Building law and regulation in Bahrain during Covid-19

There is currently no construction-related COVID-19 regulation in place. However, the government introduced measures to contain and manage the virus, which will likely impact the construction sector. The measures introduced include:

• A “recommendation” that companies in the private sector work from home where possible. The government made it clear that client meetings in the office are strictly prohibited. However, certain sectors are exempt from the above requirement, including the construction sector.
• A curfew proposal has been put forward but not yet implemented; nevertheless, individuals are to stay home and only leave the house for essentials including going to work, the supermarket, pharmacies or hospitals for emergencies. Again, certain sectors are exempt from the above requirement, including the construction sector.
• Keeping a 1-meter distance at all time.
• Wearing protective gloves, masks and using hand sanitisers at all times.
• Companies to suspend providing goods and services as at 26 March 2020 until 9 April 2020. Companies are allowed to sell goods and services via electronic means and social media if possible. Certain sectors are exempt from such restrictions, including the construction sectors.
• Gathering not to exceed five individuals in public places as at 26 March 2020. There is a recommendation that the work by different contractors is phased where possible. 
• Workers in construction sites and/or companies are randomly selected to be tested or requested self-isolate for 14 days as precautionary measure.  
• Implemented fines and/or imprisonment of not less than three months for violators. 

There is nothing specifically in place for the construction sector.  However, more generally, the government has currently presented various means of support to the economy, which could impact those involved in construction works. This support includes: 

• Allocating approximately BHD 560 million (USD 1.5 billion) as a stimulus package effective as at April 2020 for a period of three months, which includes amongst other things (i) payment of salaries for Bahraini nationals working in the private sector, to be financed from the unemployment fund; (ii) payment of electricity and water bills for Bahraini nationals, residents and companies in line with last year’s electricity and water bill; (iii) exemption of commercial entities from municipality and Labour Market Regulatory Authority fees; (iv) exemption of tourist facilities from tourism fees; (v) exemption of industrial and commercial entities from paying rent to the government. 
• The Central Bank of Bahrain expanded its lending facilities, reduced interest rates and is offering a six month deferral of repayments without interest or penalty.  

Assessing whether COVID-19 constitutes a force majeure will depend on the wording of the force majeure clause and circumstances of each project, especially in the absence of governmental direction for closure of construction sites or cessation of construction related activities.  

The standard form contract most commonly used in Bahrain is the FIDIC 1999 edition. Under the FIDIC Red Book 1999 edition, a contractor may be entitled to an extension of time if it can demonstrate that delay was a result of:

• unforeseeable shortages in the availability of personnel or goods caused by an epidemic or governmental action;
• any operations of the forces of nature which is unforeseeable or against which an experienced contractor could not reasonably have been expected to have taken adequate preventative precautions; or 
• a force majeure event.

The FIDIC Red Book 1999 Edition defines force majeure as an exceptional event over which a party has no control, could not reasonably have foreseen or reasonably avoided and is not the fault of the other party.  

The impact of COVID-19, and an assessment of whether the Epidemic will constitute a force majeure event, will vary depending on circumstances of each project (including the wording of the relevant clause and the governing law).  A party seeking relief will therefore be required to demonstrate how each event arising from COVID-19 is directly impacting performance and the measures taken to avoid costs and/or delay is likely to be expected.

The FIDIC Red Book 1999 edition also includes obligations on the contractor to issue a notice within fourteen days of becoming aware of the relevant force majeure event or pandemic. There is a further obligation to submit a detailed notice of claim. Provided notices are issued, and it is agreed that a force majeure event has occurred, a contractor should be entitled to extension of time for delay and may be able to claim any additional costs incurred until performance recommences. 

In the absence of a force majeure clause, a party can seek to rely on Law No. 19 of 2001 (the “Civil Code”). Article 608 of the Civil Code recognizes the concept of force majeure, allowing a party to terminate the contract where performance of the party’s obligation has become impossible.  In these circumstances, Parties may request the Bahraini courts to review provisions in a contract which directly result in the contract becoming commercially burdensome and/or uneconomic. The standard of proof in such claims is high and the court has discretion whether to reduce/modify party’s obligations.

Whether COVID-19 is considered to be a force majeure event or will have otherwise frustrated performance of the contract will be dependent on the terms of contract itself, in accordance with Article 127 of the Civil Code. The FIDIC Red Book 1999 edition describes two grounds which would need to be satisfied for the parties to be released from performance, namely an event or circumstance outside the control of both parties which: 

• makes it impossible or unlawful for a party to fulfil its contractual obligations; 
• under the applicable law, entitles parties to be released from further performance.  

Whether the impacts of COVID-19 reach this threshold will depend on the circumstances of the particular case. 

If the contract does not expressly provide for a force majeure clause, the party may rely on Article 608 of the Civil Code to terminate the contract (see Q3 above).    

No, the current measures are directions, recommendations and precautionary actions issued temporarily by the government at this critical time. 

No.