How to avoid costly disputes in the UAE
Defining the subject matter of construction disputes is critical to reducing the economic impact of a dispute on a project, writes ICLO’s head of disputes Hassan Saeed Abaragh
According to a recent field study, the main sources of construction disputes in the UAE are variations initiated by the owner; obtaining permit/approval from the municipality and other governmental authorities; material change and approval during the construction phase; slowness of the owner in decision-making, and the short time available during the design phase.
The subject matter of the construction dispute is predominantly agreed on in writing with parties’ signature of FIDIC or FIDIC amended contract. However, the absence of customised drafts including medium to long term prediction of dispute scenarios, disagreement triggers and pre-agreed solutions might deprive parties in their long-term contracts from a wider definition of serial subject matters, framing jointly newly imagined and anticipated disputes.
Practically, parties will have to choose between one of two approaches: one option is they pre-define the potential cases of dispute based on the project particularities and issues faced by similar project developed earlier in the market (if any).
In this very specific case, all parties will gain a wealth of time and cost if parties’ lawyers are mandated to brainstorm jointly on the hypothetical scenarios of predictable and unpredictable dispute triggers, based on the project timeline and its different phases. The participation of consultants and eventually contractors is keen to create a synergy of ideas in which engineers can provide lawyers with descriptions of practical issues faced on the ground or expected to ineluctably appear for such project.
The early identification of potential legal uncertainties in the phases or steps of the project will therefore lead lawyers to focus their imagination on the identified legal risk spots, to provide parties with a solid contract that will be more solutions generator than conflicts originator.
Lawyers can also propose parties enlarge the scope of any dispute avoidance/adjudication board (DAAB) to advise primarily on the non-listed scenarios or interpret the listed ones based on the factual context. The new mechanism of dispute resolution in FIDIC 2017 is providing parties with this interesting option.
COVID-19’s impact on projects is the typical example in which empowered DAAB can gave the most fair and accurate interpretation of the agreement, especially if UAE law is applicable. In fact, instead of investing in a long arbitration procedure to come to the interpretation of the arbitral tribunal of Article 287 (1) UAE Civil several months (or years) after the initiation of the dispute, DAAB can immediately provide after a short term its objective interpretation of Article 287 of the UAE Civil Code stating: “if a person proves that the loss arose out of an extraneous cause in which he played no part such as a natural disaster, unavoidable accident, force majeure, act of a third party, or act of the person suffering loss, he shall not be bound to make it good in the absence of a legal provision or agreement to the contrary.”
On the other hand, parties can opt for a second approach if DAAB is not on board or if its scope of work does not include such a specific mandate. The detailed description of the scope of the dispute can be detailed post-incident based on the specific circumstances that will occur during the project’s cycle. This agreement should detail the defined subject matter to narrow it and expediate the arbitration procedure and reduce its cost.
Despite that practicality, this option has limited applicability given that the majority of the arbitration agreements are approved by parties at a very early stage and signed with the contract. As a result nothing prevents parties from adding to the common formula “all disputes arising or in connection with the contract” will be referred to arbitration …” a supplementary paragraph specifying that parties can agree in writing in due time about the particular definition of the scope of dispute or disputes that will be expectedly submitted to arbitration.
This flexibility in defining the subject matter of the dispute will be increasingly needed. Its disconnection from the early stage of the contract’s approval will rationalise the reflex of triggering costly arbitrations and will provide parties with an interesting alternative to reduce the economic impact of the dispute on the project.
