Legal experts operating across the Middle East and Africa, have warned that there are some challenges to applying international contracts with local insight.
International contracts are proving to be invaluable to improving outcomes on major projects around the world, but specialists have warned that their practical use on the ground cannot be based on theory of how they should work, but real experience.
Dr Waleed El Nemr, contracts director at Hill International (North Africa), warned that engineers had to be wary of conflicts of interests that can arise from their contracts.
He told an international conference that: “If we look at the process by which an engineer arrives at a contract agreement, first the employer issues a scope of service and the engineer submits a proposals and it is accepted. Then, when the engineer starts work, this includes preparing contracts and tendering documents.”
“That can lead to a conflict between the role of the engineer in the agreement, and the position of the engineer in the contract. The terms of reference by the employer and by the consultancy at that early stage – wanting to get that job – often do not say the engineer will take on a neutral role – they say they will reflect the client’s interests.”
El Nemr also drew attention to claims consulting, adding, “Advice says that a client can hire a claims consultant. And this is another major practical challenge for employers using the standardised contract because it can be a barrier to impartiality of the consultant.”
He explained that to fulfil the fair, neutral and impartial aspect to their role, engineers needed to see the consultancy contract and the construction contract developed to work in harmony.
Funmi Iyayi, director at the Lagos Chamber of Commerce International Arbitration Centre, then looked at what happens when contracts go wrong from an African perspective.
A key challenge in Africa, she explained, was that the continent tended to have limited local manufacturing capacity for construction materials and so needed to resource projects from further afield.
As a result, Iyayi said “Disruptions to the supply chain present significant challenges in Africa. These are often caused by unpredictable circumstances like Covid -19, but disruptions in the global supply chain can very quickly affect contracts as parties are unable to proceed without imported materials,”
She also warned that political risk is a big challenge across Africa, saying that “A change in the political climate in the country can gravely affect the integrity of a contract. Parties often find that the interpretation of regulations differ in practice from the provision in rule book.”
So she advised: “You need to have a proper understanding of regulatory conditions, such as that although getting a particular license might take six months, it might also take twelve months. So, if it says six months in the contract that is a problem and everyone has to be very careful about what such interactions are like in practice, not just in theory.”
Dr Ahmed Fathi Waly, managing partner of WALY Arbitration and Contract Administration, also highlighted the implications for the ultimate failure of contracts – terminations.
He explained that in Egypt: “In bilateral contracts, if one of the parties does not perform his obligation, the other party may, after serving a formal summons on the debtor, demand the performance of the contract or its rescission, with damages, if due, in either case.”
“The judge may grant additional time to the debtor, if it is necessary as a result of the circumstances. The judge may also reject an applications for rescission when the part of the contract which the debtor has failed to perform is of little importance in comparison with the obligation in its entirety.”
As a result, he stressed the importance of the judge’s judgement in these issues. “The judge has the authority to terminate the contract, order compensation or reject the claim. Compensation can be sought but this will be granted only at the judge’s discretion.”
On the other hand, he pointed out that contract termination didn’t require a court order if the parties agree in a case of non-performance of obligations. But he warned they would also need to agree to dispense with serving a summons, otherwise it would still be expected by law even without seeking a court order.
The experts were talking at the FIDIC Contract Users Conference for the Middle East and Africa, which is the first of three regional conferences around the world.