Decennial Liability Bahrain

(1)

Rechtliche Herausforderungen bei

Bau- und Infrastrukturprojekten im

Nahen Osten

Dr. Nicolai Ritter

CMS Hasche Sigle, Berlin

München, 30. Juni 2011

(2)

CMS - Unsere Standorte

− 54 Büros

− 48 Städte

− 29 Länder

− > 2800 Anwälte

2 Juristisches Projektmanagement bei Bau- und Infrastrukturvorhaben im Nahen Osten | 30. Juni 2011

(3)

Übersicht

1. Legal Background/Basis of

Contracts

2. Entering into a Contract

3. Collaterals/Securities

4. Penalties/Liquidated Damages

5. Decennial Liability

6. Applicable Law and Jurisdiction

(4)

1. Legal Background/Basis of Contracts

(5)

1. Legal Background/Basis of Contracts

Origin of Arab Business Laws

Islamic Law

• Different Schools of Law

• The Mejelle of the Ottoman Empire

Civil Law

• _{Civil Code french law-based}

International Business Law

• International Contract Examples

(6)

1. Legal Background/Basis of Contracts

Making Use of Contract Examples

Typical examples: NEC, MF1,

JCT, ICC, Orgalime, FIDIC

Build only/Build and

Design/EPC/EPCM Contracts

Checklist:

What is the specific subject of the

parties' agreement?

What is the right example to be

used?

Which amendments are to be

made?

(7)

1. Legal Background/Basis of Contracts

Beispiel FIDIC

-7 Juristisches Projektmanagement bei Bau- und Infrastrukturvorhaben im Nahen Osten | 30. Juni 2011

(8)

2. Entering into a Contract

(9)

17.01.2011 - 19.01.2011

2. Entering into a Contract

• Content of the contract

Clarify the specific performance to be provided under

the contract in detail!

(10)

17.01.2011 - 19.01.2011

2. Entering into a Contract

• Content of the contract

Example: Clarifying the Design Responsibility

Example 1

ambiguous

-Example 2

more detailed

-Prior to commencement of

the works the Employer

shall provide the Contractor

with the Tender/Contract

Drawings

ready for

construction.

Drawings to be provided by Employer:

1. Preliminary Design

(Project and planning preparation)

Develop the essential elements of a solution to the project

task

2. Final Design

(Systems and integration planning)

Work up the complete solution to the project task

3. Building Permission Application

Prepare and submit documents for necessary approvals

and consents

4. Execution Drawings

Prepare and present design solution in implemental form

(11)

2. Entering into a Contract

• Different Cultural and Legal Backgrounds

Avoid communication difficulties and misunderstandings

Foreign Contractor:

Make yourself familiar with

local culture and customs!

Local Employer:

Be aware that the contractor

is not always acquainted with

local culture!

(12)

2. Entering into a Contract

(13)

3. Collaterals/Securities

(14)

3. Collaterals/Securities

• Post-dated checks (PDC)

Common, but a risk for

employer as well as for

Contractor

• Bank guarantee/performance

bond

Unconditional: Stand alone,

guarantee on first demand

Conditional: Requires

evidence re. breach (et al.)

(15)

3. Collaterals/Securities

• (Standby) Letter of Credit

(16)

4. Penalties/Liquidated Damages

(17)

4. Contractual Penalties/Liquidated

Damages (LAD's)

Excerpt of Qatari Civil Code:

(18)

5. Decennial Liability

(19)

5. Decennial Liability –

Liability regarding Defects

• Contractual Agreements and Mandatory Law

Typical Clause:

"The Client's rights regarding defects shall be in accordance with

the statutory provisions, unless otherwise expressly agreed in this

contract. The Consultant shall not be liable under this Appointment

in respect of any claims made more than thirty-six (36) month

after the formal acceptance of his services by the Client."

Be aware: Mandatory Law prevails!

(20)

5. Decennial Liability –

Liability regarding Defects

• Decennial Liability

What is Decennial Liability?

Main contractors and design consultants are strictly liable (i.e.

without fault) for the cost of rectifying structural defects that

appear in a building or structure within ten years of handover

(“Decennial Liability”). In Bahrain: 5 Years

Origin: French Code Napoléon

(21)

5. Decennial Liability –

Liability regarding Defects

• Decennial Liability

Excerpt from Bahraini Civil Code:

Article 615

(a) The architect and contractor are jointly and severally responsible for the

total or partial demolition of constructions or other permanent works

erected by them for a period of five years from the date of completing the

building or construction subject always to the following articles.

(b) However, if it is proved that the intent of the contracting parties that the

buildings or constructions shall last for less than five years, the warranty

shall be for the period during which they are intended to last.

(c) The warranty shall extend to the collapse of buildings even though it arises

from a defect in the land or if the employer has authorised the erection of

the defective buildings or constructions. It shall also extend to the defects

in buildings and constructions which endanger the strength and safety of

the works.

(22)

5. Decennial Liability –

Liability regarding Defects

• Decennial Liability

Excerpt from Bahraini Civil Code:

Article 616

(a) If the architect’s work is limited to producing the design of the building or

construction or a part thereof, he shall be responsible for the defects

attributed to the design prepared by him but not for the defects due to the

execution method.

(b) If the employer entrusts him with supervising the execution or a part

thereof, he shall also be responsible for the defects attributed to the

method of execution the supervision of which is entrusted to him.

(23)

5. Decennial Liability –

Liability regarding Defects

• Decennial Liability

Excerpt from Bahraini Civil Code:

Article 617

(a) The contractor shall only be responsible for the defects in execution

but not for the defects in design unless such defects are obvious.

(b) However, the contractor shall be liable for the defects due to the

design if the architect who prepared the design is an employee

thereof.

Article 618

If the architect and contractor are responsible for defects in the work,

they shall be jointly liable.

(24)

5. Decennial Liability –

Liability regarding Defects

• Decennial Liability

Key points to note about Decennial Liability:

no fault is necessary in order for liability to arise

trigger events are – normally - total or partial collapse of the building

and/or a defect threatening the stability or safety of the structure

contractors and consultants are jointly and severally liable

liability attaches notwithstanding that the collapse or defect is caused by

sub-surface conditions or that the building owner approved the defective

work

agreements purporting to exclude Decennial Liability are void

buildings or structures, the life cycle of which is less than five/ten years,

lead to liability for the duration of that life cycle

contractors/consultants are unable to pass the risk of Decennial Liability

down to its subcontractors/ sub-consultants

.

(25)

6. Applicable Law and Jurisdiction

(26)

6. Applicable Law and Jurisdiction

• Applicable Law

Choice of Law: Agreements upon applicable law are – in

general – admissible

Examine in each case whether useful

Mandatory local law to be observed!

Conflict law (Private International Law)

to be observed

• Jurisdiction

Choice of jurisdiction is – in general – admissible too. Local

courts normally accept choice of foreign jurisdiction.

Examine in each case whether useful

(27)

6. Applicable Law and Jurisdiction

• Arbitration

Alternative Dispute Resolution (ADR):

Settlement of disputes apart from State Courts

Choice of arbitration is – in general – admissible

Dubai International Arbitration Centre

UNCITRAL Model Law and Arbitration Rules

International Chamber of Commerce (ICC)

New York Convention on recognition and enforcement of foreign arbitral

awards 1958

• Adjudication

Legal process by which adjudicator reviews evidence, arguments and

legal reasoning set forth by parties.

Useful if contractual relationship is long lasting (i.e. Construction Contracts)

Normally unnecessary if purchase contracts are in question

(28)

VIELEN DANK FÜR IHRE AUFMERKSAMKEIT!

Dr. Nicolai Ritter

Rechtsanwalt/Lawyer

CMS Hasche Sigle

Lennéstraße 7

10785 Berlin

T +49 30 20360-2509

F +49 30 20360-2000

E [email protected]

(29)

Rückblatt