Disputes to treble over pay claims

Arbitration group's backlog mounts as surge in construction cases forces Dubai dispute centre to import legal experts.

The number of disputes heard at Dubai's chamber of commerce is expected to treble this year, driven by a surge in payment claims from the construction industry. The Dubai International Arbitration Centre (DIAC) has been forced to recruit top legal experts from other international centres of dispute resolution to ease a backlog of cases that has been building since the start of the year.

"There is an escalation of commercial disputes, the majority of them in construction. The current economic situation is one reason for that," said Hamad Buamim, director general of the Dubai Chamber of Commerce and Industry, which established and funds the arbitration centre. Lawyers involved in contentious work are also seeing rising demand for their services, with one Dubai law firm reporting its construction dispute caseload has doubled from a year ago.

A slowdown in the region's formerly thriving construction sector since the onset of the financial downturn has led to contractors pursuing payments worth billions of dollars from struggling developers. Lawyers say the peak in disputes could be the start of a wave of litigation as signs of loosening of credit in the industry gives companies more hope of success in pursuing claims. "It is possible that what we are seeing now is just the beginning of an increasing level of litigation as signs emerge that money is starting to return to the market," said Michael Grose, a partner with the Dubai law firm Clyde & Co.

"From my perspective there are still a lot of money-driven claims that have not been resolved." Disputes involving late payment or non-payment by developers to contractors for work completed are among the most common legal wrangles. DIAC is on course to manage between 250 and 300 dispute cases before the end of this year, Mr Buamim said. The centre has this year handled 206 cases by the start of this month, against 100 cases in the whole of last year.

Arbitration case managers are being recruited from the International Chamber of Commerce in Paris to help reduce a waiting list of cases, Mr Buamim said. "Between January and now we've tripled the number of staff," he said. "We've started recruiting from Paris so we have very good quality case managers and many of our arbitrators are not local but are international arbitrators." Arbitration is a legal process in which disputes are resolved by a third party without recourse to expensive and time-consuming litigation.

Clyde & Co is handling twice as much dispute-related work this year compared with last, Mr Grose said. Among the cases it is handling is a claim involving a UAE contractor seeking Dh2.5 billion (US$681 million) in payments from a developer. The legal firm is also defending a government-related entity against a claim involving an even greater sum, Mr Grose said. The DIAC hopes the rising demand for arbitration will ensure it cements its position as the largest centre for commercial dispute resolution in the Middle East, to rank alongside other international arbitration centres such as London and Paris.

While it has already established itself as a base for commercial arbitration in the UAE, companies from countries such as Jordan and Syria are now also applying to resolve disputes at the centre, Mr Buamim said. "We are starting to see interest not only from Dubai but from other countries in the region to settle their disputes in Dubai. For a centre that's five years old, I think this is impressive," he said.

"We have six to 10 times the number of cases compared to other dispute centres in the region. Internationally, we are becoming close to London and Paris in that respect." [e-mail]