Decennial Liability Bahrain

Rechtliche Herausforderungen bei Bau- und Infrastrukturprojekten im Nahen Osten

Dr. Nicolai Ritter

CMS Hasche Sigle, Berlin

München, 30. Juni 2011

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

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



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



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 theparties' agreement?

� What is the right example to beused?

� Which amendments are to bemade?


1. Legal Background/Basis of Contracts- Beispiel FIDIC -


17.01.2011 - 19.01.2011


• Content of the contract

Clarify the specific performance to be provided under

the contract in detail!

9

17.01.2011 - 19.01.2011


• Content of the contractExample: 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 ApplicationPrepare and submit documents for necessary approvals and consents

4. Execution DrawingsPrepare and present design solution in implemental form

10


• Different Cultural and Legal BackgroundsAvoid 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!




• Structure of the Project Management


• Post-dated checks (PDC)

� Common, but a risk foremployer as well as forContractor

• Bank guarantee/performancebond

� Unconditional: Stand alone, guarantee on first demand

� Conditional: Requiresevidence re. breach (et al.)



• (Standby) Letter of Credit


4. Penalties/Liquidated Damages


4. Contractual Penalties/LiquidatedDamages (LAD's)

Excerpt of Qatari Civil Code:


5. Decennial Liability


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!19Juristisches Projektmanagement bei Bau- und Infrastrukturvorhaben im Nahen Osten | 30. Juni 2011


• 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



• Decennial LiabilityExcerpt 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.




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.




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.



• Decennial LiabilityKey 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.



• 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



• ArbitrationAlternative Dispute Resolution (ADR):Settlement of disputes apart from State CourtsChoice 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

• AdjudicationLegal 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


VIELEN DANK FÜR IHRE AUFMERKSAMKEIT!

Dr. Nicolai RitterRechtsanwalt/Lawyer

CMS Hasche SigleLennéstraße 710785 Berlin

T +49 30 20360-2509F +49 30 20360-2000E [email protected]


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