construction engineering & infrastructure covid …
TRANSCRIPT
1International Construction and Insurance Law Specialists www.beale-law.com
Webinar 2 April 2020
Covid-19 – Where do you stand
CONSTRUCTION ENGINEERING & INFRASTRUCTURE
2International Construction and Insurance Law Specialists www.beale-law.com
Introductions
Scott Lambert - Partner
– +971 (0) 4 356 3904
– +971 50 404 9566
Sadaff Habib - Associate
– +971 (0) 4 356 3902
– +971 50 331 4472
3International Construction and Insurance Law Specialists www.beale-law.com
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
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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….
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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.
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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.
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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;
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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.
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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.
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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…
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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…
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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Scenario 1 – The Main Contractor
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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?
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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
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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
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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.
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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
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Issues- Sub-clause 8.5
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?
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Issues- Sub-clause 13.7
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
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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?
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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.
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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
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Scenario 2 – The Employer
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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?
34International Construction and Insurance Law Specialists www.beale-law.com
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
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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?
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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?
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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
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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
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Scenario 3 – The Consultant
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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?
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Relevant Clauses
Sub-Clause 4.4
Sub-Clause 4.5
Sub-Clause 4.6
Sub-Clause 4.8
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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?
43International Construction and Insurance Law Specialists www.beale-law.com
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?
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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
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Scenario 4 – The Subcontractor/Supplier
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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?
47International Construction and Insurance Law Specialists www.beale-law.com
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
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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.
49International Construction and Insurance Law Specialists www.beale-law.com
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
50International Construction and Insurance Law Specialists www.beale-law.com
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
51International Construction and Insurance Law Specialists www.beale-law.com
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
52International Construction and Insurance Law Specialists www.beale-law.com
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
53International Construction and Insurance Law Specialists www.beale-law.com
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