Construction pay disputes to escalate in 2009 - lawyer

CONTRACT DISPUTES: Delayed and non-payment of contractors will be a big issue in first half of 2009, it is claimed. (Getty Images)

Delayed or non-payment of contractors by developers for work already undertaken will become a key issue in the first six months of 2009 due to a slowdown in the construction sector in Dubai, a partner with law firm Clyde & Co said on Monday.

Mark Blanksby, who specialises in construction law in Dubai, estimated he had received a 60 to 80 percent increase in inquiries over the last two months relating to disputes over the termination and suspension of contracts and a reduction in work scope on construction projects.

He said there was little contractors could do to chase money owed to them from developers who had defaulted on payments for work completed if a developer did not have sufficient money to pay, with the problem made worse by “rudimentary” insolvency laws in the UAE in the event of the developer becoming insolvent.

“That issue (delayed payment of contractors) is potentially going to be a big feature of the first six months of this year,” said Blanksby.

“I think there’s a large measure of denial in the market place at moment among contractors. A lot of contractors think ‘it’s okay, we will get paid’, however if the money is not there there’s very little a contractor can do about it. “

He said it was up to a contractor to consider the “creditworthiness” of a developer before entering into contract with it.

There was an inequality between the laws protecting developers and contractors, he added.

“If a contractor defaults the employer has the ability to go to the bondsman from the bank but if an employer fails to pay there’s no similar mechanism for the contractor,” he said.

A number of projects in the UAE have been cancelled or have slowed down due to a collapse in the real estate market and a freezing of the credit markets as banks decline to finance new projects due to the high risks involved.

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