Introduction

The UAE is a golden wallet for construction; its landscape makes construction a key activity in the economy. However, this means that construction dispute cases are rapidly increasing in the UAE. The parties are deviating from the traditional way of resolving the disputes and prefer arbitration over litigation due to the numerous benefits arbitration offers.

Arbitration the Popular Choice

Arbitration has become a no-brainer for construction disputes due to the following reasons: 

Certainty:

Arbitration usually offers certainty because through arbitration agreements the parties have the authority to choose either ad-hoc or institutional arbitration. Provided that the parties opt for institutional arbitration, there is immense clarity on the rules that will apply to the arbitration, ensuring a degree of procedural certainty, and predictability. This clear procedural system is viable for construction disputes since it makes the arbitration proceeding process easier. 

Flexibility:

A significant advantage of arbitration over litigation is the ability to customise the procedures to the needs of a particular dispute, which allows room for innovation. Moreover, parties have more control on the arbitration proceedings since they can choose the suitable procedure. 

Neutrality:

The consensual nature of arbitration ensures that the parties can take control of the composition of the tribunal, seat and location of the hearing, making arbitration’s ecosystem neutral. 

Privacy:

Due to the high-profile status of many construction disputes, arbitration is relatively a more favourable dispute resolution because its nature is private, in comparison to litigation. 

Enforcement: 

Enforcement of arbitration awards is one of the many advantages that attract parties to choose arbitration. Since the UAE is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“the New York Convention’’), the parties in the UAE benefit from a comprehensive enforcement regime for arbitration awards. 

Arbitration Award: 

The arbitration system makes appealing or challenging an arbitration award extremely difficult since the arbitration award is deemed final. This provides a sense of security for parties involved in construction disputes. On the other hand, court judgments are often subject to appeals, resulting in frustration and delays.  

Is Arbitration Still a Practical Choice Over Litigation?

Despite the factors identified above, there are certain situations, in which litigation will usually be preferable to arbitration for construction disputes. 

Delays:

Although arbitration represents itself as a quick dispute resolution method, arbitration proceedings also suffer from unfortunate delays due unavailability of arbitrators. In addition to this, arbitrators’ coercive powers are limited compared to the courts, allowing an opportunity for breaches of procedural deadlines. As a result, this can cause stress for the parties since delays can lead to monetary losses. 

Costs: 

Arbitration is famous for being cheaper than litigation, but in reality, it might not always be true if extensive procedures can result in expensive fees. This is a factor that parties involved in construction disputes need to consider since construction disputes are technically and legally complex. 

Precedent:

One of the roots of construction disputes is the contract. This means that it is imperative for a final binding ruling on the interpretation of a disputed clause. Thus, litigation can be preferable for construction disputes since arbitration awards do not give rise to a binding precedent. 

Conclusion

Even though arbitration might not be perfect, the benefits arbitration offers are increasingly making it a popular method for construction disputes. The way arbitration functions leads to a less acrimonious relationship between the parties, which is imperative for prospective business opportunities and professional reputation. Other than this, litigation is unfavourable for parties in construction disputes because of the challenges, and rigidity it has. 

However, in the upcoming years, the trend might change, and we can witness a shift in preference from arbitration to litigation because of high costs, making it unattainable for parties. However, with the UAE continuously enhancing its arbitration framework, the UAE will remain an attractive place for arbitration, especially for construction disputes.