Leaders UAE 2016: Dispute resolution in the GCC
It is essential to ensure that dispute mitigation procedures and contracts are administered correctly during the early stages of a project, according to Scott Lambert from Al Tamimi & Company
When it comes to disputes related to the construction industry, the UAE has witnessed an exponential rise in the number of cases. Reasons for this vary from late payment issues to contract administration. And it will continue to rise if the current issues with contracts and payments are not addressed, said Scott Lambert, head of construction and infrastructure at Al Tamimi & Company, at the Leaders in Construction UAE Summit.
“At the basis of every single dispute is time and money. It should always be considered that the person who is in a better position to manage the risk should bear it. So, when a person is entrusted with a job that he is unable to manage, a dispute is bound to take place," he said, adding: “In the UAE construction sector, currently less money and time is being spent on the early stages of a particular project. It is not imperative that the lowest tender is the best tender.”
Documents like letters of intent (LOI) and letters of expression (LOE) can often cause discrepancies. Problems often arise when they are written without the necessary strict contractual purpose and precision.
Lambert continued: “Such letters are intended to have contractual consequences. The language isn’t formal, there is ambiguity, hence there is mismatch of expectations. And there lies the potential for a dispute.”
Often the construction faces a variety of problems, including design risk and variation risk. One of the major areas of strain between the employer-contractor relationships is the problem of slow payment.
Lambert said that there are various ways of solving such problems — one of them being to act in good faith. “Good faith has an important part to play in the region. It should be mentioned in the agreement, stating that [the parties both intend] to carry out the project in good faith.”
Another solution to avoid disputes, according to Lambert, lies in early warning provision. “Both parties will give each other a warning if they come to know of any impact on a project that they are working on. The time and cost for the project may get impacted due to several reasons; both parties should be made aware of it. It’s a collaborative cause, and develops a greater sense of trust,” he explained.
A dispute can be avoided if the project has a reliable engineer. Lambert said: “The first barrier of a dispute will be an engineer — he makes the initial certification and determination. Projects that have a good engineer will have less likelihood of a dispute.”
It is therefore essential to ensure that dispute mitigation procedures and contracts are administered correctly, and that the construction industry adopts new and innovative ways of preventing, mitigating and quickly resolving disputes.
He added: “Sometimes, not enough concentration is given to the making of a contract; a standard document is rolled out time and again. For making a good contract, we have to look at what the project is, what are its requirements, and also how the people are going to manage and use it.”
Lambert concluded by saying that adequate emphasis must be given to the initial contracts for a project in order to offset the chances of a dispute.