When parties first embark on a construction project, spirits are normally high. Tenders have been won, programmes have been established and within a few short years the employer will have a brand new structure. But what if a delay occurs?
Assessment of construction delays is an integral part of major projects in any region, and the Middle East is no exception. Bespoke and standard forms of contract typically allocate risk events in advance, and establish a contractual procedure for assessment of additional time and cost when a project runs past its date for practical completion.
In some cases, multiple parties may be responsible for the same delaying event, or the employer and contractor may both be responsible for entirely separate events that delay the project over the same period. How should a contractors claim for an extension of time then be considered? And how can the parties know what to expect when escalating the matter through the contracts dispute resolution procedure?
The starting point for any assessment must always be the contract. And where the contract does not expressly address the issue, then the parties must look to the governing law. Under English common law, the answer often lies in the precedent set by the English courts.
In the Middle East, parties frequently use the English language, but do not always choose English governing law for their contracts. While English is useful as a common language, and improved use of plain meanings and fewer Latin terms make contracts easier to understand, there can be difficulties using English language and English legal concepts with civil governing law. For example, different canons of interpretation may apply to the same English words under different legal systems. Common law terms may have no true equivalent in a civil law legal system and the inverse is also true, with civil law drafters translating civil law concepts into an English legalese that does not recognise abstract concepts rooted in civil codes.
Alongside the contract and the law, the UK-based Society of Construction Law (SCL) published its Delay and Disruption Protocol in 2002, with the aim of providing useful guidance on some of the common issues that arise on construction contracts. It has been referred to by contractors and employers to assist delay analysis supporting contractual claims. Although it has its roots in the English system, we have experience of parties relying on the protocol in disputes where there is no connection to England, under contracts governed by civil law.
In recognition of its increased use overseas, as well as developments in technology, practice and English law, and some criticisms of its earlier approach, the SCL is close to completing a revision of the protocol. Taking account of its Rider 1 published in 2015, the SCL expects to publish the second edition of the protocol later in 2016.
Among the significant updates to the protocol, its consultation draft proposes to address the true meaning of concurrent delay, and suggests a potentially controversial approach to employer risk events. The authors of the second edition recognise that their proposal is influenced by the English law prevention principle and the case law of the English Court of Appeal. It is far from clear that the same approach will apply under other legal systems.
From a practical perspective, the authors of the second edition strongly emphasise the importance of record-keeping, aimed at encouraging all parties to prepare, maintain and store accurate and complete records, proportionate to the project, and with a sufficient level of detail. The need for such records is stressed through guidance relating to records of the programme, progress, resources, costs, correspondence and administration, and the contract and tender, as well as recommendations as to their format and storage. While it is not intended that the detailed guidance be incorporated into the contract, these recommendations may be considered by all parties, for contracts under any governing law, to assist with resolving disputes (and perhaps avoiding them altogether).
The consultation draft describes six principal delay analysis methodologies that parties can select, setting out the pros and cons of the different methodologies available and providing guidance on the most appropriate method to use, depending on the conditions of contract, proportionality and the extent and quality of programme information available.
A key recommendation, and one that will resonate across the industry, is the overriding objective of ensuring any conclusions reached through a delay analysis are sound from a common sense perspective, in light of the facts and irrespective of the methodology used.
The second edition will also go much further in providing guidance on advancing and assessing disruption claims, which are frequently advanced alongside claims for delay. The authors explain both the productivity-based methods and cost-based methods available to analyse lost productivity resulting from disruption events, and continue to prefer the project-specific studies such as measured mile analysis (comparing areas and times where the impact of the disruption event is felt to areas and times where it is not). Additionally, the protocol acknowledges other methodologies for productivity-based disruption analysis, including earned value, trade sampling and system dynamics modelling (using a computer simulation to produce a model of the disrupted project).
Although the protocol will contain useful guidance when disputes do arise, how the parties perform their obligations will be affected by the contract, its governing law and any mandatory application of the (potentially different) provisions of the law of a projects location. In the UAE, Qatar and Bahrain, for example, the respective civil codes require that contracts be performed in good faith, a concept not addressed by the protocol.
It is unlikely any party would simply accept the protocols guidance without adaptation. What is clear is that the influence of the English language, English law and a protocol with English roots will continue to bring both benefits and difficulties to contracts in the Middle East. Perhaps the protocol itself will be adapted for a civil law context.
Clare Connellan is a partner and Alex Rowe an associate based in the London office of law firm White & Case