construction engineering & infrastructure covid …

1International Construction and Insurance Law Specialists www.beale-law.com

Webinar 2 April 2020

Covid-19 – Where do you stand

CONSTRUCTION ENGINEERING & INFRASTRUCTURE


Introductions

Scott Lambert - Partner

– [email protected]

– +971 (0) 4 356 3904

– +971 50 404 9566

Sadaff Habib - Associate


– +971 (0) 4 356 3902

– +971 50 331 4472

mailto:[email protected]



Overview

Look at Practical Scenarios for:

– Main Contractor

– Employer

– Consultant

– Subcontractor or supplier

Assume use of unammended FIDIC red book 1999 and white book 2006


Red Book Key Clauses


Sub-Clause 4.8

The Contractor shall:

(a) Comply with all applicable safety regulations,

(b) Take care for the safety of all persons entitled to be on the Site….


Sub-Clause 6.7

The Contractor shall at all times take all reasonable precautions to maintain the

health and safety of the Contractor’s Personnel. In collaboration with local

health authorities, the Contractor shall ensure that medical staff, first aid

facilities, sick bay and ambulance service are available at all times at the Site

and at any accommodation for Contractor’s and Employer’s Personnel, and that

suitable arrangements are made for all necessary welfare and hygiene

requirements and for the prevention of epidemics.


Sub-Clause 8.3

The Contractor shall also submit a revised programme whenever the previous

programme is inconsistent with actual progress…

The Contractor shall promptly give notice to the Engineer of specific probable

future events or circumstances which may adversely affect the work, increase

the Contract Price or delay execution of the Works.


Sub-Clause 8.4

The Contractor shall be entitled subject to Sub-

Clause 20.1 to an extension of the Time for

Completion, if and to the extent that completion

for the purposes of Sub-Clause 10.1 is or will

be delayed by any of the following causes:

(b) a cause of delay giving an entitlement to

extension of time under a Sub-Clause of these

Conditions;

(d) Unforeseeable shortages in the availability

of personnel or Goods caused by epidemic or

governmental actions;


Sub-Clause 8.5

If the following conditions apply, namely:

(a) the Contractor has diligently followed the procedures laid down by the

relevant legally constituted public authorities in the Country;

(b) these authorities delay or disrupt the Contractor's work; and

(c) the delay or disruption was Unforeseeable,

then this delay or disruption will be considered as a cause of delay under sub-

paragraph (b) of Sub-Clause 8.4.


Sub-Clause 8.8

The Engineer may at any time instruct the Contractor to suspend progress of

part or all of the Works.

The Engineer may also notify the cause of the suspension. If, and to the

extent, the cause is notified is the responsibility of the Contractor, the following

Sub-Clauses 8.9, 8.10 and 8.11 shall not apply.

Where not Contractor fault then can claim costs and EOT.


Sub-Clause 13.7

The Contract Price shall be adjusted to take account of any increase or

decrease in Cost resulting from a change in the Laws of the Country (including

the introduction of new Laws and the repeal or modification of existing Laws) or

in the judicial or official governmental interpretation of such Laws, made after

the Base Date, which affect the Contractor in the performance of obligations

under the Contract…


Sub-Clause 19.1

In this Clause, “Force Majeure” means an

exceptional event or circumstance:

(a) which is beyond a Party’s control;

(b) which such Party could not reasonably

have provided against before entering into

the Contract;

(c) which having arisen, such Party could

not reasonably have avoided or overcome;

and

(d) which is not substantially attributable to

the other Party.

Force Majeure may include, but is not

limited to, exceptional events or

circumstances of the kind listed below…


Sub-Clause 19.2

If a Party is or will be prevented from performing any of its obligations under the

Contract by Force Majeure, then it shall give notice to the other Party of the

event or circumstance constituting the Force Majeure and shall specify the

obligations, the performance of which is or will be prevented. The notice shall

be given 14 days after the Party became aware, or should have become aware,

of the relevant event or circumstance constituting Force Majeure.


Sub-Clause 19.4

If the Contractor is prevented from performing any of his obligations under the

Contract by Force Majeure of which notice has been give under Sub-Clause

19.2 and suffers delay and/or incurs Cost by reason of such Force Majeure, the

Contractor shall be entitled, subject to Sub-Clause 20.1 to:

(a) an extension of time for any such delay, if completion is or will be delayed,

under Sub-Clause 8.4; and

(b) if the event or circumstance is of the kind described in sub-paragraphs (i) to

(iv) of Sub-Clause 19.1, and, in the case of sub-paragraphs (ii) to (iv), occurs in

the Country, payment of such Cost.


Sub-Clause 20.1

If the Contractor considers himself to be entitled to any extension of the Time for

Completion and/or any additional payment, under any Clause of these

Conditions or otherwise in connection with the Contract, the Contractor shall

give notice to the Engineer, describing the event or circumstance giving rise to

the claim. The notice shall be given as soon as practicable, and not later than

28 days after the Contractor became aware, or should have become aware, of

the event or circumstance.


White Book Key Clauses


Sub-Clause 4.4

If the Services are impeded or delayed by the Client or his contractors so as to

increase the scope, cost or duration of the Services:

(a) the Consultant shall inform the Client of the circumstances and probable

effects;

(b) the increase in scope and/or costs shall be regarded as Additional Services;

and

(c) the time for completion of the Services shall be increased accordingly.


Sub-Clause 4.5

If circumstances arise for which neither the Client nor the Consultant is

responsible and which make it irresponsible or impossible for the Consultant to

perform in whole or in part the Services in accordance with the Agreement he

shall promptly dispatch a notice to the Client.


Sub-Clause 4.6.1

The Client may suspend all or part of the Services or terminate the Agreement

by giving at least 56 days’ notice to the Consultant, and the Consultant shall

immediately make arrangements to stop the Services and minimise

expenditure.


Sub-Clause 4.8

Upon the occurrence of circumstances described in Clause 4.5 or abandonment

or suspension or resumption of Services or upon termination of the Agreement

otherwise than under the provisions of Clause 4.6.2 any necessary work or

expense by the Consultant extra to the Normal and Additional Services shall be

regarded as Exceptional Services.

The performance of Exceptional Services shall entitle the Consultant to extra

time necessary for their performance and to payment for performing them.


Scenario 1 – The Main Contractor


Main Contractor

Applying the unammended FIDIC 1999-

As the main contractor on a large mixed-

use commercial project you are currently

behind programme and have an

outstanding yet unresolved EOT

claim. However one of your labourers has

been diagnosed as having Covid-19 and

the UAE government has ordered the

indefinite quarantine of the labour camp in

which your entire labour force is

housed. This is the only labour camp in

the UAE subject to such a limitation.

What are the main contractor’s rights and

obligations?


Relevant clauses

Sub-clause 8.3 revised programme and notice

Sub-clause 8.4 (d) unforeseeable shortage in personnel

Sub-clause 8.5 delays caused by authorities

Sub-clause 13.7 change in law

Clause 19 force majeure


Points to consider

Is the Contractor under a duty to notify under Sub-clause 8.3?

What impact will the lock down of the accommodation have on the work to be

carried out? Is it going to affect the critical path?

Is there alternative labour readily available for the lock down period?

What effect will any delay be relevant given there is an ongoing pre-existing

delay to the critical path?

What is entitlements – time, money or both


Issues- Sub-clause 8.3

What are the Contractor’s obligations under Sub-clause 8.3?

The Contractor shall promptly give notice to the Engineer of specific probable

future events or circumstances which may adversely affect the work, increase

the Contract Price or delay the execution of the Works…

Article 246, UAE Civil Code

Sub-Clause 8.3 also mandates the Contractor to submit a revised programme

whenever the previous programme is inconsistent with actual progress or with

the Contractor’s obligations.


Issues- Sub-clause 8.4 (d)

Can the Contractor claim under Sub-clause 8.4 (d)- Unforeseeable shortage in

personnel

– Sub-clause 1.1.6.8 defines Unforeseeable as means not reasonably foreseeable

by an experienced contractor by the date for submission of the Tender.

– Possible to mitigate



What does the Contractor need to show to rely on Sub-Clause 8.5?

Claim under Sub-Clause 8.4 (b) a cause of delay giving entitlement to

extension of time under a Sub-Clause of these Conditions

Sub-clauses 8.4 and 8.5 claim for EOT what about cost?



Is the order to quarantine the labour camp a change in law?

Sub-clause 1.1.6.5 of the FIDIC Redbook conditions of contract define Laws

as means all national (or state) legislation, statutes, ordinances and other

laws, and regulations and by-laws of any legally constituted public authority.

Federal Law No. 14 of 2014


Issues- Clause 19

Can the Contractor issue a notice of force majeure

under Clause 19?

• Is it a force majeure event?

• Could the Party have reasonably provided

against the Force Majeure before entering

into the Contract?

• Is the Contractor being prevented from

performing any of his obligations under the

Contract by reason of the Force Majeure?


Issues- Clause 19

Article 273, UAE Civil Code

(1) In contracts binding on both parties, if force majeure supervenes which

makes the performance of the contract impossible, the corresponding obligation

shall cease, and the contract shall be automatically cancelled.

(2) In the case of partial impossibility, that part of the contract which is

impossible shall be extinguished, and the same shall apply to temporary

impossibility in continuing contracts, and in those two cases it shall be

permissible for the obligor to cancel the contract provided that the obligee is so

aware.


Actions

Give notice under Sub-Clause 8.3 and also consider giving a revised

programme

Comply with Sub-clauses 4.8 and 6.7

Keep records of impact and of attempts to mitigate

Give notice under Sub-Clause 20.1 within 28 days claiming under Sub-

Clauses 8.4(b) (d), 8.5, 13.7 and 19.1 (where initiated)

Possible notice under Sub-Clause 19.1 within 14 days

Seek legal advice


Scenario 2 – The Employer


Employer

Applying the unamended FIDIC 1999 red book- As

a developer you are strongly aware of the

Government’s advice about social distancing and

the closure of places where large groups of people

congregate. You are concerned about the possibility

of a COVID-19 outbreak at one of your projects and

you are concerned not only for the health of people

but also about your social responsibility and brand

being diminished.

You want work to stop at your sites for 14 days

following similar closures of courts and other

establishments and also to have stricter new

working rules followed by the Contractor to

minimise the risk of an outbreak. What can you do

under the contract and what are the risks?


Relevant clauses

Sub-Clause 4.8 Safety procedures

Sub-Clause 6.7 Health and Safety

Sub-Clause 8.8 Suspension of works

Sub-Clause 13.7 Adjustments for Changes in Legislation

Clause 19 Force Majeure


Points to consider

Can the Employer suspend works under the Contract?

What are the risks with suspending works under different provisions?

Can the Employer require the Contractor to follow stricter working rules?


Issues

Suspension under Sub-clause 8.8

– Contractor EOT and cost claims

– Payment for Plant and Machinery

Force majeure under Clause 19

– Is it a force majeure event

– Could the Party have reasonably provided against the Force Majeure before

entering into the Contract?


Issues

Stricter new working rules

– Sub-clause 4.8

– Sub-clause 6.7

– Possible claim for cost- sub-clause 13.7

Maintain detailed records

Higher cleanliness


Actions

Remind the Contractor of its health and safety obligations

Maintain a check on records

Suspension for 2 weeks

Force majeure instigated by the Contractor


Scenario 3 – The Consultant


Consultant

Appling unamended FIDIC 2006 white book – As the project manager on site,

you are concerned about the work progressing and the risk to your site

staff. However the Client instructs you to demobilise and the project is to be

suspended for a month as the Contractor has suspended work claiming Covid-

19 risk. What are your rights and obligations under the agreement?


Relevant Clauses

Sub-Clause 4.4

Sub-Clause 4.5

Sub-Clause 4.6

Sub-Clause 4.8


Points to consider

There is no government order that all work on construction sites must cease.

What rights does the Client have to suspend the operations of the Consultant?

The Consultant clearly cannot continue delivering the services as envisaged

by the agreement given the main contractor is not doing any work. Does the

Consultant actually have any obligations to the Client?


Issues

Client’s right to suspend under Sub-Clause 4.6.1 and consequences under

Sub-Clause 4.8

Should Sub-Clause 4.5 be used?

Is Sub-Clause 4.5 a force majeure clause, should it be used and does it

impose any obligations on the Consultant?


Actions

The consultant should give effect to the suspension and immediately

endeavour to minimise cost. Keep records of all cost and actions taken to

justify any claim under clause 4.8.

Make diary note of the date of suspension and 182 days later in case the

consultant may consider exercising the right to terminate.

Claim for exceptional services under clause 4.8 when next invoicing


Scenario 4 – The Subcontractor/Supplier


Subcontractor/Supplier

Applying a back to back contract to a

FIDIC 1999 red book with usual clause

importing main contract provisions (not

to cause breach, paid when paid etc) –

you are on a critical path piece of work

and the materials which are required are

unable to be delivered due to the factory

in Europe having been affected by the

employer voluntarily ceasing work for a 2

week period due to Covid-19

concerns. What are your rights and

obligations? Would the situation be

different if the Government in the country

of the factory ordered a closure or

announced a special public holiday

covering that period, or the work was not

on the main contractor’s critical path?


Relevant Clauses

Clause 5 – Nominated Subcontractors

Sub-clause 8.3 Programme

Sub-Clause 8.4 Extension of Time for Completion

Sub-Clause 8.5 Delays caused by Authorities

Sub-clause 13.7 Adjustments for Changes in Legislation

Clause 19 Force Majeure

Sub-clause 20.1 Contractor’s Claims


Points to consider

The Subcontractor’s supplier is now producing materials due to overseas

factory closure in light Covid-19.

Let’s examine the Subcontractor’s position where the works involved are

critical path and when they are not.

Let’s also examine the situation where the supplier is nominated and where

the factory closure is mandated by the government in the country where the

factory is located.


EOT

Sub-Clause 8.4(d) may provide relief

Issue with back-to back and limit of entitlement to where main contractor also

entitled

Is there a claim where work on subcontractor’s programme critical path but not

main contractor’s critical path


Nominate Subcontractor and Government action

Does the subcontractor’s position change if supplier is nominated

subcontractor

Does the subcontractor have an entitlements to claim under Sub-Clause 8.5

due to authority caused delay or under Sub-Clause 13.7 due to a change in

law


Actions

Subcontractor to try and mitigate the effect of the unavailability of supply and

keep records

Give early warning notice under Sub-Clause 8.3 of the delay event and if

required provide an updated programme.

Give notice under clause 19.2 within 14 days of becoming aware that the

factory has been temporarily closed.

Give notice under Sub-Clause 20.1 claiming for delay under Clause 8.4(d)

within 28 days of becoming aware that the factory has been temporarily closed


Final thoughts

Hope you found the scenarios helpful

Actual advice is subject to the specific project and contract

Consequences of the pandemic can be severe

Be aware, be alert and get your legal advice NOW


Contact Details

Scott Lambert - Partner


– +971 (0) 4 356 3904

– +971 50 404 9566

Sadaff Habib - Associate


– +971 (0) 4 356 3902

– +971 50 331 4472



construction engineering & infrastructure covid …

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