Worldwide: Middle East Market Update – March 2017

The new FIDIC White Book: what you need to know

FIDIC has now published the 5th Edition of its Client/Consultant Model Services Agreement (the White Book). This supersedes the 2006 version which although used on many projects in the Middle East region, has never achieved the popularity of the FIDIC Red Book (used for construction contracts with client design).  Part of the reason for the more limited uptake of the old White Book is perhaps the perception by clients that its terms are far too favourable to consultants.  Clients often prefer their own bespoke contracts to having to make extensive amendments to the old White Book.

Broadly speaking, the new White Book has retained the same format but has received a comprehensive update.  Provisions dealing with variations, force majeure, intellectual property and termination have been expanded and significantly clarified.

We set out below a few of the more notable changes introduced by the new White Book:

Standard of skill and care

In the old White Book, the consultant was only required to perform all its obligations with reasonable skill and care.  Now, the consultant is required to perform the services with a higher project-specific standard of skill and care, leaving all other obligations to be treated as absolute obligations (i.e. the consultant must meet those obligations regardless of the standard of skill and care used).  This is a significant rebalancing of the contract to what we consider to be the accepted market position.

Good faith

A new obligation has been introduced requiring the parties to act in good faith and in a spirit of mutual trust.  For those legal systems (such as English law) where there is no general duty on a party to a contract to act in good faith, this is a useful development.

Suspension and termination

The client may now not terminate for convenience in order to instruct another party to complete the services or carry out the services itself.  We consider this to be a market standard position.

Dispute resolution

The default dispute resolution provisions now require the parties to follow an adjudication procedure before being able to commence formal arbitration proceedings.  Although adjudication has not had a strong uptake in the Middle East region, we welcome the inclusion of a contractual adjudication mechanism which may help to resolve disputes more quickly and cost effectively.

Scope of services

The White Book contains more comprehensive guidance on setting out the scope of services, suggesting that the parties identify matters which are specifically excluded.  This is a helpful change which should reduce disputes.

Client representative

The client is now obliged to notify the consultant as to the extent of powers and authority of the client representative.  Again, this clarification should help to reduce disputes.

Conclusion

The White Book has received a long overdue update, which includes significant improvements in drafting and has also addressed some consultant-friendly provisions which previously caused clients considerable concern.  We anticipate that the new FIDIC White Book will become more commonly used than its predecessor.

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