As the fifth anniversary of the onset of the financial crisis approaches, engineers, architects and other consultants to the construction industry should be aware of the potential risk that this unhappy anniversary presents to any remaining fee claims. Whilst any expectation of payment at this late stage is likely to be low, any optimism that early signs of returning confidence might provide a chance to cash in old debts should take into account one of the more obscure time limits applicable under UAE Laws.
In general, the time limit for commencing proceedings in respect of commercial obligations - which includes debts and claims for breaches of contract - is ten years from the due date for performance. This time limit is found at Article 95 of UAE Federal Law No. 18 of 1993 (the Commercial Transactions Code) which provides that:
“When denied, and in the absence of lawful excuse, actions relating to the obligations of traders to each other and in connection with their commercial business shall not be heard upon the expiry of ten years from the due date for fulfilment of the obligation, unless the law provides for a lesser period.”
Thus, claims for breach of a consultancy agreement, such as for the provision of negligent services, may be commenced up to ten years from the date of the relevant breach. In Qatar the corresponding time limit is 15 years by virtue of Article 403 of Qatar Law No. 22 of 2004 (the Qatar Civil Code).
It is a feature of UAE law that there are different time limits applicable to numerous types of claim. As such, the simple ten year limitation period imposed by Article 95 of the Commercial Transactions Code cannot safely be assumed to apply universally. One possible exception to the application of the ten year limitation period is claims by engineers, architects and other construction professionals for their fees.
This exception arises by virtue of Article 475 of UAE Federal Law No. 5 of 1985 (the UAE Civil Transactions Code) which provides, as follows:
“If denied, and in the absence of lawful excuse, no claim shall be heard in respect of the following rights after the passage of five year:
(1) rights of doctors, pharmacists, lawyers, engineers, experts, professors, teachers and brokers, if such rights are due to them by reason of professional services rendered, or by reason of disbursements incurred,
(2) monies reclaimable by reason of overpayment of taxes of duties, but without prejudice to the provisions of the special laws.”
“Engineers” for the purpose of Article 475, most likely includes architects and quite possibly other construction professionals.
In Qatar, the position for consultants is substantially the same as in the UAE by virtue of Article 405 of the Qatar Civil Code, which is almost identical to Article 475 of the UAE Civil Transactions Code.
In contrast, the position in Saudi Arabia is that Islamic Shariah is the underlying law and there is no equivalent of the UAE Civil Transactions Code nor the Qatar Civil Code. Shariah incorporates the principle that “a just claim never expires” and, as such, there is no equivalent in Saudi Arabia to the legislative time-bars that apply in the UAE and Qatar for commercial obligations nor, specifically, consultants’ fee claims that apply in the UAE and Qatar.
Claims for professional services rendered in excess of five years ago - around the time of the financial crisis having an impact in the Middle East - are, thus, approaching the end of their shelf life. A review of any such outstanding fee claims would be timely.
Any claim for recovery of fees for services pre-dating this five year time limit is likely to be met with a time bar defence relying on Article 475 of the UAE Civil Transactions Code. There are a number of potential routes to avoid this time-barring defence, as follows:
- Reliance on an admission of liability which will give rise to a fresh cause of action with a new time limit.
- Asserting that the relevant debt arises from a “muqawala” contract (broadly a construction contract) to which Article 475 does not apply.
- Asserting that Article 475 is subordinate to, and overridden by, the subsequently enacted ten year limitation period established pursuant to Article 95 of the Commercial Transactions Code.
Each of these propositions can be supported by reference to relevant legislation and judgments of the local courts. It may, nevertheless, be preferable to avoid the risk of facing any such issue in the first place