Arabtec-WCT begin Meydan arbitration

Firms are seeking compensation over an alleged breach of contract

The joint venture won the contract to construct Meydan's race course in September 2007.
The joint venture won the contract to construct Meydan's race course in September 2007.

The region’s largest listed construction conglomerate, Arabtec Holding, and Malaysian engineering firm, WCT Berhad, have initiated arbitration proceedings against Dubai-based Meydan over an alleged breach of contract for cancelling a deal in January.

The joint venture won the contract to construct Meydan’s race course in September 2007.

According to previous reports on WCT Berhad’s website, the company is seeking US $460 million (AED1.69 billion) in compensation from Meydan.

Arabtec has still not announced its compensation amount but it is expected to be around the same amount.

Speaking to Construction Week, Arabtec Holding CEO Riad Kamal said: “The proceedings could take a year or longer, to resolve outstanding issues.”

On Saturday, Arabtec Construction announced the formation of a joint venture with two Saudi partners to establish Arabtec Saudi Arabia.

The Saudi participants include CPC Services, a member of the Saudi Bin Laden Group, and Prime International Group Services.

Arabtec will have a 45% stake in the partnership with CPC and Prime holding 35% and 20% respectively.

“The aim of Arabtec Saudi Arabia is to play a key role in ongoing construction and infrastructure in the country,” said Kamal.

He added that the company’s first project, which has been secured by CPC, would be in Riyadh and projected turnover for the new subsidiary in its first year would be around US $400 million (SAR1.5 billion). This was expected to grow to around $934 million in two to three years.

The new venture, which took only a month to form, is expected to compensate for the slowdown in construction in the UAE, where Arabtec has been a key player.

“The reason why this happened so quickly is because we have very fast-tracked projects in Saudi Arabia,” said Moutaz Sawaf, the chief executive of CPC Services.

“We approached Arabtec a month ago and it was the right time and the right place. We [CPC and the Saudi Bin Laden Group] are exhausted. We need new people who are trained and can get on site immediately and Arabtec is well known. We have a backlog of work and we needed a company that could start right now.”

The company has a backlog of projects worth $10.6 billion, including $2.7 billion for Russian oil producer Gazprom’s headquarters in St Petersburg, which it is awaiting final approval for.

Series of events

May 2007: Prequalified contractors (Al Basti & Mukta, Arabtec, Khansaheb Civil Engineering, Al Futtaim Carillion, Al Naboodah Laing O’Rourke, Dutco Balfor Beaty, Samsung Corporation, Ssangyong Engineering and Arabian Construction Company) invited to bid for Meydan Racecourse project.

June 2007: UAE-based firms, Al Dhafrah Pipeline & Contracting Company (APCC) and National Services & Contracting (NSCC), start piling work on the Meydan project.
Malaysian Teo A Khing Design Consultants is appointed as the consultant.

August 2007: Al Naboodah Laing O'Rourke begins preparation works at the site in August.

September 2007: Arabtec and WCT joint venture awarded construction contract for Meydan project.

February 2008: Local firm Dubai Contracting Company (DCC) is awarded the contract to build a mixed-use tower at the new Meydan City development in the Ras Al Khor area.

August 2008: Local firm Mammut Building Systems is awarded a contract to build the business park at the Meydan development at Nad Al Sheba.

October 2008: India's Afcons awarded a contract to build an interchange serving the Meydan racecourse development in Nad Al Sheba.

December 2008: Arabtec receives notice from client calling for cancellation of project.

January 2009: Arabtec announces that the client, Meydan, has cancelled the contract to build the Meydan racecourse project.

March 2009: WCT and Arabtec announce arbitration proceedings with Meydan.

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