How to solve construction disputes

Stephen Oehme: Mediation is sometimes a very beneficial tool.
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With disputes on the rise, is it time to establish more mediation forums in the region? CW talks to various industry experts to find out how they’re dealing with the situation and what else is available before opting for costly court hearings.

As the level of construction related disputes in the region continues to rise, contractors and developers should consider using mediation forums to resolve disputes before raising costly court or arbitration proceedings.

While there is currently no official mediation centre for construction related disputes in the UAE, parties may nevertheless opt to fly qualified mediators into the country from other jurisdictions such as the UK.

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Mediation can provide more commercially flexible solutions than binding court judgments or arbitration awards. Furthermore, fees for the service are significantly lower than the sums at stake should the dispute be referred to formal litigation or arbitration proceedings.

“The pool of local mediators with good experience of large scale construction disputes is currently small, so one option is to bring in mediators from abroad, probably from the UK.

This is not a cheap option, but where substantial sums are at stake, the cost of a mediator is not significant”, says Stephen York, head of dispute resolution at Lovells Middle East.

York would support the introduction of an official mediation centre in Dubai for construction related disputes. A law implementing an “Amicable Disputes Settlement Centre” in Dubai for property disputes has already been passed, however so far there are no indications of a similar centre being set up for construction related disputes.

Stephen Oehme, of Hyder Consulting, agrees that a mediation centre specialising in construction disputes could be extremely valuable to the region.

“The mediation route has been introduced in many places in the world and is sometimes a very beneficial tool”, he says. “Construction is so involved and so difficult compared to many other commercial issues and this adds to the time and expense of litigation.”

Oehme also believes that due to the technical nature of construction cases, specialised mediators may have a better understanding of the issues involved than judges or arbitrators. A clear understanding of the technical issues will, in turn, facilitate achieving a fairer resolution for all parties.

“Sometimes, especially in construction cases, the issues can be very technical and clarity is obscured by lack of expertise. In these circumstances mediation can provide a far better solution for both sides.”

The rising level of construction disputes in the region is mainly attributable to late payment by developers to contractors. Loss of revenue in the off-plan sale market has left many developers unable to meet payment deadlines specified in construction contracts.