Covid-19 and force majeure issues in construction and engineering projects in the UAE and beyond – Part 1
The world changed in just a few weeks. Most of the planet seems to be under restrictions of some sort and each day the conditions change.
In construction and engineering projects governments are trying to maintain normality but delays and disruption are arising as a result of the Covid-19 virus and the emergency measures taken to restrict its' progress. What holds good today may be different tomorrow. In 3 instalments I will address:
- Introduction to the problem of Covid-19 and construction and engineering projects and suggested action areas in existing projects
- Force Majeure provisions in construction and engineering contracts and related project agreements and interface with Covid-19 events
- UAE law concerning force majeure in the context of construction and engineering projects and its' interface with Covid-19 events
Introduction to the problem of Covid-19 and construction and engineering projects
It will, in each case, be necessary to look at the facts, the contract drafting and the law. Covid-19 has developed as a worldwide pandemic and it is clear that it will have an impact on building contracts along with an impact on most people's lives in 2020.
In the context of construction and engineering projects generally it seems possible that Covid-19 may have a serious impact and may cause projects to be suspended, postponed and/or delayed. In the UAE and the United Kingdom, at the moment, construction sites remain generally open but this may not last. The construction and engineering industry may face problems in the following areas:
- Unavailability of labour; sickness of a large number of the workforce; inability to bring workers to the site, or do work, because of preventive measures or government instructions; quarantine restrictions on classes of people; unavailability of certain key personnel because of travel restrictions; lockdowns and similar.
- Impact on the supply chain for equipment and materials because of preventive measures or government instructions and sickness in other supply venues and impact on shipping and transporting to the site. Border controls and customs checking may be impacted on cargoes which are shipped.
- Testing may be prevented by absences of relevant staff or lockdown.
Difficulty may arise in assessing claims where the government does not issue any formal instruction to shut down construction sites, but nevertheless directives and measures taken (as well as the illness itself) effectively prevent workers from getting to work.
Owners and contractors should be aware of the force majeure clauses in their existing contracts and need to consider their circumstances. The following article will consider those clauses in more detail. Local law may also provide some opportunities for relief and I will address that in the final article in this series.
Where claims are made it will be vital to comply with notice requirements and to compile all relevant evidence in case a dispute may arise (now or later). Whilst it may appear self-evident today that there is a global pandemic; it is perhaps nice to think that sitting in an arbitration hearing in 2025 all this will be a distant already clouded memory. As ever, it will be necessary to put forward proof. Records will be needed. Contemporaneous clear documentary evidence is vital.
In new contracts, the parties will no doubt examine their standard clauses more closely and in the light of the pandemic should consider the need to negotiate specific language to deal with the ongoing threat.