United Arab Emirates: FIDIC And The ENAA: A Careful Comparison

Last Updated: 25 July 2017
Article by STA Law Firm
Most Read Contributor in United Arab Emirates, December 2018

In the complex and technical world of construction and large manufacturing projects, the contracts and negotiations on the terms of an agreement between the parties are a means to keep the complex relation of parties within the bounds of clear understanding by utilizing a standard form of contract. The industry has seen the development of a various standard form of contract including, FIDIC (Fédération Internationale des Ingénieurs-Conseils), JCT (Joint Contracts Tribunal), ENAA (Engineering Advancement Association of Japan), ICE (Institution of Civil Engineers), etc. This list is not exhaustive but only indicative as there are numerous standard forms. We will discuss the standard form of contract produced by FIDIC and ENAA. 

The FIDIC standard form of contract is internationally recognized and a utilized form of contract. FIDIC, established in 1913 by three countries namely Belgium, France, and Switzerland presently covers 97 countries as its member and has created forms of contract which are used extensively throughout the world. ENAA is a non-profit organization established in 1978 with the support of the Ministry of International Trade & Industry of Japan. Members of ENAA consist of 217 Companies (as of April 2016). The aims of the above organizations, in general, are to achieve inclusive, dynamic and sustainable development while having a voice for engineering professionals and, among other things, provide integrated assistance. 

FORMS OF CONTRACTS

1. FIDIC  - The  Fédération Internationale des Ingénieurs-Conseils:  FIDIC has the best-known standard contracts which are as follows:

  • The Contract for Works of Civil Engineering Construction (Red Book, 1987 First Edition, revised in 1999).
  • Conditions of Contract for Electrical and (for) Mechanical Works including Erection on Site (Yellow Book, 1987 First Edition, revised in 1999).
  • Conditions of Contract for Design-Build and Turnkey (Orange Book, 1995).
  • Conditions of Contract for EPC Turnkey Projects (Silver Book, 1999 First Edition).
  • Conditions for Design, Build and Operate contracts (Gold Book, 2007).
  • Conditions of Contract for Plant and Design-Build (Yellow book, 1999 First Edition).
  • Conditions of Contract for i) Design, ii) Build and iii) Operate (the DBO) Projects (DBO Contract, 2008 First Edition).

Other FIDIC contracts which are less known are the Turquoise Book for Dredging and Reclamation Works (January 2006), and also, the White Book Model Services Agreement (October 2006)

ENAA

ENAA also has model forms which are increasingly used by the industry recently in the past 12 years. The forms are as follows:

  • International Contract for Process Plant Construction (1986 – First Edition, revised in 1992 and 2010)
  • International Contract for Power Plant Construction (Turnkey Lump-sum Basis) (1996 – Second Edition, revised in 2012)
  • International Contract for Engineering, Procurement and Supply for Plant Construction (EPS type contract) (2007 Edition, revised in 2013) 

General Comparisons

The content structure of the FIDIC forms of contracts often consists of general conditions, forms of tender and contract agreement, guidance for the preparation of the particular conditions, and dispute adjudication agreements. The ENAA model forms' in its latest Process Model Form – 2010 edition consists of a form of contract, general conditions, and guide notes. Wherein Volume 2 includes a sample of an appendix, Volume 4 consist of work procedures and Volume 5 consists of the general conditions and the form of agreement (an alternative form of industrial plant – without process license). The Power Model Form - 2012 edition consists of a form of agreement, and general conditions and Volume 2 provides a sample of appendices to the agreement.

Although the FIDIC forms seem to be very well drafted "by the engineers for the engineers," is seemingly balanced, have many provisions, and are very extensive, they bring out the fact that legal layman draft such contracts. ENAA is written well with clear, precise, and short wordings. For the purpose of this article, with consideration to its possible limitations, we shall be comparing between FIDIC's Yellow (Conditions of Contract for Plant and Design-Build, 1999 – First Edition) and ENAA's Power Plant Construction Form – 2012.  However, there can be references in general to other forms, when stated otherwise. Where the Yellow book is for Plant and Design Build, ENAA's Power Plant construction model form is a turnkey form for BOT (build-operate-transfer) projects.

Data Accuracy Obligations

In the yellow and silver book under Sub-Clause 4.10 Site Data, there seem to be no obligations on an employer regarding an error in data provided by him. However, the responsibility for proper interpretation of information is put on the contractor as below text interprets:

 "The Contractor shall be responsible for (and) interpreting all such data."

Further, it sets out:

"To the extent which was practicable (taking into account the cost and time), the Contractor shall be deemed to have obtained all (relevant; and) necessary information as to (inherent) risks, the contingencies and (all) the other circumstances which may influence or affect the Tender or Works. To the same extent, the Contractor shall be deemed to have inspected and examined the Site, its surroundings, the above data and other available information, and to have been satisfied before submitting the Tender as to all relevant matters,...."

The above words clearly indicate that the responsibility is put on the contractor as the contractor is responsible for obtaining necessary information. Which includes but is not limited to the form and nature of the site, including the hydrological and climatic conditions, subsurface conditions, and the extent and nature of the work and goods that are necessary for executing and completing the works for remedying of any defects. Though the provision states that when "taking account of cost and time" it becomes highly difficult to determine such factors of time and "practicability." Thereby rendering the provisions uncertain without laying down a clear responsibility on the employer for any information provided. Thus, the above clause and in fact the entire yellow book does not foresee any obligation on an employer for inaccurate information and even fails to place responsibility on an employer for correct information.

Whereas the ENAA provisions under General Conditions 10.1 states that:

"The Owner(s) shall ensure (at all times) the correctness and exactitude of (each and;) all information and or data to be (provided; or) supplied by the Owner(s) as described in Appendix 9-3 (Scope of Works and Supply by the Owner(s)) except when otherwise expressly stated in the Contract,"

As such it is clear that the ENAA form makes it the responsibility of an employer/owner to provide correct data before and during the contract.

Accordingly, the contractor bears a heavy burden of not only accessing accurate data provided by the employer but also bears the responsibility for any physical condition1{C}{C} Under the definition of unforeseeable{C}.2When this occurs, foreseeability will depend again on examination by the contractor.

Employer's Requirements

As per Sub-Clause 1.9, an experienced contractor should give notice to the Engineer who will be entitled to the terms of Sub-Clause 20.1 [Contractor's Claims] when the contractor fails to discover errors in an employer's requirements. These errors would get overlooked while exercising due care and scrutiny of the Employer's Requirements under Sub-Clause 5.1 [General Design Obligations]. 

Further, "the Engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) whether and (if so) to what extent the error could not reasonably have been so discovered."  

The yellow book or other such forms having similar provisions place a heavy burden on the contractor to review the employer's requirements at the tender stage. Further, as per every variation.3Bearing in mind that from time to time to examine the employer's requirements before providing a tender and examinations without emphasizing on the obligation of an employer for such errors or on the engineer while evaluating the requirements issued by the employer.  It is pertinent to note that providing the employer's need is a factor in the control of employer which is published as per his ideas and concept of the project along with all technical and quality consideration which must also be a proper valuation of the contract price. Therefore, it is the employer who must retain responsibility for the definition and description of the works. Failing such demarcation and allocation of liability creates doubts as to the practical implementation of such provisions. 

The above provision of Sub-Clause 1.9 further seems contrary to clause 5.4 which states as:

"5.4 Technical Standards and the Regulations: The design, the Contractor's (each and all) Documents, the execution and the completed Works shall (in totality) comply with the Country's technical standards, the building, construction and (also;) environmental Laws, Laws applicable to the product being produced from the Works, and other standards specified in the Employer's Requirements, applicable to the Works, or defined by the applicable Laws."

The above states that the design and contractor's documents must be in accordance with employer's requirement. However, the responsibility of errors in employer's requirement is not enforceable or even actionable against the employer under this form of contract. Further, only if it is determined to be undiscoverable by the engineer the contractor will be entitled to cost and extension of time.

The ENAA model form under General Conditions Sub-Clause 27.3 - Defect Liability states:

"The Contractor's obligations under this GC 27 shall not apply to ..........................(3) any designs, specifications or other data designed, supplied or specified by or on behalf of the Owner, or any matters for which the Contractor has disclaimed responsibility hereunder ."

The above clause excludes the liability of the contractor on design discrepancies, errors or omissions if such erroneous specification, drawing or such technical documents are prepared due to inaccurate information provided by or on behalf of the employer. The ENAA form also provides that the contractor shall make reasonable site examination and other data, however, puts the obligation on the employer for inaccuracy. This clause in is accordance with the principle of the risk of liability being placed on the party who can control such risk.

Part II of this two series article will discuss Design obligations, force majeure, and other relevant provisions. 

Footnotes

1  Sub-Clause 4.12 provides. For example, "physical conditions" means natural physical conditions and those that are man-made. Further, other pollutants and physical obstructions which the Contractor may encounter at the Site while executing the Works. These include sub-surface and hydrological conditions but exclude weather.

2  in sub-clause 1.1.6.8 climatic conditions are not included. "Unforeseeable" is defined as unreasonably foreseeable by an experienced Contractor on the date of submission of the Tender.

3  , 1.1.6.9 "Variation" means changes to the Employer's Requirements or the Works, which are instructed or approved as a Variation under Clause 13 [Variations and Adjustments].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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