Uncertainty in the Application of UAE Laws

The UAE legal system is a civil code system based on both Islamic and civil code principles. Any contract subject to UAE law must comply with the UAE Constitution, Federal and local Emirate laws, Islamic Shari’a and custom and practice.

There are challenges in deciding how the law of the UAE will be applied in any particular case. This is due to a number of factors. The UAE legal system is still very much in its infancy, the collision of French – via Egypt and other Middle Eastern countries – civil code principles and Islamic Shari’a principles, the lack of judicial precedent – previous decisions may be useful but do not create any binding or persuasive precedent to the court, and the difficulty of predicting which legal principles and/or custom and practice a judge will apply when reaching a decision.

This uncertainty can give rise to conflicting legal opinion on many points of law and makes it a challenge for contracting parties to understand the full extent of their liability when contracting under UAE law or when carrying out work in the UAE, notwithstanding the governing law of the contract.

This two part blog will consider the following examples: decennial liability, the law of torts, and limits on liability generally and more particularly liquidated damages.

Decennial Liability

What is it?

The principle is common in civil code jurisdictions. Generally, it imposes strict liability on a contractor for certain defects for a period of ten years. In the UAE, decennial liability is codified in Article 880 of the Civil Code. It applies to the contractor and architect and imposes liability on them both for any total or partial collapse of a building and for any defect which threatens the stability or safety of a building.

How strict?

The only express defence to decennial liability afforded under the Civil Code is granted to the architect if that architect was only engaged in making the plans and was not supervising the actual construction. In these circumstances, the architect is only liable for defects in the plans. By contrast, the Civil Code expressly provides that it is no defence to show that the collapse or the defect arose out of a defect in the land itself or the employer consented to the construction of defective buildings.

One should also remember that any agreement trying to exclude or limit such liability will be treated as void.

How long is decennial liability?

The liability lasts for ten years from the time of delivery of the work (unless it was intended that the installation should remain in place for less than ten years). However, claims must also be brought within three years of the collapse or discovery of the defect.

Questions?

So far so good, but a number of questions remain:

(a) is liability apportioned between the contractor and the architect according to fault?
(b) are the contractor and the architect jointly or severally liable?
(c) if the architect is liable for a defect in the plans then is the contractor no longer liable?
(d) what is the liability of other professionals engaged on a construction project eg an engineer or a project manager?

Limited answers

It is difficult to answer any of these questions as previous cases on the issue do not bind the courts in any future cases, and there is very little commentary on the point.

So what to do?

There is insurance, although as tends to be the case with latent defects insurance generally, we understand it comes at a high premium.

A better idea may be to use contractual mechanisms to allocate the risk between the members of the supply chain on a fault basis. For that reason, it is not uncommon in the UAE and the wider region, for designers and contractors within the first tier of the supply chain to exchange collateral warranties. These collateral warranties are designed to enable an “innocent” party caught by the decennial liability regime to recover its losses from the party actually at fault for the defect.

However, even this approach cannot address the risk that the party at fault is not around at the time the claim is made, or the risk that the liability may have arisen without any fault (e.g. a land issue). But despite these gaps, this remains the best method of protecting against this liability which is uncertain in its application and potentially very significant.

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