The UAE has recently faced thunderstorms and persistent heavy rain, resulting in red alerts being issued by the National Centre of Meteorology. Consequently, a number of UAE construction projects have been impacted by both severe flooding and wind damage causing potential delay to the programmed works.
Whilst the worst of the weather has hopefully passed, it is likely that its effect on such projects will linger and questions will be asked as to who, as between Contractor and Employer, bears the risk of the resulting delay and its associated financial losses.
The construction contract
It is often the case that parties to a construction contract have pre-agreed the allocation of risk between them in respect of adverse weather conditions.
FIDIC’s Conditions of Contract typically entitle a Contractor to an extension of time where delay to completion is caused by exceptionally adverse weather, but do not contain an express entitlement to claim additional money.
For example, Clause 8.4 of FIDIC’s 1999 Red Book provides an extension of the Time for Completion for “exceptionally adverse climatic conditions” or, under Clause 19.1, in instances of Force Majeure including “hurricanes” and “typhoons”.
In order to balance risk, FIDIC’s 1999 Red Book does not contain an express entitlement for a Contractor to additional costs (by way of prolongation costs or otherwise) as compensation for losses resulting from having to deal with the impact of adverse weather. However, “forces of nature which [are] Unforeseeable” can result in an entitlement for the Contractor to additional costs for rectifying his loss or damage, if they are a defined “Employer’s Risk”, as set out in Clause 17.4.
It is common place for parties in the UAE to depart from standard form conditions, and agree amendments or bespoke conditions which displace the original apportionment of risk. That might result in lesser entitlements for the Contractor or alternatively, a contract which is silent on the topic. In such circumstances, a Contractor may consider relying on additional rights available under the UAE Civil Code.
The position at law
Various provisions under UAE law deal with events of force majeure (which might include severe adverse weather) including Article 273 of the UAE Civil Code, which deals with force majeure events that make the performance of a contract impossible. However, the general remedy offered by such provisions is the termination or “cancellation” of the contract which is an impractical and disproportionate ‘solution’ for the majority of Contractors and Employers.
Article 249 of the UAE Civil Code permits a judge or arbitrator to adjust oppressive contractual obligations to a reasonable level if unpredictable or extraordinary events of a public nature result in the contract’s performance becoming significantly burdensome “if justice so requires”. Parties often rely on this Article to contend that aspects of their contract, should, in effect, be re-negotiated on the basis that it is no longer fair that they be held to the agreed obligations due to circumstances beyond their control. In respect of time, for example, a Contractor could seek an extension to the agreed time for completion or a reduction in the agreed level of liquidated delay damages. The term “public nature” is not defined, but such events are generally interpreted to mean those that affect the general public, rather than a particular individual, and therefore could include severe weather conditions. Notably, Article 249 is a mandatory provision of the UAE Civil Code and so parties cannot contract out of it. However, in practice, this Article does not provide a wide and unavoidable opportunity to recover losses or change a contract. Its application is limited in scope by reference to both parties’ interests, how the parties have agreed to apportion risk in their construction contract, the significance of the loss in relation to the Contractor’s resources and the effect on the Employer of the obligation(s) being altered.
It is therefore important to ensure, as far as possible, that the consequences of adverse weather conditions are clearly dealt with in the construction contract from the outset.
What is “exceptionally adverse” weather?
Whilst a hurricane or typhoon may be easier to define, where other uncharacteristically poor weather has occurred, determining whether it is "exceptionally adverse” (or “extraordinary”) can be more problematic.
Clause 8.5 of the new FIDIC 2017 Red Book now clarifies adverse climatic conditions to mean those at the Site which are Unforeseeable having regard to climatic data made available by the Employer and/or published in the Country for the geographical location of the Site.
In the absence of a definition in the contract, there is limited guidance available under UAE law. However, the Dubai Court of Cassation (No. 443/98 dated 26 December 1998) has provided some guidance in the context of a force majeure claim where it described it as weather that “has to be exceptionally poor, and not expected and avoidable”.
In practice, it is likely that the literal meaning of the words “exceptional” and “adverse” will be applied. Weather that is considered “exceptional” will first have to be measured against the sort of weather that is usually expected in that particular location at that time of year, and the question asked, was this weather expected or foreseeable? Given the varying and unique climates found in the Middle East, which can include lightning storms, typhoons and sandstorms, and the evolving debates relating to climate change and cloud seeding, this answer will vary from region to region and may not always be clear.
Once is it established that the weather was “exceptional”, the question then has to be asked whether it was “adverse". This will require the Contractor to demonstrate that the weather was the direct cause of the delay to completion, or that it triggers some other provision entitling the contractor to monetary compensation.
Where the weather is not by definition considered to be "exceptionally adverse” but has impacted works which are already in delay by reason of events for which the Employer is responsible such that those works are now taking place at a time of year which experiences a different climate from when they were originally programmed to be performed, an entitlement to additional time or money may still arise. An obvious example would be where works were originally planned to be carried out in the summer months where historically severe wind and rain rarely occurs, particularly in this part of the world.
As ever, the construction contract is the first port of call to determine if and when an entitlement to additional time or money arises for the Contractor where its works have been adversely impacted by the weather. Where no entitlement arises under the contract, a Contractor may - in specific circumstances - be able to rely on Article 249 of the UAE Civil Code.
However, the key challenge in establishing the availability of a legal basis for such a claim will be in seeking to establish that the weather experienced was “exceptionally adverse” or “extraordinary” - which can vary from region to region, and over time. If the storms experienced in the UAE in recent weeks become more frequent, the argument that they are “exceptional” could be swept away.