Why Local Law Alignment Is Critical in FIDIC-Based Contracts
Most construction disputes don’t begin with bad faith. They start with copy-paste clauses — standard templates taken from FIDIC without adapting them to national legal systems.
Across the Middle East and North Africa, FIDIC forms are widely used for EPC, design-build, and infrastructure projects. But too often, the contracts are adopted “as is,” ignoring national provisions that quietly override them at enforcement. These local law rules — whether in public procurement, civil liability, or arbitration frameworks — can completely change how contractual obligations are interpreted and enforced.
At Alnaqeeb & Co Law Firm, we see this pattern repeatedly in major construction and concession projects. Misalignment between FIDIC terms and national laws doesn’t just create disputes — it can invalidate awards, extend project delays, and trigger uninsurable liabilities.
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The Core Problem: FIDIC Templates Are Not Self-Executing
FIDIC contracts were drafted as international standards, not as substitutes for domestic legal systems. Each jurisdiction has non-waivable provisions governing:
Public procurement and tendering (especially for government projects)
Professional liability for engineers and contractors
Interest, penalties, and unlawful enrichment
Arbitrability of administrative contracts
In Egypt, Saudi Arabia, and other Arab jurisdictions, these elements are not merely background rules — they are mandatory. Ignoring them can render parts of the contract void or unenforceable.
For example, a clause that sets FIDIC’s defect liability at 12 months cannot override Egypt’s decennial liability rule, which imposes ten years of joint, strict responsibility for structural defects. Similarly, a payment clause referencing “interest” may not be valid under Saudi law, where interest-based remedies are unenforceable.
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Real-World Lessons from Regional Case Law
1. Egypt – Damietta Port ICC Arbitration (USD 490 million)
In a landmark case, Egypt’s Court of Cassation annulled an ICC arbitration award valued at approximately USD 490–494 million concerning the Damietta Port concession. The dispute involved administrative and public-law controls that the arbitral tribunal had failed to consider.
The Court held that because the contract engaged Egypt’s public-law framework, the dispute was not arbitrable under Egyptian law. The result: a multi-hundred-million-dollar award rendered unenforceable.
This case underlines a critical reality — even a well-reasoned international award can collapse if it conflicts with mandatory domestic law.
2. Saudi Arabia – Técnicas Reunidas v PCMC
In another instructive example, the English High Court (2022) set aside an ICC award in Técnicas Reunidas v PCMC concerning a Saudi project. The decision turned on inconsistent dispute-resolution clauses and unclear order of precedence across multiple contract documents.
The court found that, based on the contractual hierarchy, the parties had agreed to ad hoc London arbitration, not ICC arbitration. One overlooked clause completely shifted jurisdiction and invalidated the prior award.
This illustrates how contractual inconsistency and lack of legal vetting — particularly in cross-jurisdictional projects — can cost years of litigation and millions in wasted arbitration costs.
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What to Fix at Drafting Stage
Effective contract risk management begins before signature, not after the dispute notice. Below are critical alignment points when adapting FIDIC forms for projects in Egypt, Saudi Arabia, and the wider GCC.
1. Egypt – Decennial Liability and Administrative Controls
Under Article 651 of the Egyptian Civil Code (ECC), architects and contractors bear a non-waivable, joint, and strict liability for any collapse or structural defect that threatens a building’s stability for ten years after completion.
This “decennial liability” cannot be shortened, limited, or waived — even by express agreement. FIDIC’s standard Defects Notification Period (often 12–24 months) cannot legally override it.
Additionally, for public or administrative contracts, Egypt’s Public Procurement Law 182/2018 imposes specific procedural and approval requirements for arbitration clauses. Failure to comply can make arbitration null and void.
2. Saudi Arabia – Interest, Procurement Rules, and Public Law Limits
Saudi Arabia’s legal system, grounded in Sharia principles, prohibits interest (riba). Thus, standard FIDIC clauses referring to “financing charges” or “interest on late payments” are unenforceable. Instead, lawful compensation mechanisms or time-based damages must be used.
Public projects are governed by the Government Tenders and Procurement Law (GTPL), which regulates dispute-resolution methods and approvals. Any arbitration or foreign-law clause must comply with GTPL and the Arbitration Law (2012), requiring approval from competent authorities for government entities.
These legal realities mean that FIDIC dispute-resolution and payment clauses must be tailored to Saudi regulatory and ethical frameworks from the outset.
3. Cross-Border and PPP Projects
In Public-Private Partnerships (PPPs) and multi-jurisdictional EPC contracts, hybrid structures are common — for example, an international lender’s template combined with a FIDIC base and local law addenda.
In such cases, risk arises from conflicting governing law provisions or inconsistent order-of-precedence clauses between the main agreement, annexes, and special conditions.
A legal review should test:
Whether the chosen governing law can coexist with mandatory host-state rules
If dispute-resolution clauses are enforceable across all involved jurisdictions
Whether public-policy limits (e.g., sovereign immunity or administrative oversight) apply
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Aligning FIDIC with Local Law: A Structured Approach
To avoid unenforceable clauses and prolonged disputes, project owners and contractors should integrate a local-law compliance review into their pre-contract process.
Step 1: Identify Mandatory Provisions
List all non-derogable legal rules under the project’s governing law — e.g., decennial liability (Egypt), interest prohibitions (KSA), procurement procedures (both).
Step 2: Adjust Standard FIDIC Clauses
Amend key areas including:
Sub-Clause 1.4 (Law and Language) – Clarify which law prevails and ensure it’s compatible with public-order principles.
Sub-Clause 20 (Claims and Disputes) – Align dispute timelines with national arbitration law requirements.
Sub-Clause 14 (Payments) – Replace interest-based charges with acceptable compensation methods.
Sub-Clause 17 (Risk and Responsibility) – Cross-reference statutory liability provisions.
Step 3: Review Order of Precedence
Ensure the Special Conditions of Contract (SCC) clearly override the General Conditions where local law adaptations are inserted. Ambiguity here can change arbitration forums or governing law interpretations.
Step 4: Obtain Authority Approvals (for Public Projects)
Before signing, confirm that required ministry or agency approvals are secured for arbitration or foreign-law clauses — both in Saudi Arabia and Egypt.
Step 5: Engage Local Counsel Early
International counsel may structure the contract, but local lawyers understand the boundaries of enforceability. Their role is not to rewrite FIDIC, but to translate compliance into enforceable drafting that survives in local courts or arbitral review.
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Actionable Recommendations for Developers and EPC Contractors
1. Localize before finalization. Don’t wait for disputes to test your clauses.
2. Map regulatory overlaps between FIDIC obligations and national laws.
3. Engage local legal experts who regularly handle EPC arbitration and enforcement cases.
4. Maintain document consistency. Avoid contradictions between main contracts, annexes, and subcontracts.
5. Train your project teams to identify and escalate potential non-compliance early.
By embedding these checks at tender and negotiation stages, parties can prevent the most expensive kind of legal problem — an unenforceable success.
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The Commercial Case for Legal Alignment
Ignoring local law is not only a legal mistake — it’s a business risk. Misaligned contracts often lead to:
Delays in claim resolution
Rejection of arbitral awards
Invalidation of key contract clauses
Loss of project financing or insurance coverage
Conversely, aligning FIDIC with local frameworks delivers tangible commercial value:
Faster enforcement in national courts
Reduced arbitration exposure
Improved investor confidence
Predictable cost and timeline outcomes
The goal is not to localize for formality’s sake — it’s to build legally sustainable projects.
Bottom Line
Harmonizing FIDIC with local law is not red tape; it’s risk control.
It protects enforceability, accelerates resolution timelines, and secures the commercial integrity of every high-value EPC contract.
In today’s era of GIGA projects and public-private investment across the Middle East, contractual precision is not optional — it’s strategic defense.
At Alnaqeeb & Co Law Firm, we specialize in adapting FIDIC and NEC forms to comply with Saudi, Egyptian, and regional legal systems, ensuring that international standards remain enforceable within local frameworks.