Tag: Construction

Amendments to classification requirements for engineers and contractors in Abu Dhabi

Background

 

Companies licensed to conduct engineering or contracting activities in Abu Dhabi must be classified by the Contractors and Consultants Classification and Engineers Registration Office at the Abu Dhabi Department of Town Planning and Municipalities.

 

The applicable regulations setting out the classification requirements are not new and date back to 2009, although implementation was delayed until 2014. Subsequent to the 2009 regulations, new regulations were introduced in 2018.

 

Abu Dhabi Administrative Resolution 162 of 2018 on the Classification System for the Engineering Consultancy Offices in the Emirate of Abu Dhabi, and its subsequent implementing instructions, set out the classification requirements for engineering consultancies (the 2018 Regulations).

 

Administrative Resolution 160 of 2018 on the Classification of Contractors in the Emirate of Abu Dhabi, and its subsequent implementing instructions, set out the classification requirements for contractors.

 

Administrative Resolution 158 of 2018 on the Regulations for Registering Engineers in the Emirate of Abu Dhabi, and its subsequent implementing instructions, set out the classification requirements for engineers.

 

While there are similar criteria which need to be satisfied by both contractors and engineering consultancies, this InBrief highlights the key items which engineering consultancies will need to be aware of when looking to meet the rigorous classification requirements, as well as what new amendments have been introduced by the 2018 Regulations that will impact engineering consultancies.

 

Who is subject to the classification requirements?

 

Classification is a condition precedent to renewal of the professional license for any existing engineering company. A company established in the future will have one year from the date of initial licensing to satisfy the classification requirements.

 

The 2018 Regulations now also provide that no new applications may be filed for a new building or an infrastructure license, and no engineering consultancy firm may participate in any tender in the Emirate of Abu Dhabi, unless the applicant engineering firm is in possession of a valid certificate of classification. Furthermore, an engineering firm may not practice the profession of engineering consultancy, even as a sub-consultant, in any field other than the engineering consultancy specializations in which it is classified and licensed.

 

How can the classification requirements be met?

 

Classification is not a routine or automatic approval. Nor is it simply additional bureaucracy and paperwork. Classification entails a substantive review by a panel of experts of a company’s capabilities and qualifications and a company that does not meet the specified criteria will not be classified.

 

Engineering consultancies in the Emirate have to take one of the following three forms:  a local engineering office, a branch of a foreign engineering office or an advisory (opinion) engineer office. The 2018 Regulations have introduced a fourth alternative, being an associated engineering firm. An associated engineering firm is an engineering firm that is comprised of a joint venture agreement between a local engineering firm classified in the Special Category, and a foreign engineering firm or firms with no UAE presence. Upon incorporation, an associated engineering firm is granted a temporary certificate of classification for a duration of six months, during which it is permitted to conduct the engineering consultancy activities stated in the temporary certificate. The temporary certificate may be extended for an additional duration of six months.

 

The classification categories remain as Special Category, First Category and Second Category, but branches of foreign engineering offices, opinion engineer offices and associated engineering firms may apply for classification only in the Special Category. The Special Category is the highest category for engineering firms, and firms in this category may perform contracts with a value of over AED 60 million (down from AED 70 million prior to the 2018 Regulations).

 

Generally, the classification requirements — as regards technical staff, financial criteria and financial situation, prior expertise and quality, and professional insurance requirements — remain the same. However, as will be noted from our discussion below, the more onerous requirements have been eased somewhat. The 2018 Regulations have also introduced an additional criterion based upon the project’s area (quota) and number of floors in a building.

 

The classification requirements will vary from case to case. For example, a local engineering consultancy seeking classification in the Special Category must meet, among others, the following criteria:

 

• The value of the capital and assets owned by the company should not be less than AED 2 million (previously this was AED 4 million).

 

• The company is required to employ four (previously five) specialised and registered engineers having a minimum experience of ten years each. This applies to each Special Category of engineering type the company requires to undertake; e.g., for civil engineering, it must employ four civil engineers meeting the foregoing minimum experience, and for mechanical engineering, it must employ four mechanical engineers meeting the foregoing minimum experience.

 

• The cumulative value of previously executed projects must not be less than AED 240 million, provided that the value of each project submitted is not less than AED 30 million (previously this was AED 480 million and AED 60 million respectively).

 

• The company must hold an ISO 9001 certificate and professional indemnity insurance.

 

• A local engineering consultancy seeking classification in the Special Category may undertake works with unlimited number of floor levels and an area quota of 60,000 square metres.

 

Conclusion

 

All companies conducting activities involving engineering or contracting should immediately investigate whether the licensed activities currently on the company’s trade license require classification.

 

If a company is not already classified, it should begin investigating the specific requirements it will have to meet well in advance of its next licensed renewal date.

 

Companies that are already classified should ensure that they have rectified their situations according to the provisions of the implementing instructions within one year from the effective date of the 2018 Regulations, i.e., by 3 March 2019. It is hoped that the easing of some of the onerous classification requirements will encourage both contractors and engineering consultancies to do so. ■

Mandatory classification requirements for engineers and contractors in Abu Dhabi

Background

 

Companies licensed to conduct engineering or contracting activities in Abu Dhabi must be classified by the Contractors and Consultants Classification and Engineers Registration Office at the Abu Dhabi Department of Municipal Affairs.

 

The applicable regulations setting out the classification requirements are not new and date back to 2009 but implementation has been delayed until 2014. Regulation No. 1 of 2009 on Classification of Engineering Consultancy Offices in the Emirate of Abu Dhabi, and its subsequent implementing instructions set out the classification requirements for engineering consultancies. Regulation No. 2 of 2009 on Contractor Classification in the Emirate of Abu Dhabi, and its subsequent implementing instructions set out the classification requirements for contracting companies.

 

Who is subject to those classification requirements and how can they be met?

 

The classification requirement will be imposed on existing engineering companies the next time the company’s Abu Dhabi professional license comes up for renewal. Classification is now a condition precedent to renewal of the license. Companies established in the future will have one year from the date of initial licensing to meet the classification requirement.

 

While contracting companies have been able to have commercial licenses issued and/or renewed since November 2013, there is a catch: until contracting companies are classified, their commercial licenses will include the contracting activities for which they wish to be licensed for, but will include a caveat that the contracting companies may not carry out such activities until they have been classified. Once classified, the Office will instruct the licensing authority to remove the caveat.

 

Classification is not a routine or automatic approval. Nor is it simply additional bureaucracy and paperwork. Classification entails a substantive review by a panel of experts of a company’s capabilities and qualifications and a company that does not meet the specified criteria will not be classified.

 

The requirements are onerous and will vary from case to case. For example, a local engineering consultancy seeking classification in the Special Category (which is the highest category for engineers and permits a company to perform contracts with a value of over 70 million dirhams) must meet, among others, the following criteria:

 

  • The value of the capital and assets owned by the company should not be less than AED 4 million.

 

  • The company is required to employ five specialized and registered engineers with at least one engineer having a minimum experience of 15 years, two engineers having a minimum experience of 12 years and the other two engineers having a minimum experience of 10 years each. This applies to each Special Category of engineering type the company requires to undertake, i.e., for civil engineering, it will be required to employ five civil engineers meeting the foregoing minimum experience; for mechanical engineering, it will be required to employ five mechanical engineers meeting the foregoing minimum experience; and so forth.

 

  • The cumulative value of the previously executed projects must not be less than AED 480 million, provided that the value of each project submitted is not less than AED 60 million.

 

  • The company must hold an ISO 9001 certificate.

 

Conclusion

 

All companies conducting activities involving engineering or contracting should immediately investigate whether the licensed activities currently on the company’s trade license require classification. The same applies to persons planning to set up new companies doing business in these sectors.

 

Unless the concerned authorities have a change of heart and grant further extensions to implementing the requirements (which is not currently expected), classification cannot be avoided except where a company is willing to remove all activities requiring classification from its license, which in turn will limit the scope of the company’s permitted business activities.

 

If a company is not already classified, it should begin investigating the specific requirements it will have to meet well in advance of its next licensed renewal date. ■

Settlement of Construction Disputes in the Middle East, Global Reference Guide to Real Estate & Construction, Financier Worldwide

Shahram Safai provides his professional insight towards this UAE chapter centering around the settlement of construction disputes; current trends and issues which may arise.

Get legal aid if property deals go haywire, Property Weekly

As the UAE comes to terms with the realities of the post-Lehmann world, an increasing number of property investors find themselves in default of contracts.

 

As the UAE comes to terms with the realities of the post-Lehmann world, an increasing number of property investors find themselves in default of contracts. The vast majority of these are skewed in favour of developers, having been entered into during a period of economic boom when demand far exceeded the supply.

 

Thus, buyers in default must increasingly look beyond the contract to the provisions of law in order to obtain relief. Although there are rumours that some legal consultants are guaranteeing results such as obtaining ‘money back’, purchasers should beware of such strangers bearing gifts.

 

 

Make legal enquiries
As with other aspects of life, no guarantees exist, but chances of success may be increased by conducting proper enquiries and legal analysis. This article outlines some provisions commonly resorted to in the federal laws of the UAE vis-à-vis such property disputes. Property class-action suits in the UAE.
Given the large number of investors with shared circumstances and a possible common cause of action against a common developer, enquiries on class-action suits are frequent. However, the law does not recognise the concept.
Nevertheless, it is still possible to obtain a strategic advantage by using numbers. The following arguments can be effectively used as a group to bring about a negotiated settlement which will be advantageous to all parties concerned.

Misrepresentation in the contract

 

 

The presence of misrepresentation in a contract is a factual inquiry. Article 185 of the Civil Code states that misrepresentation occurs when one of the parties deceives the other by means of trickery of word or deed, which leads the other to consent to what he would not have otherwise.
It may be noted that deliberate silence amounts to misrepresentation in instances where the person misled would not have entered into the contract, as provided for in Article 186.

 

The effect of misrepresentation, however, is slightly less clear. The better view is that misrepresentation makes a contract voidable, i.e., the party which has been misled, at its option, may choose to treat the contract as void.

 

Challenging forfeiture clauses

 

A principal concern of many, if not all, investors is that they will forfeit the amounts invested up to the point of default (or a portion thereof).
It is a standard provision of most property contracts that in the event of default by the purchaser, the seller has the right to terminate the contract and retain a specified percentage (generally between 10 to 50 per cent of the purchase price) of the sum paid up to that point. While the fixing of the amount of compensation in advance is a legitimate exercise of contractual freedom, it is nevertheless subject to limits. This is embodied in Article 390 of the Civil Code, the relevant portion of which reads: ‘The judge may in all cases, upon the application of either of the parties, vary such agreement so as to make the compensation equal to the loss, and any agreement to the contrary shall be void’ (Article 390(2)).

 

Simply put, the law states that while it is possible for the parties to fix the amount of compensation in advance, the Court has the power to adjust that sum to reflect the actual loss which has been suffered.

 

Therefore, it is open to the seller to challenge the forfeiture of his money by the purchaser where it can be shown that either the former has not suffered a loss (i.e., made a profit or attained breakeven) or the seller has suffered a loss, but the loss suffered is less than the amount forfeited.

 

A double-edged sword

 

However, therein lies the problem — the above has to be proved, which is no easy task. Furthermore, Article 390 is a double-edged sword, for if the seller is able to show that he has suffered losses in excess of the sum provided for in the contract, the judge may increase the figure beyond the forfeited amount.

 

Thus, a careful examination of the circumstances of each case is warranted in an economy where property values have plummeted. Also, note that it is the judge who is empowered to make this adjustment, therefore the matter must necessarily be referred to the Court.

 

Note that for Dubai properties, Law No. 13 of 2008 has a material effect on the foregoing. However, the Law has been extensively discussed in our previous articles, and so reference should be made to such articles. Is the economic crisis an event of force majeure?

 

This is a frequent question posed by many investors, however, it is one for which there is no definitive answer. Article 273 of the Civil Code provides for the cancellation of contracts if force majeure supervenes, thereby making the performance of the contract impossible.

 

Article 274 goes on to provide for the effect of cancellation, which is the restoration of the parties to the positions in which they were prior to the formation of the contract, or in the event that such restoration is not possible, the payment of compensation.

 

There is no definitive answer to this question, however, an educated assessment suggests the chances of success of such an argument to be low. On the one hand, force majeure has fairly defined limits within which the economic crisis does not fit in well. Mass cancellation of contracts
On the other, a judge or arbitrator will be hesitant, and perhaps rightfully so, to deem the crisis an event of force majeure, as it will lead to the mass cancellation of contracts, resulting in a complete standstill and disarray of economic activity.

 

A provision of law not found in many other jurisdictions is Article 249 of the Civil Code. It provides that if ‘exceptional circumstances of a public nature which could not have been foreseen occur as result of which the performance of the contractual obligation, even if not impossible, becomes oppressive for the obligor so as to threaten him with grave loss, it shall be permissible for the judge… to reduce the oppressive obligation to a reasonable level if justice so requires’.

 

While this may sound encouraging, the burden of proof of establishing this lies with the purchaser, and will prove difficult to discharge.

 

Time consuming exercises

 

The ultimate arbiters of a property contract will be a court of law, or where there is an arbitration clause, an arbitrator or a panel of arbitrators. However, both these forums tend to be time consuming, expensive and the outcomes cannot be predicted with any certainty.

 

Accordingly, it is advisable to attempt a negotiated solution either directly between the parties, or with the intervention of the relevant public authorities. While the arguments discussed above find their natural homes in court or in arbitration, nevertheless they can be strategically utilised to procure a favourable outcome for buyers.

 

The writer is a lawyer, professional engineer and a partner at the law firm of Afridi & Angell (ssafai@afridi-angell.com). This article was co-authored by Chatura Randeniya, Associate, Afridi & Angell.

 

Buyers’ common grouses

 

• Given the large number of investors with shared circumstances and a possible common cause of action against a common developer, enquiries on class-action suits are frequent

 

• Deliberate silence amounts to misrepresentation in instances where the person misled would not have entered into the contract

 

• A judge or arbitrator will be hesitant to deem the crisis an event of force majeure, as it will lead to the mass cancellation of contracts, resulting in a complete standstill and disarray of economic activity