any unforeseen circumstances which can have an unpropitious
impact on the project.

5.      Force Majeure
Provisions

Gold Book manifests a collaborative
and risk-sharing approach and bearing the same approach
in mind; the new yellow book includes a
provision stating “exceptional risks” or “risk allocation”. The definition of
exceptional risks is similar to the definition of force majeure clause. However, it also sets out the risks the
contractor or the employer may have to bear in future. A detailed description
of such risks can be observed from the
new amendment.

6.      The procedure
for filing claim

Interestingly, a new step has been
taken by FIDIC to divide the claims procedure from that of disputes. The intention of the FIDIC committee was to
separate the contractual processes of
seeking a claim from the procedures
regarding filing a dispute. Through this, parties will be less ingrained
towards their position and will be more likely to resolve the dispute. However, we still have to see if the
concerned approach will practically fit in such conflict.

One more significant change can be seen in clause 20 where the claims procedure
s now applied to both the employer and
the contractor. It is clear that now a
similar procedure will be followed for
employer’s claims, leading towards a balanced
approach and mutually-benefitted relationship. It is further implied from Clause 20 that numerous additional
obligation regarding contract obligations have been imposed on the party filing
a claim.

Conclusion

It is indeed very early to have conclusive remarks on the FIDIC update as the
position of new amendments are yet to be
justified through a practical
approach. However, a significant emphasis on the dispute avoidance mechanism is
perhaps the most conspicuous change in the rainbow suite.

Introduction of friendly settlement procedure is clearly to safeguard the interest of parties
and offer them employer-friendly business relationship.