UK: UAE Construction Arbitration: Time for a Revolution?

Last Updated: 8 April 2008
Article by Richard Harding

First published in ‘The Brief (UAE)’ in March 2008.

Almost every construction contract in the UAE contains an arbitration agreement. This is a result of a lack of faith in the court system. However the industry does not have much more belief that arbitration can resolve its disputes in a rapid, reliable and cost-effective manner. It is not unknown for construction arbitrations in the region to take years to resolve, with costs of many millions of Dirhams being borne by the losing party. Is there a better way?

Negotiation

As a result of the deficiencies in the dispute resolution mechanisms currently available in the region, the vast majority of claims are dealt with by negotiation. However, the claiming party is in a very weak position if he cannot demonstrate a credible intention to obtain an arbitration award. All too often a contractor will accept a deal which involves him simply dropping his claims in return for the employer not deducting liquidated damages. If the employer has in fact caused the delay, the contractor is simply giving up his entitlement, no doubt in the hope that he will recover his losses on the next project.

Even for employers, such a deal is only of short-term benefit. In a booming construction market there is strong competition for the few contractors who have the resources and expertise to deliver a high quality result on time. Employers do not want to alienate such contractors, and will want to be perceived as treating them fairly. However this is not easy where claims are traditionally inflated in anticipation of a horse trade.

Mediation

Mediation is promoted as being quick and cheap. However, it is rarely successful in the Middle East. The primary difficulties here are: first, many parties in the region want a binding decision, rather than the responsibility of agreeing a settlement; and secondly, there is little belief that the party claiming money will take the dispute to court or arbitration, so that there is no ultimate obligation to pay a substantial sum.

Alternatives

One solution to this dilemma is to look to developments in dispute resolution outside the region, where sweeping reforms have taken place over the last 10 years. The main developments are:

  • Adjudication
  • Practice in the Technology and Construction Court in England
  • ICC paper on saving time and cost in arbitration
  • IBA Rules of Evidence
  • 100 day arbitration

Adjudication

Adjudication was introduced in the UK in 19981 and is now the principal means of resolving disputes in the construction industry. It involves referring a dispute to an adjudicator, who must issue a decision within 28 days, subject to any agreed extension. The adjudicator’s decision is then binding on the parties, and the English courts will enforce compliance, with no right of appeal on fact or law. However, either party retains the right to have the dispute re-heard in court or arbitration, as appropriate. In fact, the vast majority of parties to adjudication are satisfied that the adjudicator’s decision is just and do not pursue the matter further.

In order to operate successfully, adjudication requires both a statutory framework, giving a right to adjudicate, and the cooperation of the courts to enforce adjudicators’ decisions with the minimum of interference. However, it seems that there is currently little governmental support in the region for adjudication and therefore little prospect of it being introduced, at least for the foreseeable future. If it were to be brought in, the lack of experience of the courts in matters of this nature would then provide a further formidable obstacle.

There are, however, lessons that arbitration can learn from the experience of adjudication in UK (and elsewhere). First and foremost is that parties are generally happier with a short-form procedure than with a full examination of every issue. Secondly, it is possible for disputes to be dealt with fairly, in a much shorter period than had previously been believed possible. Thirdly, the techniques which have been developed in adjudication, such as lists of issues and questions prepared by the adjudicator, could also be applied to save time and cost in arbitration.

Technology and Construction Court

The UK construction industry is fortunate in that it can call on the services of a specialist court to resolve its disputes, namely the Technology and Construction Court ("TCC"). The judges of this court are all highly experienced and respected specialists in the construction field, with the judge in charge having been an engineer, leading Queen’s Counsel and international arbitrator.

English court procedure still suffers from the poor reputation it gained before Lord Woolf’s reforms in 1998. However, the Technology and Construction Court Guide2 can now be viewed by both judges and arbitrators as setting out best practice in many areas of complex adversarial dispute resolution. Clear guidance is given on such matters as dealing with expert evidence, when to order preliminary issues, preparing trial bundles, chessclock hearing timetables, opening and closing submissions, and the use of transcript writers.

It is also worth noting that the TCC can hear international matters, and in appropriate cases the judges of the TCC are available to sit as arbitrators3.

ICC paper on saving time and cost in arbitration

In the spring of 2007 the Commission on Arbitration of the International Chamber of Commerce issued a publication entitled ‘Techniques for Controlling Time and Cost in Arbitration’4. It sets out what amounts to internationally recognized good practice in relation to the management of arbitration proceedings. There are many who consider that the paper could have gone further, but it contains sound, basic guidance.

Two of the most important recommendations in the paper are that in order to save time and cost, parties should engage lawyers with experience of conducting arbitrations, and they should appoint experienced arbitrators with strong case management skills. In fact, appointing a single suitable arbitrator is often better than having three who are less able. The hourly rate of appropriate lawyers and arbitrators may be higher, but the overall savings are invariably considerable.

IBA Rules of Evidence

It is not uncommon for arbitrations, which are conducted by inexperienced lawyers before inexperienced arbitrators, to become bogged down in procedural issues regarding how evidence is to be dealt with. However, such arguments can be avoided by considered use of the International Bar Association’s ‘Rules on the Taking of Evidence in International Commercial Arbitration’5. These are commonly adopted in international arbitrations, and set out detailed guidance on such matters as the disclosure of documents, the service of experts reports, and oral and written witness testimony. Considerable time and cost can be saved by simply adopting these rules (amended as necessary).

100 day arbitration

It is obvious that the longer the proceedings, the more they are likely to cost. If arbitrations can fairly be completed in a shorter period, the parties will get their result sooner, and the cost burden and risk will be reduced. ‘100 day arbitration’ is the name given to a procedure which sets a short timetable, starting from the service of the defence (or defence to counterclaim, if there is one). This gives both parties a fair initial opportunity to present their case.

Example directions for a ‘100 day’ arbitration have been published by the Society of Construction Arbitrators6. These include provision for a hearing lasting no more than 10 days, 7 days for closing submissions and 28 days for the award. If a period of more or less than 100 days is required, then this could be agreed by the parties (or by the arbitrator, if given the power to do so). However, the fundamental point is that substantial and complex arbitrations can be dealt with far more quickly and efficiently than has traditionally been the case.

It should be noted that by the time a dispute has arisen, one of the parties will have a vested interested in resisting any short-form arbitration procedure. Such requirements will therefore have to be included in the dispute resolution provisions of the contract.

Conclusions

There is no quick fix for arbitration in the Gulf. However, since the fair resolution of disputes is a necessity for both the construction industry and the wider economy, the development of techniques such as 100 day arbitration must be seen as the way forward.

Footnotes

1. Housing Grants, Construction and Regeneration Act 1996, Part II

2. http://www.hmcourts-service.gov.uk/docs/tcc_guide.htm

3. See Section 18 of the TCC Guide.

4. http://www.iccwbo.org/uploadedFiles/TimeCost_E.pdf

5. http://www.ibanet.org/legalpractice/Arbitration.cfm

6. http://www.keatingchambers.co.uk/resources/publications/2004/100day_arb_procedure.aspx

The articles and papers published by Keating Chambers are for the purpose of raising general awareness of issues and stimulating discussion. The contents must not be relied upon or applied in any given situation. There is no substitute for taking appropriate professional advice.

For further information on how our members can assist you, please contact the Senior Clerks, John Munton and Nick Child, in the first instance, on +44 (0) 20 7544 2600. They and their teams of Clerks will be pleased to advise you on the member of Keating Chambers appropriate to your requirements.

© KEATING CHAMBERS

http://www.keatingchambers.com

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
 
In association with
Related Topics
 
Related Articles
 
Related Video
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