Analysis

Expert insight: A pathway to efficient resolution of construction disputes

Jed Savager and Angus Frean of Pinsent Masons examine clarifications to arbitration law in the UAE

Arbitration remains the preferred forum for finally resolving construction disputes in the region, though both in the region and internationally there are concerns that the process could be more efficient and cost-effective.

This has been the focus of a recent arbitration survey on how efficiencies might be driven in international construction disputes, undertaken by Pinsent Masons in partnership with Queen Mary University.

The survey can be read here.

It draws on feedback from users of construction arbitration both in the Middle East and internationally.

One of the key messages from respondents to the survey was that the effectiveness of pre-arbitral decisions depends on the ability to enforce these on an interim basis, so as to foster a ‘pay now argue later approach’.

Given the predominance of FIDIC in the Middle East, the most common forms of pre-arbitral decision in the region are Engineer’s decisions (FIDIC ‘87) and decisions of Dispute Adjudication Boards / DABs (FIDIC ‘99). Under both FIDIC ‘87 and ‘99, the parties are required to promptly comply with decisions, i.e. they are “binding” unless and until revised in arbitration. If neither party issues a notice of dissatisfaction, they are “final and binding”.

In the event of non-compliance, and to drive efficiency in the arbitral process, the party seeking to enforce the decision might well consider applying to the Tribunal for an interim award pending its decision on the substance of the dispute, to apply pressure consistent with the ‘pay now argue later’ philosophy.

Until the introduction of the new Federal Arbitration Law in the UAE in June 2018, there was considerable uncertainty as to whether tribunals had the power to issue interim awards and the extent to which these would be recognised or enforced by the courts.

This has been clarified by the new law, which now expressly gives the Arbitral Tribunals power to issue interim awards and for the courts to enforce them. This is a welcome step towards a ‘pay now argue later’ approach and one that will improve efficiency in arbitration.

A word of caution in relation to FIDIC ‘99, however, is that the Singapore Court has previously cast doubt as to whether FIDIC ‘99 permits the Tribunal to enforce pro tem DAB decisions which are binding but which have not become final and binding. That position has been clarified in the 2017 FIDIC contracts, which now make clear that the Tribunal may enforce compliance with decisions that have either become binding or that have become final and binding.

In terms of drafting and negotiating contracts, it would be worth seeking to reflect that wording in contracts based on FIDIC ‘99, to reduce the opportunity for argument later and to provide the best prospects of enforcing compliance with decisions, using the express powers now afforded to arbitrators to issue interim awards under the new law.

In short, the introduction of the power to introduce interim and partial awards under the new Federal Arbitration Law now provides the option to enforce binding decisions (even if disagreed with) on an interim basis to obtain early receipt of funds, a strategy which may also encourage early settlement of disputes and avoid the time and expense of pursuing the arbitration to a final arbitration – and is certainly something that should be borne in mind by parties when formulating their strategy for the resolution of disputes.

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