Peace in our time

How do you reduce construction disputes in the UAE?

Daniel Brawn.
Daniel Brawn.

Research has shown that construction disputes in the UAE are the second-longest in the world, due primarily to poor contract administration.

It is expected that the UAE will pledge $1tn worth of construction projects over the next decade, so it is crucial to consider the causes of construction disputes and to understand the solutions.

The industry is notoriously litigious as margins are tight and the risks are high. The boom prior to 2008 was fuelled by easy credit, but credit has been far tighter since the collapse and a more robust legal framework has been put in place.

The industry in the UAE is confronted by numerous procurement routes and a great diversity of culture and languages. Although the FIDIC “rainbow suite” is commonly used, many contractors are unfamiliar with western forms of contracts and agreements are frequently signed without actually being properly read. The requirement to have a local sponsor is perceived as restricting competition and the freedom of movement of workers.

There is a perception that engineers do not adhere to the strict terms of the contract and are likely to favour the client who is paying them.

There are also frequent complaints in relation to cashflow constraints, and particularly that contractors do not receive sufficient payment in the early stages to be able to carry out works effectively. Often, materials must be ordered and paid for way in advance, but the costs are not recovered until months later.

Design-build forms of contract are generally the preferred procurement route, with a fixed-price, lump sum and then a schedule of amendments or “Special Conditions” attached to the standard form of contract, which shifts risk to the contractor. This type of contract provides single-point responsibility and greater certainty for the employer.

However, this means that the contractor’s price is higher and the introduction of changes will push the price up, generally take time to implement and generate disputes. This creates an adversarial atmosphere, which pushes the parties into entrenched positions.

PFI and PPP models seek to maximise the potential of a project but the costs of participation are high, certainly in the short term.

Effective contract management can reduce the incidence of disputes; but once a dispute has crystallised, effective dispute management is required. The standard FIDIC contracts have a lengthy dispute resolution process. Once arbitration has commenced, the process tends to be slow and in any event an arbitral award cannot be enforced until it has been ratified by
a judge.

The advent of Building Information Modelling (BIM) will lead to more collaborative working between the project partners from the design stage onwards, reducing the need for changes and wastage.

Forward planning among a design team is dealt with by means of “protocols” and a BIM Execution Plan, which establishes the outputs that are expected and sets out the design process.

BIM is an excellent tool for coordination to assist in the development of the design, identify clashes between responsibilities and to avoid problems that may arise before and during construction. Above all, the BIM model demands clear communication between all parties involved. What is required is a new construction model.

The UAE’s proposed new Arbitration Law will help. However, the introduction of statutory adjudication along the lines of the UK model would provide value and help to reduce the UAE’s current poor record on delays.

Daniel Brawn is a senior associate at Dubai-based law firm Galadari Advocates and Legal Consultants.

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