by Michael Pilkington and Peter Smith
As the economic slowdown continues to affect the Dubai construction market, there is no doubt that for much of the industry one inevitability will be an even greater squeeze on cashflow.
There will be many claims resulting either from the very large number of projects which have been running late or the increased focus on the quality of what has been delivered.
In respect of the latter, there has been concern for some time that the pace and scale of development in Dubai was storing up problems as contractors and consultants scoured the globe to find appropriately qualified and experienced individuals to construct, design and manage the very large number of mega projects running in parallel. Success or failure in proceedings may, for some companies at least, be the difference between survival and going to the wall.
A more adversarial culture is likely to pervade and will inevitably lead to a very close scrutiny of many agreements that have been entered into.
As the region has not really experienced problems of the nature before, many parties did not seek expert legal advice when entering into their contracts. They are therefore likely to find out now that the allocation of risk as between the parties is not quite as they might have imagined.
The advent of litigation or arbitration, whilst new and unwelcome to the region, should not damage it irreparably. The problems being faced are of a global nature.
Some foreign companies may choose not to return when the market improves but they will be outnumbered by those who do, enticed by the opportunities the region presents.
Developers, contractors and sub-contractors need to look closely at the contracts they entered into and will need to consider carefully the mechanisms and proper procedures if work is suspended or terminated.
If a dispute cannot be resolved by way of commercial negotiations, how has the resolution of disputes been provided for in the contract?
Some contracts may be standard construction type contracts with known dispute mechanism provisions but often the parties will not have given much prior thought to the consequences of disputes over payment, suspension and termination and how these issues are to be resolved, in the absence of any agreement, between the parties.
A retail client who purchased an off-plan property may fall back on the newly established Property Division of Dubai Civil Court.
As the economic slowdown continues to affect the Dubai construction market, there is no doubt that for much of the industry one inevitability will be an even greater squeeze on cashflow.
There will be many claims resulting either from the very large number of projects which have been running late or the increased focus on the quality of what has been delivered.
In respect of the latter, there has been concern for some time that the pace and scale of development in Dubai was storing up problems as contractors and consultants scoured the globe to find appropriately qualified and experienced individuals to construct, design and manage the very large number of mega projects running in parallel. Success or failure in proceedings may, for some companies at least, be the difference between survival and going to the wall.
A more adversarial culture is likely to pervade and will inevitably lead to a very close scrutiny of many agreements that have been entered into.
As the region has not really experienced problems of the nature before, many parties did not seek expert legal advice when entering into their contracts. They are therefore likely to find out now that the allocation of risk as between the parties is not quite as they might have imagined.
The advent of litigation or arbitration, whilst new and unwelcome to the region, should not damage it irreparably. The problems being faced are of a global nature.
Some foreign companies may choose not to return when the market improves but they will be outnumbered by those who do, enticed by the opportunities the region presents.
Developers, contractors and sub-contractors need to look closely at the contracts they entered into and will need to consider carefully the mechanisms and proper procedures if work is suspended or terminated.
If a dispute cannot be resolved by way of commercial negotiations, how has the resolution of disputes been provided for in the contract?
Some contracts may be standard construction type contracts with known dispute mechanism provisions but often the parties will not have given much prior thought to the consequences of disputes over payment, suspension and termination and how these issues are to be resolved, in the absence of any agreement, between the parties.
A retail client who purchased an off-plan property may fall back on the newly established Property Division of Dubai Civil Court.