Force Majeure – It’s expected

by Martin Chapman

So what is a force majeure clause? Just about all construction contracts contain such a clause and designed to address risks which cannot necessarily be insured and which are outside of the control of the parties to the contract. [Read more…]

Leave a Comment |

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. [Read more…]

Leave a Comment |

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.

[Read more…]

Leave a Comment |

A huge thirst for knowledge

By Richard Harding

The boom in professional education has been a global phenomenon, which the UAE has not escaped. Barely a week goes by without a seminar or conference offering the latest insights. Most of these are fearfully expensive, and those which are not, tend to consist of little more than a new entrant into the market selling its imported “expertise.”

[Read more…]

Leave a Comment |

Respect is due to my authority

By Nick Carnell

Have you recently spent what seemed like a lifetime trying to make sense of the identity card regulations? Have you also looked in your wallet at the number of cards you have with your photograph staring out at you?

Do you as a matter of course carry a copy of your passport visa page because you are almost bound to need to produce it somewhere? [Read more…]

Leave a Comment |

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.

[Read more…]

Leave a Comment |

The new FIDIC Contract: Design Build Operate

By Edward Sunna
The long awaited FIDIC Design Build Operate Contract has finally been published by FIDIC. The purpose of this article is to provide readers with a general overview of the new build contract and its intended application. [Read more…]

Comments (1) |

Estimating Productive Hours per Day

When estimating effort hours, duration and cost, you must start off with an estimate of effort hours. Without an idea of the effort hours, you cannot accurately estimate duration or cost. [Read more…]

Comments (1) |

Building Design

Building designs
by Dennis Brand
Perhaps the best way to describe design and build contracts is to explain what they are not. The traditional design-bid-build contract is a sequential process of phases or stages in which the owner or developer first contracts with a design professional to prepare a concept or basic design, then later a detailed design that is suitable for construction. This will include plans and specifications that when complete will be used to solicit competitive bids and finally the award of a construction contract to the lowest bidder.
In design and build contracts, one entity performs both the design and construction under a single contract. Often the contract is awarded by some process other than competitive bidding, thus it differs from traditional design-bid-build in two ways. First, the design and construction components are packaged into a single contract; second, it is not necessarily awarded to the lowest bidder after competitive bidding.
Why use design and build?
Design and build contracts have the potential to reduce the overall project costs as the contractor performing the design has a better appreciation of the construction costs of the various alternatives. They can therefore produce a design that is less expensive to build and they have an incentive to do so.
Another way to look at this advantage is that it moves value engineering from after the contract award, where the contractor proposes cost reduction ideas and shares the savings with the owner, to pre-award, where the owner enjoys most of the savings.
Design and build contracts may also result in the earlier completion and occupancy of a project as there is no downtime between the completion of a design and start of construction. Furthermore, the contractor can begin construction of early phases of the project, such as grading and foundations, before the design of later phases like the building envelope and MEP systems are complete.
This process is sometimes referred to as fast-track. It eliminates the traditional liability gap that can occur when the design is produced by a consultant and the contractor constructs the design under a separate contract. Design professionals can obtain insurance coverage for professional liability insurance only, which covers negligence, error and omissions. Virtually all design contracts limit their liability to this.
However, there can be non-negligent errors and omissions on the part of the designer that cost the owner money, but for which the designer is not liable. One example of this is where the designer undertakes reasonable subsurface investigations but fails to detect a rocky outcrop that will require additional work on the part of the construction contractor.
In the traditional design-bid-build approach, the owner warrants the correctness of the plans and specifications to the construction contractor. In the event of an error where the contractor incurs additional costs, these are met by the owner with little prospect of recovery from the designer. Design and build contracts eliminate this gap because the is solely responsible for defective plans, specifications or differing site conditions.
When a project is designed around current generation products, any proposed substitution of new or alternative items following bidding may require revisions to the structure, mechanical or electrical components to accommodate the new design. In such occasions the question arises: who will pay for the resulting charges? Design and build contracts solve this problem: the contractor selects the equipment then designs the building around this, which seems a more logical way to proceed.
The traditional design-bid-build method of contracting can suffer from under-optimisation when individual project participants seek to optimise their own positions. For example, the total cost to the owner of a building’s steel frame includes the cost of the engineering to determine the required steel sections plus that of the steel. The designer has little incentive to minimise the amount of structural steel, their concern is only to spend sufficient design time to ensure that there is enough steel to meet both gravity and seismic loads.
With design and build contracts, the contractor has an incentive to use additional engineering in order to achieve the optimum amount of steel required for the structure. That is not to say that this type of contract results in unsafe or less efficient structures, rather that it reduces unnecessary quantities of materials and equipment that do not necessarily add to the robustness of the structure.
Design and build contracts may reduce the administrative burden on the owner as there is one award and one contract to administer. The total cost of the project becomes apparent earlier. In traditional design-bid-build jobs, construction costs are not known until bid opening and it is possible to spend money on a design that the owner may not be able to build. Frequently construction bids exceed the project budget, which results in it having to be redesigned, thus delaying completion.
The risk factors
Under a traditional design-bid-build contract arrangement the owner has full control over the details of the plans and specifications. It does not publish them for bids until it is satisfied that they reflect their requirements. With design and build contracts the owner gives up some of this control.
Moreover, the owner must confirm its needs much earlier. With traditional design-bid-build contracts, if the owner is indecisive on its needs, it can clarify them during the design phase. With design and build projects, however such changes can be very expensive and disruptive, impacting on both costs and completion.
To summarise, if the owner is not certain what they want, due to the expense in making changes after contracts are awarded, the more traditional design-bid-build method may be the best choice.

Building designs

by Dennis Brand

Perhaps the best way to describe design and build contracts is to explain what they are not. The traditional design-bid-build contract is a sequential process of phases or stages in which the owner or developer first contracts with a design professional to prepare a concept or basic design, then later a detailed design that is suitable for construction. This will include plans and specifications that when complete will be used to solicit competitive bids and finally the award of a construction contract to the lowest bidder. [Read more…]

Comments (1) |

Asbestos management in the UAE

Asbestos management in the UAE
by Charles Faulkner
Each year almost 100,000 people die worldwide due to asbestos related disease, which is more than the number of lives taken by skin cancer. Asbestos related diseases are now the greatest occupational killer in world history and the figures continue to rise.
In the UAE there is a commonly-held belief that asbestos is only a problem in Europe and North America, where the horror stories of exposure, litigation, compensation and death – not necessarily in that order – are well publicised. But, asbestos is not perceived as an issue for the Emirates.
As a construction risk management consultant, it initially shocked me to find out that there was not an absolute prohibition against the use of all Asbestos Containing Materials (ACMs) in the UAE as recommended by the World Health Organisation, especially as the UAE is at the forefront of many aspects of building design and new technology. It is still legally permitted to import asbestos for the manufacture and subsequent use of asbestos cement pipes for the purpose of water supply and sewerage.
Furthermore the use of asbestos board in the Emirates has only been banned since November 2006, shattering the myth that asbestos is only present within older buildings. In fact over 17,000 tonnes of asbestos was imported and consumed in the UAE in 2007* – its most evident utilisation being the construction industry.
Any work with ACMs can present a risk to human health, and it is well established that there is no known safe level of exposure to any type of asbestos fibre. Those most at risk from the harmful effects of asbestos include construction workers, particularly those involved in demolition and refurbishment activities and asbestos water pipe installation, and tradesmen such as electricians, plumbers and carpenters.
It is not uncommon for those unknowingly exposed to asbestos to spread the deadly fibre through contaminated equipment and clothing, leading to the so called “secondary exposure” of work colleagues, family and friends. The American and European press regularly report the tragic stories of families whose lives have been devastated by asbestos related deaths, usually in women and children, attributed to contaminated clothing and second hand asbestos exposure.
The only way to reduce the hazards of ACMs in the construction industry is to prohibit the use of ACMs (voluntarily and legislatively), use safer substitute materials, and proactively manage the remaining residual risk from each of the activities that are associated with asbestos exposure.
From a legal and ethical point of view, employers must understand that prevention to exposure is paramount and where this is not possible they must assess the work and provide their employees with the appropriate procedures, control measures, personal protective equipment and respiratory protective equipment. Current legislation must be adhered to, and a best practice guideline implemented.
WSP Environment and Energy in association with the non-profit health and safety organisation Buildsafe UAE will form a focus group this month to produce workable guidelines that will not only comply with both local and federal legislation but also develop industry health and safety best practice procedures. The procedures will detail the safe systems of work for asbestos related activities and then be distributed to Buildsafe UAE members.
Only by collectively acknowledging that there is a risk from ACMs in the UAE construction industry and addressing that risk can we play our part in putting an end to unnecessary asbestos related deaths.

by Charles Faulkner

Each year almost 100,000 people die worldwide due to asbestos related disease, which is more than the number of lives taken by skin cancer. Asbestos related diseases are now the greatest occupational killer in world history and the figures continue to rise. [Read more…]

Leave a Comment |