There are strict laws in the Emirates about defects that threaten a building’s stability, and you’re liable for a decade. So what can you do to avoid having to pay out?
Under UAE law, main contractors and engineers may have to compensate their employer for the collapse of any part of a building that they construct or for a defect that threatens its stability or safety, even if they are not at fault.
This applies if the collapse or defect occurs within 10 years of the handing over of the works and claims for compensation must be commenced within three years of the collapse or discovery of the defect.
The law, commonly known as decennial liability, is set out in articles 880-883 of the UAE civil code. Contractors and design consultants should be aware that the law is strict. It is not necessary for the employer to prove there was any breach of contract or negligence to claim compensation, even if the collapse or defect arose from a flaw in the land itself.
The contractor and engineer or design consultant are jointly liable. However liability may be apportioned if negligence on the part of one of the parties can be proved. If the consultant has not supervised any part of the project, article 881 of the civil code says it may not be liable for defects that can be attributed to poor workmanship.
While most contractors and consultants in the UAE are aware of the risks associated with article 880, few do much to protect themselves from them. Largely, this is owing to a lack of availability of insurance to cover them. Specific insurance policies to cover decennial liability are not generally available in the UAE and it falls outside the scope of contractors’ “all risks” policies and consultants’ professional indemnity insurance. Many professional indemnity policies provide cover for negligent errors and omissions, but as decennial liability can arise without evidence of negligence, insurers may not respond to such claims.
There are certain measures, both contractual and practical, that can be taken by contractors and consultants to reduce risk.
One option is to incorporate a dispute resolution clause in the contract requiring all disputes to be settled by arbitration using arbitrators with common law backgrounds. An arbitrator with a common law background is more likely than a civil law arbitrator to consider causation and apportion blame.
For consultants, taking on a full design and supervision role is the safest option as this would allow them to identify defects in the design and monitor workmanship
If all subcontractors sign collateral warranties and it is proved that the defect was caused by negligence or breach of contract by one of them, contractors may be allowed to pass on liability.
From a practical perspective, carrying out full ground investigations before works are commenced may detect ground conditions that could create defects later.
Consultants would be well advised to consider carefully the roles they undertake. Taking on only a full design and supervision role is the safest option as this would allow them to identify defects in the design and monitor the workmanship of contractors to ensure that work is carried out correctly.
If the consultant takes on a design-only role, it will be exposed to decennial liability if the cause of the defect cannot be established. A supervision-only role is not advisable either, as the consultant may still face liability for defects arising from faults in the design.
As projects in the UAE become more complex, there is more risk of contractors and consultants facing liability under article 880. As such, decennial liability should feature in risk assessments, and consultants and contractors should seek further advice on ways to mitigate such risks.
In the long term, the most appropriate solution to the risks faced by contractors and consultants is for insurers to introduce policies providing specific decennial liability cover. Such policies are available in other countries and are mandatory in some, notably France and Egypt. Those operating in the UAE should explore with their insurance providers whether cover can be obtained at sensible rates on the international market. With any luck, the introduction of such policies in the UAE will not be far away.
Patrick Stone is an associate at the Middle East division of Clyde & Co
Original print headline: 10 years is a long, long time