The passage of Law No 16 of 2011 in Dubai allows for parties to voluntarily opt for common law courts of the DIFC to settle their disputes.
Given the nature of the industry – where one contract between developer and contractor often mutates into a number of contracts with the subcontractor – the passage of the law enabled the DIFC-LCIA (London Court of International Arbitration) regulatory regime.
A number of contractors and developers have recently opted for this jurisdiction, even though it must be noted that as per Article 216 of the UAE Civil Procedures Code, arbitration proceedings can be challenged at the time of enforcement. Even in the best of times, there are always likely to be disputes, an occurrence that spikes when there is a slowdown in the industry, as we have witnessed in the last few years.
Claims often take a number of years to settle. This is partly a function of the pricing and the economics that is embedded into the contract, which is a lengthy process to renegotiate given the changing economic circumstances. Equally likely is the fact that there are a number of parties involved in the dispute, especially when there are a number of subcontractors, one or more of whom may not have completed their obligations.
Given the technical nature of the contracts, this process can become lengthy, and often a recourse to the DIAC (Dubai International Arbitration Centre) and/or the DIFC-LCIA platform is advisable. This is to facilitate the mediation process and to pinpoint responsibility and specific performance.
Similarly, there exists the Abu Dhabi Commercial Conciliation and Arbitration Centre with an equally helpful set of tools to facilitate the mediation process. Of course, this may not be the optimal result at times, and there are damages that can be awarded for failing to adhere to contractual terms.
The nature of disputes in the construction industry have had the consequence of more detailed and lengthy contracts being penned between the parties that take into consideration the changing nature of economic and industry specific nuances.
Whether it relates to an individual landlord awarding a contract for building his house, or a developer awarding a contract for a multi-unit dwelling, the specific entry of legal expertise at the inception of the negotiation process goes a long way towards avoiding a conflict later in the proceedings.
Given the nature of complexity involved in the transaction, it is always advisable to enter into detailed contractual provisions, removing ambiguity wherever possible. And it is heartening to note that both the DIFC as well as the DIAC assist in this process in gaining the requisite clarity needed in contractual provisions to reduce the impact and incidence of such disputes.
It would appear that despite the rise in litigation the regional construction industry experienced in the last year, the outlook is positive. Improved contracts and implementation of mediation forums in the region should lead to more efficient resolution of construction disputes and, ultimately, a more mature contractual environment going forward.
It is of little surprise that the disputes themselves can also serve as a business opportunity for some. PWC, one of the big four consultancies, acquired HLP Consultancy, a firm that specialises in construction and contracting disputes, in 2016. Moves such as these likely foreshadow an industry-wide pattern of gaining expertise in this area given the importance the sector has in the economy.
Given the importance of the construction industry, it is likely that disputes will always be a part of the system. Going forward, all stakeholders would be well advised to take into consideration the various options that they have within the legal framework to minimise the duration of such contentious disputes.
And thereby increase both the efficacy and the profitability of their contractual agreements.