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Arbitration law back in Middle East construction contracts

Arbitration clauses cut from construction contracts in the Middle East are set to return to agreements following the introduction of a new arbitration law, engineers said this week.

The new arbitration law was passed on 1 September and allows hearings to be held in the Dubai International Financial Centre (DIFC) and upheld by the centre's courts.

The previous law insisted that arbitration awards were ratified by local Arabic courts and this led to arbitration clauses being axed from agreements as consultants and contractors did not want to take on this risk.

"I suspect this means that arbitration clauses will find their way back into contracts", said the head of one major consultancy based in Dubai. PricewaterhouseCoopers forensic investigations team's arbitration expert Anthony Morgan said there are several reasons why the law was introduced. "Firstly to attract business from the wider region and secondly to give confidence to local business."

The DIFC can now act as a centre for arbitration for the entire region eliminating the need for cases that do reach this stage to go to established centres such as Paris, London or Copenhagen.

Arbitration is an alternative to legal action. Each party agrees to the appointment of an independent arbitrator, or panel of arbitrators, who will hear the case and make an award. This award is binding.

It is typically used after dispute resolution measures such as mediation have failed. Mediation involves a third party working with both parties to reach a mutually agreeable solution.

Disputes are on the increase in the Middle East particularly in the UAE. Firms such as HPR have reported an increasing number of firms turning to them for project turnaround services. Project turnaround is a descriptive term used to describe the process of turning around a project that has run into difficulties.

"The first thing we do is work out exactly where the job is," said HPR regional managing director Kenneth Linn.

"Often when a project is locked in dispute the contractor and project manager will tell the clients what they want to hear. We work out the truth and assess the actual situation, we assess the problems and we work up a proposal as to how to turn it around."

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