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Liquidity Issues Fuelling Construction Disputes in Gulf - Mr Mackenzie

Infra News - Published on Mon, 15 Jul 2019

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Arabian Business, citing Andrew Mackenzie head of international arbitration UAE Baker Mackenzie Habib Al Mulla, reported that a lack of liquidity in the market could trigger substantive disputes across the construction industry. Mr Mackenzie told Arabian Business the lack of liquidity is a ‘significant issue’ in the industry at present, which in turn is driving an increase in disputes. He said “Large scale projects are finishing and payments/outstanding claims are falling due. Similar to 2009 and the dispute cycle of 2011-2012, the last few months have seen a marked increase in bond calls across the region. This invariably triggers substantive disputes, as once an attachment is granted by the court over the bond, the successful party must commence substantive proceedings within eight days.”

Mr Euan Lloyd, head of construction at Al Tamimi & Company, agreed that liquidity issues were an increasing concern, driven by the fact that it can be difficult to get funding from the banks. However, he said “Another thing is the demand for construction projects is not as strong as it used to be in terms of residential developments and, in particular, off plan sales. There hasn’t been that cash coming through from off plan buyers.”

He said that “A further economic issue is because the market is competitive, there are a lot of contractors putting down low prices, maybe under-pricing jobs, in order to fill their order book. They’re taking a short-term approach rather than long-term and that can cause problems.”.

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Posted By : Mohan Sharma on Mon, 15 Jul 2019
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