Legal resolution

A service provider's contractual life-cycle is usually lengthy and can last several years. It is therefore inevitable that disputes over payments or q

The UAE Minister of Economy Sultan Bin Saeed Al Mansouri announced in May that a draft federal arbitration law is expected to be passed this year, which could attract future investment in the region.

Industries are expected to benefit from the new bill, which is set to propose thorough regulation of domestic and international arbitrations and the arbitration process as a whole.

So how will it affect the FM sector?

A service provider’s contractual life-cycle is usually lengthy and can last several years. It is therefore inevitable that disputes will arise during that time.

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For example, the supplier may not be meeting guaranteed service levels, there may be no agreed guaranteed service levels in the first place and payments may not have been made for the service provider’s work.

Arbitration will still be used as a technique to resolve these disputes when the latest bill is approved, but contract lawyers in the Middle East are predicting that the new law will fill in some of the gaps, which have been missing important guidelines.

“Up until present, different centers of arbitration across the seven emirates have set down their own arbitrary regimes, leading to a great deal of discrepancy and uncertainty for parties in dispute,” says Galadari and Associates senior legal consultant for projects and construction Leonora Riesenburg.

Some positive initiatives under the legislation include the incorporation of a fairer process of selection of an arbitrator.

“The parties at dispute are given more sway over the organisation and formation of the panel, with the court of law only having to be called upon to fill any gap that might occur in the case of failure to agree. These provisions seek to redress issues of conflict of interest and integrity in the justice framework,” explains Riesenburg.

The new bill will also give parties the right to elect an arbitrator before the work starts, as well as at the time of dispute. Currently, if the client and FM contractor prefer to adopt arbitration as a method of resolving disputes, they must say so when they are negotiating contractual terms.

“This is a wholly new revolutionary concept. In theory the parties will therefore be entitled to vary the original ‘dispute resolution’ terms and conditions. In the case of non-agreement the remit will be with the tribunal,” she adds.

Another benefit clients and FM contractors can gain from the legislation is that, subject to certain specified exceptions, the arbitration award will be deemed final and binding. This eliminates the risk of court proceedings after the event. Arbitral awards on late payment will therefore bring the matter to a timely close.