Online conference highlights key role of FIDIC contracts in EMEA region

10 May 2023

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The Official FIDIC Contract Users’ Conference 2023 for Europe, Middle East and Africa (EMEA) region took place online and was delivered in-house by FIDIC from 10-11 May 2023, writes FIDIC communications advisor Andy Walker.

The event, sponsored by leading construction and energy law firm Fenwick Elliott, targeted the contract users’ community in the EMEA region and offered a unique opportunity to share progress on the application and use of FIDIC contracts internationally and across the region. The conference was attended by a range of stakeholders including MDBs, private sector organisations and clients, government, engineers, contractors, investors, consultants, and other stakeholders who have an interest in FIDIC contracts. 

Opening the first day of the conference, FIDIC CEO Dr Nelson Ogunshakin welcomed attendees to the event and thanked strategic partner sponsor Fenwick Elliott. “Events like this one are crucial for FIDIC and the users’ of our industry leading contractual documentation as they provide an indispensable and essential update on FIDIC’s contract suite, as well as discussions on the latest developments in the contracts arena,” he said. This online conference over the next two days will highlight some of the key and emerging issues in this important area, as well as giving attendees the opportunity to meet and network with key global stakeholders from across the FIDIC contracts ecosystem,” Ogunshakin said.

Welcoming delegates on behalf of the FIDIC board, James Mwangi said that the interaction and discussions at the conference were vital in ensuring that FIDIC contracts remain relevant “in what we all know is a changing and challenging marketplace and industry that we are all currently working in”. Mwangi said that the increasing use of FIDIC contracts means that it was important to respond to that increasing interest by ensuring that the organisation takes steps to build up its contracts community by providing more opportunities for users to connect and network. “That is what conferences like this one are all about,” Mwangi said.

Delivering the Doha Metro with FIDIC contracts

Day one keynote speaker, independent arbitrator and mediator Stephen Hibbert, spoke about how the FIDIC 1999 Yellow Book’s terms played a key role in the successful delivery of the Doha Metro project in time for the 2022 FIFA World Cup. Hibbert played a key role in the project, on which he spent eight-and-a-half years, overseeing the selection of the contracts used and the way they were used.

Hibbert explained that the Doha Metro was delivered using an amended form of the FIDIC 1999 Yellow Book. The amendments were based on a number of key project principles and themes and he said that the success of the project supported the view that those amendments played a constructive role. The key project principles were that the contractor’s cash flow is critical to success and should be paid promptly when milestones for core work are reached, that engagement of the employer should be facilitated by the contract and applied in practice and that where it is common for disputes to arise from processes under the contract then those processes should be modified.

Notwithstanding the key role of the engineer in a FIDIC contract, on the Doha Metro project, Hibbert was also keen to have a high level of employer engagement. This would help to ensure better ownership of issues, efficient decision making, the building of a good relationship with the contractor and above all, that there should be no surprises.

Working in challenging times

Following Hibbert’s keynote, the first main session of the conference, moderated by FIDIC contracts committee chair Vincent Leloup, looked at the use of FIDIC contracts in challenging times and how construction projects are affected by inflation, increases in cost of materials, labour and other inputs and specifically what measures are available to project participants under FIDIC contracts to manage cost increases.

Session speakers, EQE Control partner Adriana Spassova, Besix Construction Group senior legal counsel Refki El-Mujtahed, international construction lawyer at 3PB Peter Collie and Pinsent Mason partner Rob Morson, highlighted some of their experiences on projects of dealing with the increasing threat of rising global inflation and the potential adjustments for changes in cost.

Peter Collie highlighted how the FIDIC contract provides an optional clause to provide for cost adjustments due to inflation. This is something that the employer needs to decide in principle and then agreed by the contractor. Collie said that it was important to understand that the adjustment clause was not something that indemnified the contractor for all increases due to inflation and they would still need to take actions to mitigate that.

Speakers also examined the impact of the Ukraine war on construction contracts and the measures taken to overcome or address the challenges that arose as a result of the conflict. All stressed the need to maintain dialogue with clients, be aware of the effects on global supply chains across the industry and safeguard cashflows, as it was in no one’s interests for firms to cease trading, especially in a climate of skills challenges and shortages of materials.

Practical experience of using FIDIC in EMEA region

The second session of the conference, EMEA regional project experiences with FIDIC contracts, looked at the use of FIDIC contracts on public and private projects in the EMEA region and was moderated by FIDIC contracts committee member and Mott MacDonald assistant group general counsel, Jafar Khan.

Patrick McPherson, partner at Hogan Lovells, highlighted some of the giga-infrastructure projects that are a key component of Saudi Arabia’s Vision 2030, including the NEOM project, a $500bn mega-city due for completion in 2030. The NEOM project is using standard FIDIC contracts extensively, said McPherson. He explained that where the Saudi Arabia (KSA) governing law applies then the contract is subject to principles of Shariah Law, meaning that there is no construction law in KSA, the parties are free to contract – Shariah law recognises the maxim “the contract is the law of the parties”, terms which violate Shariah law will not be enforced and that KSA law can impact the application or enforceability of FIDIC standard terms.

Owain John Mills, senior director, construction legal at Red Sea Global, gave an update on the fascinating and complex Red Sea and AMAALA tourism projects in Saudi Arabia which are also part of the Saudi Vision 2030 initiative.

Courtney Rothery, legal director at CMS in the UAE, spoke about some of the amendments to the standard FIDIC forms made in the Gulf states and the potential problems and challenges that may arise as a result. Rothery said that sometimes these amendments were important and sensible but at other times they were distinctly unhelpful. Examples of common amendments in the UAE and the Gulf included removing the contractor’s entitlement to claim costs, amending or deleting the escalation entitlement clauses and amending the dispute resolution clauses.

Rothery said that unintended consequences of poorly drafted amendments to the FIDIC standard forms included creating uncertainty in respect of rights and entitlement, removing a cost adjustment clause which would have allowed the employer to benefit from falls in the cost of labour and goods, creating a dispute resolution clause which is confusing or even unenforceable. “I have seen examples of all of these amendments. Anyone making such amendments must ensure that they are clear and achieve the desired intention and all parties should understand the effect of the amendments taken as a whole,” said Rothery.

Dentons and Co partner Suzannah Fairbairn spoke about the intended introduction of amendments to the new ADGCC contract in Abu Dhabi, as part of a drive to further improve the general reputation of Abu Dhabi construction market internationally. The contract, which it is intended would be used for all capital projects in Abu Dhabi, has been subject to consultations with contractors and government stakeholders and it is intended that it will use the FIDIC 1999 contracts as a base. Fairbairn highlighted that it is intended that the contract would use a standing Dispute Avoidance and Adjudication Board (DAAB) and provide for early warnings for the contract parties to use.

Interest, enthusiasm and discussions

The many questions from the floor from attendees showed the interest enthusiasm for the issues under discussion and that enthusiasm continued at a series of discussion tables that followed conference session two, which looked at FIDIC contracts in the field - the engineer perspective, ESG and the net zero agenda and Arbitration - the EMEA experience, latest developments and the current state of play.

Introducing the ESG and the net zero agenda discussion, Fenwick Elliott partner Jeremy Elliott, highlighted the growing importance of sustainability and social value as a procurement imperative for projects and the support of organisations like the World Bank and also FIDIC for these aims. Martina Hess, director of CES Consulting Engineers in Zambia, introduced the FIDIC contracts in the field session which discussed the practical experience of the engineer through the experiences of those who have worked in that role or advised on it from a legal and contractual perspective. Finally, the discussion table on Arbitration - the EMEA experience, latest developments and the current state of play, was led by Husni Madi and discussed the issues arising in arbitration under FIDIC contracts and the regional experiences in dealing with it, including the conduct of the arbitral proceedings and enforcement of arbitral awards.

Day two of the Official FIDIC Contract Users’ Conference 2023 for Europe, Middle East and Africa (EMEA) region continues on Thursday 11 May 2023 starting at 10.30am CET.

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