Dubai claims: the new regime

In the past few years the world has witnessed a construction boom of almost unprecedented proportions taking place in Dubai. Plans for 1km-high skyscrapers, underwater hotels and a galaxy of man-made islands have fuelled a much deserved fascination with the emirate’s grand designs. Due to Dubai’s insatiable appetite for development and up until recently its bottomless pot of gold, it is perhaps not surprising that few disputes concerning claims for additional time and payment ever survive for very long. But with the recession hitting Dubai, the boom has come to abrupt halt. In line with this, the way you handle disputes must change radically.

How it was

Perhaps even culturally, negotiated "win-win" settlements are much more consistent with the way in which business is conducted in Arab countries. And, up until recently developers had much more liquidity, the ability to draw down vast funds, and greater leverage based on a seemingly endless pipeline of new projects.

Frequently, potentially major disputes were ultimately settled over coffee or in the "majlis". This relative ease with which a negotiated settlement could be attained gave rise to a further sub-culture, one in which claims for additional time and compensation would not be adequately particularised or reasonably substantiated. Theoretical or "hypothetical" forms of delay analysis, and global approaches to the assessment of additional payment were relied on in many (but not all) cases.

Anecdotally, contractors might have submitted comparatively weak claims as a basis for negotiation, and would frequently recover either an adequate portion of the claimed extension of time, or an award of time without money, and the parties would continue their working relationship on the project and the many ensuing further projects thereafter.

Consequently, whereas robust and well particularised claims are not unheard of in Dubai, many contractors have become accustomed to preparing and tabling "thin" submissions in the aim of facilitating a negotiation. Furthermore, few have experienced at first hand the bruising reality of demonstrating entitlement in tribunal proceedings.

The new reality

Since the global recession landed in Dubai (and many other parts of the Middle East, for that matter) in November of last year, liquidity has deteriorated into a state of gridlock, creating an unprecedented cashflow crisis. As many of the ongoing and planned future projects were being cancelled or postponed, employers experienced significant reductions in their ability to apply leverage in terms of negotiating and settling disputes. At the same time however, due to a chronic inability to "deal out", the same employers – and their certifiers – have never had such a great need for reasons to not pay, whether such reasons are contractually legitimate or otherwise.

Contractors who submit weak, poorly substantiated, or "summary" claims for additional payment frequently gift the engineer or employer with many of the reasons they so desperately need to justify a refusal to make reasonable awards, more so in the many instances where the employer has the final word on any determination by the engineer.

A good number of ongoing major disputes in Dubai are being very well stewarded by extremely talented and competent people within the parties’ management teams, seeking and acting on good advice provided by consultants and legal advisers. However, old habits die hard, and many contractors – and their consultants – too readily advocate the old approach of preparing and submitting "negotiation documents" – little more than a theoretically framed complaint supported by a schedule of correspondence – as opposed to well formulated and particularised claims, in the hope that a deal with the employer will be achieved.

My colleagues and I are becoming increasingly involved in matters where previously prepared and submitted claims for additional time and/or payment have been rejected outright by the engineer or the employer, and have had to be extensively re-prepared and drafted to a level which provides both a firm platform for negotiation and a solid launch pad for any ensuing formal dispute resolution procedure.

Frustratingly, whereas carrying out a fully robust form of delay analysis or properly ascertaining and particularising claims for additional payment can be expensive, the associated costs are not nearly as prohibitive as those that are wasted in failed punts with weak submissions.

Moreover, in cases where the events and corresponding losses are analysed and ascertained as the works proceed, in real-time as it were, the associated costs can be minimised to a level where they are practically insignificant when considered in the context of the amounts claimed.

Construction professionals in Dubai and many other parts of the Middle East have up until recently relied extensively on cheap and cheerful means of formulating claims for additional time and money – but such methods are hardly cheap or cheerful. As the region deals with the hangover following what could possibly be the biggest, longest and most exciting party the world has ever seen, the professionals working within the market must realise that the old ways of dealing with claims are no longer fashionable with employers and developers.