Interviews

Legal eagles: Construction disputes in the Middle East

Middle East Consultant speaks to Berkeley Research Group’s Craig Gibson about disputes in the construction sector, legal framework and the firm’s growth in the region

Craig Gibson

The Berkeley Research Group (BRG) was founded in 2009 in Emeryville, California and today has over 1,000 employees spread across 41 cities and six continents. The professional services firm offers economic and litigation consulting and advisory and strategy services, ranging from class action litigations to forensic accounting investigations. The firm also offers big data analytics across sectors including construction, healthcare, telecommunications, energy, natural resources, financial services and public policy.

In the Middle East, BRG mainly focuses on international and domestic arbitration in the construction sector, and offers strategic intelligence for the benefit of regional government authorities.

Ahead of the first anniversary of the firm’s new office in Dubai, Middle East Consultant caught up with Craig Gibson, senior managing consultant, to talk about construction disputes and the state of the industry.

Q. Talk to us in brief about the disputes you tend to get involved with, and your focus in the region
Globally, we are involved in all manner of major disputes. Our focus in the region will be on supporting international and domestic arbitrations, and we’ll be leveraging the international reputation of Michael Kenyon (managing director, Dubai) as a leading quantum expert.

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Q. BRG recently set up an office in Dubai. What prompted the decision, and had the company been involved in disputes in the region prior to setting up an office in Dubai?
Our expansion in the region has been sustained over many years; in fact, BRG has an established office in Kuwait focusing on advising regional government strategies. The construction team in our Dubai office comprises professionals with many years of experience in the region, many of whom have worked together previously on disputes in the UAE and beyond. This has expedited the formation process and quickly given our clients the confidence to engage us on complex, high-value disputes across the region.

Q. What is the unique proposition you’re offering to the market and to regional clients?
BRG prides itself on being a professional services firm led by its professionals. As a group of professionals and leading experts already established and recognised in the region, we are familiar with the practitioners, market and regional nuances. As a new company, we are in the unique position of being independent of many of the conflicts of interest found in a growing market.

Q. What’s your take on the UAE construction sector at present, and how do you see it evolving in the next year?
The market is maturing, and that brings with it oscillations that seem to get more attention in the UAE than they perhaps would in other markets. The UAE construction sector still has a number of macro developments and flagship projects underway, and indications are that the backlog of construction projects are coming online again but with more streamlined margins. This is to be expected in a maturing market with more sophisticated monitoring, auditing and taxation procedures being introduced.

Q. What are some of the key reasons disputes occur on projects in the UAE and wider GCC region?
Generally, every construction project is unique and relies on a multi-party organisation that has never worked together before – and has competing aims and objectives – to deliver a large, complex product. Clients can further complicate this as design and requirements change, and a regional legacy from oil & gas projects is that design development is often carried out via shop drawings which the client must approve, which acts as a vehicle for client re-engineering.

Other common factors include unrealistic project timetables, unrealistic and unachievable solutions, and an unfortunate tendency to negotiate now and worry about the details later. Most of these issues could be avoided if contracts were better administered on-site, and if claims made on-site were better substantiated and explained.

Q. How common are disputes in the construction sector in the current market? Has the volume of disputes changed recently for any particular reason?
Disputes in the construction industry are common, and there is a link between the economy and the amount of arbitration. By way of example, as the economic crisis caught up with the Middle East towards the end of the last decade, the Dubai International Arbitration Centre reported twice as many cases in 2009 as in 2008.

The regional economy has been investing heavily in infrastructure, power plants and construction projects over recent years. By virtue of the volume of large projects underway and a lower oil price than forecast at the outset of many of those projects, the market has a number of regional disputes to be resolved, and owing to the size and complexity of many of these projects, arbitration may be required.

Q. What are the challenges your organisation and staff face when working on disputes in the Middle East?
A lack of records and data is a major inhibitor to demonstrating the position of disputing parties in construction. In-house, BRG has world-leading forensic software to liberate data and support class action litigations, which we regularly use in other sectors, but at present the construction industry is not sophisticated enough to benefit from this technology. This requires that we manually syphon through various sets of documents purportedly in support of the same claim, which through human error are sometimes contradictory to one another or simply not reliable enough to support a claim.

Q. Are there any changes you would like to see made to the legal system in the GCC, from the perspective of the work that you do?
There has been much attention given to the amendment of Article 257 of the Penal Code by Federal Law No. 7 of 2016, which means arbitrators found to breach their duty of neutrality and integrity could potentially be punished by imprisonment. We understand this is in the process of amendment and repeal.

We also understand that the UAE is enacting a new federal arbitration law based on the UNCITRAL Model Law and associated international standards by the end of 2017. This is a strong step for the UAE and a testament to its leadership, and is expected to increase confidence in the arbitration process. This in turn will hopefully encourage further foreign investment and strengthen the UAE’s position as a regional arbitration hub.

Q. What are BRG’s plans for the next two years? Is expansion into other countries in the region on the table?
Our focus is on attracting the best talent and growing a flat, lean team to serve our clients. Our focus at the moment is on growing a quality, multi-faceted team in Dubai, which will bolster our established office in Kuwait. Should we open offices in other countries, it will be composed and necessary growth.

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