Construction Law

The TIA route to resolving disputes

The TIA route to resolving disputes
Time impact analysis is becoming an increasingly popular method of resolving construction disputes without litigation. MICHAEL HARDY* details the steps to be considered and the benefits of using the method
FUNDS for a large number of construction projects in the region are drying up. This, coupled with a substantial reduction in the cost of labour and materials, has meant that some developers are reconsidering their current projects with a view to renegotiating more favourable terms or seeking to alter the original scope.
Should a developer fail to persuade its contractor to agree to a re-scoping exercise, the developer may then be faced with a claim for delay caused by what, in effect, amounts to a contract variation.
Given the financial pressure developers are currently facing, there may also be increasingly valid grounds for contractors to make extension-of-time claims in respect of delays caused by, for example, non-payment or the late provision of information.
Whatever the cause, the contract administrator (often an engineer) must apply a methodology to determine whether and to what extent an extension of time should be awarded.
There are a number of different ways to determine an extension of time and it is not uncommon for parties to disagree upon the methodology used. If the contract follows a particular industry form, there may already be a specific methodology applicable. However, most standard form contracts fail to address the issue adequately.
For example, the Fidic Conditions of Contract are commonly used in the Gulf yet fail to promote a specific approach to extensions of time. Fidic’s Red Book uses the words: “If and to the extent that completion … is or will be delayed” but fails to consider the appropriate methodology to decide such delay.
Time impact analysis (TIA) is a method typically used to resolve complex disputes. In order to undertake a time impact analysis, the six sequential steps below must be considered:
1. Has a cause entitling the contractor to an extension of time arisen (an “Event of Delay”)?
2. Identify the programme against which any delay is to be assessed. By way of example, in the case of the Fidic Red Book, the contractor is obliged to submit a programme and to revise it “whenever the previous programme is inconsistent with actual progress or with the contractor’s obligations”. Consequently, the last such accepted (or deemed accepted) programme which most recently pre-dates the ‘event of delay’ identified should be used.
3. Without taking into account the event of delay itself, revise the programme identified in Step Two, so that it reflects:
(i) The reality that pertains at the time immediately before the occurrence of the ‘event of delay’; and;
(ii) A plan for the remaining works which complies with the contractor’s duties as to programming and progressing of the works.
4. Identify planned time for completion on the revised programme developed in Step Three.
5. Identify the activities on the revised programme that will be affected by the ‘event of delay’, and then assess the effect of it on each of those activities. Finally, impact the ‘event of delay’ on those activities, in order that the revised programme takes account of the ‘event of delay’.
6. Finally, consider whether the planned time for completion has changed following the impact of the ‘event of delay’ determined at Step Five.
As to Step Three, contractors are often tempted to use an unamended version of the accepted programme to assess events of delay, irrespective of how out of date it may be. Whilst there is no reported case law in England on this point, for the contractor not to revise the programme to reflect the position immediately prior to the event of delay, is often self-serving.
Consider a project where the programme is severely out of date and the contractor is in culpable delay. If the contractor were to be entitled to assess an extension of time against the out-of-date programme, the culpable delay in the period after that programme but before the event of delay occurred would be completely ignored, thereby reflecting reality from a frozen point in time in the past and failing to accurately demonstrate the cause and effect of the delay.
This would permit the contractor to evade liability for culpable delay and effectively provide him an incentive to stop issuing programmes for acceptance in the future, in order to avoid future liability for culpable delay. The contractor could take advantage of its own wrongdoing by benefiting from a breach of contract (be it the culpable delay or the failure to submit revised programmes).
That being said, Article 246(1) of the UAE Civil Code introduces an implied term to carry out obligations in good faith, which would seem contrary to this approach.
Conversely, employers are sometimes tempted to take hindsight into account and to use a programme that post-dates the event of delay. This is similarly not permitted. Time impact analysis does not permit events to be taken into account if they post-date the event of delay in question. In other words, a retrospective approach, which allows the benefit of hindsight, is not permitted.
In relation to Step Five above, another argument known to surface is whether the assessment or “snapshot” date should be the date at which the assessment is made (or ought to have been made) or the date of the occurrence of the event of delay itself. This is probably an arguable point and depends on contractual drafting.
However, reliance on the date of assessment (as opposed to the date of the event of delay itself) would result in differing degrees of hindsight, depending on when the assessment occurred.
For example, the Fidic Red Book allows the engineer to make its determination within either 42 days after receiving the contractor’s particulars of claim, an alternative period mutually agreed or, alternatively, seek further particulars. This leaves the position open to manipulation. Aside from anything else, carrying out the assessment as at the date of the event of delay would ensure consistency irrespective of how quickly the assessment is made afterwards and would also be truer to the concept of a time impact study (as supported by the Society of Construction Law Protocol on Delay and Disruption).
The downside of the time impact methodology is that it places considerable importance on the programme and on the contractor continually updating the programme so as to reflect reality.
However, the benefits of time impact analysis in terms of prudent project management and progress tracking are to a large degree self-evident.
The parties know where they stand as the works progress as regards contractual entitlements flowing from events at the employer’s risk. This works to all parties’ mutual benefit and should help to avoid large scale after-the-event disputes on projects that encounter difficulties.
However, if the actual process of time impact assessment does not take place within a short period after the event occurring, it can be very burdensome and expensive to revisit. Clearly, it is in both parties’ best interests not to adopt a “wait-and-see” approach, but immediate action is something which is sadly more honoured in the breach than the observance.
Developers, contractors and engineers need to be prepared for these issues and to deal with them effectively, so as to protect their contractual rights (both in existing and future contracts) in what are trying economic conditions

Time impact analysis is becoming an increasingly popular method of resolving construction disputes without litigation. MICHAEL HARDY* details the steps to be considered and the benefits of using the method

FUNDS for a large number of construction projects in the region are drying up. This, coupled with a substantial reduction in the cost of labour and materials, has meant that some developers are reconsidering their current projects with a view to renegotiating more favourable terms or seeking to alter the original scope. …

Construction Industry, Sustainability

Proactive ‘green’ approach urged

Proactive ‘green’ approach urged
by Amy Ward
Developers in the UAE are well advised to voluntarily seek certification for the sustainability of their buildings to mitigate any potential increases in design and construction costs before the emirates make the sustainable building guidelines mandatory, writes AMY WARD*.
With the 2009 World Future Energy Summit having been held in Abu Dhabi last month (January), the focus has once again turned to environmental sustainability in the UAE.
In 2007, the World Wide Fund (WWF) Living Planet Report stated that the UAE had the world’s largest carbon footprint per resident. Whether or not this provided the catalyst, the UAE has since then committed to initiatives that encourage low-carbon living such as the Masdar City development in Abu Dhabi.
In recent times, both Abu Dhabi and Dubai have taken steps to support green building principles and their implementation in the construction industry.
Abu Dhabi introduced its ‘Estidama’ sustainable building guidelines in May 2008. Estidama, meaning ‘sustainability’ in Arabic, provides guidelines for sustainable design and operation and maintenance of all types of buildings and communities in the emirate. It is intended that Estidama will become the basis for mandatory guidelines to be introduced in Abu Dhabi in the future, in addition to being introduced in the other emirates.
The Estidama programme was launched by the Abu Dhabi Urban Planning Council to underpin Plan Abu Dhabi 2030 and a sustainable community, by promoting economic growth whilst enhancing the overall quality of life and protecting environmental resources.
Three sets of guidelines were produced as a result of the programme including the new building guidelines, existing building guidelines and community design guidelines. Whilst at this stage these are discretionary guidelines, the Urban Planning Council has indicated that it plans to introduce mandatory regulations in the future.
The new buildings assessment method assesses 10 different criteria for which credits can be awarded. These include water, energy use, indoor environment quality, ecology, management, transport, pollution, materials, waste management and land use.
The Estidama assessment method, however, differs from other international assessment standards in that it has been tailored specifically to the UAE’s socio-economic and environmental conditions in mind. For example, water and energy conservation are considered to be the most important elements of the Estidama green building principles and make up 50 per cent of the total credits that a building can be awarded. Upon accreditation, buildings are rated using a pearl rating system according to the credits they have been awarded under the 10 criteria.
In Dubai, compliance with internationally-recognised green building standards has been on the rise over the past two years. The Emirates Green Building Council was established in 2006 and decided to use the US-based Leed system (Leadership in Energy and Environmental Design) as a basis for its green building guidelines. As a result, in 2007, the Emirates Leed scheme was released. The UAE, currently, has a small number of Leed-accredited facilities, with more likely to be introduced in the future.
The Leed Green Building Rating System was established in the US in 1994 and provides standards for environmentally-sustainable construction. It identifies six major areas where new commercial buildings (or those with significant renovations) can obtain credits in order to be a Leed-certified building. The areas include sustainable sites, water efficiency, energy and atmosphere, materials and resources, indoor environment quality and innovation and design process. A building can be ‘certified’ or, if it obtains a higher number of credits, can obtain a silver, gold or platinum rating.
Dubai currently has two Leed-certified buildings – the headquarters of the building automation specialist Pacific Controls, based in Techno Park, which is platinum rated; and the district cooling plant at Wafi City Shopping Centre, which is gold rated – one of only two utility buildings worldwide to achieve a gold rating.
The US is not the only country to have internationally-recognised standards for environmentally-sustainable construction. In the UK, BRE (Building Research Establishment) created the Environmental Assessment Method (Breeam), a voluntary measurement rating for green buildings. Launched in 1990, it is the world’s longest-standing environmental assessment method for buildings.
Breeam now assesses new non-domestic buildings against nine categories including management; health and well-being; energy; transport; water; material and waste; land use and ecology; and pollution. BRE launched an adapted version of Breeam guidelines in the UAE in October which took into account climate difference, water desalination and differences in ecology as well as recognising the number of sea or marine reclamation projects under construction. In developing the adapted guidelines, BRE worked with a local ecologist to look at the impact of building reclaimed islands.
Significance
Until mandatory regulations are introduced, there are advantages and disadvantages for those in the construction industry who voluntarily choose to become accredited under one of the international systems or the UAE’s own Estidama system.
Once certification is pursued under an accreditation or certification system, there may be an increase in the initial design and construction costs. This could be firstly because sustainable construction principles may not be well understood by the design professionals undertaking the project and, as a result, further time may be required on research or additional liaison between the design team, construction team and client. Secondly, there may be a lack of available manufactured building components that meet the standards required under the green building certification systems. Thirdly, there are likely to be additional costs associated with pursuing certification for the project itself and subsequent liaison with the accreditation body.
However, there are many advantages associated with green buildings, which include a tendency to use key resources more efficiently, when compared with more conventional buildings; and healthier work and living environments, which contribute to higher productivity and improved employee health and comfort.
Higher initial costs may also be mitigated over time if operational costs are lower, which typically is the case with a green building-certified project. In addition, as further developments come onto the market, differentiation may become more important as developers try to attract buyers. Sustainability may be one of the key differentiating factors for future projects in the UAE.
Developers in the UAE, especially in Abu Dhabi, may be well placed to consider voluntarily certification under Estidama in order to prepare for, and mitigate, any potential increases in design and construction costs should the Urban Planning Council introduce the guidelines as mandatory requirements.
Aside from contributing to the reduction of the UAE’s carbon footprint, and as the global community (and in particular the UAE) becomes more environmentally aware, green buildings may become one of the key features for investors in a property market. This may be an advantage in itself in persuading developers to start voluntarily seeking certification under Estidama or any of the other internationally-recognised green building certification systems.
Gulf Construction

by Amy Ward

Developers in the UAE are well advised to voluntarily seek certification for the sustainability of their buildings to mitigate any potential increases in design and construction costs before the emirates make the sustainable building guidelines mandatory.

With the 2009 World Future Energy Summit having been held in Abu Dhabi last month (January), the focus has once again turned to environmental sustainability in the UAE. …

Construction Law

Solving multi-party disputes

Solving multi-party disputes
By PATRICK BOURKE and AMANDA GREENWOOD
This article addresses the advantages of multi-party arbitration and the difficulties that can arise, while providing guidance in drafting dispute resolution clauses.
CONSTRUCTION projects involving multi-national parties, multi-layered legal obligations, consortia and other joint relationships are common in the UAE.
In such multi-party transactions, it is imperative that parties consider at the outset whether related disputes between them can be resolved in the same forum and at the same time.
This is particularly important where parties elect to resolve their disputes by arbitration (which is often the case in transactions of this nature).
Advantages of arbitration
There are two principal advantages of multi-party arbitration:
• It is significantly more efficient for related disputes between multiple parties to be heard together, in the same forum and with the same applicable laws; and
• Multi-party arbitration reduces the risk of conflicting decisions on issues of law and/or fact and thus preserves two of the main objectives of arbitration – finality and certainty.
Difficulties in achieving arbitration
Multi-party arbitration, however, is not a straightforward matter. Some of the difficulties that can arise are outlined below.
Arbitration is a creature of contract: It has its basis in the law of contract. Parties can only arbitrate if they agree to do so, either by including an express agreement to arbitrate in the contract that governs their relationship, or by agreeing to arbitrate as and when any dispute arises.
Given that parties may be unwilling to reach agreement on how their dispute is to be resolved once they are in dispute, there is a benefit to agreeing to arbitrate in the initial contract documents. This is particularly important in a multi-party context, where the consent of more than two parties will be required.
The procedural law (or ‘seat’) of the arbitration: Few jurisdictions make provision in their arbitration laws for the joinder and/or consolidation of disputes in arbitration.
The UAE does not at present have a stand-alone federal arbitration law(i). While the UAE Ministry of Economy published draft federal arbitration legislation in February 2008, it is currently uncertain as to whether (and if so, when) it will be enacted. Neither the existing law, nor the draft arbitration legislation currently provides for multi-party arbitration.
The Dubai International Financial Centre’s (DIFC) arbitration law makes only limited provision for the appointment of a tribunal in a multi-party context(ii).
In most jurisdictions (including the UAE), therefore, the procedural law of the arbitration will not fully address the issue of multi-party arbitration and parties will need to include appropriate express joinder and/or consolidation provisions in their contracts.
Arbitral rules: Multi-party arbitration may be ordered by an arbitral institution (or a tribunal appointed under an institution’s rules) where the parties agree that institutional rules will apply.
Article 22.1(h) of the London Court of International Arbitration (LCIA) Rules gives the tribunal power to join one or more third parties to an arbitration, on the application of a party. This power, however, is subject to the consent (in writing) of both the applicant and the relevant third party. Article 8 of the LCIA Rules provides a mechanism for the appointment of arbitrators where there are multiple parties. The same Rules apply where parties opt to require their disputes to be resolved in accordance with the DIFC-LCIA Rules.
Article 10 of the International Chamber of Commerce (ICC) Rules allows multiple claimants and multiple respondents to jointly nominate an arbitrator for confirmation. If the claimants and/or the respondents cannot agree on a joint nomination then the ICC Court has jurisdiction under the rules to appoint each member of the arbitral tribunal and designate one member as chairman. Article 4(6) of the ICC Rules also provides a consolidation mechanism in relation to claims between the same parties. This, however, is a limited mechanism and once the terms of reference have been signed, is only available at the arbitral tribunal’s discretion.
Article 11 of the Dubai International Arbitration Centre (DIAC) Rules deals with the appointment of the tribunal where there are multiple parties in the same manner as the ICC Rules.
While the above rules do make some provision for multi-proceeding disputes, none of them deals with the situation where multiple related disputes under different contracts between different parties arise. The rules themselves, therefore, are no substitute for provisions drafted by experienced legal advisers recording the various parties’ consent to joinder and consolidation and dealing with other issues that may arise in the context of an individual construction project.
Key drafting considerations
While simplicity is important in any dispute resolution clause, brevity may well be difficult to achieve in a multi-party and/or multi-contract arbitration provision. The following three factors are of particular importance and ought to be considered even if they give rise to a longer clause:
• Where there are more than two parties to arbitration proceedings, individual selection of arbitrators by each party will invariably be impractical. Any unfairness in the selection process may also give rise to issues when it comes to enforcement of an award. As noted above, some of the institutional rules and the DIFC Law address this point already;
• Where several parties are involved in a project, it is impossible to predict which of those parties will become a party to a dispute. The arbitration provisions will accordingly need to make provision for both bilateral and multilateral arbitration;
• It is often not possible to ascertain when any given party may need to be involved in multi-party arbitration proceedings. Consideration, therefore, needs to be given to the timing of any joinder or the consolidation of proceedings.
Where a multi-party situation arises out of multiple contracts, the use of an “umbrella agreement” (incorporated by reference into each of the agreements relating to the project) may be the best way to obtain the necessary consent from all the potential parties to a multi-party arbitration.
(i) Its arbitration legislation is set out in three chapters of the UAE Civil Procedure Code (Federal Law No 11 of 1992).
(ii) Article 17(3)(c) of the Dubai International Financial Centre (DIFC) Arbitration Law (DIFC Law No1 of 2008) provides that where an arbitration agreement entitles each party to nominate an arbitrator but there are more than two parties to the dispute (and such parties have not agreed in writing that they represent two sides for the purposes of forming the arbitral tribunal) then the DIFC Court of First Instance shall appoint the arbitral tribunal without regard to any party’s nomination.
Gulf Construction

By PATRICK BOURKE and AMANDA GREENWOOD

This article addresses the advantages of multi-party arbitration and the difficulties that can arise, while providing guidance in drafting dispute resolution clauses.

CONSTRUCTION projects involving multi-national parties, multi-layered legal obligations, consortia and other joint relationships are common in the UAE.

Construction Law

Time to clean up the flaws in the laws

By Sarachandra Bose

Arbitration is used as one of the alternate dispute resolutions to resolve disputes between parties. It is considered as cost effective and less time consuming, unlike conventional court litigation.

But is it so? I do not think so. Let me quote a recent example in which I was involved. I represented three claimants in arbitration in Dubai involving millions of dirhams. The dispute between the parties started in 2001. Since there was an arbitration clause in the agreement, the Dubai Court appointed a single arbitrator to settle the disputes.

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