Introduction

In the dynamic landscape of the United Arab Emirates’ construction and infrastructure sector, the quantification of claims—particularly those pertaining to prolongation, disruption, and recovery of head office overheads—continues to play a pivotal role in dispute resolution and risk management. The recent evolution of UAE legal frameworks, including updates to Federal Law No. 6 of 2023 on Civil Transactions (the ‘Civil Code’) and key decrees impacting public procurement and project delivery, has profound implications for how businesses and legal practitioners approach quantum claims.

For UAE-based enterprises, international contractors, and their advisors, a deep understanding of these concepts is essential—not only for securing entitlements but to ensure compliance and strategic advantage in negotiations and potential litigation. This article provides an in-depth consultancy-grade analysis of claim quantum in the UAE, relevant legal authorities, quantification techniques, practical risks, and strategic recommendations tailored for the region’s evolving legal environment.

Table of Contents

Relevant Law and Regulation

The concept of ‘claim quantum’ refers to the process of assessing and substantiating the financial value of a claim arising from contractual breaches, delays, or variations. In the UAE, claim quantum—particularly in construction contractual disputes—falls under several intersecting legal frameworks:

  • Federal Law No. 6 of 2023 on Civil Transactions (Civil Code): Replacing UAE’s former Civil Code (Federal Law No. 5 of 1985), this updated legislation governs contractual obligations, remedies for breach, compensation, and quantification standards. Key articles: Art. 246 (performance in good faith), Art. 267 (obligations and damages), Art. 386 (compensable harm).
  • Federal Decree-Law No. 8 of 2011 on the Rules of Public Procurement: Imposes requirements on government and quasi-government contracts, including delay analysis and submission of substantiated claims within specified timeframes.
  • Ministerial Guidelines: Such as those periodically published by the UAE Ministry of Infrastructure Development and the Ministry of Justice, which provide insights into acceptable documentation and substantiation standards.

Practical Insights

While parties retain autonomy to agree on contractual mechanisms, the Civil Code’s mandatory provisions mean that a significant portion of claims are ultimately subject to UAE’s statutory principles on proof, causation, mitigation, and proportionality. This elevates the importance of precise claim formulation and robust record-keeping.

Comparison of Pre-2023 and Post-2023 Legal Provisions for Claim Quantum in UAE
Aspect Before 2023 (Fed. Law No. 5 of 1985) After 2023 (Fed. Law No. 6 of 2023)
Performance Standards Good faith required (Art. 246) Expanded ‘good faith’ criterion and clarity on unforeseen circumstances
Compensation General entitlement for proven losses (Art. 386) More explicit treatment of direct/indirect harm, clarity on head office overhead entitlement
Burden of Proof On claimant; flexible evidentiary rules Enhanced documentation and contemporaneous records are emphasized

Understanding Prolongation Claims

Nature and Sources of Prolongation Claims

Prolongation claims arise when a contractor incurs additional site and time-related costs as a result of delays that extend the contract period beyond what was originally agreed. Typically, such delays are attributed to the employer, engineer, or events for which risk is contractually borne by the client.

Common sources of prolongation in UAE projects include:

  • Late issuance of drawings or instructions
  • Change orders and scope expansions
  • Acts of prevention attributable to the employer
  • Force majeure events (subject to contract and statute)

Legal Basis

The right to recover prolongation costs stems from both contract (e.g., FIDIC-based contracts, as widely adopted in the UAE) and statutory law. Articles 246 and 386 of the Civil Code are primary touchstones, requiring objective proof that the delay was not contractor-caused and that a legitimate financial loss resulted.

Consultancy Insights

  • Establishing causation: The contractor must provide a critical path delay analysis demonstrating the delay’s direct link to employer-default events.
  • Substantiation: Prolongation costs can include site staff salaries, equipment standby, extended supervision, and time-based preliminaries. The expectation is detailed, contemporaneous records.
  • Entitlement limitations: If delays are due to concurrent contractor default, quantum may be reduced or denied per the prevailing ‘apportionment’ approach in UAE courts.

Visual Placement

Suggested: A process flow diagram of prolongation claim preparation, from notification through quantification, review, and approval.

Disruption Claims: Definition and Impact

Disruption Versus Prolongation

While prolongation claims relate to extended duration, disruption claims pertain to reduced efficiency or productivity within the original contract period due to events not at the contractor’s risk. Disruption commonly results from:

  • Late information or resources from employer
  • Interference or restricted site access
  • Unscheduled re-sequencing of works

Legal and Contractual Provisions

Disruption entitlements, while less explicitly addressed than prolongation, are accepted under UAE law provided the loss of productivity is both real and attributable to employer fault. Recent legal updates require stronger causal linkage and proof of actual extra costs incurred—mere delay or inconvenience is insufficient. Key authorities: Civil Code Art. 267; Ministerial circulars requiring productivity records or measured mile studies.

Practical Guidance

  • Record-keeping: Daily reports on resource deployment and productivity are crucial for substantiating disruption.
  • Analysis methodologies: ‘Measured mile’ comparisons (benchmarking against undisturbed performance) are increasingly favored and recognized in UAE expert determinations and courts.

Hypothetical Example

A contractor, building a logistics warehouse in Abu Dhabi, is repeatedly impeded by late material deliveries from the employer’s nominated suppliers. Despite no extension of time, the contractor incurs additional overtime and inefficient resource utilization. To recover disruption costs, the contractor employs a measured mile approach, comparing actual output during obstructed and unobstructed periods, presenting this evidence in a substantiated claim.

Head Office Overheads: The ‘Eichleay’ Formula and UAE Practices

Nature of Head Office Overhead Claims

Prolonged construction activity can tie up company-wide resources, preventing their productive deployment on other projects—this is the essence of head office overhead (HOOH) loss. While contractors typically recover site overheads as part of prolongation, HOOH requires more nuanced treatment and robust proof.

The UAE recognizes entitlement to HOOH under both contract and Art. 386 of the Civil Code, particularly following recent Supreme Court guidance demanding clear evidence of actual loss and causation.

The ‘Eichleay’ Formula

Although originating in US law, the Eichleay formula (and its civil law variants) is frequently referenced by delay experts in the UAE. Under this approach:

  1. Total head office overhead for the relevant period is apportioned to the delayed project based on contract value as a percentage of all work undertaken by the contractor during the period.
  2. This apportionment is then multiplied by the number of delay days.

Comparative Analysis Table

Head Office Overhead Quantification Methods in Practice
Method Description Acceptance in UAE
Actual Cost Method Requires detailed proof of incremental costs Favored by UAE courts where evidence exists
Eichleay Formula Apportions overhead based on contract value and delay Conditionally accepted, provided causation and exclusion of concurrent delays are proven
Hudson Formula Uses tendered overhead rates Treated with caution, may be considered if mutually agreed

Practical Tips

  • Maintain segregated head office cost records specific to each project where feasible.
  • Document resource allocation decisions and the impact of delay on business development or other revenue streams.

UAE Law 2025 Updates and Impact on Claims

Recent Legal Developments

2025 is set to mark a significant year for contract and claims management in the UAE, with new ministerial guidance anticipated on evidentiary standards and electronic documentation.

  • Federal Law No. 6 of 2023 now explicitly covers digital records as admissible evidence in proving quantum, per recent Ministry of Justice guidance (Q1 2024 updates).
  • Contractual notification requirements (including those in FIDIC-adapted contracts) have been reinforced through Federal Decree-Law No. 8 of 2011, with time bars for delayed notifications being strictly enforced unless contrary to public policy.

Compliance Implications

  • Contractors must ensure robust, ideally real-time, documentation for all additional cost claims.
  • Employers and developers are advised to implement more rigorous change and variation controls, including early notification mechanisms.

Suggested Visual

Insert a compliance checklist graphic outlining key documentation requirements for quantum claims in 2025 and beyond.

Quantification Methodologies and Evidentiary Requirements

Legal Standards of Proof

Under UAE law, the party asserting a claim must demonstrate both liability and quantum of loss. As per Art. 110 of the Civil Code and Ministry of Justice guidelines, mere estimates or general assertions are insufficient; instead, claimants must provide:

  • Contemporaneous site diaries and reports
  • Correspondence evidencing cause and effect
  • Certified payroll, timekeeping, and cost records
  • Analytical delay and disruption reports (e.g., critical path analysis, measured mile studies)

Case Law Insights

Recent decisions by UAE courts (including Court of Cassation, Dubai, 2023/326) confirm that failure to present methodical quantification or to distinguish between delay, disruption, and compensable overheads can result in reduced or dismissed claims—even if liability is established.

Comparison Table: Substantiation Requirements

Key Evidentiary Elements for Different Claim Types
Claim Type Required Documentation Typical Pitfalls
Prolongation Delay analysis, site records, cost reports Inadequate critical path evidence; missing cost details
Disruption Daily productivity logs, performance benchmarks Failure to segregate disruption from delay; weak causation
Head Office Overheads Audited financials, resource allocation reports Over-reliance on theoretical formulae; double dipping with site costs

Practical Case Studies and Hypotheticals

Case Study 1: Prolongation Claim on Government Project

A Dubai-based contractor engaged in a PPP road project files a prolongation claim after protracted land access delays. Despite contractual allocations, the contractor’s contemporaneous delay and cost records enabled recovery of 85% of claimed costs following an expert determination. The employer’s failure to provide timely counter-evidence weighed against it.
Consultancy Insight: Early notification and comprehensive daily records are decisive, particularly when dealing with government clients and ministerial procurement regulations.

Case Study 2: Disruption and HOOH on Mixed-Use Development

A major international contractor, building a mixed-use complex in Abu Dhabi, experiences repeated design changes necessitating rework and site re-sequencing. While no EOT was granted, disruption and limited HOOH were ultimately recovered after deployment of a robust measured mile analysis and presentation of head office resource allocation logs substantiating actual loss.
Recommendations: Document how project delays prevent redeployment of key personnel or resources onto other revenue-generating projects, supporting HOOH entitlement under UAE law.

Hypothetical: Risks of Inadequate Documentation

A local subcontractor unable to separate disruption effects from general project delays faces a dismissed claim, with the court highlighting the absence of productivity records and ‘double-counting’ of costs. This underscores the vital need for granular and contemporaneous record-keeping aligned with evolving UAE evidentiary standards.

Risks of Non-Compliance and Mitigation Strategies

Penalties and Adverse Consequences

Failure to comply with statutory and contractual requirements for claim notification, substantiation, or documentation can lead to significant financial and reputational risk, including:

  • Dismissal or severe reduction of claims (even where liability exists)
  • Liquidated damages or set-offs by the employer
  • Delays in payment certification or arbitration awards
  • Heightened scrutiny in government and quasi-government contracts

Compliance Checklist Table

Essential Steps for Compliant Quantum Claim Preparation
Action Area of Impact Risk if Omitted
Timely notification following event All claim types Time bar, exclusion of claim
Maintain daily substantiation records All claim types Lack of evidence, disputed quantum
Distinctly quantify each head of claim Delay/disruption/overheads Invalidation or reduction of claim
Employ recognized analysis methods Delay/disruption Unacceptability of claim in court/expert determination

Mitigation Strategies

  • Implement digital site reporting and cost-tracking systems in compliance with 2025 legal expectations.
  • Establish project-level claim review committees to ensure early warning and robust documentation.
  • Engage legal advisors early—preferably at the contract formation stage—to customize claim procedures aligned with the Civil Code, ministerial guidance, and project-specific risks.

Conclusion and Best Practices

UAE’s maturing legal framework and the anticipated 2025 updates bring both opportunity and challenge to the quantification of prolongation, disruption, and head office overhead claims. As the courts and arbitral bodies raise the evidentiary bar and contractual compliance becomes ever more critical, organizations must adapt by streamlining record-keeping, deploying robust analytical methods, and ensuring constant legal awareness.

Key takeaways:

  • The legal burden on claimants has increased, with a premium placed on timely, detailed, and objectively verifiable substantiation.
  • Employers and contractors alike need to revisit internal controls to comply with both new statutory requirements and tried-and-tested best practices in contract management.
  • Proactive legal consulting and continuous process improvement are essential to mitigate risk and realize value in UAE construction and infrastructure projects going forward.

To remain ahead, we recommend clients:

  1. Undertake periodic audits of contract and claim management procedures in light of recent legal updates.
  2. Invest in digital solutions for site records, cost allocation, and compliance documentation.
  3. Seek experienced legal counsel at both pre-contract and post-event stages, leveraging sector-specific insights and up-to-date knowledge of UAE law.

Effective quantum claim management is no longer merely an option in the UAE—it is a competitive necessity that shapes outcomes, reputation, and financial resilience.