Mohamed S Abdel Wahab, Zulficar & Partners

This is an extract from the third edition of GAR’s The Guide to Construction Arbitration. The whole publication is available here

The role of FIDIC in the construction industry in the MENA region

The FIDIC forms of contract have been used in the MENA region since 1970. While these forms are English common law-based texts, they have, nonetheless, been widely adopted and applied in Arab states in the MENA region, where legal systems are primarily civil law and Islamic shariah-based. The public sector has led the way for the adoption of FIDIC forms of contract in the region in response to tendering laws and the requirements set by governmental entities.

However, owing to the codification of civil legal principles throughout the MENA region, certain tension or concerns may arise regarding the application of the FIDIC conditions of contract and the legal principles prevailing under civil law in certain jurisdictions. Among the disputes that regularly arise in this context and in relation to projects proliferating throughout the MENA region are:

  • the engineer’s administration of works and specifically the likelihood of late approvals, incorrect or insufficient instructions;
  • lack or delayed determination on extension of time (EOT);
  • cost;
  • changes and variations to the stipulated obligations, contractual breaches by the employer or contractor;
  • non-payment;
  • defective construction and performance;
  • non-conformity of materials;
  • warranties and representations;
  • concurrent delay;
  • force majeure and hardship (imprévision);
  • termination;
  • liquidated damages; and
  • fulfilment of conditions precedent.

It is in this context that FIDIC offers an effective contractual regime that has been tested and applied with success throughout the region. Nevertheless, it is not always the case that the agreed contractual model offers a framework that is consistent with the applicable law and norms, hence the need to ascertain and distill the applicable legal principles and how they apply in the context of construction contracts and disputes throughout the MENA region.

Construction contracts and disputes in the MENA region – civil law principles

The French Civil Code has influenced the civil codes of many MENA countries including Egypt, which in turn is viewed as the source and model on the basis of which many Arab countries have modelled their laws.

Construction contracts often involve issues arising from the interpretation of the various documents forming part of the contract. As previously stated, the most common type of FIDIC form of contract used in the MENA region is the Red Book, and it is submitted that among the legal issues and principles at the heart of construction disputes governed by MENA region civil laws are: good faith, abuse of rights, estoppel, prohibition of taking advantage of one’s own wrongdoing, force majeure and imprévision, global claims, accelerated claims, delay damages, concurrent delay, principles of interpretation, implied terms, the duty of mitigation, suspensive conditions, interest and decennial liability, which are addressed below.

Good faith

Good faith is a sacrosanct principle of law recognised all throughout the MENA region. It is a prevailing principle in the laws of Arab states, where it governs all aspects of a contractual relationship starting from the negotiation phase, through the conclusion of the contract, its performance, and to its termination.

The importance of the principle of good faith lies in the consequences of the breach thereof, where a party’s liability is usually aggravated whenever it is established that its acts or omissions were not undertaken in good faith or were proven to be undertaken in bad faith. Moreover, courts in the MENA region frequently add and imply obligations to contracts on the basis of good faith.

It is submitted that the duty of good faith is generally not limited to the performance of contracts but extends to the pre-contractual negotiations. Indeed, once the parties agree to enter into negotiations, such agreement to negotiate must be performed in good faith. The duty of negotiation in good faith has several variants including, an obligation to negotiate transparently, as well as an obligation not unilaterally revoke what has been agreed.

A person is presumed to be acting in good faith unless proven otherwise, hence the rebuttable presumption of innocence and good faith performance. Nevertheless, establishing gross fault or negligence is sufficient to evidence bad faith and shift the burden of proof to the party claiming good faith performance.

Acting in good faith, inter alia, involves certain constraints and positive duties including:

  • an obligation to transparently disclose any matter or event that may impact or influence the performance of the contract;
  • an implied obligation to avert any act or omission that may adversely impact the performance of the contract;
  • an obligation to pursue the most suitable method of performance when there are two or more alternative methods;
  • an obligation to notify the other contracting party within a reasonable period of time;
  • an obligation to avert dilatory and surreptitious behaviour;
  • an obligation to act in accordance with the objective or objectives of the contract and the justified [legitimate] expectations of the parties;
  • an obligation to avert deviation from the purpose the right was prescribed for  (i.e., achievement of a serious and legitimate interest);
  • an obligation to abandon strict adherence to a literal interpretation if the latter leads to absurd results contrary to the spirit of the contract, its proper performance and the parties’ common intention;
  • an obligation to mitigate damage or harm if sustained by either party;
  • an obligation to avoid any third-party communications and dealings that jeopardise or adversely impact the existing contract; and
  • an obligation to avoid reaping the greatest advantage from the contract at the expense or to the detriment of the other party by choosing to implement its right in a prejudicial way to its counterparty.

The variants of the principle of good faith have been further considered by an arbitral tribunal applying Egyptian law in the specific context of a construction contract, where the tribunal ruled that:

It is accepted in all international construction contracts that: (a) whereas it is the duty of the contractor to do what the contract requires to be done (as designed and specified by the employer, the employer shall allow the contractor to do that which is to be done without hindrance; and a party cannot benefit of its breach to the detriment of the injured party … (b) Whereas a contract provides for a date for completion of the works, but the employer through its acts or omissions prevents the contractor from achieving that date and there is no entitlement to extensions of time under the contract in such event the time for completion is nullified. This in turn means that the employer loses his right to levy liquidated damages and, while the contractor’s obligation to complete the Works remains, he must do so only within a reasonable time.

Good faith extends to administrative contracts (including public works construction contracts), where the Egyptian Supreme Administrative Court concluded that good faith requirements equally apply to administrative contracts. The Court held that:

It is also established that a performance of the contract in accordance with its content and in a manner conforming to good faith requirements, is a general principle which applies to administrative contracts, same as it applies to all civil contracts … 

It is submitted that good faith involves both acts and omissions (passive and active duties), and necessitates the absence of bad faith. In the specific context of construction contracts, an arbitral tribunal has tackled good faith, essential mistake and fraudulent misrepresentation in the conclusion of the contract and stated that if one party knew of a mistake pertaining to the conclusion of the contract and refrained from communicating it to the other party, the former shall be deemed to be acting in bad faith. As previously alluded to, good faith does not solely concern refraining from acts or omissions of bad faith, but supposes in addition, respecting a cooperation obligation when it comes to the implementation the contract.

The question of identifying the criteria of good and bad faith is left to judicial discretion, to verify whether each party’s conduct was in good or bad faith. In the performance of construction contracts, a party will be considered to be acting in bad faith if it is determined to perform or terminate the contract with a bad intention or for a bad purpose. In this context, one may distinguish between three types of situations:

  • The first situation is the case where a party to the contract is determined to take a positive action or to refrain from acting in a certain manner while being absolutely aware that such action or omission will cause detriment to its counterparty. In such circumstances, such person is acting in bad faith.
  • The second situation is the case where a party to the contract is determined to take a positive action or to refrain from acting in a certain manner, while being unaware that such action or omission may be detrimental to its counterparty. In this case, it may be difficult to discern that the said party was acting in bad faith, as this will largely depend on whether such party was acting with an understanding that this constitutes a breach of the contract or not, irrespective of whether such breach will cause a detriment to the other contracting party.
  • The third situation concerns the case where a party to the contract acts or refrains from acting in a certain manner, while it is foreseen that such action or omission may cause the other contracting party certain detriment, yet the former chooses to act in this way. In that case, while the acting party had no intention or purpose to cause any detriment to its counterparty, it actually foresaw the possibility of detriment and accepted, in view of the benefit that it may reap, that such detriment may materialise. Accordingly, that party may (depending on the facts and circumstances) have contravened good faith, since it knowingly proceeded while foreseeing the likely prejudice that may ensue and which outweighs the benefit it desires to reap.

In manifestation of the duty of good faith, it is submitted that an employer is expected to exert all possible efforts to allow the contractor to complete the works without impediment. If the works require the intervention of the employer, it shall do so within the contractually agreed period or within the period customarily required for that specific type of work. That is why the parties remain under a positive obligation of cooperation during the performance of the contract (as a variant of good faith), even if the contract does not specifically include all its manifestations.

Principles of contractual interpretation

Subject to the applicable mandatory rules and any other overriding applicable legal principles, the parties are free to regulate their contractual relationship in accordance with the principle of pacta sunt servanda, and the rules of contractual interpretation allow tribunals and courts to ascertain the common intention of the parties as to the content of their contract.

The rules of contractual interpretation within MENA region jurisdictions largely mirror or resemble their Egyptian counterparts.

Insofar as ambiguity does not taint a contract, no deviation, by way of interpretation, from the intended meaning of the clear terms of the contract is warranted, noting that this applies in accordance with the expressed intention of the parties. Thus, clarity of the contract denotes the clarity of the parties’ unequivocal intention and not just the clarity of the words used. In other words, even if the wording of a contractual term is clear on its face, the nature of the contract or the circumstances of its conclusion may reveal that the said term’s intended meaning differs from the words used. In such event, courts and tribunals must discern the parties’ common intention through the rules of interpretation.

There is a rebuttable presumption that the expressed intention of the parties is identical to their unequivocal intention. A clear text is an indication of the expressed intention of the parties; however, this does not mean that the literal wording of a text is reflective of an expressed intention of the parties. Rather, a tribunal or court may deviate from the literal meaning of texts in view of the wider context of the contractual terms. The laws of Morocco, Lebanon, and Tunisia, which are directly influenced by French law, explicitly provide that a contract shall be read in light of the whole context of the contractual terms. This is also the case in Egypt, where the Egyptian Court of Cassation upheld the ejusdem generis principle of interpretation.

The mere disagreement between the parties as to the intended meaning of a contractual provision does not, in and of itself, taint a contractual provision with ambiguity. As such, it is the court or tribunal that is vested with the authority to ascertain whether a term or provision of the contract is ambiguous or not, after assessing the parties’ positions in relation to the wording of same

Should a court or tribunal find that the parties’ common intention differs from the expressed words, it shall resort to interpretation to ensure that the parties’ unequivocal common intention prevails. That said, it was held that:

The court may deviate from the expressed meaning of the text of the contract, to what it deems more accurate in reflecting the intention of the parties as an application to its absolute [discretionary] power in understanding the provisions of the contract, and what the parties intended by [such provisions], and preserving the common intention of the parties.

Moreover, a court or tribunal is at liberty to apply the correct legal characterisation of a legal relationship, irrespective of the wording used by the parties. Nonetheless, the court or tribunal must reason such deviation from the clear wording of a text, in case the latter is not reflective of the parties’ common intention.

To ascertain the common intention of the parties, several elements must be taken into account, including:

  • the language of the contract;
  • the nature of the transaction;
  • prevailing customary practice; and
  • the good faith element reflected in the honesty and trust that ought to prevail between contracting parties.

These elements are not exhaustive and the court or tribunal may refer to other factors in ascertaining the parties’ common intention, such as the manner of performance of the contract and the purpose underlying a contractual provision.

Furthermore, interpretation of construction contracts should be consistent with commercial common sense and business efficacy. While some MENA Civil Codes do not expressly refer to common sense or business efficacy as guiding indicators, this is inferred from the references to the ‘nature of the transaction’, ‘honesty and trust/good faith’ and the ‘prevailing customary practices’.

In light of the above, to the extent the expressed common intention of the parties to a contract is clear and unambiguous it shall be upheld and applied. However, if there is ambiguity or doubt as to such intention, good faith and the prevailing principles of interpretation militate against absurd or prejudicial interpretation, and any ambiguity shall be interpreted in favour of the debtor as per the applicable principles of interpretation.

Implied terms

Consistent with the good faith obligations, Arab laws include legislative provisions dealing with implied terms, where a contract is not exclusively limited to its express terms, but extends to cover implied terms. Article 148(2) ECC, which inspired many similar provisions proliferating throughout the MENA region, states: ‘A contract must be performed in accordance with its content, and does not only bind the contracting party to its content, but also to all that which is a necessary sequel thereof, in accordance with the law, custom and equity.’

Since pacta sunt servanda is overarching fundamental principles, it is worth noting that the doctrine of implied terms is not inconsistent with pacta sunt servanda, as the sequels of a contract remain subject to the parties’ agreement and are intended to complement and supplement the same. This means that implied terms may not amend, contradict or override the express terms of a contract agreed by the parties. Nevertheless, it should be noted that even a detailed and sophisticated construction contract may possibly be silent on a certain matter or circumstances and even the nature of the obligations and their proper performance, in good faith, may warrant the inclusion of certain implied terms as a matter of law, custom or equity. Thus, if the parties’ agreement is silent on a certain provision, whether because the parties have failed to agree thereon or did not envisage the same, then the necessary sequels of a contract could intervene to fill the gap.

That said, it is not uncommon to imply terms in construction contracts, such as the duty of cooperation, which is also a variant of good faith. Similarly, even if it is not expressed in the contract, a contractor is expected to perform the works as deemed fit for the intended purpose, and the employer is subject to an implied obligation not to impede or interfere with the contractor in the performance of its obligations under the contract or the progress of the works.

An illustration of another implied term is the obligation of the contractor to maintain and protect the materials provided to him or her by the employer for performing the works and to exert his or her best efforts in doing so.

Generally, there are factors that are taken into consideration when deciding whether a given term is implied in the contract or not, which are:

  • the nature of the contract or obligation (e.g., a contract for the construction of a residential tower would imply different terms than those concerning the construction of a power plant);
  • any supplementary legal provisions;
  • custom; and

The prohibition of taking advantage of one’s own wrongdoings

Most of the MENA Civil Codes prohibit a party from taking advantage of their own breach or wrongdoing. For example, Article 216 of the ECC provides that:

The court may reduce the amount of compensation or reject any request for compensation where the fault of the creditor contributed to or aggravated the damage.

This grants a court or tribunal an express discretionary power to either reduce the amount of compensation or not to grant damages (whether agreed upon or not) altogether, as deemed reasonable, where a party has, as a factual matter, caused or contributed to the damage. An Egyptian Court of Cassation judgment held that:

… the right of the creditor to damages lapses, [in the sense] that he is not entitled [to damages] at all, if he solely committed the fault, if his fault prevailed over the fault of the debtor or if his fault is the cause resulted in the damage. [In this case] the creditor shall not have the right to demand the entirety of the damages if he contributed to the occurrence of the damage and it was proven that he himself failed to perform his obligation 

The prohibition of taking advantage of one’s own fault is indeed a general principle of law. A court or a tribunal will have to take in consideration the fault committed by the creditor (regular, gross, intentional) and how much it contributed to the overall damage (partially or fully) then weigh same with the fault and damage caused by debtor. Thus, a debtor’s liability would be wholly extinguished if the creditor’s fault outweighs and overwhelms that of the former or if the former’s fault was only an inevitable consequence of the latter’s. In other cases, the debtor’s liability may be proportionately reduced by the magnitude of fault it committed compared to that of the creditor.

The Egyptian Court of Cassation has also applied the principle of the prohibition of taking advantage of one’s own wrongdoings or fault in the context of construction contracts, while addressing decennial liability. In the said judgment, the court ruled that:

A contractor’s obligation is an obligation to achieve a result, which is ensuring durability and safety of the building that he has built for a period of 10 years after its handover, which means that merely proving the non-fulfilment of the result establishes the breach of this obligation without the need to establish any fault. However, a contractor who works under the supervision of the employer, is not liable for the collapse or the defects that impose a threat to the durability of the building and its safety, if this was due to a fault in the design provided by the employer, unless the contractor is aware of this fault and approved it, or the fault is manifest to the extent that it would not be hidden from the perspective of the experienced employer.

Abuse of right

A person is entitled to use his or her rights as mandated by the law or as agreed in a contract. However, a person is not entitled to use its right in an illicit or abusive manner. Naturally, the person invoking abuse of right must not be acting in bad faith. While not expressly included in legal provisions regulating contracts, nothing prevents utilising abuse of right, where necessary, in the context of contractual arrangements, especially that it is arguable that non-abusive use of rights can only be characterised as an application of the overarching principle of good faith.

Article (5) ECC sets the criteria for abuse of right. The first criterion deals with the illegitimacy of the pursued interests. This denotes the absence of a legitimate and serious interest. Every right is validly created to achieve a certain legitimate objective, if one utilises his/her right to achieve an illicit objective, this may be characterised as an abuse of right. Indeed, the prevailing views confirm that the provisions of Islamic Shariah may have a role to play in assessing the illicit nature of the pursued interests. The second criterion deals with the existence of an intention of aggression. This would be the case if a person’s main intention is to inflict harm, even if its act or omission is associated with a secondary intention to achieve a benefit. The third criterion denotes significant disproportionality between the benefits and prejudices resulting from the exercise of the right. This is the case whether the person who exercised the right was recklessly inconsiderate of the damage others may suffer for the sake of a minor benefit, or had a hidden intent to inflict harm under a pretext of a fictitious or minor benefit that is clearly outweighed by the damage sustained by another person. The person exercising such right would be deviating from the usual conduct of an ordinary person, and is committing a breach for which he or she must be held liable.

Estoppel

While the principle of estoppel is not be legislatively captured in most civil codes throughout the MENA region, estoppel, or ‘allegans contraria non est audiendus’, is a well-established legal principle derived from fundamental tenets of Islamic Shariah and forms part of the legal systems of several countries in the MENA region. Nevertheless, Articles 70 UAE Civil Code (1985), 239 Jordanian Civil Code (1976) and 547 Tunisian Code of Obligations and Contracts (1907) explicitly capture the principle of estoppel. According to this sacrosanct principle, he or she who seeks to revoke what has been agreed, or engages in contradictory behaviour, shall be barred from doing so. Moreover, estoppel is explicitly endorsed and upheld by the judgments of Arab courts, and it is validly argued that estoppel is a variant of good faith.

In the specific context of construction contracts, if the employer or contractor engage in contradictory behaviour or either seeks to revoke what has been agreed or endorsed, estoppel and good faith will militate against validating such actions or omissions. For example, it was held that ‘there is no place for issuing a judgment awarding a delay penalty where the stoppage of work before the end of the contractual period is attributed to the appellant himself, in addition he who seeks to contradict his own previous actions is estopped from doing so.’

In Saudi Arabia, in relation to disputes concerning the contractor’s remuneration, it was held that an employer is estopped from claiming a refund from the contractor for the works done, whether within the lump sum or extra works, if he or she has accepted the works and paid the entitlements thereto after examining the said works.

Force majeure and imprévision

The laws of Arab countries in the MENA region, as well as Islamic shariah, recognise and regulate the concepts of ‘force majeure’ and ‘exceptional circumstances’ (imprévision or rebus sic stantibus). Both concepts deal with events that are unforeseen at the time of contract conclusion and inevitable and beyond the control of a contracting party. However, while force majeure leads to impossibility of performance, imprévision, which only operates with respect to contracts whose performance is stretched over time, renders the performance of obligations excessively onerous (but not impossible) and threatens the debtor with exorbitant loss, if forced to specifically perform the exorbitant obligations.

Moreover, on one hand, force majeure generally leads to extinguishing the obligations that become impossible to perform, unless the parties agree to regulate the ramifications of force majeure differently by allocating the risk of impossibility among themselves as they deem fit. On the other hand, imprévision does not lead to extinguishing obligations, but to the possible moderation thereof by restoring the excessively onerous obligations to reasonable limits through a court judgment or an arbitral award. This could be achieved by awarding compensation or reasonably reducing the limit and scope of the cumbersome obligations. Imprévision also requires the unforeseen and inevitable supervening events to be of a general character (i.e., not exclusive to the debtor) unlike force majeure, which only requires that the unforeseen event to be due to an external cause that leads to the impossibility of performance. In addition, unlike force majeure, imprévision is generally subject to an overriding mandatory legislative regulation that does not allow the parties to a contract to derogate from such mandatory regulation by agreement.

It is of utmost importance to note that, in the context of construction contracts, both force majeure and imprévision are subject to specific legislative provisions. By way of illustration, Article 664 ECC regulates force majeure and states: ‘A contract for works [construction contract] is extinguished if the performance of the work for which the contract was concluded becomes impossible,

With respect to imprévision, Article 658(4) ECC, which exclusively applies to ‘lump sum’ construction contracts (not re-measured contracts such as the FIDIC forms) states:

However, if the economic equilibrium between the obligations of the employer and the contractor collapses, due to exceptional events of general character, which were unforeseen at the time of contracting, causing the basis for the monetary valuation of the contract to fizzle, the Court may order an increase in payment to the contractor or the rescission of the contract.

Obviously, Article 658/4 ECC is a special application of the general principle enshrined in Article 147/2 ECC. They share the same conditions of application, yet the court or arbitral tribunal is not entitled to rescind the contract under Article 147/2, but can so order under Article 658/4 ECC in the specific context of lump sum construction contracts.

Finally, the threat of a conventional loss cannot trigger imprévision, even if such conventional loss is large in value; only a threat of an exorbitant loss (naturally exceeding loss of profit) can trigger imprévision. The loss in question must also be measured according to the contract itself irrespective of the assets and solvency of the debtor.

It is also worth mentioning that both theories equally apply to administrative contracts.

Global claims

An exceedingly pertinent question in relation to construction disputes subject to the civil laws in the MENA region is whether global claims are recognised under Arab laws. While global claims are well-established and regulated in common law countries, the terminology ‘global claim’ is alien to MENA region arbitrations subject to civil law principles. However, the inexistence of a specific terminology or specific legislative rules to address global claims does not mean that such claims are not capable of being analysed and assessed under the prevailing civil law principles.

Global claim occurs when the claimant alleges two or more breaches and says that those breaches cumulatively caused the loss or losses, but does not specify the proportion of that loss that is attributable to each breach. As mentioned above, Arab laws and provisions governing construction contracts make no express reference to global claims. However, this does not mean that they are inadmissible outright. The matter ought to be carefully scrutinised under the prevailing principles of contractual liability and specifically causation.

That said, a global claim may be permissible and may succeed as a matter of law under the generally applicable legal principles of contractual liability, if the employer’s breaches were interdependent, interconnected and inseparable to an extent that it is impossible or impractical to segregate or separate same. In such event, if the contractor is able to prove that such interdependent and intertwined breaches had a cumulative effect and contributed altogether to the occurrence of the damage, without any separation, then the contractor’s claim may be accepted, provided that the contractor can show that the breaches claimed are all attributable to the employer. In such case, the burden of proof would shift to the employer to avoid liability and disprove what the contractor established.

Accordingly, global claims in construction may be admissible as a matter of civil law, if the all three elements of contractual liability are satisfied, namely: the fault (breach), the damage and the causation, and if it is established that the breaches attributable to the employer are inseparable.

Constructive acceleration

‘Constructive acceleration’ is a common construction claim derived from the common law jurisprudence, and involves, in essence, the speeding up of the progress of the works on the inferred or tacitly expressed instruction of the employer. As to the law regarding acceleration, there are implied grounds for assertion of a claim. This has become known as ‘constructive acceleration’.

The doctrine of constructive acceleration is well recognised in the United States, and is gaining traction in other legal jurisdictions around the world, including England and Canada. The trend in addressing constructive acceleration is to look solely to whether:

  • delays were excusable;
  • the contractor was ordered to accelerate; and
  • that actual acceleration caused the contractor to incur extra costs.

Most civil law jurisdictions do not recognise the term ‘constructive acceleration’ and Arab laws do not have legislative provisions addressing such claims. However, terminology does not matter and alternative routes to recovery exist, where the contractor is in excusable delay, but is not given corresponding schedule relief and is ordered to accelerate, and so incurs additional costs. In these situations, the contractor may recover damages under different legal principles, such as breach of contract, implied terms, mitigation of delay and damages.

In principle, it is established that a FIDIC contract does not necessarily oblige the contractor to accelerate and make up for the delay, if the delay is an act of, and caused by, the employer. Nevertheless, as a manifestation of good faith and cooperation in the performance of construction contracts, the contractor may effect ‘constructive acceleration’. Furthermore, if the contractor fears (notwithstanding a valid EoT claim) being penalised through the imposition of liquidated damages, the calling of its security bonds or termination, it will have to accelerate and then attempt to claim the costs of acceleration from the employer, assuming that the latter is wholly or overwhelmingly responsible for the delay. In such case, the contractor may have a claim for breach of contract provided that:

  • the employer breached its obligations of good faith in the performance of contracts by not granting an EoT;
  • the contractor suffered damages (i.e., additional costs incurred due to accelerating the works); and
  • a direct causality exists between the breach and damage.

Again, it is worth noting that the sheer inexistence of express legislative provisions on a specific matter such as ‘constructive acceleration’ does not necessarily imply that such matter is inexistent or illegal under the applicable Arab law; the matter ought to be carefully scrutinised under the prevailing principles of contractual liability and other pertinent civil law principles to ascertain whether it, or an equivalent thereof, can be recognised under the applicable law.

Maintaining the economic equilibrium in administrative public works contracts

A large part of constructions contracts in the MENA region come in the form of public works administrative contracts that may be subject to specific principles and norms not necessarily encountered in a standard civil law context. Given the proliferated use of FIDIC in state contracts and the inherent difficulty associated with characterising a contract as administrative (noting that not all state contracts are administrative contracts), it is worth shedding some light on the specificity of administrative construction contracts as a feature of the MENA region.

Generally, it is submitted that the classification of a contract as administrative relies on the collective fulfillment of three conditions, namely:

  • the administration (public entity) must be a party to the contract;
  • the contract must relate to a public utility; and
  • the contract must include exceptional conditions anomalous to private law contracts.

In this context, the Egyptian Supreme Administrative Court held that a contract is administrative if the administration’s intention to apply public law principles appears by the inclusion of one or several anomalous conditions to private law contracts. In principle, there are two types of exceptional conditions:

In brief, the contract must reflect the state’s intention to showcase its jus imperii powers and to uphold public law principles in its contract. In the context of construction (public works) contracts, several legal principles may come into play, especially in the context of maintaining the economic equilibrium of the contract. It is in this specific situation that the administrative theories of fait du prince and imprévision gain importance.

As a general rule, fait du prince is defined as an act or measure, whether public or private (targeting only the opposing contracting party), issued or undertaken by a contracting public authority without fault or breach on its part, and which results in increasing the contractual burden of a contracting party in an administrative contract. In such case, the contracting authority is bound to compensate the other party for the damage sustained (loss suffered).

The Egyptian Supreme Administrative Court upheld this doctrine, in its judgment of 11 May 1968, and ruled that ‘the interference of the Administrative Court to achieve the financial equilibrium of the administrative contract for the application of the doctrine of ‘fait du prince’ presupposes/requires the satisfaction of its conditions’. These conditions that must be collectively fulfilled are:

  • the existence of an administrative contract;
  • the act is issued from the contracting authority and it is presumed that the contracting authority is not in default or breach by undertaking such act;
  • a harm results from the act and is suffered by the contracting party (i.e., without need for a specific degree of gravity of harm);
  • the act is unforeseen; and
  • the damage suffered by the contracting party is specific so that others (third parties) are not affected.

Additionally, the Egyptian Supreme Administrative Court upheld the doctrine of imprévision in the context of administrative contracts, where imprévision remains subject to the same conditions discussed herein above. However, in an administrative public works contract, the remedy would be compensation, whereas, in civil law, the courts have broader powers to restore the cumbersome obligation to reasonable limits. Nevertheless, imprévision is not intended to compensate a contractor for all its losses; it only aims to restore the excessively onerous obligation to reasonable limits, so that the employer’s utility is not affected and the contractor is not severely harmed.

Delay damages

It is common knowledge that delay damages or liquidated damages are the employer’s strong tool and remedy for the contractor’s breaches, and they are regularly invoked and flagged in construction-related arbitrations. Liquidated damages are also an area where common law and civil law principles collide, and where administrative law principles intervene to distinguish penalties from delay damages.

Generally, in civil law contracts, a party may avoid damages by proving:

  • it committed no breach;
  • the breach is attributable to an alien cause or the other party’s acts or omissions;
  • the inexistence of a causal link; and
  • no loss or harm was suffered or sustained by the aggrieved party;

A liquidated damages clause is an agreed compensation for either non-performance, delay in performance, or both. Mostly, liquidated damages clauses are drafted as an agreed compensation for delay; it is seldom drafted as a compensation for non-performance in construction contracts. Generally, a contractor is under an obligation to achieve completion of the works by the agreed time and his or her obligation to complete the works is an obligation to achieve a result.

Thus, on one hand, the fault element of the contractor’s liability for delay in completion cannot simply be obviated by establishing that the contractor has exercised the due care of a reasonable person. Nevertheless, a contractor may avoid liability for delay by proving that the reason for such delay was beyond the contractor’s control, such as force majeure, supervening events beyond the contractor’s control, an act of a third party or the employer’s own fault.

On the other hand, the harm element of liability is rebuttably presumed by virtue of the liquidated damage clause. While the employer needs only to prove the contractor’s delay (fault element) to apply liquidated damages, the harm element is readily presumed and the burden of proof is shifted to the contractor to refute the said presumption and avoid liquidated damages. Liability for liquidated damages would also be avoided if the delay in performance is attributed to the contractor’s lawful exercise of its right of exceptio non adimpleti contractus.

In addressing damages or harm in general, Article (170) ECC grants courts a broad authority in quantifying damages, and empowers courts and tribunals to quantify compensation, through the mechanism set out in Articles (221) and (222) ECC.

Moreover, it is also common in construction contracts that capped liquidated damages are agreed in respect of a contractor’s failure to achieve the contractually specified and agreed performance standards. Capped liquidated damages clauses work to save the employer the need to prove loss in events of delay by the contractor, and also to keep contractors informed about the magnitude of their potential exposure resulting from delay in performance. Accordingly, the general principle would be that courts or tribunals would uphold the agreed liquidated damages clause and will not reduce same in insofar as:

  • liability is not avoided;
  • the harm or damage presumption is not refuted;
  • the amount of liquidated damages is not proven to be excessively exaggerated; and
  • the contractor has not performed part of the obligation. This condition is not required if the obligation in question is indivisible.

Liquidated damages also work as a limitation of liability clause. For instance, an employer cannot claim damages for delay in excess of the amount stipulated in a liquidated damages clause unless gross fault or fraud is established and attributed to the contractor.

Save for Tunisia and Morocco, the majority of Arab laws recognise and incorporate provisions regulating capped delay damages or liquidated damages, and such laws are largely influenced by Egyptian law. Article 224 ECC states:

(1) Damages fixed by agreement are not due, if the debtor establishes that the creditor has not suffered any loss. (2) The judge may reduce the amount of these damages, if the debtor establishes that the amount fixed was grossly exaggerated or that the principal obligation has been partially performed. (3) Any agreement contrary to the provisions of the two preceding paragraphs is void.

While most Arab laws provide for equivalently similar provisions of equal overriding mandatory nature, the Jordanian Civil Code of (1976), the UAE Civil Code (1985) and the new Omani Civil Code of (2013) offers a wider discretion to local courts. For instance, Article (267) Omani Civil Code, also encapsulating an overriding mandatory norm, stipulates:

(1) If the object of the obligation was not an amount of money, the contracting parties may determine in advance the value of compensation by stipulating same in the contract or a subsequent agreement. (2) The Court may, in all events, based on a request by one of the parties, amend such agreement to make the quantification equal to the damage. Any agreement to the contrary shall be null and void.

Consequently, as a matter of Omani, Jordanian and UAE laws, a party can apply to the court or arbitral tribunal to override contractually agreed compensatory arrangements and adjust the specified compensation to equate it to the actual damage or harm suffered. The court’s moderation of the obligation to pay liquidated damages can also be sought on different grounds such as exceptional general events, where partial or total discharge of the obligation may be also sought on grounds of force majeure causing partial or complete impossibility of performance, where applicable.

Concurrent delays

Concurrent delay refers to a period of delay in a construction contract caused by one or more factors, where some of those factors are attributed to the contractor while others are attributed to the employer, which affect the project’s completion date, or occur simultaneously or share a common point in time.

On one hand, such case of concurrent delay might be utilised by contractors as a shield and a sword; a shield from the application of liquidated damages, and a sword to claim entitlement to an EOT. On the other hand, employers may attempt to invoke same to undermine and moderate contractor’s claims for prolongation costs.

The problem concerning this situation is who exactly should bear the consequences of such delay?

Under common law jurisprudence, different notions of causation were deployed to allocate the risk in a case of concurrent delay (the Malmaison approach, but-for causation, apportionment, and dominant cause).

Under most MENA region Civil Codes, the causation theory expressly deployed in matters of concurrent liability, whether contractual or tortious is a mixture of the theory of apportionment and the theory of dominate cause. For instance, on the issue of apportionment of liability, Article 169 ECC, such as the case in most of the MENA region, stipulates:

if there’s a number of persons liable for a wrongful act, they would be jointly liable to compensate the damage, and the liability would be divided between them equally, unless the judge decides the portion of liability attributed to each of them.

This Article applies to cases where (1) there is more than one person liable for a wrongful act that causes damage; and (2) the injured party is among those who contributed to the harm (e.g., a case of concurrent delay). Notwithstanding Article 169 ECC, Article 216 ECC, as is the case in many MENA region countries, has also provided a special application to both the theories of apportionment and dominant cause where an injured party contributes to his or her own loss:

The court may reduce the amount of compensation or not award same at all where the fault of the creditor contributed to or aggravated the damage.

Thus, courts and tribunals have the discretion to apportion liability among the wrongdoers (apportionment theory) or, according to some MENA region jurisdictions, dismiss it altogether (where the dominant cause theory applies). Similarly, the UAE Federal Supreme Court has held that:

A judge may reduce the amount of damages or dismiss same at all if the injured party has participated by its own action in effecting the damage or aggravating same. This provision addresses the rule applied in the case of joint fault, which applies equally to both contractual and tortious liabilities.

The Egyptian Court of Cassation has applied the theory of apportionment in many cases, for instance, it was held that:

Whereas the challenged judgment […] has dismissed both appellants’ claims pertinent to the defendant company‘s fault in using the leased property [of the appellants] in a way that prejudices the integrity of the building on the basis that the defects that affected the building, subject of the dispute, have resulted from the owners’ [appellants] use of low quality types of reinforcing steel, other used materials, and iron bars, which lead to the defects and cracks in the building. […] while the judgment ignored that the company [defendant] has contributed to the prejudice concerning the integrity of the building due to its employees and clients abusive use of the bathrooms, where they [the defendant] did not care to repair the trays and sewage pipelines, which lead the ground to be filled with humidity and dribbling, which affected the reinforcement steel and caused the cracks, thawing to the concrete roof roofing […] Hence, the challenged judgment’s reliance, in its ruling, [only] on the fault of the owner [appellants] in causing damage to the integrity of the building and dismissing the claim […] even though the company’s liability to those damages is proven to be 40 per cent […] makes the judgment erroneous and necessitates its cassation

This leads to the following conclusions:

  • Principally, the theory of apportionment applies, being dominant in many Arab Civil Codes.  In this regard, the court or tribunal shall discern the amount of delay attributable to each party so that they would be able to apportion liability between the contractor and the employer, each according to the degree of fault it committed in relation to the other.
  • If, however, the court or tribunal is unable to discern the amount of delay attributable to each party according to their faults, the liability for delay would be equally divided between the employer and the contractor, which is the general solution adopted under Article 169 ECC and similar Arab Civil Codes provisions.
  • In certain MENA region jurisdictions, if one of the causes of delay highly outweighs the other to the point that one dominates or consumes the other, or where one cause is merely consequent upon the other, the effective cause therewith would be considered the dominant cause and the person whom the dominant cause is attributed to would bear 100 per cent of liability.

Under the ECC (and many MENA region laws as mentioned above) a court or tribunal also has an authority to moderate the amount of liquidated damages if the harm is proven to be highly exaggerated or if the debtor proves that he or she has performed part of the obligation

Professor Soliman Morkos opines that, as a preliminary issue, if one of the faults is of a ‘highly probable’ but not certain causative potency while the other is of an ‘assured’ and ‘certain’ causative potency, it is likely that only the latter would be deemed the relevant cause of the harm.

The Egyptian Supreme Administrative Court generally applies the principle of apportionment. In the specific context of construction contracts, the Egyptian Administrative Court also recognises the principles of apportionment and dominant cause, and even Saudi law recognises the same.

Decennial liability

Decennial liability is a mandatory strict regulation of a certain construction-specific liability. In the context of construction contracts, MENA region construction-related regulation includes mandatory strict decennial liability in the civil codes of countries such as Algeria, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Syria and the UAE.

Contractors, according to the prevailing view, have an obligation to achieve a specific result, which is to duly perform the works without defects. Decennial liability also imposes the joint and several liability of contractors, architects and engineers regarding any defects affecting the structural integrity of the building or causing total or partial collapse. This decennial liability operates as a mandatory overriding provision that may not be derogated from by agreement or choice of a foreign law, if such choice of foreign law (in relation to construction contracts relating to immovables) is legally permissible in the pertinent jurisdictions.

Under decennial liability, architects, engineers and contractors are jointly liable for partial failure or total collapse of constructions or other installations for a period of 10 years from the date of handover. While most Arab laws provide for a 10-year decennial liability period, Article 876 Tunisian Code of Obligations and Contracts (1907) and Article 668 Lebanese Civil Code (1932) provide for a five-year liability.

The burden of proving that the collapse resulted from an external event beyond the jointly liable persons lies with such persons.

The liability period generally extends to 10 years, unless the parties intend to keep the building for a shorter period, or the pertinent civil law provides for a shorter period, such as the former Bahraini rule providing for a five-year period. Following the enactment of the Bahrain Civil Code in 2001, the liability period was extended to 10 years, as is the case in other Arab states. Furthermore, any clause intending to limit or exclude the decennial liability shall be null and void.

The MENA jurisdictions share the following features of decennial liability:

  • it runs from handover and lasts for a period of five or 10 years or such lesser period, depending on the jurisdiction and whether the building is intended to last for a shorter period;
  • it arises notwithstanding that the collapse or defect resulted from a defect in the land;
  • it is joint and several, where the employer can proceed against the contractor, the engineer or the architect for the full amount of the claim; and
  • it is considered of an overriding mandatory nature and so cannot be excluded or limited by contractual arrangements or possibly choice of foreign law (assuming such choice is permissible).

Suspensive conditions

Parties to construction contracts uneventfully add suspensive conditions to one or more of the obligations in the contract. An obligation is deemed conditional if the obligation’s existence or extinction depends on a future uncertain event. Conditions can either be ‘suspensive’ or ‘resolutory’.

A ‘suspensive condition’ is that which has the effect of suspending the effect of an obligation until the agreed uncertain event occurs or is realised. Examples of suspensive conditions include:

  • suspending the issuance of completion certificate by the employer on the completion of a successful performance test by the contractor;
  • suspending the commencement of the works on the handing over the site; and
  • suspending the performance of the works on securing any agreed financing, etc.

In specific reference to suspensive conditions, it was held that if the debtor intervenes and contributes to the nonfulfillment of the suspensive condition, the debtor would be liable and the obligation may well be deemed fulfilled, even if the suspensive condition has not actually materialised.

That said, there are three types of suspensive conditions: fortuitous, voluntaryand mixed conditions. Both fortuitous and mixed conditions are valid. As to the voluntary condition, it is either (1) a simple voluntary condition; or (2) an absolute voluntary condition. The ‘simple voluntary condition’ is not simply conditional on the will of one of the parties, but is also constrained by the surrounding circumstances. For example, obtaining an approval from an independent third party (not subject to the control of the employer) as a suspensive condition for the acceptance of the works by the employer may well be a simple voluntary condition. Simple voluntary conditions are legally valid.

Concerning the ‘absolute voluntary condition’, it is either dependent on the will of the creditor or the will of the debtor. If such condition is dependent on the will of the creditor, it is valid and binding. However, if such condition is subject to the will of the unilateral debtor, the obligation becomes inexistent ab initio (i.e., the obligation is considered as never having been created).

The duty of mitigation

The duty of mitigation is known in both civil and common law systems. Article (221/1) of the ECC, as is the case with many MENA region Civil Codes, states:

The judge shall fix the amount of compensation, if it has not been fixed in the contract or by law. The amount of damages includes losses suffered by the creditor and profits of which it has been deprived, provided that they are the normal result of the failure to perform the obligation or of delay in such performance. These losses shall be considered to be a normal result, if the creditor is not able to avoid them by exerting reasonable effort.

Commenting on the said Article, Al Sanhoury stated that:

If the injured party did not perform reasonable efforts to avoid the damage, he would be deemed as having committed a fault; thus, there exists a common fault, and the injured party would have to bear the consequences of his fault by bearing the damage caused by that fault.

This evidences, from a civil law perspective, the existence of a general duty of mitigation by the aggrieved party, or it may risk moderation and reduction of the compensation due to its own fault, which contributed to the loss sustained.

The duty of mitigation can be seen as subordinate to the obligation of cooperation dictated by the general duty of good faith. This duty exists whether in the context of the contractual or tortious liability. Courts throughout the MENA region have also confirmed that the damages for which the aggrieved party can seek compensation are those that could have not been avoided by taking reasonable steps by such party.

While there are no strict criteria for determining what constitutes reasonable mitigation efforts, it is commonly agreed that these efforts should not be burdensome on the aggrieved party. According to the UNIDROIT principles, these efforts can either be directed to limit the extent of the harm ‘where there is a risk of it lasting for a long time if such steps are not taken’ or to avoid any increase in the initial harm.

Once the reasonable mitigation efforts are undertaken, there exists no prohibition that prevents an aggrieved party from seeking to recover mitigation costs on the basis of the principles of contractual liability as well as the general principle that a party may not benefit from its own wrongdoing.

Under Egyptian law, compensation (inclusive of incurred costs and expenses that form part of the losses) is not due if the aggrieved party did not suffer any harm. In case of a sustained harm, the amount of compensation, subject to any limitation of liability clause, would include all direct losses incurred including mitigation expenses.

The Egyptian Court of Cassation has held that the determination of compensation is a factual matter that falls within the jurisdiction of the trial court. However, such determination must be proportionate to the sustained harm. Thus, an arbitral tribunal would be at liberty to assess the value and scope of compensation, as inclusive of the costs and expenses of mitigation and their characterisation as direct and foreseen losses or not.

Finally, this chapter shall briefly address two scenarios related to recovery of mitigation costs. These scenarios specifically pertain to the situation where mitigation costs were incurred prior to a contractual breach by the employer, if at all possible. Under such scenario, the aggrieved party may have anticipated or envisaged a forthcoming breach by the other party and so acted prudently to mitigate the damage that would likely ensue as a result of the anticipatory breach materialising.

Under the first scenario, the breach happens and the damage is sustained despite the mitigation efforts. In such case, the aggrieved party would have incurred costs prior to the actual breach and damage. From a purely legal perspective, a potential breach of contract cannot be considered an actual default or breach to form the basis for recovery. However, a court or tribunal may treat this as a manifestation of good faith, and if the damage unfolds, compensation may likely include mitigation costs that directly contributed to the reduction of the damage or loss sustained.

Under the second scenario, if the breach does not occur and the damage does not materialise, even though the aggrieved party had incurred mitigation costs, then one ought to distinguish between two possibilities: (1) the breach and damage have not occurred owing to the mitigation efforts undertaken by the aggrieved party; and (2) the breach and damage have not occurred for unknown reasons or reasons other than the mitigation efforts undertaken by aggrieved party. While there is no direct Arab authority or judgment on the point, yet if under (1) the aggrieved party managed to prove that the breach and damage have not materialised, in whole or in part, because of the mitigation efforts or actions, then to the extent that such actions were the direct cause for the non-materialisation of such breach or damage, a court or tribunal should order recovery of the costs on the premise that such efforts and actions led to a clear avoidance of contractual breach and harm that would have otherwise materialised. However, under (2), the aggrieved party will not be entitled to recover costs of mitigation simply because that scenario (2) confirms the lack of a causal link; hence no liability can be established.

Interest

Interest remain a hot topic in the MENA region legal systems and specifically in the context of construction disputes.

Generally speaking, interest can be claimed for delay or as compensation. However, there are certain specificities when claiming interest in certain MENA region legal systems. This includes the legality and illegality of claiming interest, the applicable rate or rates, whether interest can be compounded, whether interest can be claimed for any debt, the time at which interest starts to accrue and whether the contracting parties are legally permitted to derogate from any applicable statutory regulation of interest.

While an analysis of the specificities referred to above goes beyond the purpose and scope of this article and this section with focuses exclusively on the applicable statutory interest rates, it suffices to state that the legality, scope and conditions of interest differ significantly across the MENA region jurisdictions. For example, interest is altogether prohibited under Saudi law.

Specifically, in relation to interest rates, the Egyptian and Syrian laws statutory interest rates (in non-banking transactions) vary from 4 per cent per annum in civil matters to 5 per cent per annum in commercial matters, noting that an agreement on an interest rate in excess of 7 per cent is prohibited under the ECC,  and in excess of 9 per cent is prohibited under the Syrian Civil Code. Moreover, under Syrian law, if the interest rate is not agreed, then its determination shall be according to the custom and trade usages in commercial matters. Moreover, the Kuwaiti and Bahraini Civil Codes prohibit agreements on interest in civil law matters. Furthermore, the Qatari, UAE and Omani Civil Codes uphold the same principles existent in the Kuwaiti and Bahraini Civil Codes, with the exception that they do not impose the condition of extraordinary harm. In commercial law matters, the Kuwaiti Commercial Code allows for a 7 per cent interest rate on the non-payment of or delay in the payment of commercial debts. It also allows parties to agree to an interest rate that does not exceed the rates published by the Central Bank of Kuwait. The Bahraini Commercial Code also allows for interest rate in commercial matter. The Qatari Commercial Code does not explicitly provide a different statutory approach in commercial matter, yet judgments indicate that interest rate might be upheld in the case of commercial matters by virtue of the commercial custom. The Omani Commercial Code provides that parties may agree on interest subject to the ceiling specified in the pertinent Ministerial decrees. In addition, the UAE Commercial Code provides that in commercial matters, the parties may agree on interest rate, and, in the absence of an agreement, such rate shall be determined according to the rate prevailing in the market during the time of the transaction, which shall not exceed 12 per cent.

Concluding remarks

The construction industry in the MENA region is booming and constructions contracts and associated disputes are on the rise, and the majority of construction projects burgeoning throughout the MENA region adopt the FIDIC form of contracts with noticeable proliferation of the FIDIC Red Book form of contract.

However, the business, economic and legal reality confirms the existence of a direct relationship between the proliferation of construction contracts in the MENA region and the increase in construction disputes arising from said contracts. It has been suggested that the top causes of construction disputes in the MENA region include:

  • failure to properly administer a contract;
  • failure to make interim determination of EOT and compensation;
  • employer-imposed change;
  • contract selection was not a ‘best fit’ when compared to the project’s characteristics; and
  • third-party events (force majeure, imprévision, etc.).

Construction contracts are complex agreements and require special expertise to negotiate, draft, prosecute and hear disputes arising therefrom. This complexity is further compounded in the MENA region owing to:

  • certain gaps and possible friction between the agreed terms and conditions and certain applicable civil law principles;
  • the top causes of construction disputes, given above;
  • the outdated legislative regulation of construction contracts in Arab laws;
  • relative (unwarranted) avoidance of the needed in-depth scrutiny of the applicable legal principles;
  • the existence of a bipolar (civil law–administrative law) system existing in certain Arab jurisdictions, which largely affects the characterisation and performance of construction agreements; and
  • prevailing misconceptions on the specificities of the MENA region laws.

It is in this context that the present contribution invites scholars, counsel, judges and arbitrators to carefully scrutinise the applicable civil law principles, so as to ensure that they are capable of proper implementation and adaption to the specificities of construction contracts and disputes. It remains for courts and arbitral tribunals to innovate and safeguard the application of the pertinent legal principles under the governing law regime that may not be ignored, overlooked or weighed under a totally alien legal system that may not be relevant to the applicable laws.

Legal principles in the civil laws of the MENA region are capable of accommodating the specificities and intricacies of the construction industry and catering for the disputes arising thereunder, in due consideration of the fact that arbitration is the prominent dispute resolution mechanism and the most favoured option for settlement of construction-related disputes in the region. It has indeed been seen that the principles of good faith, implied terms, abuse of right, estoppel, global claims, constructive acceleration, force majeure and imprévision, delay damages and decennial liability are among the concepts that are regularly invoked in arbitral proceedings, and so careful consideration as to their possible application and scope is required.

For ease of reference, the summary table below captures the specific construction law sections in Arab laws, as well as the pertinent arbitration legislation.

In specific reference to construction disputes, it is also clear that the International Chamber of Commerce and the London Court of International Arbitration remain the leading arbitral institutions that administer, inter alia, large-scale construction disputes and arbitrations in the MENA region. Other notable regional arbitral institutions are the Bahrain Chamber for Dispute Resolution (BCDR), the Cairo Regional Centre for International Commercial Arbitration (CRCICA), the Dubai International Financial Centre-London Court of International Arbitration (DIFC-LCIA), the Dubai International Arbitration Centre (DIAC), the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), Qatar International Centre for Conciliation and Arbitration (QICCA) and the up-and-coming newly established Casablanca International Mediation and Arbitration Centre (CIMAC).

Finally, and in light of the above, given the complex and competitive environment of the construction industry, it is common knowledge that construction projects and contracts offer recipes for disputes no matter how well-drafted such contracts are. In such environment, since differences in perception exist among the participants of the projects, conflicts are inevitable. As explained above, in practice, there are a certain number of common causes for dispute in the construction industry; these are classified into six main categories, as follows:

Consequently, it is always preferable in the context of construction to adopt measures and techniques for dispute avoidance. In this respect, it is advisable that the contracting parties do the following:

  • carefully select the best-fit contract with proper drafting;
  • acknowledge the need for contractual balance;
  • engage in proper and careful choice of law and forum;
  • maintain a high-level team with sensible contract administration and implementation;
  • maintain efficient policies for documentation, correspondences, records and claims;
  • scrutinise legal and factual rights and follow procedures;
  • evaluate and share risks;
  • consider the proper utilisation of dispute avoidance and adjudication boards; and
  • opt for amicable settlement options prior to proceeding with fully fledged arbitration proceedings.

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