One of the largest construction disputes in the Middle East showed signs of coming to an end yesterday after four years of legal wrangling.
Meydan Group, the private developer behind the world's largest horse racing complex, and Arabtec, the country's largest listed construction company, said that they had agreed to hold talks aimed at reaching a settlement in their long quarrel over the contract to build a vast extension to the Meydan racecourse in Dubai.
The announcement came as Arabtec said, separately, that Riad Kamal had resigned as chief executive and had been replaced by the managing director Hasan Ismaik. It also said it was undertaking a Dh4.8 billion (US$1.3bn) rights issue to raise funds for new projects.
Arabtec and the Malaysian contractor WCT Berhad originally won the multibillion-dirham contract to build the lavish Meydan development in September 2007, at the height of Dubai's construction boom.
But Meydan cancelled the contract 16 months later, saying the contractors had not kept to the construction timetable. The racecourse, which hosts the Dubai World Cup, includes a 60,000-seat grandstand and a five-star trackside hotel.
The decision to cancel the contract prompted Arabtec and WTC to launch a Dh2.8bn arbitration action against Meydan. Meydan responded with its own Dh3.5bn counter claim.
In a joint statement, the two parties agreed to withdraw their cases from the Dubai International Arbitration Centre while negotiations were in process.
"Four years of legal proceedings have failed to make sufficient progress so we have decided to find a faster and more practicable way forward to resolve matters," the Meydan chief executive, Saeed Humaid Al Tayer, and the Arabtec managing director, Mr Ismaik, said.
"We are determined to reach an amicable agreement over all the outstanding claims and counter-claims. This is a very welcome initiative and we remain optimistic, confident and committed to reaching an amicable out-of-court settlement."
The news comes as property experts point to an increasing number of out-of-court settlements over legal disputes resulting from the global financial crisis.
The collapse of property prices in late 2008 in the Emirates produced a rash of legal disputes between builders and developers over delayed projects as financing dried up and investors withdrew. But few have come into the public eye.
"It is very unusual for these cases to become public and this case has only come to public knowledge because Arabtec is a listed developer and so must inform its shareholders," said Craig Plumb, the head of research at Jones Lang LaSalle's Dubai office. "But we have been involved in a number of these sorts of disputes and it is clear that the number of cases each year runs into the hundreds.
"We are definitely seeing more and more of these cases settling out of court ... Part of the reason is that there is more money coming into the system so people can afford to make payments and also the increasing market confidence means that companies now want to press ahead with new projects rather than arguing about old ones."
Arabtec this month said it had moved a number of its operations from Dubai to Abu Dhabi after the Abu Dhabi Government-owned Aabar Investments increased its stake in the company last year and took seats on the board.
In a separate statement announcing the rights issue, Arabtec said it proposed to raise debt of up to Dh1.6bn to fund a 27 per cent increase in new projects it was awarded last year as well as the ones it was awarded so far this year.
In its year-end results, published yesterday, the company said the total value of the contracts it was working on grew last year from Dh14.1bn to Dh17.9bn - and increased even further to Dh21.4bn when including new contracts, such as the Abu Dhabi Louvre, awarded this year.
Gross profits rose slightly to Dh575 million off the back of sales of Dh5.6bn - a 15 per cent increase on the previous year. But the company said net profits were hit by administrative expenses.
"Arabtec now has the right platform to take the business to the next level of its development, by applying our core competencies and skills to other growth sectors and markets, " Mr Ismaik said.