UAE laws do not favour contractor

by Shikha Mishra

In light of the current economic downturn, contractors will have little legal recourse if payments for on-going projects get delayed, legal experts say.

The recent cancellation of the US $1.25 billion contract between Dubai-based Meydan and the Arabtec-WCT JV has led to concerns in the market over similar situations arising in the future and the legal recourse available to contractors.

Talking to Construction Week during a roundtable discussion held at the firm’s Dubai offices, Mark Blanksby, partner, construction and engineering, Clyde & Co, said: “Payments getting delayed will be a common feature in the market over the next six months. If the money isn’t there, there is very little a contractor can do about it. It is a risk they have taken. It is possible that certain contractors have taken payment security in the form of bonds or letters of credit, but that is extremely rare.”

As contractors cannot attach the money in escrow accounts, the only option they have is to chase payments.

“Under UAE law a contractor can claim property against his unpaid dues. But, it extremely difficult to get to that position as it requires a court order. The bottom line is that a contractor is left to chase the assets of the owner,” said Michael Grose, partner, construction and projects, Clyde & Co.

“Unfortunately, we will soon find out that insolvency laws are under-developed in the UAE. There is a huge inequality between a contractor and developer – if a contractor defaults, the employer has the ability to get the money from the bondsmen or the bank, conversely if the employer has to pay, there is no similar mechanism for the contractor.”

  1. my boyfriend was hired by an agency and is now in saudi arabia. he started working in an engineering company there since may 22, 2009. up to now he has not received any salary because his employer said that it’s just delayed. can he do something about this company not paying him his salary? can he end his contract now and just go to U.S. where his brother owns a construction company in los angeles, california? pls advice me on how to help him out….thank you very much

  2. Hi Len, sorry for this late reply…

    You have to indicate which State in the US your child was born or domiciled because Child Support is determined by the laws of such State.

    Child support actions is bacially anchored on the capability of the respondent (the father) to provide monetary support. Having said that, it would be futile therefore to run after a father who is incarcerated for most likely he is not earning anything.

    Actions or Petition for change of last name or reversion to former last name is an entirely different action from that of child support.

    Suggest you consult a US lawyer who are expert on Family Law of the State where you intend to commence these action.

  3. i agree with what you said Rey. pls give me some advice re US laws how to collect child support arrears, can i take my case to court, what if the ex husband is incarcerated? will there be a chance to take the child support case to court and change our last names to my prior name?

  4. I beg to disagree that UAE Laws do not favor contractors, rather it is failure of the lawyers to provide adequate protection to their clients.

    If the problem lies in the failure of the contractor to get payment due to failure of the project owners, the contractor could very well run after the client or the latter’s banks if adequate contract clause were put in place. The problem with common-law lawyers that predominates UAE, which is a civil law country, is their ineptitude to see light along the provisions of UAE Civil Code.

    Economic meltdown come and go, but while such cannot be considered “force majeure” that would provide relief , contractual clause on “extra-ordinary inflation or deflation” and appropriately defined therein could easily provide cover.

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