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Can alternative dispute resolution tools reduce Middle East construction conflicts?

by Oscar Rousseau on Mar 31, 2018

Dispute resolution cases in the Middle East need a similar “quick fix” solution, Jackson said, adding: “We need something that can take place during the course of the project, not something that you store up until the very end of the project and then fight about for years. We need the cash flow [and...] to keep moving. And I still think the client wants somebody to make a decision, so I think something like adjudication, enforced by law, would work well in this region.”

Ahmed Ejaz, an energy engineer at Dubai-based energy consultancy Taka Solutions, who attended Construction Week’s Dispute Resolution Question Time, said there was a “lack of education” in the sector that was compounded by an “unwillingness to learn, explore, or adhere to contractual requirements”. He agreed with experts that said ADR development was needed in the region, and suggested a clause could be inserted into contracts between clients and contractors stipulating that disputes must go through a reasonable ADR process before being escalated to litigation. He also suggested both parties should “educate themselves about the contractual stipulations, roles, responsibilities, and what they are entitled to and when” to manage disputes and avoid them whenever possible.

Hina Pancholi Rao, the managing director of Expressions FZC, an interior design supplier to high-end hotels including Atlantis, The Palm, said there was a lack of help for small and medium-sized enterprises (SMEs) operating in the GCC: “In my opinion, if large contractors are pulling out of the UAE for lack of clarity on dispute resolution, clearly there is a lot of scope for improvement. Contracts are extremely one-sided, and with no legal help available to SMEs like ours, it is getting increasingly difficult for us to get our voices heard and, correspondingly, we keep getting bullied by our clients, most of whom have all the legal backing they can lay their giant hands on, because of their greater clout.”

Rao added that ADR mechanisms would be useful for smaller outfits such as Expressions FZC. “Mediation would be the best alternative dispute resolution mechanism, considering the highly avoidable cost of other mechanisms like arbitration,” she said.

There seems to be a clear preference for ADR within the market, but the moderator, Deloitte’s Hargreaves, said that the entire industry must think about how to avoid lengthy and costly dispute processes, so that contractors and clients in the GCC retained strong and long-lasting business relationships.

“I think it is very important to consider a formal dispute resolution process,” he said. “By that, I mean how to avoid it in the first place – that is what everybody would rather do. This industry, like any other, is built on the strength of relationships between contractors, employers, sub-contractors, and [other parties]. If one can find a mechanism to resolve a dispute [that] keeps relationships intact, [then] that has got to be a win-win for everybody.”