Construction legal disputes most costly in Middle East

Legal disputes in the Middle East construction industry are now taking over a year to be resolved, according to study from EC Harris.

The global built asset consultancy said it has found that construction disputes in the Middle East are taking, on average, 14.6 months to be settled compared to just nine months in the previous year, an increase of 62 percent.

Its annual study into the duration, value, common causes and resolutions of construction disputes across the globe showed that the Middle East continued to experience the highest value disputes at an average of $65m, followed by Asia at $39.7m.

Average global dispute values fell by $500,000 to $31.7m, down from $32.2m in 2011. Disputes in the US had the lowest value at $9m, while in the UK disputes more than doubled in value from $10.2m to $27m.

David Dale, head of Contract Solutions, Middle East at EC Harris said: “Construction projects are increasing in complexity, so when a dispute materialises, it can be just as complex to initiate the formal dispute resolution procedure which is resulting in many disputes spanning a year or more.

“The sheer volume of disputes in the Middle East may be another reason for this delay. There are a limited number of arbitrators and expert witnesses based in Middle East, so there has been, to some extent, a backlog of cases while respective parties counsel, experts and the arbitral tribunals’ schedules can be coordinated.

“To relieve this backlog, parties have sought to appoint arbitrators/expert witnesses that live and practice outside of the Middle East which has helped, but can still cause delay to coordination and availability problems.

“Dispute values tend to vary year on year and but they do indicate that with many billions of dollars being spent on construction, particularly in the Middle East, it is likely that high value disputes will continue to be a feature in international markets.”

The research found that the top five causes of construction disputes in the Middle East during 2012 were failure to properly administer the contract, failure to make interim awards on extensions of time and compensation, employer imposed change, contract selection was not a ‘best fit’ when compared to the project’s characteristics and third party or Force Majeure events.

EC Harris said the most common methods of resolution in the Middle East are party to party negotiation, followed by arbitration and adjudication which is largely due to frustrations with the arbitration and possible enforcement process which results in a greater number of parties agreeing to the negotiation strategies.

Dale added: “The greater stability experienced in the region is one of the key reasons for third party or force majeure events dropping to fifth place as a reason for dispute.

“Outside Libya, Syria, Egypt and occasionally Bahrain, the region has settled back down which has allowed construction projects to proceed with less disruption from outside events. I think this trend is likely to continue, with a gradual increase in the number of disputes in such places as Qatar, Oman and the Kingdom of Saudi Arabia.”


Arabian Business

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