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How to Navigate Legal and Contractual Aspects of PEB Projects in the UAE

Construction projects, whether PEB or traditional, are always governed by an amazing legal structure. Understanding the laws and regulations is significant when navigating the legal complexities of projects in the UAE. 

When legal requirements are required for all the processes to be smooth, stakeholders, including your PEB companies in Dubai, need to be together and on the same page. 

In this article, we will talk about the legal formalities of construction in the UAE. We will talk about the contracts and other legal aspects you need to consider before starting your PEB project. 

peb companies in dubai

Key Considerations in PEB Construction Contracts

The major factors and forms to consider are mentioned below:

  • Terms and schedule for completion
  • Standards and specifications
  • Resolution mechanisms

Collaborate with PEB specialists who are knowledgeable about UAE standards and best practices. They can provide useful insights into:

  • Design and engineering for UAE PEB structures, including supplier selection and quality control methods. 

Contractual Aspects of PEB Projects in UAE

There are some simple regulations you need to follow, and the things you need to know are below:

Confidentiality Agreements

Some people are concerned about confidentiality responsibilities in cases when the parties do not sign formal confidentiality agreements.

In the UAE, contracts do not include any broad confidentiality restrictions. In addition to any specific contractual terms, the UAE Civil Code requires an employee to keep his employer, such as pre-engineered building companies in UAE industrial and trade secrets confidential throughout and after contract termination if this is normal practice. 

Furthermore, the UAE Penal Code establishes three criminal offenses for breaches of secrecy, which parties should be aware of. These include the following:

  • It is illegal to publish news, pictures, or comments about people’s private or family lives, even if they are true. It is also illegal for anyone who is entrusted with a secret to disclose it or use it for personal or professional gain unless allowed by law.
  • It is an offense for any individual to open a letter or telegraph without the authorization of the addressee or eavesdrop on a telephone conversation. 

Know the Types of Construction

While standard procure-and-build contracts, which are usually based on the Fédération Internationale des Ingénieurs-Conseils (“FIDIC”) Conditions of Contract for Construction (“Red Book”), are also utilized in the United Arab Emirates (“UAE”), design-and-build contracts are also occasionally used. In these contracts, the employer provides the design.

Although the 1987 FIDIC Red Book is still the most widely used employer construction contract in the United Arab Emirates, businesses are beginning to use the more modern FIDIC Red Book (1999) and even the FIDIC Red Book Second Edition (2017). If the FIDIC standard payment terms are used, the contractor is paid on a measurement basis for the actual amounts of work accomplished or, as is more common, on a lump-sum basis.  

The parties must be aware of the UAE Civil Transactions (known as the “Civil Code”), specifically Articles 872 to 897, which deal with Muqawala contracts (contracts to make a thing, i.e., building).

Statutory Requirements About Construction Contracts

Except for those who work in free zones, all construction workers in the United Arab Emirates are entitled to statutory rights under the UAE Labour Law, regardless of whether they are foreign nationals or not. 

An employer cannot unilaterally reduce a worker’s core benefits. Salaries and other remuneration elements, as well as annual leave and job location, are considered fundamental advantages. As a result, an employee of the PEB companies in Dubai cannot be contracted out of their basic statutory rights under UAE labor law. 

Employers have an affirmative obligation to safeguard their employees from risks such as workplace injuries and occupational diseases, fire hazards, and any potential hazards deriving from the use of equipment and machinery. 

The employer shall use all forms of protection recognized by the Ministry of Labour and Social Affairs under Article 91 of the UAE Labour Law. Income tax obligations do not apply in this jurisdiction because the UAE’s taxation system solely incorporates value-added tax (“VAT”).

Legal Conditioning of Completion and Omission of Work 

The contract allows employers, including PEB companies in UAE, to change the scope of labor. Article 877 of the Civil Code provides that the contractor must finish the work in conformity with the terms of the contract. As a result, if the contract, as is typical, allows for changes to the scope of work, the contractor must comply with such changes as long as they are properly informed in accordance with the contract conditions. 

Once the taking-over certificate is granted, no more alterations may be requested unless the parties agree to them at this time.

The engineer may direct the omission of certain works, provided that they are not carried out by the employer or others. This is an acceptable condition since otherwise, the contractor would have no assurance when pricing a project, and the employer would have the freedom to change the scope and undercut the contractor’s prices.

Bottom Line

Finally, at whatever phase you are in, construction needs to be planned and executed with all the legal formalities in place. It is important for you to discuss it with your builders, PEB structure manufacturer, and contractors and bring all the stakeholders together to fulfill legal requirements. 

If you need some guidance when starting up, contact Yarmouk

As one of the best PEB companies in Dubai, we can help you before you begin working on your PEB projects.