Dealing with the complex issues

Two events have recently focused my attention on official steps being taken to enhance lawmaking in the UAE and therefore the ‘quality of justice'. Neither were specifically aimed at the engineering and construction (E&C) world, nor the principles of law under which E&C operates. But they have prompted E&C lawyers, such as myself, to question to what extent E&C law - if such a thing exists in the UAE - may be enhanced, and how.

The first event was the opening of the new court at Dubai International Financial Centre (DIFC). More important than the official opening itself, however, has been the introduction of the set of laws that will apply to parties doing business within the new legal jurisdiction at DIFC. The needs of the international ‘players', which DIFC wishes to attract, have been the driving force for this new set of laws. Financial institutions that are so used to operations under their home-based laws, seem to require the same ‘comfort blanket' when operating in the Middle East, separate from the region's unfamiliar set of codified laws.

The other event of note was, of course, the unveiling of the UAE government strategy document, which, according to the press reportage, has "sustainable development" at the heart of its message. The development of government services based on "international best practice" is also core to the strategy, as is "developing regulations needed to entrench transparency". Worthy aims indeed.

Against the backdrop of these modernising developments, where is the set of laws most used by the E&C sector? And how compatible is it with standards of international best practice?

At a recent talk given to the Society of Construction Law (UAE), UK judge, Sir Vivian Ramsey, said that construction law worldwide is nothing less than the principles of local laws applied to "one of the most complex of human endeavours", which refers, of course, to the very processes of E&C. And that the challenge for local laws, wherever they come to be applied, is to adapt to the huge risks encountered in the industry.

In the UAE, the scope of law devoted to E&C is contained in 36 sub-paragraphs of just 25 articles of the civil code, the principal federal law that governs the making of contracts within the UAE. How adequate are such provisions for one of the "most complex of human endeavours"? Are they sufficient to cope with the complex issues that arise from the complexity of the structures they govern? My view is that the provisions are good in themselves, but in no way can, or can be expected to, amount to any objective review of a comprehensive set of principles to deal with every eventuality of risk that will arise on a complex project. But I know of no existing body of law, in any other jurisdiction, that can do so either.

What I think may be fairly said against the civil code principles is that they remain a static, codified set of values that cannot develop in the same way as the nature and complexity of the issues to which they need to be applied to. In what lawyers term ‘common law jurisdictions' (countries that use precedent case law), development of the legal principles can more readily occur in step with current industry risk growth. This can be done through the binding decisions of the judiciary, as handed down over time.

Therefore, as Judge Ramsey said, a case law jurisdiction can develop the concept of "time at large" to cover delaying events not catered for in a contract; or "quantum meruit" claims to allow the consequential financial entitlement of the contractor. Similarly, precedent-based countries can develop a law relative to the "dropping out" of the nominated subcontractor (especially when "pushed" by the main contractor).

Section three of the civil code deals with "subcontracting" but no reference is made to the particular process of nomination, which is recognised by the common law, and is operated here in the UAE. Nor does the civil code cater for time extension issues in the same manner as court judgments in common law jurisdictions can against the impact of delaying events not provided for in the extension of time clause.

In one way, though, the UAE's codified laws may be seen as providing a more adequate remedy, by allowing the parties themselves to cover risk events by whatever means they choose in their contract provisions.

This is not, however, universally accepted by lawyers here. The concept rests on the UAE Commercial Code of 1993, which says that what parties agree in their contracts takes priority over provisions of other UAE laws that are not inconsistent with the party-agreed terms. But under the civil code there are specific provisions that would seem to negate what parties agree in their contracts. At best, such uncertainty is not a happy state of affairs for the E&C industry here, which requires clarity in respect of its many complexities.

There have been questions asked recently as to why contracting groups do not press for necessary changes. Those of us with UK experience will recall the tensions within such organisations as the JCT in relation to amending even the wording of the standard forms of contract. It may be a wholly different dimension to bring about suitable changes in the law in codified jurisdictions such as the UAE.

Perhaps the first step, though, is for there to be some mechanism for formally enquiring whether the UAE law does indeed reflect "international best practice" for the E&C industry. That may well lead to sustainable development of the UAE laws.