COVID-19: the impact on construction industry projects in the Middle East

Kennedys and HKA recently co-hosted a webinar addressing the impacts of the COVID-19 pandemic on construction industry projects in the Middle East.

Kennedys partner Celine Kanakri moderated the session and was joined by David Stapleton, partner at HKA, and Kennedys senior associate, Khalil Mechantaf. The presentation began with an overview of significant dates during the outbreak of COVID-19 and the measures taken to combat it in the Middle East, in particular the United Arab Emirates (UAE). Khalil Mechantaf then moved on to explain the Damages Pyramid, concluding that the likely available COVID-19 defences against damage claims in the UAE are either force majeure or unforeseen circumstances.

Dealing initially with the issue of force majeure, Khalil Mechantaf advised on the UAE legal position, firstly as provided for by statute and secondly as considered with regards to UAE jurisprudence. David Stapleton continued with the theme of force majeure, highlighting the fact that the effects have been far-reaching and exceeded any possible expectations, reasonable or otherwise. He also addressed various considerations that need to be taken into account when assessing how COVID-19 may have prevented a party from meeting its obligations and thereby impacting on milestone completion dates. David Stapleton concentrated in this respect on (1) the nature of the delay, (2) when the delay actually impacted on the progress of the works, thereby causing prevention, and (3) the particular impact of the delay on supply chain and offsite activities.

Having addressed the impact of force majeure on the contract/obligation, by reference to ‘absolute possibility’ and ‘temporary impossibility’, Khalil Mechantaf then moved on to the alternative position of unforeseen circumstances. Considering firstly the defences available when the performance becomes onerous but not impossible, and secondly, addressing the commentary of the UAE Ministry of Justice which distinguishes the two concepts in two main areas, namely (1) impact of the event and (2) available relief.

The seminar then moved on to consider the topics of suspension and pacing, maintenance of records and the benefits of stakeholder engagement. Khalil Mechantaf addressed suspension in terms of statutory entitlement and then moved onto ‘pacing’ as a potential alternative. David Stapleton addressed various cost issues when considering pacing, in particular how pacing could produce a mutually acceptable outcome through extended delivery, postponement of works and/or implementing alternative procurement solutions, delivery options and labour/equipment utilisation. David Stapleton concluded with a reminder of the necessity for maintaining good records, identifying the extent to which records, as matters of fact, are critical to the process of identifying what happened in an event of force majeure. He also stressed why stakeholder engagement is increasingly important to reaching an outcome which could be acceptable, if not beneficial, to all parties in such situations.

The webinar closed with a brief Q&A session where Celine Kanakri, David Stapleton and Khalil Mechantaf briefly addressed questions regarding mitigating the impact of COVID-19 and how contracts signed now, in the knowledge of COVID-19, should deal with such issues moving forward.

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