This month’s contract question comes from a company considering work in Dubai, and wondering about the differences in construction contract legislation. Mark Watson explains:
The question
Our company is thinking of starting work in Dubai. What is the legal and contractual structure like, will we need to retrain and learn FIDIC? How different is the contractual and commercial landscape in the Middle East?
The answer
Construction and development remain significant features of the economic landscape in the Middle East and Gulf Cooperation Council (GCC). As you might expect, workers and companies from around the world are drawn to this vibrant and rapidly changing region. They come to work and experience projects that might not be happening elsewhere.
However, after the honeymoon period, construction companies and teams soon discover distinct differences in performing construction projects in the Middle East compared to projects ‘back home’.
These distinct differences often, if not always, turn on matters of cultural customs. If not properly understood, the same differences can result in construction projects experiencing time and cost overruns. In turn, these become expensive disputes to resolve.
The cost of ignorance
The costs around construction disputes are laid bare in the Dubai International Arbitration Centre’s 2023 report. With over AED 5.5bn (£1.14bn) in new disputes registered in the region, a notable 67% of the total value stemmed from the construction value chain. A large proportion of those (40%) specifically originated from disputes relating to construction contracts.
The adage ‘prevention is better than cure’ is apt for the construction sector in the Gulf. Yet, we still find companies entering the sector, struggling to adopt a proactive approach to understanding:
- Local customs.
- How standard form contracts interact with the law.
- Common contractual and commercial pinch points.
The common thread is often a lack of access to suitably experienced mentors. Finding people who possess a strong understanding of regional customs relating to the principles of contract management is extremely important when negotiating and executing construction projects.
Read the full response in the Construction Management Magazine.
If this is something you need support with do get in contact with the team at Decipher – A DeSimone Company.