Construction Disputes in Middle East

The Middle East has long been a hub for ambitious construction and infrastructure projects. From mega-cities in the Gulf to high-speed rail lines and energy facilities, the region has witnessed unprecedented growth. However, these large-scale undertakings also give rise to legal complexities and disputes—often involving delays, payment issues, or breaches of contract. In this context, arbitration has become a leading method of dispute resolution.

This article explores how construction disputes are addressed in the Middle East and why arbitration is increasingly favoured by contractors, developers, and state entities alike.

Why Construction Disputes Are Common in the Middle East

• Project Scale and Complexity: Multibillion-dollar projects often involve dozens of stakeholders, including international contractors, consultants, and suppliers.
• Regulatory Differences: Legal systems across the region differ widely (e.g., civil law in Egypt, Sharia-influenced laws in Saudi Arabia, common law in DIFC).
• Contractual Variations: Use of standard forms like FIDIC is widespread, but local amendments often lead to ambiguity.
• Payment and Delay Issues: Cash flow constraints, delayed approvals, and unclear timelines contribute to friction.

Common Types of Construction Disputes

• Delay and Disruption Claims: Disputes over the cause and impact of delays.
• Variation Orders: Changes in scope without proper documentation or agreement.
• Defective Work Allegations: Claims involving design or construction quality.
• Termination and Liquidated Damages: Disputes arising from wrongful termination or enforcement of penalty clauses.
• Unpaid Invoices and Bank Guarantees: Financial disputes including wrongful calls on performance bonds.

Arbitration as the Preferred Dispute Resolution Mechanism

Arbitration is widely used in the Middle East construction sector for several key reasons:

• Neutrality and Fairness: International parties prefer a dispute forum that avoids potential local court biases.
• Confidentiality: Especially important in reputationally sensitive sectors like real estate and infrastructure.
• Specialised Expertise: Arbitrators can be chosen for their technical or industry-specific knowledge.
• Enforceability: Arbitral awards are recognised under the New York Convention, to which most Middle Eastern countries are signatories.

Key Arbitral Institutions and Forums

• DIAC (Dubai International Arbitration Centre): Widely used in UAE-based projects.
• DIFC-LCIA: Merged with DIAC but continues to offer common law-based arbitration under DIFC jurisdiction.
• QICCA (Qatar International Centre for Conciliation and Arbitration)
• Cairo Regional Centre for International Commercial Arbitration (CRCICA)
• ICC and LCIA: Frequently selected for high-value, cross-border construction disputes.

Legal Trends and Regional Nuances

• Saudi Arabia: The Saudi Center for Commercial Arbitration (SCCA) is gaining traction, and recent legal reforms support greater arbitration autonomy.
• UAE: The 2018 Federal Arbitration Law aligns with UNCITRAL principles and supports arbitration-friendly practices.
• Qatar: Arbitration is governed by Law No. 2 of 2017, providing a modern legal framework.

Practical Considerations for Stakeholders

• Arbitration Clauses: Ensure that contracts include clear and enforceable arbitration clauses, with attention to governing law and seat.
• Document Management: Maintain proper records of variations, approvals, communications, and project timelines.
• Expert Witnesses: Technical testimony can be pivotal in delay and defect claims.
• Early Legal Intervention: Dispute boards or early neutral evaluation may prevent escalation.

Final Thoughts

Arbitration offers a robust and reliable mechanism for resolving construction disputes. Understanding regional nuances and institutional options is crucial for stakeholders navigating high-stakes projects.

At RBN Chambers, we assist clients across the Middle East in navigating construction-related arbitration. Whether you are a contractor, developer, or government agency, our team is equipped to safeguard your interests in complex dispute scenarios.