Wednesday, September 21, 2011

Construction Disputes and Negligent Supervision Claims

Many construction disputes in the Middle East arise out of the alleged negligent supervision of a project. There can be a tendency for judges and arbitrators in the region to assume that, by undertaking to “supervise” a project, an entity is assuming wholesale responsibility for everything that happens in relation to the project – and anything that goes wrong.

But what if the “supervisor” had no role or responsibility in the design of the project? What if the “supervisor” was only being paid to supervise two days per week? What if the constructing/installing entity deliberately ignores or overrides the recommendations of the “supervisor”?

The upshot of all this is that, from the point of view of the so-called “supervisor”, it is important to precisely define and caveat in every contract what exactly is meant by “supervision.”

In many cases, the word “supervision” should probably be left out of the contract entirely, given that “supervise” can be a loaded word in the Middle East construction sector and may connote to some of the region’s judges and arbitrators an unreasonably heightened standard of responsibility.

Instead, it might be preferable for the supervising entity to describe itself in the contract using a different term, such as “monitor” or “compliance monitor”. This would be particularly appropriate when the entity is merely monitoring the other parties on the project and providing suggestions, with no power to bind those other parties or control their actions.

More importantly, the contract should clearly state:
(i) what the monitor’s/supervisor’s responsibilities are;
(ii) how these responsibilities are to be fulfilled (e.g., by maintaining a log noting observed instances of non-compliance); and
(iii) any limitations on the powers to carry out these responsibilities (e.g., if the monitor/supervisor has been granted no powers to bind the other entities involved in the project, this should be explicitly stated in the contract).

In sum, given the tendency of some tribunals to assume that “supervisors” bear wholesale responsibility for the project, it behooves supervising and monitoring entities to negotiate a contract that clearly states what their mandate includes – and explicitly carves out what their mandate does not include.