Access all areas

As Dubai's skyline continues to transform at startling speed, the legal landscape of the construction market is also changing. As a result, it may become easier for UK players to bid for work in this compelling market, although new entrants must still beware of Dubai's ongoing legal immaturity.

Although a change in the law will be required before this relaxation can be fully implemented, the prospect of being able to bid for projects without the wasted costs of setting up a local operation if the bid is not successful is likely to attract keen interest from overseas.

Many large projects are still in their early stages of development, for example Burj Dubai - planned to be the tallest building in the world on completion - Dubai Festival City, Dubai Healthcare City, Dubai Light Railway, The World, Jebel Ali Palm Island, Dubai Financial City and Dubailand. All of these are multi-million dollar projects.

The surrounding emirates (Sharjah and Abu Dhabi) and the other Gulf States (Qatar, Oman, Saudi Arabia and Kuwait) also provide work for companies based in Dubai and all are within easy commuting distance.

Abu Dhabi in particular is starting to compete with Dubai in the expansion stakes, with large commercial and residential developments planned. Abu Dhabi has immense oil resources in comparison with Dubai, which will help to ensure its success in this kind of development. The oil and gas sector in Abu Dhabi is also vibrant, as it is in Qatar, with the high oil price encouraging strong capital investment. North Africa and the Caspian regions are also benefiting from the oil and gas boom and the UAE provides a good base for these markets.

This surge of activity in Dubai and the region generally has led to strong interest from overseas contractors, including many from the UK. Those contractors may find that the current levels of work make it easier for them to enter the market than before.

Overseas contractors are generally required to establish a local company, usually in joint venture with a local partner, before being allowed even to bid for projects in Dubai. However, there are signs this may be changing. Dubai Municipality is reported to be allowing international contractors to bid for projects before establishing a local entity. Contractors with bases in Dubai's free zones are also being allowed to pitch for contracts, as are Abu Dhabi-based contractors without offices in Dubai.

Dubai Municipality is reported to be allowing international contractors to bid for projects before establishing a local entity

It is not just the scale and speed of development that will be an eye opener to contractors new to Dubai. Given the size and complexity of some of the projects, they may also be surprised by how little opportunity there generally is to negotiate the contract terms being offered. Parties will often be expected to conclude contract negotiations in much shorter timescales than they may be used to and to accept often quite onerous conditions without question.

Despite the glut of work for contractors, developers usually seem to have the whip hand in negotiations and many contractors are willing to accept this. This may come from a recognition that problems on contracts tend to be sorted out commercially, without resort to formal dispute resolution, mainly because of the relative immaturity of the legal systems in the region. Many developers also resist arbitration clauses in contracts or, if they do accept them, insist that the arbitration is conducted locally.

Perhaps as a reflection of this culture, there is much less variety in the forms of contract in use than in the UK, with the FIDIC 1987 4th Edition Red Book being the most widely used. There has been little take up of the new 1999 FIDIC Red Book, again an indication of the relative lack of focus on detailed contract conditions, even on the largest construction projects.

Dubai's expansion continues to gather pace at startling speed. The emirate's rulers have set targets for Dubai's population to increase from its current level of 1.5m to 5m by the year 2010 and there are equally ambitious plans for growth in areas such as tourism and financial services.

The new six-runway Jebel Ali international airport in Dubai is currently under construction and will be ready for its first flights by September 2007. It will have an eventual capacity of 120m passengers, twice Heathrow's current total of just over 60m.

Contractors who have experienced construction booms in the past will be familiar with the assumption that the detailed terms of the contract do not matter too much - that it will all come out in the wash and that losses on one project will be made up on the next one. This certainly seems to be the prevailing view in Dubai's current favourable climate. Cynics, though, will question whether Dubai's boom will turn to bust in the way that similar booms elsewhere in the world have done in the past. Given the wealth and the political will behind the boom, this still looks unlikely, but it will be interesting to see whether attitudes to contract negotiation and dispute resolution harden if the market takes a turn at some point in the future.