New guidance on challenging an adjudicator’s decision during TCC enforcement (Hutton Construction v Wilson Properties)

by Hardwick Legal | Mar 22, 2017 | Purpose Built (LexisNexis)

In Hutton Construction v Wilson Properties, Coulson J issued guidance superseding the guidance found in the TCC Guide concerning when the court will consider a dispute over an adjudicator’s findings in the course of enforcement by way of TCC summary judgment. Matthew Thorne of 4 Pump Court Chambers considers the judgment and its implications.

This article originally appeared on Lexis®PSL on 20 March 2017. Subscribers can enjoy earlier access and a full-range of related guidance. Click here for a free trial.

What are the practical implications of this case?

Unless the parties agree a consensual approach to resolution of the disputed issue:

• a defendant to a TCC adjudication enforcement must issue a prompt Part 8 claim setting out the declarations it seeks or, at the very least, indicate in a detailed defence and counterclaim to the enforcement claim what it seeks by way of final declarations. The former is the preferred option.
• the defendant must be able to demonstrate that:
  • there is a short, self-contained issue which arose in the adjudication which it continues to contest
  • the issue requires no oral evidence or any other elaboration beyond that which is capable of being provided during the interlocutory hearing set aside for the enforcement
  • a defendant who unsuccessfully raises this sort of challenge on enforcement will almost certainly have to pay the claimant’s costs of the entire action on an indemnity basis. Conversely, where a claimant does not agree to deal with the issues on enforcement, but the court finds that it does fall within the exception, also runs the risk of cost penalties

This guidance supersedes that in paragraph 9.4.3 of the TCC Guide.

What were the facts?

The parties entered into a contract dated 12 November 2014 on the JCT Standard Building Contract Without Quantities 2011 form. On 17 August 2016, the claimant served an application for payment. A dispute arose, and the issues in the adjudication were whether there was a valid interim certificate or pay less notice in response. The defendant argued that its pay less notice was an interim certificate, alternatively was a valid and effective pay less notice. The defendant’s case was rejected by the adjudicator.

Following commencement of TCC enforcement proceedings, the defendant raised issues of fact, identified conversations said to be relevant but not raised in the adjudication, and failed to identify what declarations were sought. It subsequently issued a Part 8 Claim Form, but again failed to seek any specific declarations.

The judge permitted the Part 8 claim to continue at a later date, but refused to consider the defendant’s challenge to the adjudicator’s decision during the earlier TCC enforcement proceedings. Coulson J indicated that the Part 8 Claim Form was issued late in the day and was incomplete; new factual matters were being raised; and there was nothing unconscionable in refusing to consider the challenge at this stage. On the contrary, permitting a challenge would mean that, instead of being the de facto dispute resolution regime in the construction industry, adjudication would simply become the first part of a two-stage process, with everything coming back to the court for review prior to enforcement. That is completely the opposite of the principles outlined in Macob Civil Engineering v Morrison Construction , Bouygues (UK) v Dahl-Jensen (UK) and Carillion Construction Limited v Devonport Royal Dockyard and cannot be permitted.

What is the relevant process when seeking to dispute an adjudicator’s findings during TCC enforcement?

The court noted that the starting point is that, if the adjudicator has decided the issue referred to him or her, and has broadly acted in accordance with the rules of natural justice, the decision will be enforced.

There are two narrow exceptions to this rule:

• the first involves admitted error: namely, where the error is collectively admitted, and where there is no arbitration clause, the court has jurisdiction and can correct the error, such as in Geoffrey Osborne v Atkins Rail
• the second concerns the proper timing, categorisation or description of the relevant application for payment, payment notice or pay less notice, following Caledonian Modular Limited v Mar City Developments Limited

Where the claimant has succeeded and seeks to enforce an award, the point in dispute is often straightforward, to the effect that the adjudicator was wrong and that, either with regard to its timing or content, the relevant payment notice was invalid and/or that the pay less notice was valid and prevented payment.

Often, the defendant will issue a Part 8 claim challenging the decision, and the parties will reach agreement that the matter will be put to the court, and the sum paid if the award is upheld. The existence of the Part 8 claim also means that the TCC knows from the outset what is likely to be involved at a subsequent hearing. This process has worked relatively well to date.

In circumstances where the parties do not reach such consensus, on the other hand, the following approach must be adopted:

1. The defendant must issue a prompt CPR Part 8 claim setting out the declarations it seeks or, at the very least, indicate in a detailed defence and counterclaim to the enforcement claim what it seeks by way of final declarations. A prompt Part 8 claim is the better option due to the speedy nature of the enforcement proceedings.
2. the defendant must be able to demonstrate that:
   1. there is a short, self-contained issue which arose in the adjudication and which it continues to contest
   2. that issue requires no oral evidence or any other elaboration beyond that which is capable of being provided during the interlocutory hearing set aside for the enforcement, and
3. the issue is one which, on a summary judgment application, it would be unconscionable for the court to ignore

The judge went on to suggest that, in practice, this means that the adjudicator’s construction of the clause should be ‘beyond rational justification’, the calculation of time periods should be obviously wrong, or a document be categorised in a way which, on any view, it could not be described as.

Furthermore, such an issue could only be raised on enforcement if the consequences were clear-cut. If the effect of the issue is disputed as well, it is unlikely that the court would take it into account on enforcement.

Are there any costs implications?

A defendant who unsuccessfully raises this sort of challenge on enforcement will almost certainly have to pay the claimant’s costs of the entire action on an indemnity basis.

Conversely, a claimant who does not agree to deal with the issues on enforcement, where the court finds that it does fall within the exception and can be considered, also runs the risk of cost penalties.

This article originally appeared on LexisPSL. Subscribers can enjoy earlier access and a full-range of related guidance. Click here for a free trial.

Source: LexisNexis Purpose Built
New guidance on challenging an adjudicator’s decision during TCC enforcement (Hutton Construction v Wilson Properties)

Industry insight: Brexit and the construction industry

by Hardwick Legal | Mar 13, 2017 | Purpose Built (LexisNexis)

Sarah Schütte of Schutte Consulting Limited sets out her top ten observations and predictions as to how ‘Project Brexit’ will impact on the construction and engineering industry. Among other things, she looks at market access, labour and skills availability and the effect on small and medium-sized enterprises (SMEs).

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So, Brexit is going to happen. It’s official. The Supreme Court has spoken and Parliament has voted. Our Prime Minister has declared her intention to trigger Article 50 by 31 March 2017. Given that the House of Lords is still to be persuaded, that’s a tall order. Uncertainty continues. But no business can put its operations on hold. So what does all this mean for the construction and engineering industry?

Many of my previous articles have talked about the need for good planning, solid project management support, and consultation with stakeholders (see News Analyses: The future of portfolio, project and programme management—part 1 and part 2 and Stakeholders—managing the challenges and opportunities). Brexit is a ‘project’. A big one, certainly, and a long one (maximum 2 years under Article 50, subject to any agreed extensions of time), and it has lots of moving parts, needs constantly revising and has a requirement for agility. A project like this is a nightmare for the best planners and project managers!

For legal advisers too, Brexit presents a huge challenge. How can we support clients at this time, who feel in limbo? The 10 observations and predictions made in this article follow an unscientific straw poll of my industry clients and contacts. Continuing the project management parallel, they are all ‘project risks’.

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Market access

The EU-UK free trade arrangement is the most important trading bloc, permitting tariff-free import and export. The lack of visibility about possible alternative trade agreements, both with the EU and other major trading partners around the world, is the biggest concern right now. The prospect of the UK negotiating fresh agreements is a major task and will take significant time, unless a swift practical solution can be found.

Guaranteed access to the EU can only now be effected via an EU hub or office—it doesn’t have to be big. Clients are considering establishing such a ‘post box’, or have it in motion already. Ireland is the easiest in many ways, since the countries have a close and long-standing relationship. An association with an EU-centred organisation is an option, but could be more fragile (another risk) depending on the terms of agreement entered into.

Compliance and legal matters

Some clients, particularly heads of legal, are not overly concerned about this risk, insofar as they see an opportunity for taking more control of contractual risk, for example jurisdiction and law clauses.

In addition, compliance is already strong in the UK. For example, something like ‘safe harbours’ would not in my opinion be difficult to agree since the principles are well-established globally and human rights watchers follow closely data protection matters.

Generally, the extent to which any EU legislation is subsumed into UK law will depend on negotiations at EU level. Remember, EU Directives need to be transposed into law through national legislation, in contrast with EU Regulations, which have direct effect and are automatically incorporated. Draft EU laws on the books now can expect to have a rough ride if they do not chime naturally with UK principles or objectives.

Labour skills/shortages

This is the biggest concern for the supply chain, such as my vendor-clients who hire out labourers to the rail and other industries and those in specialist trades.

Already there is competition in this risk and that means uncertainty as to commitment from customers, and leverage on pricing. It is trite but true that several skilled trades are underpinned by highly-experienced, hard-working eastern Europeans.

The risk of skills-shortage is also of concern to the technology sector, where London has the edge. No other country in the world has embraced the internet like the UK has—it contributes a significant wedge to GDP (second only to the construction industry (save the public sector)). It is estimated that around 40% of those working in the tech sector are EU-born (ref: Douglas McWilliams, The Flat White Economy), and the diversity of background, culture and education brought innovation and new ways of problem-solving. One can easily see, hear and feel this in London’s technology hub (known as the ‘East London Tech City’) of Shoreditch and its environs.

Let’s see how the debate over cross-guaranteeing the rights of EU citizens currently in the UK, and vice versa, goes.

Practicalities—materials, plant and office overheads

Tendering and procurement specialists are having a tough time, whatever contracting tier they work at. Typically asked to guarantee prices for 90 days or as long as 6 months, the risk of fluctuation lies with them, traditionally, insofar as employers usually seek to put the risk of price change onto the contractor.

The fear of increased prices in imported materials is very real for those at the forefront of procurement in tier 1 contractors in particular, and currency instability does not help (see ‘Sources of funding’ below). In addition, customs duties are likely to increase.

The costs of data roaming could become a real problem for those who have business in the Eurozone (i.e. the Digital Single Market) if the ‘roam like at home’ rules, which come into force in June 2017 after a decade of negotiation with telecoms operators, are deconstructed for the UK.

Currency and inflation

Linking in with the above item, this is another risk for tendering organisations. The balance is tipping in favour of end users/ promoters. They of course want certainty in budgets (as they always did). NEC3 contracts include X options as to multiple currencies (X3) and inflation (X1), which I think will become more prevalent (i.e. people will actually think about them more actively).

The good news is that goods and services have become cheaper with the devaluation of the GB Pound. So vendors who have clients outside of the UK could benefit (and are benefitting now, in fact).

Intra-UK selling becomes harder, and is vulnerable to inflation. Already we have seen this impact as the weak pound continues to stoke inflation and prices are rising. This puts more pressure on organisations and individuals.

Sources of funding

Without the crutch of the EU for some well-deserving regeneration or development projects, the UK is going to have to find creative ways of attracting investment. The risk is again one of uncertainty. The UK needs to attract new sources of money, and circulate its existing ‘own’ money in order to stimulate development. The need to find non-traditional funding sources is already important, but will become greater. See, for example, the Hinckley Point C Nuclear power station, part funded by the Chinese and with EDF at the helm (see News Analyses: Hinkley Point C nuclear plant deal agreed by UK—the reaction so far and Stakeholders—managing the challenges and opportunities).

Without new sources of funding, the UK risks being unattractive to investment, which will stifle growth, especially in the construction and engineering sectors which often require huge budgets, plenty of foresight and years of planning to deliver large developments and infrastructure.

This is a key risk for everyone at every level. Clients are making contingency plans, putting non-urgent projects on hold and recalibrating projects which are in delivery phase, to try to mitigate the uncertainties ahead.  Some projects are being phased, or divided into more manageable budget-friendly chunks. Although this approach risks being more expensive overall, it is probably sensible in some cases.

The EU as a stakeholder

Public-sector industry clients and contractors are generally happy that the EU will no longer be able to oversee and scrutinise projects. This comes from a place of frustration, which is understandable given the overly-bureaucratic approach to the stakeholder role notwithstanding the importance of ‘value to the taxpayer’ (see News Analysis: Stakeholders—managing the challenges and opportunities). However, this relief comes at a cost and they appreciate this is as a result of the withdrawal of a key source of regeneration funding (see ‘Sources of funding’ above).

SMEs

These clients fear the withdrawal of the free trade arrangements as the biggest risk, along with labour shortages and increased costs. SMEs (defined as organisations with fewer than 250 employees) are the backbone of the UK economy. Look more closely, which is more interesting to my mind, and see that micro-businesses (defined as organisations with fewer than 10 employees) comprise 96% of all businesses. The Federation of Small Businesses estimates that:

• 60% of the UK private sector is employed in SMEs
• 3% of all private sector businesses are ‘small’
• 76% of SMEs employ no-one except the owner
• there has been a huge increase in the number of SMEs in this millennium: 5.5m now, 2m more than in 2000

Most interestingly, perhaps, is that 18% of SMEs (numbering 975,000) operate in the construction industry. This figure is a significant proportion of the SME pie, and the largest representative industry or sector (professional services comes second at 15%).

Whilst this pattern of growth has links to the way that technology has changed work patterns over the past decade, and tax laws, the truth is that SMEs contribute significantly to UK GDP, and to the construction industry. If they struggle to survive, then contract stability is put at risk and the supply chain becomes more fraught and fragile. For wider reading, I recommend the House of Commons Briefing Paper Number 06152 (23 November 2016).

Tendering to the world: selling the UK’s strengths

On a more positive note, the UK has strengths to sell! The UK government and the professional associations have to ramp up their offering to the outside world. The ‘#Londonisopen’ campaign, launched by the Mayor of London in the wake of the Brexit vote, has been a creative and fun opportunity to show off London’s skills with a serious undertone.

Other industry associations are using their strength in member numbers to promote the collective’s skills and value of accreditation. The legal system has a chance to carve out an even better place than it has already on the world scene—independence from the over-reaching Court of Justice of the European Union.

The ‘Northern Powerhouse’ movement too must rise to the challenge if efforts to empower these communities without the future prop of EU regeneration money are to remain strong.

Planning for the worst

All good planners think about what could happen on their projects. They might not show every possible outcome in their plans, but they must anticipate risk and uncertainty, and ‘stress-test’ worst-case scenarios. The UK government must do the same—let’s hope it has great planners on board!

This article originally appeared on Lexis®PSL. Subscribers can enjoy earlier access and a full-range of related guidance. Click here for a free trial.

Sarah Schütte is a solicitor-advocate and runs her own legal and training consultancy, Schutte Consulting Limited. She has more than 15 years’ experience as a construction and engineering solicitor, including ten years in industry. She works with a wide variety of industry clients, law firms, seminar organisers and educational establishments to support their projects, disputes, risk management and insurance strategies and training programmes.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Source: LexisNexis Purpose Built
Industry insight: Brexit and the construction industry

The New Green Deal

by Hardwick Legal | Mar 7, 2017 | Purpose Built (LexisNexis)

Will the new incarnation of the Green Deal fare any better than its predecessor? Richard Wald, barrister at 39 Essex Chambers, examines the issue and questions whether the new initiative will breathe new life into the scheme.

Greenstone Finance and Aurium Capital Markets has announced its acquisition of the business and assets of the Green Deal Finance Company (GDFC), as well as its existing loan book, with a principal value in excess of £40m. The acquisition is being supported by Honeycomb Investment Trust.

This Analysis was originally published on Lexis®PSL Environment. Discover how Lexis®PSL can help you stay on top of the latest developments and find the answers you need fast: click here for a free trial to access.

What events led up to this transaction?

The Green Deal was launched by the government in 2013 to provide consumers with access to finance aimed at making their homes more energy efficient. The scheme effectively enabled customers to borrow money for energy efficiency improvements and then repay the loans using the savings from future energy bills. The loans are tied to the properties, so that payments are made by whoever is benefitting from the energy saving measures. It was axed by ministers 18 months ago, shortly after the General Election due to low take-up and concerns over industry standards. The GDFC assets and remaining loan book were sold for £40m to Greenstone Finance, a renewable energy investment vehicle and Aurium Capital Markets which specialises in financing deals in the energy and real estate sectors. The consortium was one of more than a dozen parties who bid to take over the GDFC.

What is the significance of this transaction for the Green Deal?

It breathes new life into a scheme that was once hailed as the biggest home improvement measure since the Second World War and a revolutionary effort to cut greenhouse gas emissions by fixing Britain’s notoriously draughty houses. The new incarnation of the Green Deal enjoys the advantage of lessons learned from its ill-fated predecessor, including excessive complexity, an unattractive loan interest rate (of 7%) and the concerns of many homeowners about letting installers into their homes.

The New Green Deal will seek to raise awareness of what is described as an attractive ‘pay-as-you-save’ concept that has worked well abroad and is not as expensive as many think. It promises to:

• boost the number of approved installers
• perform spot checks, and
• weed out cowboy operators

If all of this is done and seen to be done, the new scheme has good prospects of succeeding where the old one failed.

Would the New Green Deal need to be put in place from scratch or is it likely that the existing policy and framework be used?

The existing framework will be used. The new owners will continue to service existing Green Deal loans and will begin financing new ones by the end of March.

What are the practical implications for lawyers and their clients?

The restart of the New Green Deal has come at a time when the home energy efficiency market is preparing for an upsurge in demand as the Energy Efficiency Regulations 2015, SI 2015/962 (the 2015 Regulations) come into force in April 2018. After this date, it will be unlawful for landlords to grant a new lease for properties that have an energy performance certificate rating below E.

Landlords who fail to meet this standard (whether by availing themselves of the financing opportunities which exist under the New Green Deal or otherwise) may thereafter face enforcement action from the relevant local authority pursuant to Part 3 of the 2015 Regulations, including the imposition of financial penalties and a ban from the sector.

This Analysis was originally published on Lexis®PSL Environment. Discover how Lexis®PSL can help you stay on top of the latest developments and find the answers you need fast: click here for a free trial to access.

Interviewed by Evelyn Reid. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Source: LexisNexis Purpose Built
The New Green Deal

Getting documents: early specific disclosure

by Hardwick Legal | Feb 14, 2017 | Purpose Built (LexisNexis)

In Bullring Limited Partnership v Laing O’Rourke Midlands Limited [2016] EWHC 3092 (TCC), the Technology and Construction Court ordered specific disclosure (before the defence had been served) of several categories of documents. Simon Hargeaves QC of Keating Chambers, who acted for the defendant/applicant, considers the decision and the benefits of obtaining early specific disclosure during proceedings.

What are the practical implications of this case?

There are several ways to get documents from the other side:

• contractual rights (eg injunction, agency and specific performance)
• procedural rights (pre-action disclosure, disclosure in aid of another dispute resolution process, early (specific) disclosure, standard disclosure and third party disclosure)

In this case the court defined the test to be applied for early specific disclosure; ie applying for specific disclosure during proceedings but ahead of the usual time for disclosure.

Early specific disclosure is underused. It should be given some consideration as the jurisdiction and test are simple, lots of proceedings are stayed after protective claim forms, documents are often required to plead defences satisfactorily and there is no costs penalty like for pre-action disclosure.

What was the background?

The defendant had been requesting documents which only the claimant had and which the defendant needed in order to plead its defences. Specifically, the documents were:

• maintenance records, which went to a liability defence to the defects claim (i.e. the maintenance records would show whether maintenance, or a lack of maintenance, caused or contributed to the defects)
• historic complaints and investigations, which went to a limitation defence (i.e. when physical damage first occurred (primary limitation in negligence) and when the ‘date of knowledge’ (second limitation in negligence, under s14A of the Limitation Act 1980).

These requests had been going on for 18 months. The claim was a very stale one, issued at the very end of the limitation period. The claimant had made use of an agreed standstill, and then a stay after protective proceedings were issued, in order to improve the presentation of its case. The defendant had not been afforded the same opportunity to improve its own case, due to the claimant’s refusal to provide the documents.

What did the court decide?

The court had the jurisdiction to order disclosure under CPR 31.12, which provides that ‘The court may make an order for specific disclosure or specific inspection’.

The court formulated the test for whether disclosure should be given as:

Taking into account the overriding objective and the respective consequences of making or not making the order, whether, in all the circumstances of the case, the applicant has demonstrated that there is a proper basis for early disclosure as opposed to disclosure after close of pleadings.”

It added that:

for a proper basis to be identified, there does need to be something important or significant which can be achieved by ordering early disclosure.”

The court decided that the defendant was entitled to early disclosure of the categories of documents requested, for reasons including the following:

• it was not an exercise that would have to be done twice. It was just being done early, and any costs would be modest
• it would not be a difficult task
• the exercise of collecting the documents ought to have been done many years ago
• now was a good opportunity in the proceedings for the disclosure work to be done (due to a pause in the proceedings for other reasons)
• the documents would narrow the issues in dispute
• it would allow the defendant an equivalent benefit to the lengthy period of evidence gathering enjoyed by the claimant

This article originally appeared on Lexis®PSL. Subscribers can enjoy earlier access and a full-range of related guidance. Click here for a free trial.

Source: LexisNexis Purpose Built
Getting documents: early specific disclosure

New labour legislation in the United Arab Emirates

by Hardwick Legal | Feb 9, 2017 | Purpose Built (LexisNexis)

Luke Tapp and Andrea Hewitt-Sims of Pinsent Masons explore key changes announced recently by the Ministry of Human Resources and Emiratisation (MOHRE), which will have a positive impact on employees in the UAE.  The changes impact:

• salary protection
• Emiratisation, and
• employee accommodation

It is important for UAE based companies, senior managers and HR professionals to be aware of these important developments and how they may impact on the management of their workforce.

Wage protection

The payment of salary within the UAE has been regulated and monitored by the authorities for several years following the introduction of the Wage Protection System (WPS) in 2009. The WPS is an electronic salary transfer system that requires all companies to pay employees via banks, UAE Exchange or registered financial institutions. Developed by the Central Bank of the UAE, the system allows the MOHRE to create a database that records wage payments in the private sector to guarantee the full and timely payment of agreed wages. The WPS applies to all institutions registered with the MOHRE across all sectors and industries.

The WPS had an extremely positive impact in respect of the regularity and timing of salary payments within the UAE.  However, where employers based within the UAE have failed to comply with the WPS, although there has been business interruption, there has historically been no associated financial penalty.  Therefore some companies have failed to comply with the WPS for long periods of time without accruing any punitive penalties.

The MOHRE has sought to tackle this by introducing a punitive Wage Protection Decree, Ministerial Decree No (739) of 2016, which reinforces the statutory obligation on employers to pay their employees on time and in full and introduces possible financial penalties.  The Decree was introduced in October 2016. The key provisions of the Decree are:

1. The Decree applies to all organisations which are registered onto the WPS. Such companies must pay wages within ten days of the registered payday in the WPS.
2. In respect of companies with over 100 employees:
   1. where such companies fail to adhere to the ten day timeframe, the MOHRE will stop granting any additional work permits with effect from the 16th day of the delay.
   2. if wages are not paid within one month of the registered payday, the MOHRE will inform the judicial authorities, which will take “all necessary punitive measures against the company”.
   3. if wages are not paid within 60 days of the registered payday, the company will be fined AED 5,000 per employee, up to a maximum of AED 50,000 if the delay affects multiple workers.
3. In respect of companies employing less than 100 employees, it shall be treated in the same way as a larger company and subject to the same penalties where:
   1. the company breaches the requirements of the Decree twice within one year; or
   2. the company fails to pay within 60 days of the registered payday.

The introduction of this Decree adds further regulation to the provisions of the WPS and better protection to employees.  It provides the MOHRE with greater authority to enforce its provisions.

Emiratisation

The UAE Labour Law (Federal Law No. 8 of 1980, as amended) provides that employment is the right of UAE nationals and that non-nationals should only be employed if there is no suitably qualified UAE national available. A number of Ministerial decrees and regulations set out the UAE’s Emiratisation programme which has been in place for over ten years. This programme includes, for example, the requirement that companies employing more than 100 employees must appoint an Emirati or GCC national public relations officer. Further, companies should contact the National Human Resource Development and Employment Authority (Tanmia) who will nominate UAE nationals for the role of secretary, and a UAE national must be employed as HR manager.

While these latter requirements, in relation to the employment of secretaries and the appointment of HR manager, may not be rigidly enforced, the fact remains that practice may change at any time and businesses can derive benefits from compliance with the Emiratisation programme. The three new provisions recently announced by the MOHRE confirm the UAE’s ongoing commitment to encourage Emiratisation within the UAE private sector.  Increasing the number of local nationals employed within the private sector continues to be an important theme for all of the governments of the GCC countries.  Within the UAE in particular, the MOHRE remains committed to encouraging Emiratisation in a positive and inclusive manner.

The three new requirements which UAE businesses must adhere to with effect from 1 January 2017 are:

• Data Processing Officers – Ministerial Resolution No. 710 of 2016 requires all organisations employing 1,000 or more employees to register on the MOHRE’s online platform (Tas’heel) to obtain work permits for employees. Businesses must declare that they are an employer and register every staff member. The platform can only be accessed by UAE nationals.  The Resolution also places an obligation on employers to engage two UAE nationals in the position of Data Process Officer.

Organisations which fail to comply with the Resolution may lose their sponsorship privileges and be unable to obtain new work permits.  The MOHRE may also apply additional administrative and financial penalties.

• Health and Safety Officer – Ministerial Resolution No. 711 of 2016 requires all companies operating in the construction or industrial sector which employ 500 or more employees to employ a UAE national in the position of occupational health and safety officer. The employee should implement and monitor employee health and safety practices.

Organisations who do not comply with the Resolution will not be able to obtain new work permits until an Emirati is appointed to the role.  The MOHRE may also impose additional sanctions.

• Changes to Company Classifications – Ministerial Resolution No. 740 of 2016 builds on the existing Emiratisation framework in the UAE. The present framework provides incentives for organisations to engage UAE nationals within their businesses and grades organisations into one of three categories depending on how effective their Emiratisation policies are. Organisations within a higher category may avail of a number of benefits including paying lower MOHRE and immigration fees, exemption from depositing bank guarantees for employees and finding it easier to obtain visas. 

The new Resolution amends the existing categories by introducing additional sub-categories to enable organisations to improve their rating by applying certain enhanced Emiratisation requirements.

In light of these changes, businesses should in the first instance assess staff population and if the required 500 or 1,000 person threshold is met, complete the necessary registration and appoint or employ a UAE national to the required role.

It should also be noted that the Emiratisation requirements both existing and newly introduced do not currently apply in the UAE’s free zones.

Employee accommodation

The introduction of Ministerial Resolution No. 591 of 2016 applies to employees earning less than AED 2,000 per month (Low Income Employees). Employers who employee more than 50 Low Income Employees must provide such employees with accommodation at the employer’s cost.

The Resolution took full effect from 1 January 2017 and compliance is expected to be monitored closely by the MOHRE.  It is important for employers who engage Low Income Employees to ensure they have suitable employee accommodation available for their employees.

The scope of the Resolution may expand in future as Local authorities have discretion to apply the Resolution to employers with fewer than 50 Low Income Employees or to employees earning above the AED 2,000 threshold. This demonstrates the importance the UAE government places on protection of employees, particularly those on low incomes.

Going forward

The introduction of these new provisions demonstrates the importance of wage protection, Emiratisation, and employee accommodation to the UAE government.  These are key areas of labour management which the MOHRE and the UAE government wish to focus on, protect and improve.  It is important for contractors and employers to be aware of the emphasis which the local authorities are placing on labour management and Emiratisation and of course, it is essential for companies to understand how the above Regulations may impact on their business.

It is an exciting time to be growing business and engaging employees in the UAE and the development of the statutory framework around key issues such as Emiratisation, wage protection and employee accommodation is a positive development for business growth and commercial activity within the region.

Source: LexisNexis Purpose Built
New labour legislation in the United Arab Emirates