Jurisdictional Challenges

Dale notes that the biggest concern in the area is the jurisdictional challenges and enforcement under the New York Convention, which is one of the key sets of rules in international arbitration that many countries in the world honor, but the number of states that follow the Convention is the Middle East is limited.

“There is still an element of mistrust there with the dispute resolution process,” Dale says, “They are taking much, much longer to resolve partly because of the fear of jurisdictional challenges, and I also think it’s partly because of the lack of qualified experts, arbitrators, lawyers that are able to take the parties through a proper international arbitration process.”

Countries in the region are making an effort to regulate and generalize the process.

United Arab Emirates passed a law last year that went into effect January this year to define the qualifications of an expert witness.

The new law states that an industry expert “must be specialized persons of experienced works” with postgraduate experiences exceeding seven years for nationals and 15 years for foreigners and the degree must be from a “recognized” university, according to Clyde & Co, a global law firm covering sectors such as energy and infrastructure with experiences in emerging markets.

Dale believes this law change would result in additional shortage in experts in the area and might further complicate the situation. “People on the back end of a decision in an arbitration are using any means they can to avoid paying,” says Dale, “The problem is, some of the local courts aren’t experienced enough to deal with the ramifications to the region and how to handle all of that.”

Improvements, however, are in the projection and to be expected for the region. “Before things get better, I think they potentially can get worse,” Dale notices.” But what the Middle East has achieved out here is phenomenal, and what they have built in 10 years, it’s crazy.”

The U.S., on the other hand, amassed the least dollar value at stake in disputes, only $9 million in settlement last year, down from $10.5 million in 2011. The disputes lasted a mere 11.9 months, down from 14.4 months.

Market sophistication and experienced professionals with substantial knowledge help hold down the time needed to resolve disputes in the U.S..

In addition, Seibold points out that the competitiveness of the market and discounted pricing were also critical for the decline.

“The construction contracts that were awarded in the last three to four years during the economic downturn are now approaching completion,” Seibold says.” Those earlier construction bids often came in lower than was budgeted by the owner due to a hyper-competitive market at the time.”