The use of construction contracts across the Middle East and Africa has a strong base but needs to reflect sustainable modern drivers. That is the strong message emerging from Day one of the FIDIC Contract Users Conference in the region.Â
Launching the FIDIC Contract Users Conference for the Middle East and Africa, Dr Nelson Ogunshakin OBE, CEO of international engineering body FIDIC, laid a marker for experts around the world by stating: “Involving drivers of change in contracts has to become standard. Energy and water will be critical and investment is crucial because we must not forget the macro-economic influence on projects.”
That set the tone for the debate that followed.Â
Dr Nael Bunni of Bunni and Associates pointed out that for over 75 years of standard contracts, the original principles within them have held true and that in the Middle East and Africa they had proven themselves applicable across all three legal systems – Islamic, Common and Roman law.
Dr Bunni is a recipient of the construction law medal for promoting the study and understanding of construction law. He explained:
“Islamic law adopts the principles of freedom of contracts, which provides that parties are free to enter into contracts, and the sanctity of contracts requires that a contract validly entered into is binding upon those parties.”
“Common Law began in England in the 11th century and the origins of the FIDIC contract was rooted in the common law system and it still adheres to this today.”
“Meanwhile, Civil Law dates back to the Roman Empire and development by the romance nations. This has been adopted by many countries in the region.”
“The evolution across all of them, of the FIDIC contract, will continue to enable those contracts to prompt further success.”
Jafar Khan, regional head of legal at global engineering firm Mott MacDonald, highlighted some of the challenges emerging.
Khan said: “One of the common issues we’ve seen across the Middle East and Africa is ‘fitness for purpose’, where clients want to push this down to the consultants and contractors. For consultants that doesn’t make sense because they don’t build the structure.”
He also said that a contract “normally provides that termination cannot be done without a specific order by the court,” before warning, “There have been attempts recently to get consultants to wave that right, which removes the balance of the contracts”. Â
Adriana Spassover of EQE Control OOD, pointed out that there was a strong case for pro-active insertion of clauses that reflect modern concerns about the environment.
She explained “We have to introduce some specific goals. First of all, we have to introduce net zero targets for construction, and then introduce net zero targets for the operation of the assets. This must be done with provisions for payments for the performance against net zero targets.”
“We can do this easily because there are greenhouse gas standards that you can download into the contract and FIDIC has clauses for the protection of the environment, underpinned by wider obligations that can be added.”
Spassover added that contracts can then have a real balance. “We can include the stick beside the carrot, with text for performance damages for net zero performance problems. We can include measures for failure to comply with net zero guarantees if there is a breach.”
Mahmoud Aba Hussein of Dolphin Energy pointed out that FIDIC’s Green Book had established a lot of flexibility in the tricky area of arbitration while now often needing little amendment project-by-project.
Hussein explained: “Arbitration by default is now under the rules that allow for a fast-track procedure within six months. The variation procedure can proceed as a retrospective procedure – which is an express route by instruction – when instructed by the engineer, and the contractor is bound by it.”
“The other route is a staged route that allows a prospective assessment that means the contractor must as soon as practical, provide a proposal response or explain why it cannot do so. If accepted, the variation will be instructed. If it is not accepted, then the variation may still be instructed if the employer agrees, via the previous procedure.”
“The updated green book now requires minimum amendments to manage the risks and specifics of a medium-sized projects since the new 2021 edition was launched.”
The experts had come together for the FIDIC Middle East and Africa Contract Users Conference, the first of three regional conference around the world.
