Liquidated Damages in the UAE, Qatar, and Saudi Arabia
By Harriet C. Jenkins, K&L Gates, Doha
INTRODUCTION
Liquidated Damages (LDs) are treated very differently across the Gulf region and from the position as understood within the English common law jurisdiction.
The universal starting point for LDs is in contract; parties should pre-determine the rate of damages a contractor should pay to the employer in the event of a (specified) breach, most commonly that of late completion. For the purposes of this article, we shall consider LDs solely in the context of delay damages, whereby in the event of delay to project completion, an employer can demand a fixed compensatory sum from the contractor.
The position of the civil law jurisdiction of the Middle East is very different from that understood within the English common law system. It is commonly accepted that English courts are generally very reluctant to look beyond the contractual position and open up any agreed position on LDs.[1] Across the Gulf however, differing civil codes empower courts (and tribunals) to look behind the parties’ contract and adjust delay damages based upon principles of actual loss and fairness.
This article discusses the differing treatments of LDs across three Gulf jurisdictions (namely, the United Arab Emirates, Qatar and Saudi Arabia), and reveals what parties can expect in regards to their compensation for delay.[2]