This article was featured in our 2023 Construction Arbitration Report, which is part of a series of industry-focused arbitration reports edited by Jus Connect and Jus Mundi.
This issue explores the construction industry and presents a goldmine of information based on data available on Jus Mundi and Jus Connect as of May 2023. Discover updated insights into construction arbitration and exclusive statistics & rankings, as well as in-depth global and regional perspectives on construction projects, disputes, & arbitration from leading lawyers, arbitrators, experts, arbitral institutions, and in-house counsel.
THE AUTHOR:
Hashem Al Aidarous, Partner at Al Aidarous Advocates and Legal Consultants
The Significance of the Construction Industry in the UAE
Construction is one of the most dynamic industrial sectors in the United Arab Emirates (UAE) and plays a crucial role in the growth of the national economy. The UAE construction market is highly competitive, with the presence of major international players, valued at USD 101 billion in 2019 and is expected to reach a value of USD 133 billion in 2028. The construction industry in the UAE will continue to grow rapidly and attract foreign investment being supported by continued large-scale investment in infrastructure, commercial, residential and energy projects.
Special Nature of International Construction Disputes
Construction disputes require a particular treatment that differentiates them from other commercial disputes, as they are distinguished in several ways. They can be factually and technically complex, involving multiple parties, and large amounts of evidence. Construction disputes are inevitable, since differences in perception exist among the participants of the projects.
Available Mechanisms for Resolving International Construction Disputes Under the UAE Legal System
There are certain mechanisms for resolving international construction disputes under the UAE legal system. First, litigation before civil law- based UAE courts as well as common law-based courts of the Dubai International Financial Centre (“DIFC”) and Abu Dhabi Global Market. Second, arbitration, as the UAE is one of the principal international arbitration jurisdictions in the MENA region due to the issuance of the modern Federal Law No. 6/2018 on Arbitration that is based on the UNCITRAL Model Law. Arbitration institutions in the UAE include, among others, Dubai International Arbitration Centre (“DIAC”) and the ADGM Arbitration Centre Dubai is also known to be one of the top seven seats globally for international arbitration along with London, Singapore, Paris, and New York. Third, ADR such as negotiation, dispute boards and mediation. This article will focus on litigation before civil law-based UAE courts.
Challenges Encountered in Practice
Given the internationalization of the UAE construction market, there are, certain challenges encountered in practice when resolving international construction disputes. As major international construction projects often involve parties from diverse jurisdictions; the majority of construction contracts are drafted in English and are based on the FIDIC forms of contract with a noticeable widespread use of the FIDIC Red Book Construction Contract (FIDIC Conditions of Contract for Construction); and most of the practitioners, such as contractors, claim managers, quantity surveyors, or consultants, practice in English.
However, the official language of the courts in the UAE is Arabic and the applicable law in most of these contracts is UAE law. So, whether the dispute resolution forum is litigation or arbitration, parties will still need to address UAE law, which is based on civil law tradition and heavily influenced by Sharia principles, with which concerned legal practitioners in the UAE, such as judges, arbitrators, and legal counsel trained in common law jurisdictions are not familiar. This presents practical cultural challenges.
Further, the Courts generally assign experts to address technical issues and those important technical issues such as ‘as planned versus as-built’ schedule analysis, time impact analysis, time-slice windows analysis, excessive descoping, and the likes generally go unchallenged by the judge. The Court’s role is to verify whether an expert complied with due process throughout the reporting process, that is procedural scrutiny only. If the Court is satisfied, then it will generally endorse the expert report and the expert’s findings become part of the court’s reasoning. However, if the Court is to depart from the expert’s findings, then it must provide detailed reasoning for such departure.
Another practical challenge is the language, as court-appointed experts have to submit their reports to the Courts in Arabic and most of the registered experts’ command of English is limited.
The Court-appointed expert approach as discussed above may be suitable for low value cases that do not require sophisticated expert analysis; however, such an approach may not be suitable for high value and technically sophisticated cases.
Practical Tips
Having identified the various challenges encountered by construction claims in the UAE courts in general, some useful tips, not necessarily of a legal nature but rather practical, should be kept in mind.
First, to cooperate with your adversary to select an expert, as UAE Courts welcome parties’ choice of expert as interlocutory judgment issued by courts appointing the expert, which typically allows parties two weeks to mutually agree on an appointee.
Second, to cooperate with your adversary to agree on the expert’s mandate to be specific and not generic, addressing the issues in dispute as the mandate will then be adopted by the court.
Third, to prepare in advance to deal with the court-appointed expert, since the actual trial is before the expert. Parties need to identify the discipline of the expert required, engage in discussions with the adversary to agree on an expert and mandate, and robustly rebut and comment on the expert’s report.
Fourth, to commission parties’ own expert in addition to the court-appointed one, and to avoid submitting lengthy and detailed reports, because using simple language and brevity is key. Also, parties’ own expert needn’t submit their report directly to the court as it will hold little weight. It is preferable to appoint a qualified bilingual expert and, if not bilingual, to translate through a qualified Arab engineer into Arabic.
Fifth, to select a suitable lawyer. International law firms typically do not have rights of audience before local courts and have to retain UAE law firms with rights of audience before local courts. In this process, common pitfalls that may arise are that international firms may devise claim/ defense strategy in isolation of local firms, and they may prepare lengthy expert reports in English as it would be pleaded in common law courts or international arbitrations and then translate the same into Arabic by ill-suited translators, thus, eventually the message is lost. The solution for this issue is to preferably adopt solicitor/barrister team dynamics, in which an international law firm assumes the role of a solicitor and a local law firm assumes the role of a barrister. The local law firm is to have bilingual proficiency and a working knowledge of construction at least.
ABOUT THE AUTHOR
Hashem Al Aidarous is a Partner at Al Aidarous Advocates & Legal Consultants, holding triple qualifications as a Lawyer admitted by the Supreme Court of Queensland, an Advocate certified by the UAE Ministry of Justice, and an Attorney licensed by the New York Supreme Court. Specializing in Dispute Resolution, he focuses on international and domestic commercial arbitration, along with complex litigation within UAE Courts. Hashem’s expertise lies in the practice areas of Construction Law, Comparative Law, and Corporate and Commercial Law.
Find more data-backed insights in our 2023 Construction Arbitration Report
