Dispute Resolution in Construction Contracts UAE
Construction Disputes in the UAE
Disputes and Litigation in the Construction Industry
The construction industry constitutes a considerable sector of national and global economies. Their services range from the erection of buildings to infrastructural development and facilities maintenance. With all these, the construction industry is estimated to account for more than 10% of global GDP.
The industry also employs nearly 300 million persons, or about 7% of the global workforce. In the United Arab Emirates (UAE), the construction industry represents over 10% of the country’s gross domestic product (GDP).
The UAE prides itself on high-class, sophisticated buildings, roads, plants, and so on. This makes the country the cynosure of the eyes of other countries. Even now, the country’s construction industry is growing at a rapid pace. In 2019 alone, the industry awarded contracts worth over $53.8 billion.
However, the industry also faces a high level of construction disputes and claims due to the size and complexity of construction projects. Currently, construction projects are the subject of more claims than at any other time in history. The majority of construction claims come from road and building projects. They represent 65.33% of the total number of construction claims.
These disputes can be quite expensive though, especially when they are allowed to fester or are mismanaged. To ensure that your organization can save time and money where construction disputes are concerned, it is usually best to work with experienced attorneys who can ensure that these disputes are resolved quickly, amicably, and in a way that protects your rights.
Causes of Disputes in the Construction Industry
In any human endeavor, disputes are inevitable. The construction industry is no exception. However, how disputes are handled can make or mar companies and organizations. Disputes also generally tend to hinder development. As such, construction contract disputes can be one of the factors that cause a decline in the industry’s productivity.
It impacts the delivery of project objectives and strains relationships between contracting parties. Additionally, disputes disrupt the flow of work, resulting in extra costs, delays, and other negative impacts. It’s therefore essential to understand the root causes of disputes in the UAE construction industry.
These causes vary from region to region and from country to country. However, there are some that are cross-cutting. They include contract ambiguities, defects, and inconsistencies.
It also extends to varying perceptions of contractual clauses which may not have been explicit. As such, it results in interpretational difficulties and opportunistic behavior, especially when unanticipated risks are experienced.
Take the Covid-19 Pandemic lockdown as an example. The pandemic impacted economies and resulted in several cut downs. It also resulted in the downsizing of investments that affected construction contracts already in existence.
For instance, having a situation where daily work is unable to continue due to the pandemic. Yet, construction workers want their pay since this is not their fault. This would create tension between the employers and the workers.
Similarly, an existing contractual agreement may be withdrawn due to the impact of the pandemic. Therefore, construction industry employers may have the challenge of paying off their workers.
The causes of disputes in the UAE’s construction industry may fall under any of the following categories:
- Owner related: This includes variations initiated by the owner, change of scope, late giving of possession, unrealistic expectations, payment delays, and so on.
- Contractor-related: Delays in work progress, time extensions, quality of work, and so on can cause disputes.
- Design related: Disputes may be a result of design errors, inadequate/incomplete specifications, quality of design, availability of information.
- Contract related: Different interpretations of the contract provisions, risk allocation, and other contractual problems.
- Human behavior related: Lack of communication, lack of team spirit.
- Project-related: Site conditions, unforeseen changes, weather, etcetera.
- External factors: This includes legal and economic factors, fragmented structure of the sector.
How to Resolve Disputes in the Construction Industry
Generally, the most frequently used methods to resolve disputes are litigation, negotiation, mediation, and arbitration – not necessarily in that order. Usually, negotiation is the first step in trying to resolve a dispute. If that fails, other measures come into play.
With negotiation, the disputing parties meet (usually the owner’s representative and the contractor) and try to resolve the dispute at its early stages. Here, there is no independent third party involved.
If negotiation fails, the parties go on to mediation or arbitration. Sometimes, negotiation comes up after protracted litigation. This is after the contending parties observe that continuing with litigation consumes more time and resources with no clear winner emerging.
When negotiations fail, parties may resolve their disputes by involving a mediator. The mediator must be neutral and fair to all parties involved in the dispute.
The role of the mediator is to bring the parties together. If the mediator sides with one party or have an interest in the outcome of the mediation, his role is compromised. At that point, the parties may seek a fresh independent mediator.
During the mediation, the parties make efforts to reach an agreement. The mediator may try to bring clarity on thorny issues. This could help all parties understand the situation better and possibly get more insight into the other side’s position.
The mediator may also make suggestions and may even propose a final solution. However, the mediator has no power to make a final, binding decision. As such, the parties may accept or refuse the mediator’s decision.
This is a process where a private tribunal of the parties’ choosing determines the disputes formally. The outcome of arbitration, otherwise known as an award, is final and binding on the parties. Often, the award is also private and therefore confidential.
During the arbitration process, each party has the opportunity to present its case. After that, the arbitrator gives a decision based on facts and laws guiding the contract.
Arbitration is generally faster than litigation. It is also cheaper for all parties involved. Moreover, its’ decisions are easier to enforce than that of a mediator’s. The final award is binding, and the parties have no choice but to adhere to it.
Traditionally, courts are the final arbiter of all disputes. Litigation usually comes on when all other options have failed. The parties may also resort to litigation if they believe they cannot get justice or relief by other means. Litigation is thorough, legally binding, and enforceable.
During litigation, the construction contract is crucial to resolving the dispute. The court analyzes who bears the risk, which party is primarily at fault, the extent of the loss, and so on. In doing that, it reaches a decision and settles the aggrieved party.
Connect with Our Lawyers UAE in Dubai For Dispute Resolution in Construction Contracts
At LawyersUAE, our construction lawyers have comprehensive, extensive, and specific knowledge of the construction industry and other construction-related matters.
Our construction attorneys are renowned for helping clients across the entire construction industry. We take the time to understand the needs of our clients. Then, we carefully assess the case, explain the legal situation, and provide advice on the steps to take.
Our lawyers help to both prevent and resolve construction contract disputes in the UAE. We do this by providing our clients with creative, practical legal advice that focuses on their commercial and strategic objectives. Our team of UAE construction law experts are highly experienced in all aspects of construction disputes and we have experience of handling complex construction litigation cases.
Our experience includes the full scope of dispute resolution and litigation mechanisms. From negotiation, mediation, and conflict resolution to sturdy courtroom strategy, class, and multi-party action lawsuits, as well as appellate proceedings.
Contact us today for assistance in any construction law-related disputes. For urgent calls, you can reach us on +971506531334 or +971558018669.