TABLE OF CONTENTS

INTRODUCTION
1. What is the substantive and procedural legal framework relevant to construction
disputes in the UAE? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. What is the form of a Construction contract ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3. Is the Engineer a party to a construction contract ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. Is the contractually agreed duration of a defects liability period binding
under UAE Law? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
5. What is the Contractor entitled to claim if a project of works is not completed ? . . . . . .3
6. What is the time limit for bringing a claim against the Contractor for defects
discovered or collapse of a building or fixed installation? . . . . . . . . . . . . . . . . . . . . . . . .3
7. Would a clause setting out a time limit to issue arbitration proceedings bar a
Contractor from commencing these proceedings against the Employer after the
passage of that time bar? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
8. How soon should a claim arising out of a construction contract be lodged and what
is the time limit for doing so under UAE Law ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
9. How soon should a Contractor notify the Employer that unit rates and quantities
need to be increased for the completion of the project or of one of its aspects ? . . . . . . .4
10. Is a Contractor entitled to claim loss of profit as part of its claim against
the Employer? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
11. Can a Subcontractor claim directly against the Employer for anything that is
due to him from the Contractor? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
12. Should a Subcontractor be paid upon of the completion of its work irrespective of
whether or not the Main Contractor has been paid ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
13. Are construction disputes referred to arbitration in the UAE? . . . . . . . . . . . . . . . . . . . . .5
14. Can an arbitral award resolving a construction dispute be challenged or nullified
before the UAE Courts at the request of the losing party? . . . . . . . . . . . . . . . . . . . . . . . .5
15. What are the most important aspects of an Arbitration Clause in a construction
contract or subcontract? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
16. What UAE law procedural aspects should parties to a construction contract or
subcontract be aware of during arbitration proceedings? . . . . . . . . . . . . . . . . . . . . . . . . .7
17. In construction disputes resolved through arbitration, what is the time frame for
issuing an arbitration award under UAE Law ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
18. How can an arbitral award resolving a construction dispute be enforced on the
loosing partys assets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
19. Are legal costs and relevant expenses incurred in arbitration proceedings
recoverable by the successful party to a construction dispute? . . . . . . . . . . . . . . . . . . . . .8
20. Can one of the parties go to Court in a dispute on a Construction contract
with an Arbitration Clause? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
ANNEX A: MODEL CLAUSES OF CONCILIATION AND ARBITRATION . . . . . . . . . .9
ANNEX B: EXAMPLE OF PERFORMANCE GUARANTEE FORM . . . . . . . . . . . . . . . . .9
ANNEX C: EXAMPLE OF SURETY BOND FOR PERFORMANCE FORM . . . . . . . . . .11
ANNEX D: EXAMPLE OF GUARANTEE FOR ADVANCE PAYMENT FORM . . . . . . .12
ANNEX E: EXAMPLE OF TENDER FORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
APPENDIX TO TENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ANNEX F: MAIN CONTRACT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
ANNEX G: SUBCONTRACT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
APPENDIX TO SUBCONTRACTORS OFFER . . . . . . . . . . . . . . . . . . . . . . .22
ANNEX H: RULES OF COMMERCIAL CONCILIATION AND ARBITRATION OF
THE DUBAI CHAMBER OF COMMERCE & INDUSTRY : . . . . . . . . . . . . .23
UAE CONSTRUCTION LAW AND DISPUTE RESOLUTION
INTRODUCTION
Construction contracts form an integral part of the economy and development of
many countries including the United Arab Emirates (UAE). It is essential that such
contracts should be undertaken on conditions that hold a fair balance between the
interests of the employer and the contractor and which reflect the role of
independent consulting engineers. Construction disputes are generally complex
with many interwoven issues involving multiple claims and counter claims which
arise mainly because of the uniqueness of the construction contract itself.
Construction disputes normally involve large sums of money and this results in the
parties attempts to pursue vigorously all issues and engage in extensive legal
arguments to overcome technical shortcomings. The number of construction
projects and related contracts has increased substantially in the UAE over the last
decade. This has inevitably given rise to significant numbers of claims either
between contractors and owners / employers or between contractors and sub-
contractors. These disputes are resolved either by way of conciliation or arbitration
predominantly held in the English language, with specialist arbitrators appointed
due to the technical nature of the aspects involved
Litigation is a less preferred mode of dispute resolution in the construction
industry, although there are a number of Court rulings on important aspects of
construction law. As a consequence of this, focus on construction law is increasing.
We address below some of the most often encountered issues in construction law
related disputes.
1. WHAT IS THE SUBSTANTIVE AND PROCEDURAL LEGAL FRAMEWORK RELEVANT TO
CONSTRUCTION DISPUTES IN THE UAE?
Articles 870 to 896 of the UAE Civil Law No. 2 of 1987 (the Civil Code) relating
to construction works, as well as general maxims and principles set out in the
same law, form the basis of the legal framework relating to construction.
In addition, the provisions of the UAE Commercial Transactions Law No. 18 of
1993, (the CTL) would also apply to the extent that the parties to a
construction claim can be defined as traders carrying out commercial business
in accordance with Articles 6 and 11 of the CTL.
Specialised laws and Decrees - such as Law No. 6 of 1997 relating to contracts
with Government Departments in the Emirate of Dubai.
Articles 203 - 219 of the Civil Procedure Law (Law No. 11 of 1992) (the CPL)
relating to Arbitration and appointment of arbitrators as well as authentication
of arbitral awards.
Various Rules of Arbitration and Conciliation as promulgated by Abu Dhabi,
Dubai or Sharjah Chambers of Commerce & Industry, Dubai or other
Municipalities, International Chamber of Commerce, etc.
There are discussions for the promulgation of a Federal Construction Law
implementing a building code the absence of which has been identified as a
major handicap within the local construction industry.
Construction Law in the United Arab Emirates 1
2. WHAT IS THE FORM OF A CONSTRUCTION CONTRACT ?
Construction contracts are usually set out in FIDIC (Federation Internationale des
Ingenieurs Conseils - International Federation of Consulting Engineers) forms.
These are standard forms of contract that are periodically revised (e.g. the FIDIC
1998 Conditions) tailored to broad areas of construction (such as Mechanical Works,
Electrical works, Subcontracting etc). They are usually amended to suit the more
specific needs of the parties, or the peculiarities of a specific project or legal
framework of a certain jurisdiction. FIDIC contracts also contain appendixes for the
parties to complete (such as dates, names of parties, arbitration clause, percentage
of performance bonds, rates etc). In general FIDIC forms are set in Parts I and II:
Part I of the conditions is intended to provide a general framework for the
Construction Contract. Part II contains blank sections for the parties to fill in
accordance with the particular requirements of the work. Part II also contains the
specific details of any modifications required by the parties to the general
provisions of Part I. For the avoidance of any doubt in the interpretation of the
parties intentions, the contract should also provide that in the event of a conflict
between the provisions of Part I and Part II, those of Part II are to prevail.
In addition, construction contracts can also have the form of one partys standard
terms and conditions (for example, the Dubai Municipalitys Conditions of
Contract). Whatever the form of the construction contract, it is important for the
parties to factor in all aspects of the UAE construction industry and of the
governing law of the contract in addition to all the procedural details of the dispute
resolution method chosen by them.
3. IS THE ENGINEER A PARTY TO A CONSTRUCTION CONTRACT ?
Although the role of the Engineer is very critical throughout the duration of a
construction contract (he supervises and authorises the works carried out, issues
certificates that officially confirm the fulfillment of various stages, considers
validity of claims, variation orders, etc.) it is not in fact a party to the construction
contract, which is usually an agreement exclusively between a contractor and an
employer (owner of the project in question). The engineer is only a party to a
contract it has entered into with the employer. The engineer operates as a
representative of the employer throughout the construction contract and therefore
any actions he carries out are, in law, considered as those of the Employer. To the
extent the Engineer has acted beyond the scope of his contract with the Employer,
it is the Employer who has a cause of action against the Engineer and not the
Contractor. However, it is possible, although relatively rare, to have multi party
arbitration proceedings where all relevant parties are present in an all embracing
dispute resolution process.
4. IS THE CONTRACTUALLY AGREED DURATION OF A DEFECTS LIABILITY PERIOD
BINDING UNDER UAE LAW?
It is important when signing a FIDIC based or other construction contract to always
be fully aware of the potentially relevant mandatory UAE law provisions, as they
will override anything in the contract that contravenes them.
Defects liability periods under most standard form contracts are usually considered
as extension of contract periods and are for one to two years. However, Article 880
of the UAE Civil Code states that the Contractor and the Engineer (if the plans were
2 Construction Law in the United Arab Emirates
produced by it) will be jointly liable for a period of 10 years to compensate the
Employer for any total or partial collapse of the works to the extent these relate to
a building or other fixed installation. This period of time can be extended by
contract but cannot be reduced. The provision does not apply to installations that
are intended to remain in place for a period of less than 10 years. This liability of
the Contractor is unconditional and can not be circumvented even if it is proved
that the defect or collapse of the construction in question arose as a result of the
defect in the land or even as a result of the Employers consent to the construction
of defective buildings or installations.
5. WHAT IS THE CONTRACTOR ENTITLED TO CLAIM IF A PROJECT OF WORKS IS NOT COMPLETED ?
If the cause of preventing the works from being completed is not attributable to the
Contractor, Article 894 of the UAE Civil Code states that the Contractor will be
entitled to the value of the work which it has completed and the expenses it has
incurred in the performance of that work up to the amount of the benefit that the
Employer has derived from that work.
6. WHAT IS THE TIME LIMIT FOR BRINGING A CLAIM AGAINST THE CONTRACTOR FOR DEFEETS
DISCOVERED OR COLLAPSE OF A BUILDING OR FIXED INSTALLATION ?
Article 883 of the UAE Civil Code states that the time limit for this type of claim will
be three years from the date of the collapse or discovery of the defects.
7. WOULD A CLAUSE SETTING OUT A TIME LIMIT TO ISSUE ARBITRATION
PROCEEDINGS BAR A CONTRACTOR FROM COMMENCING THESE PROCEEDINGS
AGAINST THE EMPLOYER AFTER THE PASSAGE OF THAT TIME BAR?
Breach of a procedure set out in a clause of the contract would normally not bar the
Contractor from instituting arbitration proceedings under UAE law. The time bars
that relate to the bringing of legal actions (before the UAE Courts or a UAE based
Arbitral Tribunal) are set out by Federal Laws and the parties cannot normally
contract out of them to the extent that such time bars constitute mandatory UAE
law.
8. HOW SOON SHOULD A CLAIM ARISING OUT OF A CONSTRUCTION CONTRACT BE
LODGED AND WHAT IS THE TIME LIMIT FOR DOING SO UNDER UAE LAW ?
Most construction contracts specifically state that the Contractor/Subcontractor can
not suspend its obligations under the contract, simply because a claim has arisen.
Therefore, in practice, most Court actions and arbitration proceedings commence
after completion of works and it is very rare to see a dispute resolution process
taking place before the Courts or the arbitrators whilst works are still in progress.
There are various time limits involved from the date a claim is formed until it is
filed in the form of arbitration proceedings or a Court action. Most FIDIC form
contracts include an elaborate procedure for submission of claims before the
Engineer within a specific number of days. The Engineer would normally consider
the merit of those claims and will then issue his decision accordingly. If one of the
parties is not satisfied with the Engineers decision within a further prescribed
number of days the concerned party is free to submit a notice for arbitration.
The UAE Commercial Transactions Law (CTL) under Article 95 specifies a time
limit of ten years for an action to be commenced in relation to obligations of one
Construction Law in the United Arab Emirates 3
party towards the other. Over and above the time limits that are described within a
construction contract (none of which is sufficient to bar a claim from being heard
before an arbitral tribunal or a Court under UAE law) this ten year time limit
usually forms the basic time bar for most construction law related claims.
9. HOW SOON SHOULD A CONTRACTOR NOTIFY THE EMPLOYER THAT UNIT RATES
AND QUANTITIES NEED TO BE INCREASED FOR THE COMPLETION OF THE PROJECT
OR OF ONE OF ITS ASPECTS ?
Article 886 of the UAE Civil Code states that :
If a contract is made under an itemised list on the basis of unit prices and it
appears during the course of the work that it is necessary for the execution of the
plan agreed substantially to exceed the quantities on the itemised list, the
Contractor must immediately notify the Employer of this, setting out the increased
price expected, and if he does not do so he shall lose his right to recover the excess
cost over and above the value of the itemised list.
Although Article 886 only refers to unit rates it may apply to any additional costs
or time that a Contractor needs to incur and then claim in order to complete the
works. FIDIC contracts often vary the period of time during which the Contractor
has to request the Engineer for a variation and any time frame agreement between
the parties that would depart from the above provision is usually recognised as
valid by UAE law.
10. IS A CONTRACTOR ENTITLED TO CLAIM LOSS OF PROFIT AS PART OF ITS CLAIM
AGAINST THE EMPLOYER?
UAE law normally does not provide grounds for claimants to successfully pursue
loss of profit claims or financial loss/economic loss claims. In addition, this type of
claim is normally excluded in the FIDIC standard forms of contract.
11. CAN A SUBCONTRACTOR CLAIM DIRECTLY AGAINST THE EMPLOYER FOR
ANYTHING THAT IS DUE TO HIM FROM THE CONTRACTOR?
Article 891 of the Civil Code expressly precludes the Subcontractor from claiming
directly from the Employer for any amounts that are properly claimed against the
Contractor unless the Contractor has given an assignment of its rights against the
Employer to the Subcontractor. In addition, standard clauses are often included to
reflect this. For example, Clause 4.3 of the FIDIC Conditions of Subcontract for
works of Civil Engineering Construction, states:
Nothing herein shall be construed as creating any privity of contract between
Subcontractor and the Employer.
12. SHOULD A SUBCONTRACTOR BE PAID UPON THE COMPLETION OF ITS WORK
IRRESPECTIVE OF WHETHER OR NOT THE MAIN CONTRACTOR HAS BEEN PAID ?
A recent Court of Cassation judgment has held that during the Subcontract a
Subcontractor will only be entitled to proportional payment during the
performance period from any payment received by the Main Contractor from its
client. However, it was also held that the same does not apply when a
Subcontractor has completed all its works and delivered the project to the Main
Contractor. It was held that in such circumstances a Subcontractor has no
obligation to wait for payment until such time as the Main Contractor has been
paid.
4 Construction Law in the United Arab Emirates
13. ARE CONSTRUCTION DISPUTES REFERRED TO ARBITRATION IN THE UAE?
Arbitration is gradually becoming a popular construction dispute resolution mode
in the UAE. An important factor influencing parties decision to opt for arbitration,
as a dispute resolution process is the fact that English is the widely accepted and
agreed language of conducting arbitration proceedings. The benefits arising out of
this factor are substantial: not only do parties save costs in translating voluminous
documentation but, more importantly, specialised English speaking experts from
various fields of the construction industry are appointed as arbitrators. They are
usually very familiar with the technical aspects of a construction dispute and they
possess a wealth of experience on the basic principles of construction dispute
resolution. This, together with the time limit of six months (subject to extension by
mutual agreement) for issuing an award provided for in Article 210 of the UAE
Civil Procedures Law renders arbitration an increasingly preferred option for
construction dispute resolution.
14. CAN AN ARBITRAL AWARD RESOLVING A CONSTRUCTION DISPUTE BE
CHALLENGED OR NULLIFIED BEFORE THE UAE COURTS AT THE REQUEST OF THE
LOSING PARTY?
It is possible to challenge an arbitral award but only on specific procedural
grounds. These are set out in Article 216 of the UAE Civil Procedures Law, which
states that:
ARTICLE - 216
1. In the following instances, the opposing parties may apply for the annulment of
an Arbitrators ruling when the court is examining whether to validate it:
(a) If given without a deed of arbitration or if based on an invalid deed, or if
lapsed through prescription, or if the arbitrators have exceeded the limits of
the deed.
(b) If the ruling has been given by arbitrators not appointed according to the law,
or if given by some of them without being so empowered in the absence of
the others, or if given under deed of arbitration in which the subject of the
dispute is not stated, or if given by someone not competent to agree to
arbitration or by an arbitrator who does not fulfill the legal requirements.
(c) If there is something invalid in the ruling or in the procedures affecting the
ruling.
2. Acceptance of invalidity shall not be inhibited by the opposing party
abandoning his right thereto before the Arbitrators ruling is issued.
Ultimately, the award will take the form of a judgment and as such it is imperative
to ensure that it is as legally sound as possible so that its nullification by the UAE
Courts is avoided and that throughout the Arbitration procedure (in fact from the
stage of drafting the arbitration clause or arbitration agreement) attention is
focused on the ultimate validity of the arbitration award.
Construction Law in the United Arab Emirates 5
15. WHAT ARE THE MOST IMPORTANT ASPECTS OF AN ARBITRATION CLAUSE IN A
CONSTRUCTION CONTRACT OR SUBCONTRACT?
The Claimant needs to ensure that the arbitration award, when issued, will
survive any attempt made by the Defendant through the three tiers of the UAE
judicial system (Court of First Instance, Court of Appeal, Court of Cassation) to
nullify it on the basis of lapse of procedure or breach of a mandatory provision of
UAE law.
Some of the basic points that the parties should bear in mind in this respect, include
the following:
Jurisdiction of Arbitration
As the UAE have not yet signed the 1958 New York Convention on mutual
enforcement of arbitration awards, it is important for a party potentially interested
in enforcing an arbitration award on UAE based entity/security, to avoid agreeing
a foreign (i.e., non-GCC) arbitration clause. However, there are some bilateral
agreements with certain countries (e.g. France) making enforcement of arbitration
awards issued in those countries possible.
Clear Arbitration Clause - Arbitration Agreement
The arbitration clause or agreement should specify the rules under which any
dispute resolution by way of arbitration should be conducted. These may be the
Rules of the Dubai Chamber of Commerce & Industry, Dubai Municipality Rules,
UNCITRAL, ICC etc. For a more effective supervision and conduct of arbitration
proceedings held in the UAE it is advisable to agree to local (as opposed to
international) rules. This will facilitate the certification of the award by the
supervising body and subsequently its authentication through the UAE Courts. In
addition, it is preferable that the parties to the dispute, rather than their lawyers,
sign any arbitration agreement. This is because in most cases, although a Power of
Attorney gives a lawyer rights to conduct an arbitration on behalf of his client,
occasionally it may not include an express right for the lawyer to sign binding
arbitration agreements.
Determination of whether the dispute will be resolved by one or three Arbitrators.
Very often this issue is left unclear in arbitration clauses or agreements that are part
of a Construction contract or Subcontract and becomes the object of a separate
dispute. The options available are essentially three:
either one Arbitrator appointed by mutual agreement of the parties or by a
neutral entity (such as a Chamber of Commerce & Industry) or
three Arbitrators, one appointed by each party and the third appointed by the
two arbitrators or a neutral entity, the majority of whom will determine the
dispute or finally
two Arbitrators one appointed from each party and an Umpire who will only
determine the dispute if the two Arbitrators disagree on their findings.
6 Construction Law in the United Arab Emirates
16. WHAT PROCEDURAL ASPECTS OF UAE LAW SHOULD PARTIES TO A CONSTRUCTION
CONTRACT OR SUBCONTRACT BE AWARE OF DURING ARBITRATION PROCEEDINGS?
Powers of Attorney
It is essential under UAE law that, parties are represented by authorised attorneys
who should carry with them during all arbitration hearings a letter of authorisation
or ideally, a Power of Attorney appointing them as legal representatives of the
parties with powers to draft pleadings (written submissions), attend hearings and
perform advocacy on their behalf.
Arbitrators limits under the arbitration clause / agreement.
If arbitrators exceed the limits of the powers given to them in the arbitration
clause/agreement, paragraph 1(a) of Article 216 of the UAE Civil Procedures Law
(set out above under 14) clearly states that the award will be invalid - at least to the
extent that it includes decisions that have been made beyond the powers of the
arbitrators as these are set out in the arbitration clause / agreement.
Arbitrators should not violate or overlook any of the Rules of Arbitration agreed to
by the parties.
Paragraph 1(c) of Article 216 of the UAE Civil Procedures Law sets out the general
provision that if there is something invalid in the ruling or in the procedures
affecting the ruling the Arbitrators Award may be nullified.
17. IN CONSTRUCTION DISPUTES RESOLVED THROUGH ARBITRATION, WHAT IS THE
TIME FRAME FOR ISSUING AN ARBITRATION AWARD UNDER UAE LAW ?
The time limit for issuing an arbitral award is usually six months, but can often be
extended up to another six months or more by mutual agreement. Any time
extensions need to be agreed upon at an early stage. Time extensions need to be in
compliance with the agreed rules of Arbitration and Article 210 of the UAE Civil
Procedures Law, which states:
ARTICLE - 210
(1) If the opposing parties do not specify a time for a ruling to be given in the
arbitration agreement, the arbitrator is to give his ruling within six months from
the date of the initial arbitration hearing, otherwise any of the opposing parties
may raise the dispute to the court or may pursue it before the court if already
raised.
(2) The opposing parties may explicitly or implicitly agree to extend the date
prescribed by agreement or by law, and they may empower the arbitrator to
extend it to a particular date. At the request of the arbitrator or one of the
opposing parties, the court may extend the date specified in the foregoing
paragraph for such period as it deems appropriate for a settlement of the
dispute.
(3) The period shall be interrupted whenever the proceedings are interrupted or
suspended, and shall be resumed from the date on which the arbitrator becomes
aware that the cause of the interruption or suspension has been eliminated. If the
remaining period is less than a month, it shall be extended to a month.
Construction Law in the United Arab Emirates 7
It is important that the Claimant always focuses on this issue and ensures that if it
becomes obvious that the arbitration award will not be issued within the prescribed
time limit, an agreement for extension is obtained as soon as possible.
18. HOW CAN AN ARBITRAL AWARD RESOLVING A CONSTRUCTION DISPUTE BE
ENFORCED ON THE LOOSING PARTYS ASSETS?
As in most jurisdictions, an award needs the authentication of the local courts for it
to be equivalent to a Court judgment and to be enforceable against the Defendants
assets. This involves an application to the Court of First Instance, the judgment of
which is then appealable within 30 days before the Court of Appeal. Thereafter, the
Court of Appeal judgment can be appealed within 30 days before the Court of
Cassation, the judgment of which is final. During the process of this authentication,
the UAE courts cannot consider the merits of the arbitrators findings. This is
clearly stated in paragraph 1 of Article 217 of the UAE Civil Procedure Code, which
states that arbitrators rulings may not be contested in any way. There have also
been a number of Dubai and Abu Dhabi Court of Cassation rulings confirming that
appeals against the merits of arbitrators awards are not permissible.
19. ARE LEGAL COSTS AND RELEVANT EXPENSES INCURRED IN ARBITRATION
PROCEEDINGS RECOVERABLE BY THE SUCCESSFUL PARTY TO A CONSTRUCTION DISPUTE?
Although legal costs are not generally recoverable by the successful party under
UAE Law, in some cases, the successful party will be awarded a greater portion of
its actual expenses and legal costs than it would have done had it resolved its
dispute through litigation. For example, Article 48 of the Dubai Chamber of
Commerce & Industry Rules for Arbitration and Conciliation states that:
The costs of conciliation or arbitration shall include charges of the Chamber,
remuneration and actual expenses of the conciliators or arbitrators, fees and
expenses of the experts and the translators if any, normal expenses incurred by the
parties in preparation of their pleadings, any administrative expenses relating to
meeting-rooms rentals, typing, recording, photocopying and others incurred in the
course of the conciliation or arbitration proceedings.
In addition, it is possible for both parties at the beginning of the Arbitration to agree
on bearing their own legal costs or that these will be borne by the losing party. The
higher costs that are generally involved in arbitration coupled by the inevitable
legal and court fees of the subsequent litigation (for authentication of the arbitration
award) can mean that the ultimate cost exposure to the successful party in
arbitration may be substantially greater than in litigation.
20. CAN ONE OF THE PARTIES GO TO COURT IN A DISPUTE ON A CONSTRUCTION
CONTRACT WITH AN ARBITRATION CLAUSE?
The claiming party may file a case with the court even where the contract contains
an Arbitration clause, but this will be subject to the Defendant expressly referring
to the Arbitration clause at the first court hearing in accordance with Article (203/5)
of the Civil Procedures Law. Upon the Defendant so doing, the Court will refer the
matter to Arbitration. Conversely, if the Defendant fails to object and refer to the
Arbitration clause at the first court hearing, the Court will assume that the
arbitration clause has been waived by both parties and will continue with the
resolution of the dispute through litigation. The Plaintiff in such approach should
bear in mind that it may lose the court fees and advocacy charges if the Defendant
successfully raises the Arbitration clause defence at the first hearing.
8 Construction Law in the United Arab Emirates
ANNEX A: MODEL CLAUSES OF CONCILIATION AND ARBITRATION
The DCCI Centre for Commercial Conciliation & Arbitration recommends the
parties wishing to resolve their disputes under the DCCI Rules of Commercial
Conciliation and Arbitration include in their contracts one of the following clauses
according to their choice of dispute resolution mode:
Conciliation Clause:
Any dispute arising from this contract shall be referred to conciliation in
accordance with the provisions set forth in the Rules of Commercial Conciliation
and Arbitration of the Dubai Chamber of Commerce & Industry.
Arbitration Clause :
Any dispute connected with the formation, performance, interpretation,
nullification, termination or invalidation of this contract or arising therefrom or
related thereto in any manner whatsoever shall be referred to arbitration in
accordance with the provisions set forth in the Rules of Commercial Conciliation
and Arbitration of the Dubai Chamber of Commerce & Industry.
Conciliation and Arbitration Clause:
Any dispute connected with the formation, performance, interpretation,
nullification, termination or invalidation of this contract or arising therefrom or
related thereto in any manner whatsoever shall be referred to conciliation in
accordance with the provisions set forth in the Rules of Commercial Conciliation
and Arbitration of the Dubai Chamber of Commerce & Industry.
If the Dispute is not settled by conciliation, it shall be referred to arbitration in
accordance with the provisions set forth in the said Rules.
ANNEX B: EXAMPLE OF PERFORMANCE GUARANTEE FORM
THIS AGREEMENT is made on the ........ day of ....... 20...........................
BETWEEN: (1) ................................... ....... [name of bank surety or insurance
company] of .................................... [address] (hereinafter called
the Guarantor); and
(2) .................................................. [ name of Employer]
of ............................................... [address] (hereinafter called the
Employer).
WHEREAS:
A. This agreement is supplemental to a contract (hereinafter called the Contract)
made between (1) the Employer and (2) [name of Contractor] of
....................[address of Contractor] (hereinafter called the Contractor)
whereby the Contractor agreed and undertook to design and execute and
complete and remedy any defects in the Works of ........................................ [name
of Contract and brief description of the works] for the sum of ........................
[amount in Contract currency] being the Contract Price ; and
B. The Guarantor has agreed to guarantee the due performance of the Contract in
the manner hereinafter appearing.
Construction Law in the United Arab Emirates 9
IT IS HEREBY AGREED as follows:
1. Subject to Clause 2 if the Contractor (unless relieved from the performance by
any clause of the Contract or by statute or by the decision of a tribunal of
competent jurisdiction) shall in any respect fail to execute the Contract or
commit any breach of his obligations thereunder then the Guarantor will
indemnify and pay the Employer the damages sustained by him as a
consequence of such failure or breach not exceeding the aggregate sum of .........
[amount of guarantee] ............ [in words], such sums being payable in the types
and proportions of currencies in which the Contract Price is payable.
2. The payment by the Guarantor will only be made if, prior to the earlier of the
date of issue of the Performance Certificate or .......................(the End Date), the
Guarantor has received:
(a) Written notice from both the Employer and the Contractor that the amount
of damages payable to the Employer is agreed between the Employer and the
Contractor; or
(b) A copy of a notice of arbitration issued by either the Employer or the
Contractor under the Contract which is subsequently followed (whether
before or after the End date) by a legally certified copy of an award issued in
arbitration proceedings carried out in conformity with the Contract that the
amount of the damages is payable to the Employer; or
(c) a legally certified copy of a decision of the Dispute Adjudication Board under
the Contract in respect of which no notice of dissatisfaction has been given
by either the Employer or the Contractor within twenty eight days of the
decision under the Contract stating an amount due to the Employer.
3. The Guarantor shall not be discharged or released from his Guarantee by an
arrangement between the Contractor and the Employer, with or without the
consent of the Guarantor, or by any forbearance on the part of the Employer,
whether as to payment, time, performance or otherwise, and any notice to the
Guarantor of any such arrangement, alteration or forbearance is hereby
expressly waived.
4. This Guarantee shall not be assignable by the Employer and upon it ceasing to
be in full force and effect the Employer shall return the same to the Guarantor
within 14 days.
5. Words and expressions defined in the Contract shall so far as the context admits
bear the same meaning in this Guarantee.
6. This Guarantee shall be governed by the laws of ................
Signed by .................................... Signed by ....................................
For and on behalf of ...................... For and on behalf of ......................
On (date) .................................. On (date) ..................................
in the capacity of ......................... in the capacity of .........................
and in the presence of .................... and in the presence of ....................
Seal (where applicable) Seal (where applicable)
10 Construction Law in the United Arab Emirates
ANNEX C: EXAMPLE OF SURETY BOND FOR PERFORMANCE FORM
By this Bond..................................................[name and address of Contractor] as
Principal (hereinafter called the Contractor) and ........................... [ name, legal
title and address of surety, bonding company or insurance company] as Surety
(hereinafter called the Surety), are held and firmly bound unto
..............................[name and address of Employer] as Obligee (hereinafter called
the Employer) in the amount of ...... [amount of Bond]
..................................................[in words], for the payment of which sum well and
truly to be made in the types and proportions of currencies in which the Contract
Price is payable, the Contractor and the Surety bind themselves, their heirs,
executors, administrators, successors and assigns, jointly and severally, firmly by
these presents.
WHEREAS the Contractor has entered into a written Agreement with the Employer
dated the ...... day of ...19.... for ......[name of Contract] in accordance with the
documents listed therein, which are by reference made part hereof and are
hereinafter referred to as the Contract.
NOW, THEREFORE, the Condition of this Obligation is such that, if the Contractor
shall promptly and faithfully perform the said Contract (including any
amendments thereto) then this obligation shall be null and void; otherwise it shall
remain in full force and effect. Whenever the Contractor shall be, and declared by
the Employer to be, in default under the Contract, the Employer having performed
the Employers obligations thereunder, the Surety may promptly remedy the
default, or shall promptly:
(1) complete the Contract in accordance with its terms and conditions; or
(2) obtain a tender or tenders from qualified tenderers for submission to the
Employer for completing the Contract in accordance with its terms and
conditions, and upon determination by the Employer and the Surety of the
lowest responsive tenderer, arrange for a Contract between such tenderer and
Employer and make available as work progresses (even though there should be
a default or a succession of defaults under the Contract or Contracts of
completion arranged under this paragraph) sufficient funds to pay the cost of
completion less the Balance of the Contract Price; but not exceeding, including
other costs and damages for which the Surety may be liable hereunder, the
amount set forth in the first paragraph hereof. The term Balance of the Contract
Price, as used in this paragraph, shall mean the total amount payable by
Employer to Contractor under the Contract, less the amount properly paid by
Employer to Contractor;
(3) Pay the Employer the amount required by Employer to complete the Contract in
accordance with its terms and conditions up to a total not exceeding the amount
of this Bond.
The Surety shall not be liable for a greater sum than the specified penalty of this
Bond.
Any suit under this Bond must be instituted before the issue of the Performance
Certificate.
No right of action shall accrue on this Bond to or for the use of any person or
Construction Law in the United Arab Emirates 11
corporation other than the Employer named herein or their heirs, executors,
administrators, successors and assigns of the Employer.
In testimony whereof, the Contractor has hereunto set his hand and affixed his seal,
and the Surety has caused these presents to be sealed with his corporate seal duly
attested by the signature of his legal representative, this ........ day of ....... .
Signed by .................................. Signed by ....................................
For and on behalf of ..................... For and on behalf of ......................
On (date). ................................. On (date) ..................................
In the capacity of ......................... In the capacity of .........................
and in the presence of .................... and in the presence of ....................
Seal (where applicable) Seal (where applicable)
ANNEX D: EXAMPLE OF GUARANTEE FOR ADVANCE PAYMENT FORM
To:....................................... [name of Employer]
................................................ [address of Employer]
............................................. [name of Contract]
Gentlemen:
In accordance with the provisions of the Conditions of Contract, Sub-Clause 13.2
(Advance Payments) of the above mentioned Contract, ..............[name and
address of Contractor] (hereinafter called the Contractor) shall deposit with
.....................[name of Employer] a bank guarantee to guarantee his proper and
faithful performance under the said Clause of the Contract in an amount of
................. ..........[amount of guarantee] ...........[in words].
We, the ..........................[bank or financial institution], as instructed by the
Contractor, agree unconditionally and irrevocably to guarantee as primary obligor
and not as Surety merely, the payment to ..........................[Name of Employer] on his
first demand without whatsoever right of objection on our part and without his first
claim to the Contractor, in the amount not exceeding ........................[amount of
guarantee] ..................................[in words].
We further agree that no change or addition to or other modification of the terms of
the Contract or of Works to be performed thereunder or of any of the Contract
documents which may be made between ........[name of Employer] and the
Contractor, shall in any way release us from any liability under this guarantee, and
we hereby waive notice of any such change, addition or modification.
No claim may be made by you under this guarantee until we have received notice
in writing from you specifying the amount of each advance payment which has
been paid to the Contractor pursuant to the Contract.
Our outstanding liability under this guarantee will reduce by such amounts as may
be notified to us in your authorised writing and stated to be the reduction of this
guarantee required to be made in accordance with the Contract by reason of the
12 Construction Law in the United Arab Emirates
repayments made by the Contractor.
This guarantee shall remain valid and in full effect from the date of the first advance
payment under the Contract until ......... [name of Employer] receives full
repayment of the same amount from the Contractor.
Yours truly, .........................................
Signature and Seal : .........................................
Name of Bank: .........................................
Address: .........................................
.........................................
.........................................
Date: .........................................
ANNEX E: EXAMPLE OF TENDER FORM
NAME OF CONTRACT :
TO:
GENTLEMEN,
We have examined the Conditions of Contract, Employers Requirements,
Schedules, Addenda Nos...... ......... ........ and the matters set out in the Appendix
hereto. We have understood and checked these documents and have not found any
errors in them. We accordingly offer to design, execute and complete the said Works
and remedy any defects, fit for purpose in conformity with these documents and
the enclosed Proposal, for the fixed lump sum of
(in currencies of payment)
....................................... ............ ......... ......... ......... ......... ......... ...... ...... ...... ... ...... ............
............ ................. .............................. ..................... ..................... ............... .....................
..................... ......................
We accept your suggestions for the appointment of the Dispute Adjudication Board,
as set out in Schedule. ......[We have completed the Schedule by adding our
suggestions for the other members of this three-person Board, but these suggestions
are not conditions of this Tender].*
We agree to abide by this Tender until................... and it shall remain binding upon
us and may be accepted at any time before that date. We acknowledge that the
Appendix forms part of our Tender.
Construction Law in the United Arab Emirates 13
If our Tender is accepted, we will provide the specified performance security,
commence the Works as soon as reasonably possible after receiving the Employers
Representatives notice to commence, and complete the Works in accordance with
the above-named documents within the time stated in the Appendix to Tender.
Unless and until a formal Agreement is prepared and executed this Tender, together
with your written acceptance thereof, shall constitute a binding contract between
us.
We understand that you are not bound to accept the lowest or any tender you may
receive.
Yours faithfully
Signature ............................................. in the capacity of ............................
Duly authorized to sign tenders for and on behalf of .............................................
......................................................................................................
Address .......................................................................................................
......................................................................................................
Date ............................................
* If the Tenderer does not accept, this paragraph may be deleted and replaced by:
We do not accept your suggestions for the appointment of the Dispute Adjudication
Board, and propose that we jointly agree upon the appointment after the Effective
Date (unless previously agreed) in accordance with Sub-Clause 20.3 of the
Conditions of Contract. [OPTIONAL: Our Proposal includes our suggestions for
this appointment, but these suggestions are not conditions of this Tender.]
14 Construction Law in the United Arab Emirates
APPENDIX TO TENDER
[Note: with the exception of the items for which the Employers requirements have
been inserted, the following information must be completed before the Tender is
submitted]
Sub-Clause
Employers name and address ......... 1.1.2.1 ............................................
& 1.8 ............................................
Contractors name and address ........ 1.1.2.2 ............................................
& 1.8 ............................................
Name and address of 1.1.2.3 ............................................
The Employers Representative ....... & 1.8 ............................................
Time for notice to commence ......... 8.1 ...................................... days
Time for completion of the Works .... 1.1.3.4 ...................................... days
If Sub-Clause 13.15 does not apply:
Foreign Currency / Currencies ......... 1.1.5.3 as named in the TENDER
Law of Contract ......................... 1.4 ..............................................
Ruling language ......................... 1.4 .............................................
Language for communications......... 1.4 .............................................
Electronic transmission systems ...... 1.8 .............................................
Confidential details ..................... 1.12 .............................................
Construction Law in the United Arab Emirates 15
Time for access to the Site............. 2.2 ...days after the Commencement date
Amount of performance security...... 4.2 ....................% of the Contract
Price, and in the proportions of
currencies in which the Contract
Price is payable.
Time for submission of programme... 4.14 ....... Days after the effective Date
Normal working hours.................. 6.5 ..............................................
Liquidated damages for the Works..... 8.6 .............% of the Contract Price
per day, in the proportions of
currencies in which the Contract
Price is payable.
Limit of liquidated damages for delay... 8.6 .......% of the Contract Price
If Clause 11 applies: 11.4
Liquidated Damages for failing
Tests after Completion
(details of test failure) ...................... .............................................
(details of test failure)...................... .............................................
Total amount of advance payments...... 13.2 .................% of the Contract Price
Number and timing of installments...... 13.2 ..............................................
Start repayment of advance payment.... 13.2(a) When payments are 10% of the
Contract Price
Repayment amortization of advance payment. 13.2(b) ........................................25%
16 Construction Law in the United Arab Emirates
Percentage of retention ................... 13.3 ..........................................%
Limit of Retention Money................ 13.3 .................% of the Contract Price
If Sub-Clause 13.5 applies: 13.5 ....................................[list]
Plant and Materials for payment
When delivered to the Site.......
Minimum amount of Interim 13.6 ................% of the Contract Price.
Payment Certificates.......................
If Sub-Clause 13.15 applies: 1.1.5.3
&
Payments in local and Foreign Currencies. 13.15
Currency Unit Percentage payable in Rate of exchange: number
such Currency of Local per unit of Foreign
Local: ____________[name] _____________________ 1.000
Foreign: __________[name] _____________________ _____________________
___________[name] _____________________ _____________________
If there are Provisional Sums:
Percentage for adjustment of 14.5(b) ...........................................%
Provisional Sums ..........................
Amount of insurance for design......... 18.1 ..............................................
Amount of third party insurance......... 18.3 ..............................................
Construction Law in the United Arab Emirates 17
Periods of submission of insurance: 18.5
(a) evidence of insurance ...... .................................. days
(b) relevant policies ............ ................................... days
Number of members of
Dispute adjudication Board .............. 20.3 ...........................................
Member of Dispute Adjudication Board The President of FIDIC or a person
(if not agreed) to be nominated by....... 20.3 appointed by such President
Arbitration rules ........................... 20.6 ..............................................
Number of arbitrators...................... 20.6 ..............................................
Language of arbitration.................... 20.6 ..............................................
Place of arbitration......................... 20.6 ..............................................
If ICC rules are NOT to apply - Either:
Arbitration rules to be 20.6 ..............................................
administered by, Or: Arbitrator
(if not agreed) to be nominated by
Description Value (percentage of Time for completion Liquidated Damages
(Sub-Clause 1.1.6.9) Contract Price) * (Sub-Clause 1.1.3.4) (Sub-Clause 8.6)
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________
* These percentages shall also be applied to the first half of the Retention Money
under Sub-Clause 13.9
Initials of signatory of Tender ____________________________________________
18 Construction Law in the United Arab Emirates
ANNEX F: MAIN CONTRACT AGREEMENT
This Agreement made the ................................day of ..........................................19 ......
Between .............................of............................(hereinafter called the Employer) of
the one part, and ....................of ......................(hereinafter called the Contractor) of
the other part.
Whereas the Employer desires that the Works known as ..................... should be
designed and executed by the Contractor, and has accepted a Tender by the
Contractor for the design, execution and completion of such Works and the
remedying of any defects therein,
The Employer and the Contractor agree as follows:
1. In this Agreement words and expressions shall have the same meaning as are
respectively assigned to them in the Conditions of Contract hereinafter referred
to.
2. The following documents shall be deemed to be for and be read and construed
as part of this Agreement:
(a) The Letter of Acceptance dated ............
(b) The Employers Requirements
(c) The Tender dated ...........
(d) The Conditions of Contract (Parts I and II)
(e) The Addenda nos.............
(f) The completed Schedules, and
(g) The Contractors Proposal.
3. In consideration of the payments to be made by the Employer to the Contractor
as hereinafter mentioned, the Contractor hereby covenants with the Employer to
design, execute and complete the Works and remedy any defects therein, fit for
purpose in conformity with the provisions of the contract.
4. The Employer hereby covenants to pay the Contractor, in consideration of the
design, execution and completion of the Works and remedying of defects
therein, the Contract Price or such other sum as may become payable under the
provisions of the Contract at the times and in the manner prescribed by the
Contract.
In witness whereof the parties hereto have caused this Agreement to be executed
the day and year first before written in accordance with their respective laws.
Construction Law in the United Arab Emirates 19
Authorised signature Authorised signature
Seal of Employer Seal of Contractor
(if any) (if any)
In the presence of: In the presence of:
Name ______________ Name ______________
Signature____________ Signature____________
Address ____________ Address ____________
20 Construction Law in the United Arab Emirates
ANNEX G: SUBCONTRACT AGREEMENT
This Subcontract Agreement made the ............ .................. .................. .........
day of .................................................... 19 ..........................................
Between ...............................................................................................
Of ......................................................................................................
.....................................(hereinafter called the Contractor) of the one part and
.................................................. of ......................................................
(hereinafter called the Subcontractor) of the other part
Whereas the Contractor is desirous that certain Subcontract Works should be
executed by the Subcontractor, viz ....................................... and has accepted a
Subcontractors Offer for the execution and completion of such Subcontract Works
and the remedying of any defects therein.
Now this Subcontract Agreement witnesseth as follows:
1. In this Subcontract Agreement words and expressions shall have the same
meanings as are respectively assigned to them in the Conditions of
Subcontract hereinafter referred to.
2. The following documents shall be deemed to form and be read and
construed as part of this Subcontract Agreement, viz:
(a) The Contractors Letter of Acceptance;
(b) The Subcontractors Offer;
(c) The Conditions of Subcontract (Parts I and II):
(d) The Subcontract Specification;
(e) The Subcontract Drawings: and
(f) The Subcontract Bill of Quantities
(3) In consideration of the payments to be made by the Contractor to the
Subcontractor as hereinafter mentioned the Subcontractor hereby
covenants with the Contractor to execute and complete the Subcontract
works and remedy any defects therein in conformity in all respects with
the provisions of the Subcontract.
(4) The Contractor hereby covenants to pay the Subcontractor in
consideration of the execution and completion of the Subcontract Works
and the remedying of any defects therein the Subcontract Price or such
other sum as may become payable under the provisions of the
Subcontract the times and in the manner prescribed by the Subcontract.
Seal In witness whereof the parties hereto have caused this Subcontract
if Agreement to be executed the day and year first written in
any accordance with their respective laws.
The common Seal of ............................................................................................
Construction Law in the United Arab Emirates 21
.................................................................................................................................
was hereunto affixed in the presence of :
or
Seal Signed Sealed and Delivered by the
if said .............................................................................................
any in the presence of:
APPENDIX TO SUBCONTRACTORS OFFER
Sub-Clause
Amount of security (if any) .................... 2.2 ______________percent
of the Sub contract Price
Time for issue of notice to commence ......... 7.1 _________ days
Subcontractors Time for Completion ......... 7.1 _________ days
Percentage of invoice value of listed 16.1(c) _______ per cent
materials and plant ...............................
Percentage of Retention ......................... 16.3 _______ per cent
Minimum amount of Statement ................ 16.3 (a) ______________
Initials of Signatory of Offer ...................
(Notes: All details in the list above shall be inserted before issue of Offer
documents. Where a number of days is to be inserted, it is desirable. For consistency
with the Conditions of Subcontract that the number should be a multiple of seven.
[Additional entries are necessary where provision is included in the Subcontract
for:
(a) completion of Sections
(b) liquidated damages
(c) a bonus
(d) an advance payment
22 Construction Law in the United Arab Emirates
ANNEX H:
Rules of Commercial Conciliation and Arbitration of the Dubai Chamber of Commerce &
Industry :
Table of Chambers Administrative fees and Arbitrators remunerations
Construction Law in the United Arab Emirates 23
Up to 500 1,000 3,000 7.5% of the amount subject of dispute
Dhs.200,000 (Maximum amount shall be 15,000)
From 200,001 1,000 2,000 3,000 + 1.5% of the amount 15000 + 6% of the amount exceeding
upto 500,000 exceeding 200,000 200,000
From 500,001 1,500 3,500 7,500 + 1% of the amount 33,000 + 4% of the amount exceeding
upto 1,000,000 exceeding 500,000 500,000
From 1,000,001 2,000 5,000 12,500 + 0.5% of the amount 53,000 + 2% of the amount
upto 2,500,000 exceeding 1,000,000 exceeding 1,000,000
From 2,500,001 3,000 10,000 20,000 + 0.3% of the 83,000 + 1.5% of the amount
upto 5,000,000 amount exceeding 2,500,000 exceeding 2,500,000
From 5,000,001 4,000 15,000 27,500 + 0.2% of the 120,500 + 0.8% of the amount
upto 10,000,000 amount exceeding 5,000,000 exceeding 5,000,000
From 10,000,001 5,000 20,000 37,500 + 0.1 % of the 160,000 + 0.4% of the amount
upto 20,000,000 amount exceeding 10,000,000 exceeding 10,000,000
20,000,001 7,500 25,000 47,500 + 0.5% of the amount 200,000 + 0.2% of the amount
upto 50,000,000 exceeding 20,000,000 exceeding 20,000,000
More than 10,000 30,000 62,500 + 0.02% of the amount 260,000 + 0.1% of the amount
50,000,000 exceeding 50,000,000 exceeding 50,000,000
The Disputed
Amount
In Dirhams Conciliation Arbitration Minimum Amount Maximum Amount
The Chambers *
Administration Fees
Arbitrators Remunerations in Dirhams and
in Percentage
* Registration Fee for conciliation and arbitration claims is Dhs.200 non-refundable