Construction stakeholders and legal experts continue to cite concerns about risk allocation and the use of unsatisfactory contracts within the Middle East’s construction sector, and the topic was a key point of discussion at Leaders Kuwait 2019, held on 16 October in Kuwait City.
Practical advice in relation to construction claims and disputes was offered during the Construction Conflicts – Dealing with Disputes discussion, moderated by BCLP managing director, Richard Davies, featuring HFW partner Michael Sergeant, KEO project director Osama Madokh, and Pinsent Masons partner Mark Raymont as panellists.
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With steady cash flow being critical for all stakeholders across the supply chain, the prospect of potentially lengthy and costly construction disputes remains a concern for the region, the panellists discussed.
Tools to improve resolution have been put in place across the Middle East, but Madokh said that there was room for improvement in Kuwait, adding:
“I have not seen many projects in Kuwait that emphasise on mechanisms such as mediation that would eliminate the disputes.”
This view was echoed by Raymont, who said remedies for cash flow issues in the Middle East needed improvements:
“As we know, cash is king in our day-to-day lives, and particularly for construction projects. People and labourers need to be paid, materials need to be bought. If you turn this tap off, then clearly it is going to lead to stresses. There are no mechanisms for issues around the payment flow and issues around variations.”
Sergeant said remedies for improving adversarial issues would attract international contractors for megaprojects in Kuwait, adding: “Clearly, there are excellent capabilities in Kuwait, but on a megaproject, you need key specialisms which often you can only get from international contractors abroad. This is not a negative thing for Kuwait, but [international contractors] bring in very valuable specialisations. From a construction lawyer’s perspective, this is very important.”
Raymont added that in order to minimise the risk of disputes in Kuwait, understanding and managing interfaces was important:
“Problems [are] inevitable when you have complex interfaces and difficult working conditions. On a well-run project, most of these can be resolved in a satisfactory way and it’s about nipping problems early in the bud.”
Madokh highlighted the need to involve senior officials at an earlier stage if a dispute arises:
“One of the issues is escalation – team members [sometimes] don’t know how to escalate matters to their seniors.”
Setting realistic expectations at the beginning of a project was also among the key topics addressed by Sergeant:
“The first thing from the employer’s side, as much as the contractor’s side, is to be realistic about the budget and the planning. If you end up with a situation that the programme is too short, then effectively you are clearly building problems for the future. We need to have a realistic expectation of communication between the two parties.”
Sergeant added that he often described a construction contract as a “marriage” when offering advice for resolving disputes:
“With a marriage, the first thing is to not oversell yourself and pretend to be something that you are not. Honesty is big when entering into a contract, to make sure it is clear what you’re buying and getting. Communication is very important.”
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