Construction Disputes in the UAE Amid Rising GCC Tensions

Introduction: From Geopolitics to Project Claims

The current wave of regional tensions in the GCC driven by maritime insecurity in the Red Sea, the Strait of Hormuz, and surrounding trade corridors, has shifted disruption risks from the exception to the imminent. Shipping route suspensions, insurance withdrawals, logistics bottlenecks, and energy price volatility are now materially affecting live construction projects across the UAE, particularly those dependent on imported materials, specialist equipment, or cross‑border subcontractors.

These conditions are fertile ground for construction disputes, particularly claims for delay, disruption, prolongation costs, material unavailability, and workmanship issues arising from substituted resources and accelerated or re-sequenced works. The legal question is no longer whether disputes will arise, but how UAE courts are likely to treat them.

The Dispute Landscape: What Claims Are Emerging?

Delay and Disruption Claims

Delayed shipments, rerouted vessels via the Cape of Good Hope, suspension of Hormuz transits, and port congestion have extended delivery times by weeks and is expected to extend beyond that in some cases, directly impacting critical paths on UAE projects reliant on imported steel, aluminum, MEP systems, and other equipment.

From a disputes perspective, this has already translated into extension of Time (EOT) claims grounded in force majeure or “exceptional events”; disruption and prolongation claims for extended preliminaries and site overheads; employer counter‑claims alleging concurrent delay, poor planning, or inadequate mitigation.

Experience from COVID‑era disputes suggests that these claims will be rigorously scrutinized by courts in the UAE, particularly where contractors were already behind program or failed to comply strictly with contractual notice regimes.

Material, Equipment, and Workmanship Disputes

Supply chain stress has forced contractors to source alternative materials, substitute manufacturers, or rely on unfamiliar subcontractors. This creates heightened risk of non‑compliance with specifications; latent defects attributable to hurried procurement or untested suppliers; quality and workmanship disputes following accelerated works or resequencing.

Such disputes often surface months later, crystallizing into contentious expert battles in arbitration or court proceedings.

Legal Analysis of Force Majeure Under UAE Law: Onshore vs Offshore

In the UAE, the legal treatment of force majeure and hardship varies significantly depending on whether a project is onshore or seated in an offshore jurisdiction. Onshore projects are governed by the UAE Civil Transactions Law (Federal Decree Law No. 25 of 2025), under which force majeure is a statutory concept rather than purely contractual. UAE courts, however, apply it narrowly: the event must render performance objectively impossible, not merely more costly or inconvenient, meaning shipping delays, inflation, or logistical disruption will rarely suffice unless performance is entirely prevented.

Where performance becomes excessively onerous but not impossible, Article 249 empowers courts to rebalance obligations to restore contractual equilibrium, although this discretionary remedy is unpredictable in practice. In all cases, Article 246 imposes a mandatory duty of good faith, exposing contractors who fail to mitigate delays, give timely notice, or explore alternatives to the risk of losing otherwise viable claims.

Offshore jurisdictions take a markedly different approach. In the DIFC, force majeure arises only contractually or under Article 82 of the DIFC Contract Law, with courts placing strong emphasis on strict compliance with notice provisions and the contractual allocation of risk. ADGM applies English common law without statutory force majeure; relief depends entirely on drafting, and the doctrine of frustration is applied narrowly, with cost escalation and supply chain delays rarely qualifying. As a result, the same factual scenario may generate radically different outcomes depending on whether a project is onshore, in the DIFC, or in the ADGM, a distinction that is often underestimated at the contract stage.

FIDIC 2017 in the UAE: Why the Same Clause Produces Different Disputes Onshore and Offshore

The use of the FIDIC 2017 suite across UAE construction projects has materially reshaped dispute dynamics, particularly against the backdrop of current regional tensions. While FIDIC 2017 was designed to introduce greater procedural clarity and balance, its clauses do not operate uniformly across UAE jurisdictions. Instead, their effect diverges sharply depending on whether a project is governed by onshore UAE law or seated in an offshore common law jurisdiction such as ADGM or DIFC. This divergence has become acute in disputes arising from disruption, delays, material shortages, and logistics failure.

Under onshore UAE law, FIDIC 2017 operates within a mandatory statutory framework anchored in the UAE Civil Code. Even where the contract expressly allocates risk under Sub‑Clause 18 (Exceptional Events), Sub‑Clause 20 (Claims), or Sub‑Clause 8 (Delay Damages), tribunals and courts retain discretion to recharacterize or override contractual outcomes based on statutory principles such as impossibility, exceptional hardship, and good faith. As a result, claims arising from shipping interruptions or supply‑chain disruption frequently evolve beyond strict contractual analysis into broader assessments of whether performance became impossible or excessively onerous regardless of whether the FIDIC threshold for an “Exceptional Event” was strictly met.

In contrast, offshore jurisdictions, particularly ADGM, apply FIDIC 2017 as a self‑contained risk allocation instrument. Exceptional Events under Sub‑Clause 18 do not relieve parties unless the contractual definition is satisfied, causation is proven, and mitigation steps are evidenced. Cost escalation, shipping delay, or market instability, no matter how severe, will not excuse performance unless the contract expressly provides for relief. The result is a materially higher failure rate for claims that are contractually imperfect but factually compelling.

This distinction is most visible in disputes concerning notice compliance under Sub‑Clause 20.2. Under FIDIC 2017, the 28 day notice regime is expressly framed as a condition precedent. Offshore tribunals have increasingly treated late or defective notices as fatal, regardless of employer knowledge or absence of prejudice. Onshore, however, parties often attempt, sometimes successfully, to argue that strict enforcement of time bars violates good faith or commercial fairness. While such arguments are far from guaranteed, they introduce uncertainty that does not exist offshore.

The same fracture appears in disputes relating to delay damages under Sub‑Clause 8.7. Offshore tribunals generally enforce liquidated damages strictly as agreed, subject only to contractual caps or express relief mechanisms. Onshore, courts retain discretion to reduce agreed delay damages where actual harm is disproportionate, particularly where delay is intertwined with regional disruption or employer contribution. This tension frequently blindsides employers who assumed that FIDIC 2017 would deliver LD certainty across jurisdictions.

Perhaps most critically, FIDIC 2017’s enhanced emphasis on mitigation, early warning, and contemporaneous substantiation has intensified evidentiary burdens in offshore proceedings. Claims grounded in regional instability or maritime disruption are scrutinized through a forensic lens: Was the disruption unforeseeable at contract execution? Was it the sole or dominant cause of delay? Were alternative routes, suppliers, or sequencing genuinely explored? Offshore tribunals will not fill gaps left by imperfect records. Onshore forums occasionally might.

The practical consequence is stark. Identical disruption events, shipping delays, port closures, equipment shortages, are now producing divergent dispute outcomes, not because the facts differ, but because FIDIC clauses are filtered through fundamentally different legal ecosystems.

Practical Risk Mitigation: What Should Parties Do Now?

First, we advise parties to audit their contracts with jurisdictional precision. Governing law, seat of arbitration, and force majeure clauses are no longer boilerplate, they are outcome‑determinative.

Second, contractors should issue early, precise, and contract‑compliant notices, even where entitlement is uncertain. Procedural preservation has become more important than substantive arguments.

Third, contemporaneous documentation must be treated as a strategic asset. Delay logs, shipping correspondence, mitigation efforts, and alternative procurement records are increasingly decisive.

Fourth, employers and developers should engage early rather than adopt a wait‑and‑see approach. Courts and tribunals are far more receptive to parties who demonstrably acted in good faith to manage disruption.

Finally, parties should consider early negotiation or dispute boards before positions harden. In the current climate, prevention remains materially cheaper than arbitration.

Conclusion

The current GCC tensions are reshaping the UAE construction dispute landscape. Delays, disruption, and material shortages are no longer exceptional; they are systemic. The legal response, under UAE onshore law and the offshore DIFC and ADGM regimes, will not be uniform, and parties who fail to appreciate these distinctions will pay for it in disputes that could otherwise have been avoided.

In this environment, precision, preparation, and proactive legal strategy are not optional. They are the difference between recoverable risk and unrecoverable loss.