Saudi Arabia: Arbitrating Construction Disputes In The UAE: The Process From Start To End

Last Updated: 1 October 2015
Article by Dean O'Leary

So you have taken your claim through the prescribed contractual procedures to try and resolve it amicably but this has failed.

Therefore, you find yourself with little option other than to commence arbitration proceedings, but you are not really sure what this will entail.

This article provides an overview of arbitrating a construction dispute. It is not intended to be exhaustive of the whole process, and clients should take advice from specialist construction arbitration practitioners when making or facing such a claim.

Introduction

Whilst arbitration may have its critics due to its duration and cost, commercial clients should not overlook the clear benefits, e.g. the flexibility of the process, option to choose the place (seat), confidential nature of the proceedings, detailed analysis of claims and defences, recoverability of legal costs (as a general rule), the perception that the parties will have their dispute heard in a neutral arena by specially selected arbitrators who have the appropriate level of experience and knowledge to handle complex construction disputes and that arbitral awards will be more readily enforced around the world than court judgments.

Starting the arbitration

To avoid a jurisdictional challenge at the very outset that arbitration proceedings have been commenced prematurely it is imperative that the initiating party ensures that: (i) the claim has crystalised into a dispute; and (ii) the dispute has met with all the pre-conditions to arbitrate (e.g. consider Clause 67 of FIDIC 1987 and Clause 20 of FIDIC 1999).

All too often we come across situations whereby an arbitration has been commenced but, upon investigation, the claim is either a new one which has not yet been disputed or has not yet run through the tiered dispute resolution process. This latter issue can become extremely complex when interim claims have been previously made and are then supplemented or superseded by 'new' claims, which may be said to be an embellishment of the previous claims, or are inextricably linked to them.

If the above criteria are met then careful regard must be had to the wording of the contract to see how arbitration should be commenced.

The agreement to arbitrate should be checked to ensure it is binding (for example, was it signed by persons who had express authority to bind the respective contracting parties to arbitration?). Careful consideration should be given whether the arbitration clause provides for an institutional or ad hoc arbitration. Whilst most experienced arbitration lawyers would generally like to work with institutional rules, this often depends on the particular institutional rules themselves, because some of them are not exactly comprehensive, comprehensible or user friendly, and uncertainty offers leads to disputes; hence, even more costs. Some inexperienced arbitration lawyers may be sceptical of ad hoc arbitrations, but experienced practitioners should be able to work with the tribunal in agreeing on the process and will often seek to adopt the UNCITRAL Rules to govern the process.

So the above checks have been made and you are now ready to start your arbitration, what next?

The arbitrationis started when the claiming party (the Claimant) issues a 'Notice to Arbitrate' (often referred to in institutional proceedings as a 'Request for Arbitration'). Some arbitration laws may be vague or even silent on when proceedings are formally commenced, so careful regard may be needed to this issue if the expiry of a limitation period is looming.

The Notice to Arbitrate should clearly state that it is a demand to arbitrate the dispute. It should also provide some basic details; e.g. names of parties and their contact details, inclusion and reference to the arbitration clause, reference to underlying contract, description of dispute,relief sought, details of compliance with pre-conditions, choice of arbitrator (if appropriate), details of language, law and seat of the arbitration.

If it is to be an institutional arbitration then registration fees for filing the Request for Arbitration will have to be paid.

Whilst institutional arbitrations allow for the responding party (the Respondent) to issue a response (by way of an Answer or Reply) and possible counterclaim, ad hoc proceedings generally do not cater for such a document (unless the arbitration clause has been drafted in considerable detail or the UNCITRAL Rules have been incorporated).

The next stage is the constitution of the arbitral tribunal. The arbitral tribunal may comprise a sole arbitrator, or, as is more usual for construction disputes, a three-person tribunal. If the mechanics for appointing a tribunal have not been set out in the arbitration clause, and if the parties fail to subsequently so agree (which may very well be likely once they are in dispute), the relevant provisions of the UAE's arbitration law will apply.

Along with retaining experienced arbitration lawyers, choosing a suitable arbitrator is crucial to the success of the overall process. As mentioned above, arbitration is a flexible process and the parties should take advantage of this flexibility by appointing suitably qualified and experienced arbitrators. Unfortunately, leaving institutions to appoint can sometimes lead to unsuitable arbitrators being involved in the process. Unlike the legal profession, there is little control or regulation over who may qualify and sit as an arbitrator in the region.

In our experience, the process of constituting the tribunal can sometimes become protracted due to challenges to party nominated and chairman arbitrators.

Whilst in an institutional arbitration the tribunal will be appointed by the institution, in an ad hoc arbitration the parties will be required to enter into a tri-partite arbitration agreement with each arbitrator.

In the case of an institutional arbitration advance fees for the institution's administration and tribunal's fees will have to be paid before the case file will be transferred to the tribunal.

The UAE's arbitration law provides that within 30 days of its constitution the tribunal is required to give notice of the date for the first (preliminary) meeting.

The parties and the tribunal will before, at, or after the preliminary meeting execute a document entitled the 'Terms of Reference'. This document is extremely important because it will set out the parties' respective claims and the issues to be decided by the tribunal, thereby defining the scope of the tribunal's jurisdiction. It will also with ancillary issues, such as what rules of evidence will apply, what expert evidence is required, whether the witness statements are to stand as evidence-in-chief, etc.

At the preliminary meeting, or shortly thereafter, the tribunal will issue a 'Procedural Directions Order' which will map out what each party is expected to do and when. One criticism of arbitration is that these timetables are often rescheduled leading to lengthy proceedings. However, there are often genuine reasons why the timetable may need to change.

It is quite usual for the tribunal to request the lawyers to present their respective 'Powers of Attorney' at the preliminary meeting.

The Team

Parties who are about to embark on a substantive construction arbitration should be aware that a team will be needed to handle the dispute.

The arbitration team will comprise: (i) the legal team (including possibly external counsel, more of which is discussed below); (ii) the experts (likely to include delay and quantum and possibly, technical, valuation, forensic accounting, and maybe legal); (iii) the client (including its in-house counsel, commercial and contracting staff); and (iv) witnesses of fact.

Picking the right legal team is crucial for several reasons.

Clients should be choosing their lawyers based not only on fees, but also on experience, knowledge and recommendations.

Construction arbitrations are legally and technically complex. It is essential, therefore, that the client carries out its own due diligence when appointing its lawyers. They should be wary of lawyers with little hands-on experience of arbitrating construction disputes, or those who are generalists who dabble in construction disputes from time to time.

The best due diligence a client can do is by carefully reading CVs/profiles, interviewing and obtaining references/recommendations. Watch out for words like "assisted", "involved", or "managed" in CVs/profiles; ask what these words actually mean.

Further, when choosing the law firm clients may wish to have regard to how the firm usually handles such disputes. For example, it may be alien to some firms to instruct senior English barristers (QCs) to advocate at a final hearing; whilst some firms may instruct external counsel as a matter of course for almost everything.

Most of the above apply to appointing experts and external counsel. In terms of both external counsel and experts, a crucial factor will be at what stage in the process should they be appointed.

Preparing for the Hearing

So the tribunal is constituted and the directions timetable leading to the final evidentiary hearing has been issued, what next?

In short, your appointed lawyers should lead in handling the process from start to finish.

Your lawyers will need to marshal the evidence, both documentary and witness (factual and expert).

It is not unusual for requests to be made for disclosure of documents from the other party (usually set out in the form of a Redfern Schedule). This is an extremely important facet of arbitration, because ordinarily in the UAE parties will only seek to disclose documents which support their own case.

The issues that the experts will be required to provide their opinion on need to be identified relatively quickly by the legal team and instructions issued accordingly.

Witness statements, if not taken already, should also be taken relatively quickly. Construction projects have definitive start and finish dates, so project staff will move on. Therefore, it is imperative that the key witnesses are identified early on and interviewed so that their evidence will not be lost.

The pleadings will need to be prepared and these can run to hundreds of pages, with volumes of exhibits, schedules and appendices attached to them.

As well as managing fees and other issues relating to the experts and external counsel, the lawyers will be involved in assisting the experts in the preparation of their reports (i.e. obtaining important documents, giving instructions on matters of law/contract interpretation, etc.). Sometimes, and especially with quantum and forensic accounting experts, confidentiality agreements may need to be executed to allow experts to review sensitive information.

In the build-up to the final hearing (which may involve a split hearing between liability and quantum (bi-furcated proceedings)), practical aspects such as finding a suitable venue, translators and transcribers will need to be arranged.

Immediately prior to the hearing the parties will usually be required to file written opening submissions. The tribunal will also likely fix the agenda for the hearing and deal with issues relating to the order of witnesses, whether experts should be allowed to sit in during the evidence of factual witnesses, whether experts will be required to give their evidence together, etc. All of this will normally be dealt with during a pre-hearing review.

At the end of the hearing the tribunal will normally state that proceedings are closed, subject to any final written closing submissions. Sometimes, but not very often, proceedings may be re-opened.

In substantive construction arbitrations closing submissions will usually be dealt with in two rounds, the first dealing with a party's substantive closings and claim for legal costs (if legal costs are an issue to be decided by the tribunal), followed by a second round which comments on the closing submissions (including claim for legal costs) made by the opposing party.

The Award and Enforcement

Whilst under UAE law the tribunal is bound to issue its award within the 6 months, the parties usually agree to grant the tribunal an extension to this period.

If there is a sole arbitrator then an award can usually be expected fairly quickly after the final hearing. However, if there is a three-person tribunal, with some or all of the arbitrators residing overseas, it can often take several months to receive an award. If there is an institutional body like the ICC involved, then there will be further time involved because the ICC will need to scrutinize the award before the award can be issued.

At some point the award will be issued to the parties. It is essential that once received it is carefully reviewed to check that it complies with the formalities of the UAE arbitration law, e.g. it is signed on every page, states the place where it was issued, includes the arbitration agreement. It should also be checked for arithmetical and typographical errors.

The dispositive part of the award will set out which party has won and what the losing party must do. Sometimes, the losing party will act on this and that will be the end of the matter. Unfortunately, that is not always the case. If the award is not complied with the winning party will have to take steps to recover its entitlements.

Whether the award is a foreign (seated and issued outside the UAE) or domestic (seated and issued within the UAE) will determine what laws apply to the enforcement process.

In the UAE, the enforcement of a domestic award involves: (i) the ratification of the award; and (ii) the execution of the ratified award.

In terms of the appropriate forum for enforcement, and following recent case law, the DIFC Courts now seemingly offer a viable alternative to having domestic awards (both 'on-shore' and 'off-shore') enforced and then taken across to the Dubai Courts for execution, thereby possibly by-passing the legal arguments that could otherwise be deployed in the defence of ratification proceedings (e.g. consider Article 216 of the UAE Civil Procedures Code) in the local courts. However, this is a new development in this area of law and it remains to be seen how the Dubai Courts will act in the future.

Summary

Arbitrating construction disputes can be a lengthy process, which inevitably leads to greater cost, but this is due to the fact that construction disputes are technically and legally complex, involve multiple parties, involve projects which span many years and involve the review of thousands of documents and numerous witnesses (factual and expert).

Therefore, it is imperative that a party gives careful consideration to the process, the applicable laws and its team.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions