Category: Middle East

1
New UAE Penal Law Allowing for the Imprisonment of Biased Arbitrators Leads to Widespread Concern and Uncertainty in International Arbitration Community
2
QATAR COURT OF CASSATION CONFIRMS CONDITIONS FOR THE ENFORCEMENT OF ICC AWARDS IN QATAR
3
Welcome to the 32nd Edition of K&L Gates’ Arbitration World
4
Suspension and Termination Under the Civil Law, Part 2
5
Suspension and Termination Under the Civil Law, Part 1
6
Materials Available: EPC Contracting Issues in the Oil & Gas Industry
7
Good Faith in the Middle East
8
Liquidated Damages in the UAE, Qatar, and Saudi Arabia
9
Time Bars in Construction Contracts – A Comparison between Jurisdictions
10
Procurement Strategies for Major Rail Projects: International Railway Summit 2015

New UAE Penal Law Allowing for the Imprisonment of Biased Arbitrators Leads to Widespread Concern and Uncertainty in International Arbitration Community

By Michael P. Cotton, K&L Gates, Pittsburgh

Through a recent amendment to Article 257 of the UAE Penal Code, any arbitrators, experts, or translators who issue biased decisions or opinions in UAE arbitration proceedings may now be subject to criminal liability. The new law has led to widespread concern and uncertainty in the international arbitration community.

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QATAR COURT OF CASSATION CONFIRMS CONDITIONS FOR THE ENFORCEMENT OF ICC AWARDS IN QATAR

By Matthew Walker and Leanie van de Merwe, K&L Gates, Doha

In Appeal No. 173/2016, the Qatar Court of Cassation considered an appeal against the Court of Appeal’s decision  dismissing an application for the enforcement of an International Chamber of Commerce (ICC) award.

SPEEDREAD

The Qatari Court of Cassation has clarified the position on enforcement of foreign arbitral awards in Qatar, by confirming that none of the domestic requirements relating to certification and authentication of foreign official documents apply to international awards, thanks to the New York Convention.

This judgment is a significant step in the right direction for arbitration in Qatar, especially where it concerns the hotly debated topic of  enforcement of foreign awards. Qatar, which has a mixed legal system (Civil Law based on overriding principles of the Shari’a), does not recognise the principle of legal precedent in the same way as a common law jurisdiction does. Judges are generally not strictly bound by the decisions made in previous cases or by superior courts. However, whilst this judgment may not be strictly binding on the lower courts in Qatar, it may be considered as highly persuasive, and is therefore not a case that the lower courts should overlook lightly.

It remains to be seen whether the French courts will uphold or dismiss the appeal in the parallel proceedings to annul the award. Until then, the Court of Cassation’s judgment stands and provides considerable clarity on the requirements for enforcement of an ICC award in Qatar. (Appeal No. 173/2016).

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Welcome to the 32nd Edition of K&L Gates’ Arbitration World

Welcome to this 32nd edition of Arbitration World.

To view Arbitration World, click here.

To download a printable PDF of the publication, open the link above and click on the fourth icon from the right in the magazine toolbar at the top of the page.

We are very pleased to include in this edition, as part of our series of guest contributions from expert witnesses, an article by Howard Rosen and Noel Matthews of FTI Consulting, regarding how “country risk” can affect the value of investments and the approach towards this issue in damages calculations in international arbitration.

We review recent developments in arbitration in Qatar, including court decisions regarding the validity of arbitration agreements and the enforcement of arbitration awards. As part of a series of articles related to so-called “Bermuda Form” liability insurance policies, we look at the process of formation of the arbitral tribunal in Bermuda Form policies and whether such insurance policies may conflict with certain U.S. state laws regulating insurance.

We report on a recent decision of the English Commercial Court regarding enforcement of a tribunal’s order for a provisional payment, as well as a recent UK Privy Council decision on the meaning and effect of permissive arbitration clauses. We review the new mediation rules of the Vienna International Arbitration Centre (VIAC) and report on the work of an International Bar Association (IBA) Subcommittee in assessing how states have defined the public policy exception under the New York Convention.

We review some recent decisions of the Federal Supreme Court of Switzerland on arbitration award set-aside applications in the past year. We are also very pleased to include a guest contribution from Ben Beaumont, a barrister from Thomas More Chambers and Chairman of the Arbitration Club, regarding a recent decision of the Federal Supreme Court of Switzerland on the role of a Dispute Adjudication Board (DAB) under the FIDIC Red Book regime.

We also provide our usual update on developments from around the globe in international arbitration and investment treaty arbitration.

We hope you find this edition of Arbitration World of interest, and we welcome any feedback (email ian.meredith@klgates.com or peter.morton@klgates.com).

Suspension and Termination Under the Civil Law, Part 2

By Alex Brightman, K&L Gates, Doha and Donal Scott, K&L Gates, Dubai

In a previous blog post, we looked at suspension and termination of a construction contract under a Civil Code system.  We focused, in particular, on the FIDIC form of contract and looked at how that would be treated under the Qatar Civil Code.

In this article, we will continue that review, but look at how suspension and termination would operate under the UAE Civil Code.

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Suspension and Termination Under the Civil Law, Part 1

By Alexander Brightman, K&L Gates, Doha

Introduction
Although “freedom of contract” is a concept that is recognised in both the common law and civil law jurisdictions, the codified and prescriptive nature of a civil law system means that the relevant provisions of the Civil Code may even be implied into robustly drafted contracts, including standard forms. As set out below, such implied provisions could have the undesirable effect of delaying termination whilst a court order is obtained or exposing the terminating party to a claim for breach of contract (and compensation) for unlawful termination. In this article, I will be discussing suspension and termination rights under the FIDIC Contract (Red and Yellow Books), before examining the position under the Qatar Civil Code.  In a follow-up blog post, I will look at suspension and termination under the UAE Civil Code.

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Materials Available: EPC Contracting Issues in the Oil & Gas Industry

K&L Gates and Marsh recently co-sponsored a one-day, complimentary seminar titled “EPC Contracting Issues in the Oil & Gas Industry.”

The seminar featured six hour-long sessions, including a luncheon presentation by Robert Peterson, senior partner at Oliver Wyman, and an industry roundtable review panel consisting of industry experts from Exxon Mobil, Phillips 66, Chicago Bridge & Iron Company, Fluor, and Aker Solutions.

More than 100 representatives from leading energy companies attended the seminar at the JW Marriott Houston Downtown.

Houston partners Randel Young and John Sullivan III, Pittsburgh partners Richard Paciaroni and Jason Richey, London partner Matthew Smith, Washington, D.C. partner Steven Sparling, and Dallas partner Beth Petronio, along with Pittsburgh associate Jackie Celender, presented during the seminar.

Seminar materials can be found here.

Good Faith in the Middle East

By Darran J. Jenkins, K&L Gates, Doha

The concept of good faith as applicable in the Civil law jurisdictions of Qatar and the United Arab Emirates (“UAE”) is one that may be unfamiliar to lawyers from a common law background where good faith is applies in a very limited fashion, if at all. [1]

The Position in the Middle East

The position in Qatar is set out in Article 172 of the Qatar Civil Code[2]:

1.    The contract must be performed in accordance with its contents and in a manner which consistent with the requirements of good faith.

2.    The contract is not confined to obliging a contracting party to its contents, but also includes its requirements in accordance with the law, custom and equity as per the nature of the obligation.

The corresponding article in the UAE Civil Code[3] is Article 246 which states:

“(1)     The contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith.

(2)     The contract shall not be restricted to an obligation upon the contracting party to do that which is (expressly) contained in it, but shall also embrace that which is appurtenant to it by virtue of the law, custom, and the nature of the transaction.”

In Bahrain, Article 127 of the Civil Code[4] requires:

A contract is not only limited to its expressed conditions, but also as regards everything which according to law, usage and equity is deemed in view of the nature of the obligation, to be a necessary sequel to the contract, taking into consideration custom and usage, requirements of equity, nature of business, good faith and honesty.”

And Article 129 provides:

A contract must be performed in accordance with its contents and in compliance with the requirements of good faith and honesty.”

Each of these Civil Codes takes an almost identical approach to the treatment of good faith. As a result, a contract will not be interpreted using solely its terms but will be interpreted against the requirements of customs, equity and good faith.

The requirement to act in good faith is a strong, positive obligation on the parties to a contract.  It is not merely a requirement not to act in bad faith and not to deceive one another. Each party is instead under a legal obligation to exercise good faith in the performance of its contractual obligations and it is dealings with the other party. In a construction context, the duty of good faith would require an employer to cooperate with the contractor and deal with change requests in a timely and fair manner, whilst a contractor would be obliged to avoid delaying the performance of their works.

It is interesting to note that the obligation within the Qatar Civil Code is to perform the contract in good faith but it does not extend to negotiating the contract in good faith. The parties are free to adopt an adversarial approach to negotiation of the contract to try to obtain the best possible deal for themselves. Only once the contract has been signed does the duty to act in good faith arise.

In relation to insurance contracts, the duty to perform in good faith under the Civil Code does not in any way limit the duty of the insured to act with utmost good faith when placing the policy.  This is because the Civil Code also recognizes and enforces a higher standard of care where the parties have agreed it should apply.

[1] Please note, all English extracts in this Article are taken from an unofficial English translation of the Qatar and UAE Civil Code, reference should always be made to the original Arabic text.

[2] Law Number 22 of 2004

[3] Law Number 5 of 1985

[4] Law Number 19 of 2001

Liquidated Damages in the UAE, Qatar, and Saudi Arabia

By Harriet C. Jenkins, K&L Gates, Doha

INTRODUCTION

Liquidated Damages (LDs) are treated very differently across the Gulf region and from the position as understood within the English common law jurisdiction.

The universal starting point for LDs is in contract; parties should pre-determine the rate of damages a contractor should pay to the employer in the event of a (specified) breach, most commonly that of late completion.  For the purposes of this article, we shall consider LDs solely in the context of delay damages, whereby in the event of delay to project completion, an employer can demand a fixed compensatory sum from the contractor.

The position of the civil law jurisdiction of the Middle East is very different from that understood within the English common law system.   It is commonly accepted that English courts are generally very reluctant to look beyond the contractual position and open up any agreed position on LDs.[1]  Across the Gulf however, differing civil codes empower courts (and tribunals) to look behind the parties’ contract and adjust delay damages based upon principles of actual loss and fairness.

This article discusses the differing treatments of LDs across three Gulf jurisdictions (namely, the United Arab Emirates, Qatar and Saudi Arabia), and reveals what parties can expect in regards to their compensation for delay.[2]

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Time Bars in Construction Contracts – A Comparison between Jurisdictions

By Jafar S. Khan, K&L Gates, Doha and Inga K. Hall, K&L Gates, London

The consequences for a contractor who delays in submitting an application for an extension of time, or who gets his payment application in late, can differ dramatically depending on the contract terms and also the governing law of the contract.

In order to ensure contractors submit their claims as they arise (rather than ‘roll them over’ to the end of a project) and to assist in efficient cash-flow management, it is common practice for both bespoke and standard form contracts to include express procedures for submitting claims for time, money or other relief. Provisions dealing with claims for an extension of time for example will frequently stipulate time limits for each of the following:

  • the initial notification of the events giving rise to the claim,
  • submission of particulars,
  • a response/request for further particulars on behalf of the employer, and
  • an assessment of what if any extension should be awarded.

What happens though if one of the parties does not complete the relevant action or step forming part of the procedure within the stipulated time?

This will depend first on what the contract says the consequences are to be. The usual practice in the standard forms mentioned above is to expressly provide that a failure to (say) submit the particulars of the claim strictly in accordance with the time period prescribed will invalidate the claim i.e the claim becomes “time barred”. Looked at in another way, such express provisions are seeking to make timely submission of the required particulars a condition precedent to recovery.

This raises the interesting question of whether such time bars are enforceable. On the one hand it would seem disproportionate to bar a substantial claim if a contractor was only one day late in filing its claim, but on the other hand, an employer might have made certain assessments as to liability and closed its position with respect to issues in relation to the events surrounding the claim. It would arguably be unfair to ignore the terms of the contract and permit the employer to continue to be exposed to claims.

The issue of enforceability will depend to a significant extent on the law of the contract. In common law systems such as the United Kingdom for example, clearly drafted time bars (such as those found in FIDIC sub-clause 20.1 and NEC3 clause 61.3) have in the past generally been enforced.

An issue which is however currently generating debate in the UK is how to properly assess the time period for first notifying an event. NEC3 clause 61.3 states that if the contractor does not notify a compensation event (i.e a variation) “within 8 weeks of becoming aware of the event, he is not entitled to a change in the Prices [or] the Completion Date”. FIDIC sub-clause 20.1 requires the contractor to give notice “as soon as practicable and not later than 28 days after the contractor became aware, or should have become aware of the event or circumstance [giving rise to the claim]”. Although both clearly state the condition precedent aspect of the timely giving of notice, the more difficult issue is when does that time start running?

There is frequently a delay between the time an event occurs, and when the effect of that event as giving rise to a claim is identified. Equally, for an ongoing event which spans several days or weeks (such as a prolonged period of bad weather), should notice be given on day one (on a ‘just in case’ basis even though the duration and effect of the event are unknown) or at the end of the event (which the effect is known but with the risk the employer will say you have given notice too late?). These were the type of issues considered by the UK courts in the 2014 case of Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar[1] where the court said the notice provisions should be construed broadly, meaning the time should be calculated from when the contractor became aware (or should have become aware) of the delay, rather than from the date of the event itself.

Across the common law jurisdictions, the hardest line against time bars is taken in Australia, with the 2012 decision in Andrews v Australia and New Zealand Banking Group Ltd[2] that such time bars can be unenforceable as penalties.

The approach in civil code jurisdictions such as the GCC generally take the middle ground.

The UAE Civil Code neither expressly prohibits time bars nor enforces them.

Instead, prescribed time periods need to be read in the context of certain provisions of the UAE Civil Code including:

  • Article 106 – prohibiting the exercise of rights if the desired interest or result is disproportionate to the harm that will be suffered by the other party;
  • Article 246 – requiring the parties to act in good faith; and
  • Article 249 – prohibiting a party from exercising its rights in a manner that is oppressive or abusive

These provisions, read together, have the effect of meaning that time bars are neither expressly permitted nor expressly prohibited under UAE law. Instead, consideration will be given to matters which under common law are considered as being “equitable principles” such as whether the parties were acting in good faith, whether the actions are oppressive or unconscionable, and whether the benefit enjoyed by one party will be disproportionate to the harm suffered by the other party. Although such an approach is to be commended, since it ensures that a party is prevented from unnecessarily abusing its position under the contract, it does mean that the terms of the contract may be ignored in some instances. It is not clear as to the frequency at which courts in the UAE are willing to intervene and override the express terms of the contract, and this is an area we are continuing to monitor with interest.

Of course, a different scenario arises if a clause is silent on the consequences of a failure to submit a claim strictly in accordance with the time period prescribed by the construction contract. The question then becomes whether a time bar is implied when the prescribed steps to making a claim are not followed. One of the leading authorities on time-bars is Brember Handels GmbH v Vanden Avenne Izegem PVBA[3], HL which is authority for the proposition that, for a notice requirement clause to be a condition precedent, the clause must state the precise time for service and make it plain by express language that unless the notice is served within that time, the party required to give notice will lose its rights under that clause. Hence the conclusion should be that time bars will never be implied. However notably Jackson J in Multiplex Construction (UK) Ltd v Honeywell Control Systems[4] permitted a time bar to be implied despite the contract being silent on the matter. Some commentators however have suggested that a clear intention for a condition precedent is required, and that the decision in Multiplex can be distinguished on the basis of the Prevention Principle. Although there is no clear guidance in the UAE on whether a UAE court would be willing to view notice requirements as a condition precedent without clear words to that effect, in our view the UAE courts do not follow the principles which are equivalent to those in Brembar but instead weigh up the circumstances of each case and determine the fairest approach.


 

[1] [2014] EWHC 1028 (TCC)

[2] (2012) 290 ALR 595

[3] [1978] 2 Lloyd’s Rep 109

[4] [2007] EWHC 477 (TCC)

Procurement Strategies for Major Rail Projects: International Railway Summit 2015

London partner Matthew Smith recently attended the International Railway Summit 2015 in Barcelona. The International Railway Summit provides a meeting ground for senior decision makers from the world’s key rail operators, transport ministries and solution providers. Matthew had the opportunity to discuss the importance of risk assessment, project delivery structure, and risk allocation in rail contracts as a presenter at the conference.

To view a copy of the full presentation titled “Procurement Strategies for Major Rail Projects,” please click here.

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