Does COVID-19 really result in a force majeure claim under FIDIC?

August 18, 2020

Now that many construction and engineering contracts have recommenced after a period of shut down or slow down due to the issues surrounding Covid-19, many Contractors and Employers are having to assess and deal with the effects on their projects including whether extensions of time and damages should be awarded to the Contractor.  In this article, I consider the issues that arise and the position of the parties under the FIDIC suite of contracts. Most FIDIC contracts in the UAE utilise the law of England & Wales or the Federal Laws of the UAE.  Additionally, although FIDIC has published their 2017 updated form of contract most projects are currently using the previous versions originally published in 1999 or, in some cases, the earlier versions.  In order to be relevant to most readers, I have concentrated on the terms of the 1999 suite of contracts.  This being the case I should mention that the 2017 suite of contracts are not significantly different but rather have been re-written so as to provide greater certainty and clarity so that the Employer, Engineer and Contractor understand their respective roles and obligations to reduce the potential for disputes.  The Dispute Resolutions Procedures have also been updated so as to provide a more flexible approach.  ‘Force Majeure’ under the 1999 suite of contracts has been replaced by ‘Exceptional Events’ under the 2017 suite of contracts but the emphasis and direction of these clauses remain essentially the same.  The changed wording is, in reality, an effort by FIDIC to avoid the pre-conceptions of Force Majeure in civil law countries and allow the parties to understand what FIDIC meant by the terminology used.  Therefore, much of what is said in relation to the 1999 suite of contracts and Force Majeure is pertinent to the 2017 suite of contracts as well. Before looking at the contract itself it is perhaps worth noting that Force Majeure does not ordinarily result in a Contactor being awarded damages for delay.  Under most contracts and legal systems Force Majeure is seen to be an event that prevents the works being carried out but the event is not one that is a fault of the Employer or the Contractor but rather an event which could not have been foreseen by either party and thus the financial effect should be neutral.  In other words, neither party has accepted or indeed seen the risk of the Force Majeure event occurring as it was not within either party’s contemplation at the time that the contract was entered into. FIDIC expand this idea and set out definitions as to what their use of the term means.  It is important to understand that any case law or interpretation based on civil law concepts that deal with Force Majeure may not be applicable when construing the FIDIC suite of contracts.  Care should be taken when considering case law of civil law interpretations outside of the FIDIC contracts to ensure that the specific issues being considered to do indeed fall within the scope and wording of the FIDIC suite of contracts. FIDIC DEFINITION OF ‘FORCE MAJEURE’  Sub-Clause 19.1 (Definition of Force […]

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Measures taken to protect the Insurance sector in the UAE: Resolutions of the Insurance Authority further to the coronavirus pandemic

August 13, 2020

In the backdrop of a worldwide health crisis brought about by the novel coronavirus (COVID-19), the Insurance Authority in the UAE took a number of measures to limit the adverse implications of the virus on the insurance sector and to ensure continuation of insurance businesses across the UAE. On 8th March 2020, the Authority passed Circular No. (3) of 2020, which relates to precautionary measures and preventive procedures for the protection of public health and safety; its intent was to also curb the spread of the novel coronavirus (COVID-19): By virtue of this circular, the Insurance Authority requested insurance companies and professionals associated with the insurance sector, who are operating in the UAE, to take precautionary and preventive measures as necessary for the protection of public health at workplaces. This direction relates to the technical and operational level of businesses. The Circular further directed employees and clients to implement all preventive procedures issued by the competent authorities of the UAE, which included: quarantine for employees who have returned from overseas travel, in particular for those who were returning back to the UAE from the countries that were mostly affected by the virus, and further recommended opportunities to work from home for any employee manifesting symptoms similar to the symptoms of the Covid-19 virus. They also emphasized the necessity to follow all means of hygiene and the ongoing sterilization of all company facilities. On 30th March 2020, the Board of Directors of the Insurance Authority passed several resolutions, which provided: Resolution No. (13) of 2020, which amended several provisions of Resolution No. (9) of 2011 of the Board of Directors of the Insurance Authority and directed on the instructions for the licensing of health insurance claims of management companies and further updated the regulation of insurance businesses whereby, “Health Insurance & Claims companies shall provide the Authority with an annual report that contains details of all the business of the company during that year, and the closing financial statements of the financial year, duly audited, having enclosed therewith the report of the external auditor, within (4) months from the ending date of the financial year.” In addition, the Authority added a third clause to the said Article (13) requiring  Health Insurance & Claims companies to provide the Authority with a quarterly report on the company’s business and the accounts related thereto. This was to be signed by the chairman of the board of directors, the general manager, or the executive director, within a duration not exceeding (45) days from the end of the quarterly period. 2. Resolution No. (14) of 2020, amended provisions of Resolution No. (15) of 2013 of the Board of Directors of the Insurance Authority. This concerned the system of insurance brokerage. Under Article 1, the Authority amended Article (13) of its said Resolution No. (15) of 2013, with the addition of a sixth clause which allowed for an insurance broker to submit an application to the Authority for the reduction of the amount of the letter of guarantee issued by a banks operating in the UAE by an amount of one (1) Million Dirhams from the amount […]

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