Claims chaos threat hangs over industry

Delays and disputes in UAE’s construction industry are on the rise

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By  Sean Cronin Published  May 21, 2005

Construction claims in the UAE are rocketing as contractors are hit by project delays and contractual variations. With an estimated US $30 billion in ongoing construction projects, recent research indicates that live contractual claims could run to hundreds of millions of dollars. A report produced by the department of civil and environmental engineering at the UAE University reveals that the sector has been hit by more claims than any other time in history. By the end of last year, claims lodged by contractors within the UAE topped US $4 billion. The sharp rise in construction rows coincides with an increase in construction-related litigation reported by local lawyers. “We are seeing more claims in the region, principally at the main contractor/subcontractor level,” said Michelle Nelson, senior associate at legal firm Masons Galadari. “We are also starting to see claims coming through at the employer/main contractor level but to a lesser extent — possibly because contractors are often wary of disturbing established relationships. This increase is not really surprising given some of the contractual conditions that have, and continue to be, signed up to in the region, and the increasingly tough way in which contracts tend to be administered during their project life.” However, many contractors are still reluctant to launch legal proceedings against clients. Report author Dr Essam Zaneldin told Construction Week: “Most contractors are still too afraid to go to court because they know they can expect to receive more by negotiation and through mediation.” His report reveals that most claims arise from changes to the original scope of works, followed by claims arising from contractors taking on ‘additional’ works. While the global construction industry is well known for its adversarial approach to doing business, the tight timetables associated with many high profile projects in the UAE, could be creating even more potential for disputes to arise. Nelson said: “There will always be claims for variations, extensions of time and prolongation costs. In the UAE there is an environment where there is a huge number of projects ongoing at the same time, with completion tied to ambitious deadlines and stretched resources. “It is therefore not surprising that claims arise. The fact that they now appear more ‘visible’ is both a reflection of this and also an increasing commercial approach to the use of contractual mechanisms on the part of contractors and employers alike.”

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