Unfortunately a range of pressures on the construction industry means that disputes are inevitable. Materials prices have soared over the past 12 months with steel rising by up to 60% and cement rising by more than 20% in the same period. In addition, inflation has hit 14% in the United Arab Emirates putting enormous pressure on salaries.
These issues coupled with a culture of lump sum contracts and demanding timescales mean that a large number of contracts are coming in considerably over budget.
As the market matures and more projects reach the final stages the number of disputes is rising. The authorities have recognised that there is a need for legal recourse or arbitration in the worst case scenarios.
From September a new arbitration law comes into effect. It brings Dubai's processes in line with international best practice and negates the need for decisions to be ratified by local courts. Instead the Dubai International Financial Centre courts can hear any referrals that cannot be resolved through arbitration and which require legal hearings.
This means that the arbitration clauses that have increasingly been axed from contracts should start to find their way back, a necessary step for the protection and security of all involved. In a market where the huge demand for consulting and construction services means that new international firms are circling the sector seeking opportunities, the introduction of a modern arbitration process is a positive step.
But to avoid getting to this point in the first place more must be done to encourage clients to employ mediation and other dispute resolution methods such as dispute resolution boards. When brought in at the beginning such parties can pre-empt potential arguments, deal with them swiftly and ensure that the project does not become a mess of claims and writs by the end of the construction phase.
- Bernadette Redfern is a civil engineer and former features editor of Middle East Economic Digest