x Abu Dhabi, UAEMonday 22 January 2018

Construction disputes in Middle East drag on

Legal disputes between construction companies in the Middle East are the longest in the world as the region continues to struggle to deal with the fallout from soured mega projects.

Going nowhere: a pronounced escalation in stalled construction projects during the financial downturn has led to a plethora of protracted legal disputes. Jeff Topping / The National
Going nowhere: a pronounced escalation in stalled construction projects during the financial downturn has led to a plethora of protracted legal disputes. Jeff Topping / The National

Legal disputes between construction companies in the Middle East are the longest in the world as the region continues to struggle to deal with the fallout from soured mega projects.

According to the building consultant EC Harris, a backlog of disputes from schemes stalled during the downturn and a lack of qualified arbitrators and expert witnesses in the region meant last year that legal disputes took an average of 14.6 months to settle.

This compared with an average of six months in mainland Europe, 11.9 months in the United States, and 12.9 months in the United Kingdom. Only disputes in Asia came close in length to the Middle East at an average 14.3 months.

The delays are prompting firms to import specialists from outside the region in an attempt to get a speedier resolution, EC Harris said in its report taken from an analysis of the several hundred cases EC Harris's Contract Solutions and Arcadis Construction Claims Consulting teams handled around the world last year.

"The sheer volume of disputes in the Middle East may be a reason for this delay," said David Dale, the head of contract solutions for the Middle East at EC Harris. "There are a limited number of arbitrators and expert witnesses based in Middle East, so there has been, to some extent, a backlog of cases while respective parties counsel, experts and the arbitral tribunals' schedules can be coordinated."

"To relieve this backlog, parties have sought to appoint arbitrators and expert witnesses that live and practice outside of the Middle East, which has helped, but can still cause delay to coordination and availability problems," he added.

The amount of money firms were fighting over in the Middle East was also double the global average at US$65 million compared with $9m in the US, $27m in the UK, $25m in mainland Europe and US$39.7m in Asia.

The UAE is one of the largest centres for construction dispute resolution in the Middle East. Most cases go to arbitration at the Dubai International Arbitration Centre (DIAC), the London Court of International Arbitration at the DIFC or the Abu Dhabi Commercial Conciliation and Arbitration Centre.

"Since the downturn in the real estate market in 2008, the number of arbitration cases particularly for construction and real estate disputes in the UAE arbitration centres has increased massively," said Mohammed Kamal,a partner at Berwin Leighton Paisner'sproperty team, who also sits as an arbitrator at the DIAC.

"Based on recent reports, in the DIAC alone the number of cases has increased six-fold in four years from 77 in 2007 to 440 in 2011.

"Although it appears that the number of disputes in the market are beginning to tail off, over the last few years there have simply not been enough arbitrators in Dubai to deal with the sheer volume of disputes coming through the arbitration centres.

"All of this means significant delays in concluding a case. For larger and more complex cases, it is not uncommon for it to take up to a year after a case has been filed before the tribunal is formed and the file is transferred"

 

lbarnard@thenational.ae