Construction Law in the UAE - Expert Insight Q&A
Mark Fraser, a partner in the Dubai office of Taylor Wessing answers questions on where the construction future for the UAE lies for Lawyer Monthly.
Since your arrival in Dubai, what trends have you noticed in the construction industry?
Something that immediately resonated with me was the number of incomplete structures in Dubai as a result of the downturn in the property market in late 2008. These incomplete structures or “ghost buildings”, reminded me of the Bangkok skyline between 1997 and 2003 after the Asian Financial Crisis. For some 6 or 7 years these structures lay open to the elements until the property market recovered in 2003. From a legal and technical standpoint, I had to address the concerns of developers, contractors, professional designers, funders and insurers as to who would assume the risk of interaction of old and new design and construction.
Although from a technical standpoint exposure to the elements is not a major cause for concern as degradation should not be serious and should be curable, from a legal perspective, in Dubai professionals and contractors should be aware of the potential exposure to strict liability under Article 880 of the Civil Code. An additional complication is that such liability is not covered by conventional professional indemnity insurance policies. All of these factors dictate the need to carry out rigorous due diligence before becoming involved in resuscitation of these projects.
On a separate note, it appears that Dubai has been prepared to embrace international standards for dispute resolution, particularly with regard to arbitration. An interesting development in the property arena is that, where real estate purchasers are unwilling to go to court, arbitration is now seen as an attractive alternative way of resolving commercial disputes. In Dubai,many sale and purchase agreements relating to off-plan real estate contain arbitration clauses whereby the partners agree that they will resolve disputes by way of arbitration. A key issue will be for the parties to take advantage of the flexibility that arbitration offers in the resolution of disputes as opposed to the more formulaic approach of a court system.
TaylorWessing is holding a seminar on 2 November 2010, to examine the issue of sustainability. How is this topic being addressed in the region?
The UAE has one of the biggest carbon footprints in the world. The simple fact is that an average building in the UAE uses substantially more energy than a building in Europe. Against this background, the construction industry in the UAE is beginning to embrace the concept of sustainability. Furthermore, with projects such as Masdar and initiatives like Estidama, Abu Dhabi is taking a leading role in this area.
Debates will continue in the region about reducing carbon emissions and ensuring that sustainable measures in the construction industry are commercially viable. A key area of focus will be projects which enable carbon credits to be traded on the European markets in order to generate an income.
Do you foresee the need for legislative change in the next 12-24 months?
I would advocate the introduction of legislation to outlaw pay-when-paid provisions in construction contracts. I would also recommend the introduction of a statutory adjudication process,more along the lines of the Australian model (The Security for Payments Act) than the UK model (The Housing Grants, Construction and Regeneration Act 1996), to provide an expeditious, interim means of dispute resolution for payment issues.What are the future aspirations and directions for your company? How do you see your practice area progressing for the rest of 2010 into 2011?
As for the construction law practice for which I am primarily responsible, I foresee an increase in our arbitration case-load going forward. We are looking at a number of opportunities in Dubai and in the region and I anticipate there will be more of this contentious work in the near future as the patience of creditors runs out. On the non-contentious side, I foresee more work in the sustainability sector. Given the need to reduce carbon emissions in the UAE, there is a need (and a desire) for comprehensive legislation on this subject. In the event that the UAE chooses to implement legislation similar to the CRC Energy Efficiency Scheme in the UK, or other legislation, it could have wide ranging implications for a number of organizations, particularly those in the construction sector.
Taylor Wessing has recently completed a firm-wide overhaul of its internal systems and strategic intent. With developments in key areas such as geographic strategy, industry focus, stronger firm-wide alignment and thought leadership drives, the firm will see a more robust approach in these areas. Taylor Wessing Middle East will seek to heighten its visibility via profiling activities, increase business efforts within selected industries, and enhance the services offered via strengthened alignment and synergies with our network of offices internationally.
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Lawyers Mark Fraser
This article appeared in the September 2010 edition of Lawyer Monthly and is reproduced with the kind permission of the editors.
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