Page 1 Adjudication In The Middle East - Real Estate and Construction - Worldwide

03-May-14 2:51:39 PM http://www.mondaq.com/x/272198/Building+Construction/Adjudication+in+the+Middle+East

We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more
here . Close Me
Home >Offshore >Real Estate and Construction
Last Updated: 7 November 2013
Article byNicholas Gould
Fenwick Elliott LLP
Worldwide: Adjudication In The Middle East
0
Adjudicationis nowa dispute resolutionprocess that most intheUK constructionindustryare
familiar with. The process was introducedbytheHousing Grants, Constructionand
RegenerationAct 1996, whichbecame effective fromMay1998. We have therefore livedwith
it for almost 15years. Adjudicationis included inall of thestandardformcontracts, but inany
event will be implied, as weall nowknow, into anycontract that meets withthedefinitionof
"constructioncontract" under theAct.
Other commonlawcountries have followedsuit. All of thestates inAustralianowhave
securityof paymentlegislation, whichintroduces a right toadjudication. NewZealandis the
same. Singapore alsointroduceda Securityof Payment Act whichprovides for adjudication.
Malaysia introduceda similar Act providingfor adjudicationinJ une 2013, and it is due tobe in
forcesoon. Other countries have consideredsimilar legislation. The mechanics of the
legislationvaries betweencountries and states, but theyall share thedesire toprovide a
rapid, binding dispute resolutionprocedure.
The situation intheMiddleEast is somewhat different. There has been considerable
constructionworkinthat regionfor manyyears. The wealthcreatedbyoil has ledto
increasinglevels of development throughouttheregion. Dubai is perhaps thebest knownfor
its substantive impressive developments suchas The Palmand The Burj Khalifa Tower.
Despitea slowdownof constructionactivity4years ago, as a result of theeconomic crisis,
Dubai has continuedtogrow. The Dubai Theme Park is nowunder way, alongwithmany
other substantial developments.
Disputeresolutionintheregionand inDubai has providedsomechallenges. The local courts
have been unfamiliar withcomplexconstructioncontracts, and local employers have not
always been keen toagree touse international arbitration. International arbitrationis of
course widelyused throughouttheworldfor substantial projects involving suppliers and
contractors fromcountries other thantheone wheretheworkis taking place. Nonetheless,
Dubai has a regional arbitrationcentreintheformof theDubai International ArbitrationCentre
(DIAC) and alsotheDubai International Financial Centre (DIFC). Egypt has for sometimehad
anarbitrationcentreinCairo, and nowQatar alsohas theQatar International Centre for
Conciliation and Arbitration(QICCA). However, international arbitrationcanbe time-
consumingand expensive.
Page 2 Adjudication In The Middle East - Real Estate and Construction - Worldwide
03-May-14 2:51:39 PM http://www.mondaq.com/x/272198/Building+Construction/Adjudication+in+the+Middle+East
It is perhaps thenunfortunate that adjudicationhas not been introducedbylocal legislation
withintheMiddleEast. However, that wouldrequire a cultural understandingnot just of the
locals fromtheMiddleEast, but alsotheinternational contractors and consultants whowork
there. Bothhave a different perspective onhowdisputes areresolved. Whyshouldthe
international communityimpose upon theMiddleEast a rapid dispute resolutionprocedure,
whichincommercial terms is quite newtothebusiness communityeven byinternational
standards? Perhaps it is somethingthat will be consideredand debatedover time.
Ontheother hand, dispute boards have been used intheregioninsomeinstances. They are
not necessarilythenorm, but throughtheuse of FIDIC, dispute adjudicationboards and
dispute reviewboards have been encountered.
The use of theterm"DisputeBoards" or occasionally"Disputes Boards" (collectively DBs) is
relativelynew. It is used todescribea dispute resolutionprocedure whichis normally
establishedattheoutsetof a project and remains inplacethroughouttheproject's duration. It
maycomprise one or threemembers whobecome acquaintedwiththecontract, theproject
and theindividuals involved withtheproject inorder toprovide informal assistance, provide
recommendations about howdisputes shouldbe resolved and provide binding decisions. The
one-personor three-personDBs areremuneratedthroughouttheproject, most usuallybyway
of a monthlyretainer, whichis thensupplementedwitha dailyfeefor travellingtothesite,
attendingsite visits and dealing withissues that arise betweentheparties bywayof reading
documents and attendinghearings, and producingwrittenrecommendations or decisions if
and as appropriate.
The termhas morerecentlycomeinto use becauseof theincreasedglobalisationof
adjudicationduringthecourse of projects, coupledwiththeincreaseduse of DisputeReview
Boards ("DRBs"), whichoriginallydevelopedinthedomestic USA major projects market.
DRBs wereapparentlyfirst used intheUSA in1975 ontheEisenhower Tunnel. The use of
DRBs has steadilygrownintheUSA, but theyhave alsobeen used internationally. However,
DRBs predominantlyremaintheprovidenceof domestic US constructionprojects. As
adjudicationdeveloped, theWorldBankand FIDIC optedfor a binding dispute resolution
process duringthecourse of projects, and so theDisputeAdjudicationBoard ("DAB") was
bornfromtheDRB system; theDRB provides a recommendationthat is not binding onthe
parties.
The important distinctionthenbetweenDRBs and DABs is that thefunctionof a DRB is to
makea recommendationwhichtheparties voluntarilyaccept (or reject), whilethefunctionof a
DAB is toissuewrittendecisions that bindtheparties and must be implemented immediately
duringthecourse of theproject. The DRB process is saidtoassist indeveloping amicable
settlement procedures betweentheparties, suchthat theparties canaccept or reject the
DRB's recommendation. Buildingupon this distinction, theInternational Chamber of
Commerce(ICC) has developedthreenewalternative approaches:
1. DisputeReviewBoard theDRB issues recommendations inline withthetraditional
approach of DRBs. An apparentlyconsensual approach is adopted. However, if neither
partyexpresses dissatisfactionwiththewrittenrecommendationwithinthestipulated
periodthentheparties agree tocomply withtherecommendation. The recommendation
therefore becomes binding if theparties do not reject it.
2. DisputeAdjudicationBoard - DAB's decision is tobe implemented immediately.
3. CombinedDisputeBoard ("CDB") this attempts tomixbothprocesses. The ICC CDB
rules require theCDB toissuea recommendationinrespectof anydispute, but it may
instead issuea binding decision if either theemployer or contractor requests, and the
Page 3 Adjudication In The Middle East - Real Estate and Construction - Worldwide
03-May-14 2:51:39 PM http://www.mondaq.com/x/272198/Building+Construction/Adjudication+in+the+Middle+East
Contact Us | Your Privacy | Feedback
MondaqLtd 1994 - 2014
All Rights Reserved

Do youhave a Question or Comment?
Click here to email the Author
Interested in the next Webinar on this Topic?
Click here to register your Interest
Nicholas Gould
Fenwick Elliott LLP
Email Firm
ViewWebsite
More fromthis Firm
More fromthis Author
Nicholas Gould
other partydoes not object. If thereis anobjection, theCDB will decidewhether toissue
a recommendationor a decision.
AccordingtotheICC theessential differenceis that theparties arerequired tocomply witha
decision immediately, whereas theparties must comply witha recommendationbut onlyif the
employer and contractor express no dissatisfactionwithinthetimelimit. The combined
procedure seems atfirst glancetobe a somewhat cumbersomeapproach, attemptingtobuild
upon thebenefits of theDRB and DAB, withoutfollowinga clear pathway. Nonetheless, it may
prove useful for thoseparties that cannot decidewhether theyneed a DRB or a DAB.
At theother end of thespectruma DB couldbe consideredas a flexible and informal advisory
panel. Inother words, beforeissuinga recommendation, theDB might be asked for general
adviceonanyparticular matter. The DB will thenlookatdocuments and/or visit thesite as
appropriate and, most usually, provide aninformal oral recommendationwhichtheparties
maythenchoose toadopt. If theparties werenot satisfied, theDB wouldproceedtotheissue
of a formal, albeit non-binding, writtenrecommendationafter followingtheformal procedure of
exchangeof documents and a hearing. Perhaps this amicable approach will suit theMiddle
East morethana rapid, binding adjudicationprocess.
International Quarterly is produced quartely by Fenwick Elliott LLP, the leading
specialist construction law firm in the UK, working with clients in the building,
engineering and energy sectors throughout the world.
The content of this article is intended to provide a general guide to the subject matter.
Specialist advice should be sought about your specific circumstances.
Contributor
Authors