Facing delays, cost overruns, or contract disagreements on a construction project in the UAE?
Construction projects in the UAE frequently face legal disputes due to their scale, complexity, and the number of parties involved. The most common construction disputes include project delays, cost overruns, variation or change orders, payment disputes, and defective or incomplete works.
Delays often arise from late approvals, design changes, supply chain issues, or poor coordination. Determining liability is critical, as contractors may face delay damages, while employers may be exposed to prolongation or compensation claims. Disputes also commonly arise from variations to the scope of work, particularly where parties disagree on valuation or entitlement. Payment delays and withholding of certified amounts remain a major concern, directly impacting contractors’ cash flow. Defective or incomplete works during the Defects Liability Period are another frequent trigger for disputes.
UAE Federal Legal Framework Governing Construction Disputes reference to the law
Construction disputes in the UAE are governed by a combination of Federal laws and contractual provisions. The UAE Civil Transactions Law (Federal Law No. 5 of 1985, as amended) sets out general principles governing contracts, including contracting agreements, liability, breach, and compensation.
Commercial contracts and transactions also fall within the scope of the Federal Commercial Transactions Law (Federal Law No. 18 of 1993), which governs commercial dealings between traders and commercial parties in the UAE. Together, these laws provide the statutory framework for contractual rights, duties, and remedies in both civil and commercial construction agreements.
Available Methods for Dispute Resolution in the UAE
Arbitration
Arbitration is the preferred method for resolving construction disputes in the UAE due to its confidentiality, flexibility, and enforceability. It allows parties to appoint arbitrators with technical expertise and is governed by the UAE Federal Arbitration Law.
Negotiation
Negotiation is often the first step in dispute resolution, enabling parties to resolve issues directly, reduce costs, and maintain commercial relationships without formal proceedings.
Mediation
Mediation is governed by the UAE Mediation Law (Federal Law No. 6 of 2021 on Mediation in Civil and Commercial Disputes) and is further supported by mediation rules issued by leading arbitration centres, such as DIAC. These rules provide a structured and confidential framework for resolving disputes efficiently, either as a standalone process or alongside arbitration.
Litigation
Litigation before UAE courts, including DIFC and ADGM courts, remains an option where arbitration is not agreed or urgent court intervention is required, though it is generally less suited to technical construction disputes. Litigation before the UAE courts, including DIFC and ADGM courts, remains an option where arbitration is not agreed or urgent court intervention is required. However, it is often less suited to technical construction disputes, as parties do not have the ability to choose the decision-maker or appoint industry experts to determine the issues, unlike arbitration.
Common Construction Disputes in the UAE
Project Delays
Delays are a frequent source of conflict. Causes may include poor planning, delayed approvals, material shortages, or weather conditions. Determining who is responsible is crucial, if the contractor is at fault, the employer may claim delay damages; if the employer causes the delay, the contractor may claim compensation.
Variation or Change Orders
Disputes often arise when changes are requested to the original scope of work. These variations may involve additional work or reductions, and disagreements can occur over cost adjustments or whether a requested change qualifies as a variation under the contract.
Payment Issues
Late or withheld payments are common and can severely affect contractors’ cash flow. Contracts often allow contractors to suspend work until payments are made and may provide for interest or damages for delays.
Non-Completion and Defective Work
Incomplete or substandard work is another major source of disputes. Construction contracts usually specify a Defect Liability Period (DLP), typically 12–24 months, during which the contractor must address defects. Failure to rectify defects can lead the employer to undertake the work and recover costs from the contractor.
Construction Claims Funding
Construction claims funding allows parties to pursue legitimate claims without bearing the full financial burden of dispute resolution. Through third-party funding arrangements, legal and arbitration costs may be financed in exchange for an agreed return, improving cash flow and enabling access to justice, particularly in high-value or complex construction disputes.
Some contractors or employers may be concerned about the limited resources available to them, as dispute resolution can be a costly process, especially in arbitration or litigation. Today, solutions such as third-party funding or claims financing are available, allowing parties to pursue their legitimate claims without bearing the full financial burden, while preserving cash flow and access to justice.
How Charter Legal Can Help
At Charter Legal, our experienced construction lawyers assist contractors, consultants, and developers in managing and resolving construction disputes across the UAE. We guide clients through various resolution methods, including negotiation, mediation, and arbitration, tailored to each project’s needs.
Charter Legal’s construction lawyers assist contractors, consultants, and developers in resolving disputes across the UAE through negotiation, mediation, and arbitration. We help clients protect their interests, minimize delays, and maintain professional relationships. We also provide support in litigation and can assist in securing funding for arbitration or litigation to manage costs effectively.