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Introduction

The construction industry in the United Arab Emirates (UAE) mainly adopts and follows international best practices for construction contracts governed by UAE law or implemented in the UAE. These contracts are heavily modelled on International Federation of Consulting Engineers (Fédération Internationale Des Ingénieurs-Conseils) (FIDIC) forms of contracts.

However, domestic law considerations should not be ignored. It is true that, in principle, the UAE courts recognise and accept the standard terms and conditions set out in the FIDIC contracts. However, there are several UAE law principles that have a direct impact on the parties’ contractual terms and prevail over such terms in some cases.

As the UAE is a civil law jurisdiction, UAE law principles are mainly codified in the Civil Transaction Law No. 5 of 1985, as amended by Federal Law No. 1 of 1987 (Civil Code) and in the Commercial Transactions Law No. 13 of 1993 (Commercial Code).

More specifically, construction contracts are regulated by Articles 872 to 896 of the Civil Code dealing with muqawala contracts (that is, contracts to build), and other general principles of UAE law codified in the Civil Code and the Commercial Code.

Some of these provisions are imperative, which means that they are default provisions and that parties must explicitly contract out of them.

Other provisions are rules of public order, which means that parties cannot contract out of these rules when they seek enforcement in the UAE, even where a foreign law is applicable to their contract and/or a foreign court or arbitration tribunal is competent to rule on a dispute arising from the contract.

Therefore, opting for the application of a foreign law to a construction contract, or for the submission of disputes to a foreign court or to an arbitration tribunal, does not make the construction contract immune from being subject to certain rules of UAE law.

Understanding the legal framework applicable to construction contracts in the UAE requires shedding light on what the parties can and cannot agree in their contract. To this end, this article outlines:

  • The extent to which a foreign law can govern a construction contract performed in the UAE.
  • The choice of dispute resolution mechanisms in construction contracts.
  • The possibility of enforcing foreign judgments and arbitral awards relating to construction contracts.
  • Key concepts of UAE construction laws that can assist employers, engineers, contractors and subcontractors in setting out their respective rights and obligations, at the stages of negotiation, implementation or dispute resolution.
  • Practical steps that parties should take before entering into a construction contract.

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