GUEST COMMENTARY

In our experience, the average aggregate value of construction related disputes including counterclaims in 2019 across the GCC was between USD 50-70 million.

The causes of disputes varied but recurring issues and factors remain, such as ambiguously drafted contracts, poor contract administration by both sides as well as deeply rooted and adversarial positions.

Although dispute resolution mechanisms under construction contracts in the market have become more elaborate over recent years (i.e. DABs and mediation are becoming more prevalent), the majority of construction contracts still provide that disputes shall proceed to litigation or arbitration if an amicable settlement cannot be achieved.

The majority of construction-related disputes we advise on are settled through direct negotiation but some disputes inevitably proceeded to formal dispute resolution proceedings in respect of which a court of first instance decision can be expected in 9-12 months and an arbitral award in the region of 15-18 months.

COVID-19 and its continuing impact will undoubtedly be the fundamental issue for the industry to address throughout 2020.

Stakeholders are very sensibly collaborating to seek mutually acceptable solutions to the many and daunting obstacles caused by the COVID-19 pandemic including emanating from liquidity as well as supply chain and labour issues.

However, amicable and enduring settlements cannot always be achieved, so formal disputes will undoubtedly crystallize between parties at all levels of the supply chain. We expect the long shadow cast by the COVID-19 pandemic to remain over the construction industry for the foreseeable future.

All stakeholders therefore need to proceed with caution but should also be on the lookout for the opportunities that will undoubtedly emerge as the new normal takes shape.

EUAN LLOYD
Head of Construction & Infrastructure
Al Tamimi & Company