FIDIC development and implementation in the UAE

FIDIC development andImplementation in the UAEBy Dr. Imad Al Jamal

Brief history•In the late 70s and early 80s official and privatebodies used the 3 rd Edition of FIDIC 1997 in theircontracts but without a clear reference to FIDICInternational by name as they adopted theapproach of “cut and paste” towards the formalFIDIC document.•In the late 80s and up to now, most governmentand private institutions rely heavily on FIDIC 4 thEdition (Red Book) in its original format i.e.without adopting the modified versions of 1988and 1992, which refers to Dispute AdjucationBoards.

Brief history of FIDIC development & usagein the UAE•Nowadays, the trend towards the usage ofFIDIC latest edition (1999) is on the increase,but still well below the desirable level ofusage and implementation due to lack ofknowledge, training and experience in thefield of contracts adoption and usage.•Despite the fact that during the last ten yearsthere have been an increasing number ofFIDIC related contracts from the governmentand private sectors.

Brief history of FIDIC development & usagein the UAE•Bearing in mind the above developments in UAErepresented by Abu Dhabi emirate adoption andimplementation of FIDIC 1999 by an official decree on3 rd January 2007, which covers both constructioncontracts as per the standard FIDIC 1999 under thename of ‘Model I Contract’ as well as design and buildcontract under ‘Model 2 Contract’.•Quick review of the above FIDIC adopted contractswill reveal that the number of clauses is twenty-twoinstead of twenty as per FIDIC, with the addition oftwo sub-titles under the names of: ‘Directionagreement ‘and ‘Regulations’, in addition to exclusionof some of the important appendices as recognized inthe formal FIDIC document.

Brief history of FIDIC development & usagein the UAE•Moreover, the maximum amount of delayeddamages under Clause 8.7 in both modelsreplaces the 10% agreed limit by anexaggerated 20% limit of the contract pricewithout any explanation and/or justification.•In addition to the above, Clause 13.5 in theappendix to tender does not specify thepercentage for adjustment of provisionalsums.

Brief history of FIDIC development & usagein the UAE•Again Clause 13.8 does not clearly defineadjustments for changes in costs and tables ofadjustment data.•In this sub-clause (13.8), table of adjustmentdata means the completed table of adjustmentdata included in the appendix to tender. If thereis no such table of adjustment data, this subclauseshall not apply.•It is important to mention that the absence ofprice indices’ tables and parameters will make itabsolutely difficult if not impossible toimplement the price adjustment formula as givenunder the same sub-clause.

Brief history of FIDIC development & usagein the UAE•On a more serious note, the adoption of thedesign and build contract can be hardly suitedto local contractors due to lack of experience inthis field and therefore will leave the door wideopen for more experienced internationalcontractors to penetrate the local constructionmarket which has been practically done underthe name of ‘joint venture agreements andcontracts’ as well as ‘so-called’ transfer oftechnology and know-how contracts.

Brief history of FIDIC development & usagein the UAE•Sub-contractors agreements attached to bothmodels need to be revisited and scrutinizedfor competence with the original maincontracts as well as the size and value ofcontractual, technical, financial and legalliabilities and responsibilities in theappropriate proportions for all partiesconcerned.

Dispute resolution under FIDIC contracts•Recent developments relevant to:Dispute boardsArbitration

Dispute resolution under FIDIC contracts•Dispute boardsFIDIC 1999 contracts – appointment ofdispute board members where the Parties donot agree (Sub-clause 20.3)the appointing entity or official named in the Appendix toTender shall, upon the request of either or both of theParties and after due consultation with both Partiesappoint ……what is “due consultation”?can a failure to consult prior to appointment be ratified?what is required to make the appointment effective?

Dispute resolution under FIDIC contracts•ArbitrationArbitration nationality (cont)Jivraj v. Hashwani (2010) EWCA Civ 712In 1981, the parties entered into a joint venture agreement forinvestment in real estate in various parts of the worldThe arbitration clause provided that the arbitrators “shall berespected members of the Ismaili community and holders of highoffice within the community”One party challenged the enforceability of the arbitration clauseThe Court of Appeal held that arbitrators are in “employment” forthe purposes of the Employment Equality (Religion and Belief)Regulations 2003 (SI 2003/1660) (Employment Equality Regulations),which implemented the EU Employment directive (2000/78/EC), thatthe religious requirement was discriminatory and unlawful and, as aconsequence, the entire arbitration clause was void

Dispute resolution under FIDIC contracts•Arbitration•Arbitration centres in the Middle East and AfricaDubai International Financial Centre – London Courtof International Arbitration CentreDubai International Arbitration CentreGulf Cooperation Council Commercial ArbitrationCentreCommercial Arbitration Centre of the KuwaitChamber of Commerce and IndustryQatar Chamber of Commerce and IndustryTehran Regional Arbitration CentreTunis Centre for Conciliation and Arbitration

ADCCAC is adopting standard clauses for settlement of thenational and International commercial disputes. LikeConciliation, Arbitration and Mixed Clause:•Conciliation Clause"All disputes arising from the interpretation; implementationor termination of agreement/contract herein shall have tobe conclusively settled via conciliation in accordance withthe provisions on conciliation provided in the Abu DhabiCommercial Conciliation & Arbitration Center's ProceduralRegulations and through a conciliation board comprisingone; three or more conciliator(s) who shall be nominatedand summoned up in accordance with the rules andprocedures provided in the Center's ProceduralRegulations".

Arbitration Clause"All disputes arising from the interpretation;implementation or termination of agreement/contractherein shall have to be conclusively settled viaarbitration in accordance with the provisions onarbitration provided in the Abu Dhabi CommercialConciliation & Arbitration Center's ProceduralRegulations and through an arbitration boardcomprising one; three or more arbitrator(s) who shall benominated and summoned up in accordance with therules and procedures provided in the Center'sProcedural Regulations".

Mixed Clause"All disputes arising from the interpretation; implementationor termination of agreement/contract herein shall have toinitially settled via conciliation and through a special boardcomprising one; three or more conciliators who shall benominated and summoned up in accordance with the provisionsof (ADCCAC) Center's Procedural Regulations". In theevent of failure of such endeavors, or consent on giving upthe aforementioned conciliatory clause, the dispute shallhave to be conclusively settled via arbitration and through aspecial board comprising one; three or more arbitrators whoshall be nominated and summoned up in accordance withthe provisions of the (ADCCAC) Procedural Regulations".

Model Arbitration ClauseThe Dubai International Arbitration Centre (DIAC)recommends parties, desiring to resolve their disputesunder the DIAC Arbitration Rules, to include the belowstatedarbitration clause in their agreements: " Anydispute arising out of the formation, performance,interpretation, nullification, termination or invalidationof this contract or arising there from or related there toin any manner whatsoever, shall be settled byarbitration in accordance with the provisions set forthunder the DIAC Arbitration Rules ("the rules"), by one ormore arbitrators appointed in compliance with theRules".

Model Arbitration ClauseParties are also advised to include the following in theircontractual and submission agreements:1) The number of arbitrators (1 OR a panel of 3) OR anauthorization for the Dubai International ArbitrationCenter (DIAC)to determine the number of arbitratorsand their identities.2) Determine the place of arbitration (e.g. "Dubai") andvenue to hold arbitration proceedings(e.g. "premises ofthe Dubai International Arbitration Center")3) Determine the language of arbitration (e.g." Englishor Arabic).

Model Submission agreementsIn cases where there is an-going dispute between the partiesand they have not previously agreed to refer their disputesto arbitration, The Dubai International Arbitration Centre(DIAC) recommends parties to refer their disputes toarbitration in a new agreement. The following format hasbeen suggested for parties to apply for arbitration under theDIAC Arbitration Rules:"parties [ please insert names, addresses of parties]herewith agree to settle their dispute, concerning [pleaseinsert an accurate description of the subject matter of thedispute], by arbitration in accordance with the provisionsset forth under the DIAC Arbitration Rules ("the Rules"), byone or more arbitration appointed in compliance with theRules".

Model Submission agreementsPlease note that Arbitration & or Consultation can beoffered by UAE Contractors' Association in accordancewith the above mentioned rules & regulation or anyother agreed rules that is jointly agreed upon by theparties to disputes.

• Prepared by Dr. Imad Al Jamal.• Phone: +971 50 6228783• Fax: +971 4 4422938• Email: imad53pn@hotmail.comimad53pn@yahoo.comimad.aljamal@idraac.com• Website: www.idraac.com• Prior permission in writing must be obtainedbefore publishing of all or any part of the abovearticle by any method of advertising orpublication and under any circumstances.