Introduction

Construction remains one of the UAE’s most dynamic and strategically important sectors, forming the backbone of economic diversification and infrastructure development, especially as the country pursues its UAE Centennial 2071 vision. With ambitious projects, multinational stakeholders, and complex contractual frameworks, construction disputes inevitably arise. The recent updates to UAE legislation, including changes from Federal Decree-Law No. (6) of 2022 (regulating arbitration), ongoing adoption of the UAE Civil Transactions Law (Federal Law No. (5) of 1985), and regulatory reforms in 2023-2025, have further transformed the landscape for resolving construction claims. Understanding how to navigate negotiation, mediation, adjudication, and arbitration in this environment is crucial for developers, contractors, consultants, and corporate legal advisors.

This article delivers authoritative legal analysis and actionable strategies for resolving construction claims in the UAE. Leveraging verified sources from the UAE Ministry of Justice and the Federal Legal Gazette, the discussion blends regulatory overviews with in-depth consultancy insights and practical guidance, tailored to business and legal professionals operating in the UAE’s vibrant construction sector.

Table of Contents

Overview of UAE Construction Law and Recent Legal Updates

Legal Framework Governing Construction Disputes

The legislative framework over construction contracts and claims in the UAE is notably comprehensive. Key statutes include the UAE Civil Transactions Law (Federal Law No. (5) of 1985), the UAE Commercial Companies Law (Federal Decree-Law No. (32) of 2021, updated via Federal Decree-Law No. (26) of 2020), and most pivotally, Federal Decree-Law No. (6) of 2018 as amended by Decree-Law No. (6) of 2022, which governs arbitration proceedings.

Recent years have witnessed regulatory refinements aimed at aligning with international best practices and enhancing the efficiency of construction claim resolution. Notable developments include:

  • Expansion of mandatory mediation under select government contracts (per Cabinet Resolution No. 82/2022)
  • Increased recognition of Dispute Adjudication Boards (DABs), supported by endorsements from the Dubai International Arbitration Centre (DIAC) and the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC)
  • Broader enforceability of domestic and foreign arbitral awards following legislative harmonization in cooperation with the Ministry of Justice
  • Continued adoption of FIDIC contract models, with tailored dispute resolution clauses favored by government agencies and developers

Key Official Sources and Regulatory Institutions

Legal practitioners must routinely consult:

Typology of Construction Claims in the UAE

Common Types of Construction Claims

Understanding the types of claims developers, contractors, and consultants may face is foundational to effective risk management:

  • Variation Claims: Result from changes in project scope or design, often leading to disputes over costs or time extensions.
  • Delay Claims: Claims for project issuance or completion delays, covering causes such as adverse site conditions or regulatory delays.
  • Payment Claims: Disputes over delayed payments, non-payment, or certified sums due under interim/final valuations.
  • Defect Claims: Raising issues related to construction quality, latent defects, or breach of warranties.
  • Termination Claims: Arising from alleged wrongful or premature termination of contracts.

Recent Legal Developments Affecting Claims

With amendments through 2022-2025, key changes impacting construction claims include:

  • Shortened timeframes for notification and quantification of claims (aligning with FIDIC’s modern “prompt notification” regime)
  • Enhanced requirements for substantiation and documentation (per Cabinet Resolution No. 82/2022 and Federal Decree-Law No. (6) of 2018, as amended)
  • Clearer jurisdictional boundaries between mediation, adjudication, and arbitration
Key Changes in Construction Claims Regulation
Aspect Pre-2022 2022-2025 Updates
Claim Notification Unstructured, longer periods permitted Prompt, typically 28 days; mandatory under FIDIC-based contracts
Dispute Boards Rarely institutionalized Supported by government guidance, recommended in large-scale tenders
Mediation Optional, not emphasized in public contracts Encouraged or required before litigation/arbitration for certain public contracts

Negotiation: The First Line of Defense

Role of Negotiation in UAE Construction Claims

Negotiation is the default and often most efficient method for early resolution of disputes between contracting parties. UAE law encourages amicable settlement, consistent with Article 318 of the Civil Transactions Law.

Key Legal Considerations and Strategies

  • Written records: All settlement proposals and counteroffers should be clearly documented, ensuring enforceability and traceability.
  • Without prejudice basis: Discussions explicitly labeled as “without prejudice” are protectable from use as evidence in subsequent dispute resolution (per UAE evidence law principles).
  • Limitations Periods: Negotiation does not automatically suspend statutory limitation periods under UAE law unless agreed in writing.

Practical Insights

  • Engage in pre-dispute risk reviews: Early identification and quantification of potential claims aids negotiation leverage.
  • Integrate expert opinions: Engaging technical advisors can expedite mutually agreeable valuations of claims or variations.
  • Maintain open channels: Appoint project-level dispute coordinators to facilitate continuous dialogue.

Case Example

Scenario: A UAE-based developer and contractor face a dispute over design variations. Through pre-arbitration negotiation, facilitated by expert quantity surveyors, an amicable agreement is reached within the project timeline, avoiding escalation to mediation or adjudication.

Mediation in the UAE Construction Sector

Mediation Framework: Laws and Guidelines

Mediation in the UAE has gained formal recognition through:

  • Federal Law No. (6) of 2021 on Mediation for Civil and Commercial Disputes
  • Cabinet Resolution No. 57/2018, which facilitates court-annexed mediation
  • Institutional rules, such as DIAC and ADCCAC Mediation Rules (aligned with the 2020 UNCITRAL model)

Under these provisions, parties may agree to mediation before or after disputes arise, with outcomes enforceable as settlement agreements under UAE law.

Mandatory vs. Voluntary Mediation

  • Mandatory Mediation: For public works and select government projects, mediation is required prior to arbitration or litigation (as per Cabinet Resolution No. 82/2022).
  • Voluntary Mediation: Parties may opt for private mediation at any contract stage.

Effectiveness and Strategic Use

  • Preserves business relationships through consensual, confidential resolution.
  • Provides flexible, interest-based outcomes not achievable through adjudication or arbitration.
  • Shortens claim resolution timeframes, typically within weeks rather than months or years.

Mediation Process Flow

Suggested Visual: Mediation Process Flow Diagram
(Contact our team to develop a graphic illustrating the steps: initiation, selection of mediator, joint meetings, private caucuses, drafting settlement, enforcement.)

Case Study

Scenario: An international EPC contractor and UAE public entity enter into a contractual dispute over delay penalties. Mandatory mediation (per government contract terms) leads to a mediated settlement that resolves underlying scheduling disputes, preserves project momentum, and avoids arbitration costs.

Adjudication for Construction Disputes

Legal and Contractual Framework

Adjudication—particularly through Dispute Adjudication Boards (DABs) established under FIDIC contracts—is increasingly supported by UAE regulatory authorities:

  • Use of DABs is institutionalized for major public infrastructure contracts (in line with FIDIC 2017 guidelines, as acknowledged by the Ministry of Energy and Infrastructure).
  • Decisions are binding on an interim basis, providing ‘pay now, argue later’ solutions to maintain project momentum.

DAB Process: Key Steps

  1. Dispute referred to DAB per contractual provision
  2. Parties submit documentation, evidence, and arguments
  3. DAB renders a decision within a defined contractual period (typically 84 days)
  4. Party dissatisfied may issue a “notice of dissatisfaction,” allowing escalation to arbitration or litigation

Advantages and Limitations

  • Fast-track, cost-effective dispute resolution method during project execution
  • Not a substitute for arbitration/litigation; provides interim enforceable relief
  • Less formal than arbitration, though process must conform to contractual standards

Comparing FIDIC 1999 vs 2017 in UAE Practice (Table)

Comparison of FIDIC 1999 and 2017 Dispute Provisions in UAE Use
Aspect FIDIC 1999 FIDIC 2017
DAB Appointment “Ad hoc” boards post-dispute “Standing” boards engaged from project inception
Decision Timeline Longer, less defined Strict timelines, usually 84 days
Referral to Arbitration More open-ended, risk of delay Streamlined notice and escalation process

Hypothetical Example

A dispute arises regarding extension-of-time claims in a government infrastructure project. The DAB rules in favor of the contractor (within 60 days), enabling project resumption while preserving the employer’s right to challenge the decision via subsequent arbitration.

Arbitration as a Preferred Mechanism

Current Arbitration Law

Arbitration remains the dominant mechanism for high-value, complex construction claims. The UAE has solidified its pro-arbitration stance through:

  • Federal Law No. (6) of 2018 on Arbitration, as amended by Decree-Law No. (6) of 2022, aligning with UNCITRAL (United Nations Commission on International Trade Law) standards
  • Judicial enforcement procedures for both domestic and foreign awards under UAE Civil Procedure Code (Federal Law No. (11) of 1992)
  • Support for major arbitration centers (DIAC, ADCCAC, and international venues via Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM))

Essential Arbitration Procedures

  • Commencement: Initiated by submission of a notice of arbitration in accordance with governing contract terms
  • Formation of Tribunal: Parties appoint a panel of one or three arbitrators, often construction specialists
  • Proceedings: Written exchanges, documentary disclosure, and oral hearings (usually more flexible and private than litigation)
  • Award Enforcement: Final awards are recognized and enforceable in UAE courts under the New York Convention (ratified by UAE in 2006)

Key Legal Developments 2022-2025

  • Federal Decree-Law No. (6) of 2022 mandates quicker award ratification, narrowing grounds for challenging enforcement
  • DIAC 2022 Rules introduce rapid appointment of arbitrators and fast-track procedures for claims below AED 1 million
  • Broader use of electronic hearings and e-discovery mechanisms, especially post-2020

Practical Insights and Recommendations

  • Draft clear, detailed arbitration clauses identifying seat, language, and institutional rules
  • Consider specifying consolidated or multi-party arbitration frameworks where projects involve multiple interrelated contracts
  • Preserve the right to seek interim measures (emergency arbitrators) for suspension of works or preservation of evidence

Case Study

Actual Scenario: A multinational JV contractor and local employer proceed to arbitration at DIAC following the breakdown of DAB proceedings and failed mediation. The arbitral tribunal issues a comprehensive, enforceable award within 15 months, delivering resolution on quantum, extension-of-time, and defects liability issues, thereby safeguarding the parties’ commercial interests and project deliverables.

Comparative Analysis: Selecting the Optimal Dispute Resolution Method

Resolution Method Comparison for UAE Construction Claims
Method Timeframe Confidentiality Binding Nature Cost Recommended Use Case
Negotiation Days–weeks Private Only if agreement reached Lowest Early-stage, minor variations
Mediation 2–6 weeks Strictly confidential Only if settlement executed Low–moderate Ongoing relationships, preservation of goodwill
Adjudication (DAB) 2–3 months Private Interim binding Moderate Project-phase disputes, urgent payment issues
Arbitration 6–18 months Very high Legally binding, final High Complex, high-value, cross-border claims

Suggested Visual: Consider a bar chart illustrating duration and cost comparisons across methods for use in client briefings.

Strategic Factors: How to Choose

  • Nature and value of claim
  • Contractual mandates and governmental requirements
  • Urgency versus need for finality
  • Relationship dynamics and long-term project goals

Compliance, Risks, and Strategic Recommendations

Risks of Non-Compliance

  • Loss of contractual entitlements due to missed notification deadlines (now strictly enforced post-2022)
  • Potential unenforceability of defective dispute clauses
  • Extended project delays and cash-flow impacts pending dispute resolution
  • Risks of adverse cost awards and reputational impact in the event of failed or mishandled ADR processes

Legal Compliance Checklist

Construction Claims Compliance Checklist for the UAE
Requirement Action Item Legal Reference
Prompt claim notification Notify within contractually specified period (often 28 days) Civil Transactions Law, FIDIC, Cabinet Resolution No. 82/2022
Document substantiation Maintain thorough, contemporaneous project and claim records Civil Transactions Law, FIDIC
Dispute clause drafting Ensure clarity and legal sufficiency in contract Federal Law No. (6) of 2018, DIAC/ADCCAC Rules
Mediation/Adjudication prerequisites Comply with pre-arbitration steps if mandated Cabinet Resolution No. 82/2022

Consultancy Insights

  • Engage UAE-qualified lawyers for front-end contract review and ADR clause drafting
  • Invest in project management training to ensure on-ground teams are equipped to document, notify, and escalate claims appropriately
  • Leverage institutional ADR centers for procedural guidance and specialized mediators/adjudicators
  • Adopt early dispute avoidance tools—such as regular risk audits and joint management review boards

The UAE’s regulatory environment for construction claims has matured, aligning closely with global best practices and emphasizing efficient, enforceable, and flexible alternative dispute resolution (ADR) mechanisms. The adoption of prompt claims notification, expanded mediation and adjudication frameworks, and the modernization of arbitration laws underscore the UAE’s commitment to a robust, investor-friendly business climate. Looking forward, businesses should expect further digitization of ADR processes, rising use of standing dispute boards in public projects, and greater cross-border enforceability of awards.

Best Practices:

  • Proactively review and adapt contractual ADR frameworks to align with UAE law 2025 updates and federal decrees
  • Invest in training and claims management systems for compliance and early dispute avoidance
  • Seek legal advice at contract drafting and claim escalation stages to minimize risk and maximize outcome efficiency
  • Monitor regulatory updates via validated portals (Ministry of Justice, Federal Legal Gazette)

The evolving landscape of construction claims in the UAE presents challenges, but also unprecedented opportunities for organizations ready to embrace proactive dispute resolution planning and compliance-driven contract management.