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Acknowledgments
I wish to thank my supervisor&&&&..for his encouragement and useful suggestions thought out my project.
I also wish to thank various construction industry professionals and insiders who graciously shared their experiences and opinions with me on this study.
Finally, I wish to acknowledge the support of my colleagues and family in our academic journey.
Abstract
Negotiation is gaining popularity as a means of Alternative Dispute Resolution (ADR) mechanism within the UAEs construction industry. However, the method is not well understood within the industry. In this context, this study aimed at examining the prevalence of negotiation used in the UAE construction industry in contrast to other available dispute resolution mechanisms. The paper also examined the various obstacles in terms of legal implications or attitude issues about negotiation use in the UAE. Both primary and secondary data were used in this study. Secondary research was undertaken through an examination of various relevant literature on the subject from diverse sources. Such sources included books, journals, and credible websites among others. Primary research was undertaken using interviews and questionnaires. The study found that the level of awareness on the availability of negotiation as a dispute resolution mechanism stood at 80%. However, only a paltry 38% of the construction practitioners considered negotiation as the most ideal dispute resolution mechanism. Nevertheless, a relatively large percentage (92%) would consider using negotiation for solving simple and non-technical disputes.
Glossary
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ADCCAC Abu Dhabi Commercial Conciliation and Arbitration Centre
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ADR Alternative Dispute Resolution
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CPL Civil Procedure Law
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CTL Commercial Transactions Law
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DAB Dispute Adjudication Board
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DCCI Dubai Chamber of Commerce and Industry
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DCCI Dubai Chamber of Commerce and Industry
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DIAC Dubai International Arbitration Centre
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DIFC Dubai International Financial Centre
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DIFC Dubai International Financial Centre
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FIDIC Fédération Internationale Des Ingénieurs-Conseils
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FMCS Federal Mediation and Conciliation Service
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GDP Gross Domestic Product
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ICE Institute of Civil Engineering
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JCT Joint Contract Tribunal
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JICA Japan International Cooperation Agency
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LCI Law Commission of Ireland
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LCIA London Court of International Arbitration
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NADRAC National Alternative Dispute Resolution Advisory Council
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NEC New Engineering Contract
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SFCCs Standard Forms Construction Contracts
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UAE United Arab Emirates
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UNCITL United Nations Commissions on International Trade Law
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UNCITRAL United Nations Commission on International Trade
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UNCTD United Nations Conference on Trade and Development
Introduction
It is no doubt that the construction industry constitutes one of the largest sectors of any given economy. The critical contribution of the construction sector to the economies of various geographical entities can be measured through two variables. One of the variables is the contribution of the construction sector towards the Gross Domestic Product (GDP) of various countries. The other variable is the contribution of the sector as an industrial employer (Malty & Dillon 2007). The United Arab Emirates (UAE) has a robust industry that competes favorably with the construction industries in different geographical entities. This is attested by the scope of the various construction projects undertaken in recent years. In this context, the UAEs construction industry accounted for a fifth of the construction industry in the Arab world (RNCOS 2011: Gulf News 2011). It was also the second-largest contributor to the UAEs GDP (Gulf News 2011).
The current study will look at negotiation as a dispute resolution mechanism in the context of the UAE construction industry. It is noted that conflicts a common feature in the construction industry. The aim is to look at how stakeholders make use of negotiations to resolve them. The use of negotiation will be compared to the use of other dispute resolution mechanisms such as litigation, arbitration among others. Data will be collected from clients, PCM consultants, contractors, consultants, and claim consultants in the industry. Questionnaires and phone interviews will be used to collect data.
Problem Statement
Despite the relatively positive outlook of the construction industry, disputes among various stakeholders have the potential to derail any economic gains made in the industry. The construction industry in the UAE has seen an increase in construction disputes (Mansoor 2010). The growing demand for lawyers versed with construction disputes attests to the increasing construction disputes within the UAE (Bin Shabib & Associate 2009). Construction disputes affect the industry in several negative ways. There is a loss of economic value through the engagement of lawyers in litigation processes and failure to complete the projects in the projected deadlines. This failure may result in the construction projects being completed at significantly higher costs than initially budgeted for. Construction disputes may also make given projects unprofitable which may make future investors reluctant to invest in the industry.
There are several causes of disputes within the UAEs construction industry. These are classified into three broad categories. The three categories include economic factors, legal factors, and human factors. Economic factors as a cause of disputes within the construction industry can be analyzed within the context of the wider global economic crisis. The recent economic crisis resulted in cash strapped developers (Haddad 2009). The developers had limited cash liquidity to settle their debts from lenders and to pay their contractors, subcontractors, and employees resulting in disputes. Human factors can be understood from the three dimensions; disputes attributed to the contractor, disputes attributed to clients, and finally disputes attributed to the designer (Motsa 2006). These are construction disputes that can be directly associated with a given partys failure to accomplish its part of the agreement. Such failure may be for example inadequate design drawings by the designer amongst other factors.
According to Motsa (2006), disputes attributed to the legal factors often occur due to inadequate understanding or compliance with set legal provisions. In agreement with Motsa, Haddad (2009) adds that disputes may also occur because of abuse of powers or provisions of the construction laws. Sometimes the disputes may occur due to loopholes inherent in the construction laws utilized. Negotiation is increasingly becoming a preferred mode of settling construction-related disputes in the UAE (Al Tamimi & Company 2011). Negotiation as a means of dispute resolution involves the disputing parties agreeing on an amicable solution to their problem. It often works best in instances where there is a provision of the same in the construction contract or where the conflicting parties mutually settle on the negotiation process. Some of the construction issues that can be negotiated include project completion dates, arbitration dates, and special work item compensation amongst other issues (Fleming 2003).
Rationale of the Study
There several reasons justifying the need for this research within the context of the UAEs construction industry. In regards to dispute resolution methods, there are often limitations or obstacles that limit the utilization of a given dispute resolution method. These limitations may be in the form of construction industry players attitudes, lack of awareness of the process or procedures of the given method, and the inadequacy of the legal framework for the given method. For example, Mansoor (2010) notes the inadequate legal framework for the negotiation dispute mechanism within the UAE. In this context, the UAEs laws only implicitly provide for the negotiation method as a platform for dispute resolution within the UAEs construction industry. These obstacles are not unique to the negotiation method but are generally applicable to many ADR methods. A deeper understanding of the negotiation method in terms of procedures, benefits, limitations, and legal framework will contribute towards increasing the body of knowledge on the method. This awareness is critical in expanding the available options for the disputing parties. The awareness will also guide the industry experts and players on any needed legal reforms towards strengthening the use of negotiation in the UAEs construction industry (Motsa 2006).
While there are different dispute resolution methods for the disputing parties to pick from, each of the methods has its level of success within the UAEs construction industry. These methods also have a diverse impact on the relationship of the various parties in the disputes. This paper seeks to find the level of the acceptance of negotiation as a means of dispute resolution mechanism in the UAE in comparison to other ADR methods. Mansoor (2010) has studied negotiation as a means of dispute resolution mechanism has often been studied within the context of the broader and more general ADR methods. In this context, several studies focus on the ADR methods and generally discuss negotiation from the sidelines. However, there is a shortage of studies exhaustively focusing on the negotiation as a means of dispute resolution mechanism within the UAEs construction industry. This paper seeks to address this gap.
Aim of the research
The research aims to access the use of negotiation as a means of dispute resolution mechanism within the context of the UAEs construction industry.
Objectives
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To find out the obstacles towards utilization of negotiation as the preferred mode of dispute resolution mechanism within the UAEs construction industry
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To access the prevalence of the negotiation dispute resolution method in comparison to other ADR methods in the UAEs construction industry
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To analyze the structure, form, and context in which negotiation is used within the UAEs construction industry
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To discuss the legal and institutional framework of negotiation within the UAEs construction industry
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To examine how the negotiation process and outcomes impact the relationship between various stakeholders within the UAEs construction industry
Research methodology
Desk work
The information for the research was obtained through primary and secondary sources. Secondary sources of information included credible websites, construction journals, construction electronic magazines, and various academic papers. The academic papers on the construction industry disputes were sourced from both local and foreign scholars. These secondary sources of information were critical in constructing the background information on the negotiation structure, methods, and types. The information was also critical in understanding the use of negotiation in the construction industry disputes from both the UAEs and global context.
Fieldwork
Two primary sources of information were used that is interviews and questionnaires. These sources of information were critical in contextualizing the use of negotiation within the UAEs construction industry, the prevalence of its use within the UAE, and the attitudes among the industry professionals on its relevance in modern times.
Hypothesis
Since of objectives is to study the obstacles that limit effective utilization of the negotiation method in dispute resolution the following hypothesis was formulated for testing.
Negotiation method as a means of dispute resolution mechanism could be put to more use if there was adequate legal framework and if there was adequate awareness on its use
Conclusion
The chapter has successfully set up the framework of the research as well as contextualized the dispute resolution mechanisms within the UAE. This chapter sets the platform for the ensuing chapters that discuss in detail dispute resolution mechanisms.
Dispute Resolution Mechanisms
Introduction
Dispute resolution methods used in the UAEs construction industry include arbitration, adjudication, litigation, and ADR methods amongst others. The chapter discusses these methods within the context of the UAEs construction industry.
Adjudication
According to Habib Al Mulla & Co (2011) adjudication is defined as a process that &allows parties to resolve their disputes on an interim basis thus allowing work on the project to continue pending the outcome of litigation or arbitration proceedings(p.1). Smith (2007) agrees with the inherent characteristics of adjudication as outlined by Habib Al Mulla & Co (2011). He notes that adjudication &consists of an abbreviated court-like procedure under the direction of the Adjudicator, in which disclosure and/or rules of evidence may be applied flexibly or dispended with altogether (p.5).
Smith (2007) notes that the adjudication method saves on the cost involved in dispute resolution. Construction Week (2012) determines that this cost-saving is a result of the fact that work continues even as disputing parties look for a more permanent solution to their problem. However, Habib Al Mulla & Co (2011) notes that this method may be perceived to be technical and there can be infighting on the control of the process.
Habib Al Mulla & Co (2011) opines that the introduction of Dispute Adjudication Boards (DABs) in construction contracts is a major milestone towards the utilization of adjudication in the UAEs construction industry. Hibbert (2012) emphasizes this point by stressing DABs are by default the first option in dispute resolution involving government projects in Abu Dhabi.
Litigation
The litigation method is a method that involves the use of courts to settle disputes (Kirchhoff et al. 2006). While decisions arrived through litigation method may be easy to enforce, the method is costly and time-consuming (Lew et al. 2003; Rau et al. 2006). Sanders (2004) further notes that the disputing parties also lose privacy about the content and form of their dispute. This is because litigation cases are often published in law journals for reference
Arbitration
There is a lack of consensus among scholars and institutional authorities on the definition of arbitration. Bridge Mediation LLC (2004) views arbitration as an ADR mechanism where the disputing parties present their disputes to a third person versed with the nature of their dispute who determines the outcome of the case. On the other hand, the United Nations Conference on Trade and Development [UNCTD] (2005) proposes a set of conditions that it claims constitutes arbitration and from which a definition can be implicitly derived. These conditions propose that arbitration is a private and consensual settlement of disputes in which it leads to a final and binding determination of the rights and obligations of the parties (UNCTD 2005, p.5).
Mansoor (2010) opines there are several advantages of using the arbitration method in dispute resolution. There is flexibility in the choice of the arbitrator and this gives the disputing parties the psychological confidence of being in control of the process. Lew et al. (2003) and Rau et al. (2006) attribute this confidence to the acceptance of the arbitration outcomes by both parties in contrast to the litigation method. Kirchhoff et al. (2006) further cite privacy as another major advantage of the arbitration method.
Despite the advantages of arbitration, there are several disadvantages associated with the method. While arbitration may be perceived as cost-effective when compared with the litigation method, the same does not hold when compared with other ADR methods such as mediation and conciliation (Mansoor, 2010). In the same spirit, arbitration decisions and awards may take time to effect as compared to alternative ADR methods. The role of the third party has often been perceived as the greatest disadvantage of the method. In some contexts, one party may view the arbitrators decision as imposing and insensitive to its interests (Lew et al. 2003).In such a scenario, the arbitration decision and settlement may affect the business relationship between the two parties. The business relationship may be on future business prospects and the continuing or work in progress.
Dispute Resolution Boards
Some of the significant milestones within the UAE about dispute resolution mechanisms and arbitration, in general, include the adoption of the New York Convention in 2006 (Mansoor,2010). The New York Convention has two major functions. According to the New York Convention (2012), the convention applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration (p.1). The adoption of the convention has boosted the UAE as a significant player in the international economy. This is based on the notion that international contractors feel safe as they are covered by the convention in case of disputes. In this context, the convention obliges the contracting state (in this case UAE) to recognise such awards (foreign arbitral awards) as binding and to enforce them in accordance with their rules of procedures& (New York Convention 2012, p.1). In this context, the recipient of a foreign arbitral award needs only to provide the arbitral award as well as the agreement supporting the same to the courts for enforcement (New York Convention 2012, p.1).
Since these early milestones, the UAE has grown through the establishment of Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC) in Abu Dhabi by the Abu Dhabi Chamber of Commerce and Industry, the Dubai International Arbitration Centre (DIAC), Dubai International Financial Centre (DIFC) and Dubai International Financial Centre London Court of International Arbitration (DIFC- LCIA) (Mansoor 2010; Rau et al. 2006).
Conclusion
The establishment of the arbitration centers goes a long way in availing arbitration services in the UAE. This is expected to expand the dispute resolution options in the UAES construction industry. Such an expansion would be critical in making the UAEs construction industry to be more competitive.
Negotiation
Introduction
Scholars from diverse backgrounds have advanced several definitions of negotiations. Gulliver as cited in Moor & Weigand (2004, p.4) defines negotiation as
&a process in the public domain in which two parties, with supporters of various kinds, attempt to reach a joint decision on issues under dispute. On the other hand, Robinson & Volkov (1998) defined negotiation as &a process in which the participants bring their goals on the bargaining table, strategically share information , and search for alternatives that are mutually beneficial (p. 1). In the context of dispute resolution, the ultimate aim of negotiations is to reach &a joint decision on issues under dispute or &a joint decision on their common concerns or &a mutually acceptable agreement. Reaching a consensus on the way forward is thus a critical component of a successful negotiation process. The need to arrive at these joint decisions or agreements is based on the notion that negotiations involve two or more participants. These participants have their viewpoints or interests.
Prerequisites for negotiations as a dispute resolution mechanism
In a view supported by World Bank (2006), Robinson & Volkov (2004) opine that there are several conditions, behavioral and legal requirements necessary for effective negotiations to take place. In the context of the UAEs construction industry, for the disputing parties to use the negotiation method there must be provisions for it in the dispute resolution clauses (Mansoor 2010). Moor & Weigand (2004) cites several such conditions e.g. the willingness of the disputing parties to negotiate, and the demonstration of good faith towards each other. The availability of several viable options to a dispute resolution is another major component that makes negotiation a viable means of dispute resolution. In the absence of viable options to a dispute, there would be no incentive to the disputing parties to enter into a negotiation process.
Negotiation approaches; Integrative versus distributive approaches
Integrative negotiation seeks to benefit each of the disputing parties in a win-win scenario (Moor & Weigand 2004). The essence of integrative negotiation is for each of the parties to walk away with something. On the other hand, the distributive negotiation process assumes a finite number of solutions to a dispute or limited gains to be made from dispute resolution (World Bank 2006). The essence of distributive negotiation strategy is to try to maximize ones gain from limited resources or fixed pie.
The use of negotiations in the UAEs construction industry: A review of past studies
Negotiation as a means of dispute resolution in the UAEs construction industry has been discussed within the wider context of Alternative Dispute Resolution (ADR) methods. The ADR methods include negotiation, mediation, and adjudication (Al-Tamimi & Company 2011). Mansoor (2010) notes that in the recent past ADR methods are favorably competing with traditional dispute resolution mechanisms as the preferred mode of dispute resolution mechanism. It is now a current practice to make provisions for dispute resolution clauses in construction contracts. In terms of an order of hierarchy, such contracts provide for negotiation as the starting point in dispute resolution (Motsa 2006). There are also provisions for mediation, adjudication, arbitration and litigation should negotiation fail.
In the recent past, negotiation has become popular as a means of dispute resolution mechanism in the UAEs construction industry. In this context, negotiation is often used as the primary mechanism of construction industry disputes within the context of the UAEs construction industry (Al-Tamimi & Company 2011; Motsa 2006). This is because of the several advantages associated with the method.
There are several advantages associated with the use of negotiation as a means of dispute resolution in comparison with the other methods. Negotiation saves on time that would have otherwise been used in the lengthy litigation process (Mansoor 2010; Al-Tamimi & Company 2011). It is also not a costly method as the disputing parties often negotiate without the involvement of paid third parties. World Bank (2006) cites that the integrative negotiation maintains the business relationship between the disputing parties. The integrative negotiation process also encourages examination of causes of disputes in-depth and thus establishes long-term solutions that may forestall a reoccurrence of the same problem. Overall, the negotiation method is an efficient way of resolving conflict-related disputes.
Disputing parties often use the negotiation method to strike a balance between completing the construction works and resolving the conflict (World Bank 2006; Moor & Weigand 2004). In this context, there is a mutual aim of completing the work with minimal delays and costs. However, in contexts where there are little trust and goodwill among disputing parties the negotiation process is likely to fail. In the context of the construction industry, negotiation is often a voluntary pre-hearing session or a mandatory pre-trial session among the disputing parties (Mansoor 2010).In this sense, negotiation may precede other forms of dispute resolution mechanism. Motsa (2006) notes negotiations in the pre-trial stage may proceed under the direction of a judge. At this stage, the disputing parties may appoint attorneys or representatives to negotiate on their behalf. These representatives must consult the disputing parties before agreeing.
Several factors determine the outcome of the negotiations in the UAEs construction industry. Despite the negotiation being an ideal way of avoiding trial, the expertise and the attitudes of the attorneys or representatives may influence the outcome of the negotiations (Mansoor, 2010).In agreement with Mansoor, Motsa (2006) states that the negotiation strategies adopted which are integrative versus distributive negotiation strategies also determines the success of the negotiations. The success of the negotiation method is often achieved when any decision to initiate any dispute resolution process is arrived at as a rational and imperative inference (Al-Tamimi & Company 2011). Such an inference can only be achieved through a thorough and principled negotiation process. In this context, negotiation is not approached from a hostile perspective.
Within the construction industry in UAE, mediation is often used in contexts where negotiations fail. World Bank (2006) cites that mediation is a method closely related to the negotiation method and falls within the ADR framework of dispute resolution mechanism. However, mediation involves the use of a third-party mediator to resolve the dispute between the parties (Motsa 2006). The disputing parties often jointly appoint the mediator. In this context, the mediator is expected to be a neutral person. The mediator thus often works as a facilitator to the dispute resolution process (Mansoor 2010). While mediation has similar benefits to the negotiation method, it can be especially useful in solving disputes with advanced technical and legal issues. Despite the advantages of utilizing the negotiation method in the UAEs construction disputes, there are several shortcomings associated with the method. The method may prove inadequate in the interpretation of controversial and complex issues. In this context, a legal authority such as a court or arbitral tribunal may facilitate negotiations.
Institutional and Legal framework for negotiating in the UAEs construction industry
In the context of construction, there are two broad types of construction contracts: bespoke construction contracts and the Standard Forms Construction Contracts (SFCCs) (Shnookal & Charret, 2010). Bespoke construction contracts are construction contracts drafted primarily to focus on the project at hand. These kinds of contracts can be tedious and costly to draft (Kerur, 2011). This is based on the need for legal expertise to factor all the project specifics in the contract. On the other hand, the bespoke contracts offer a more suited draft of legal provisions specific to the project at hand.
The second type of construction contract is the Standard Forms Construction Contracts (SFCCs). Various professional bodies have developed these generic construction contracts over time. There are several SFCCs used in the construction industry include Fédération Internationale Des Ingénieurs-Conseils (FIDIC), New Engineering Contract (NEC), and the Institute of Civil Engineering (ICE) contracts (Shnookal & Charret, 2010; Mansoor 2010). Other standard forms of contracts include Joint Contract Tribunal (JCT) contract amongst others. The UAEs construction industry uses the FIDIC SFCC as well as appropriate local UAE federal laws. In a global context, the NEC published by the United Kingdoms Institute of Civil Engineers is the next major competitor to the FIDIC laws (Motsa 2006).
There are several advantages associated with the SFCC in comparison to the bespoke contracts. One of the major advantages of the SFCCs is the element of certainty in the execution of the contract (Kerur 2011; Mansoor 2010). The legal provisions in the SFCCs have been tried and tested in litigation in various legal jurisdictions. In this context, the parties can have some insights into how various clauses have been interpreted in a litigation environment (Motsa 2006). This gives the parties a sense of meaning and intent of the various clauses in the SFCC.
In contexts where the SFCC is not heavily amended to suit the project into consideration, the legal clauses are easy to adapt quickly and flexibly. This saves the time and costs involved in the procurement of the legal provisions to adapt to the given project (Kerur 2011; Shnookal & Charret, 2010). It is also far much easier and cheaper to amend SFCC to suit the project as opposed to constructing a fresh bespoke contract. SFCCs generally have a wide scope on issues that may arise in the construction work (Moor & Weigand 2004)). In this context, parties do not necessarily have to think about all the legal provisions that they need in their contracts.
Despite the advantages associated with the SFCCs, they also have several disadvantages associated with its use. Complex projects may require contracts that address the unique risks involved in the construction project. In such contexts, the generic SFCCs may not be adequate to cater and provide for the risks involved (Shnookal & Charret 2010). On the other hand, inadequately amended SFCC may pose an even greater risk should a dispute arise. This often occurs in scenarios where clauses are amended and the related clauses are not appropriately amended. In this context, it is critical to ensure that whenever amendments are carried out then other related clauses must be also appropriately amended. This prevents a scenario wherein in case of a dispute there is a lack of consistency in the intent and the meaning of the various clauses (Kerur 2011).
In the context of the UAEs construction industry legal framework, we will address the framework from two dimensions: Fédération Internationale des Ingénieurs-Conseils (FIDIC) legal provisions and the UAE federal laws (Kerur 2011). It is important to note that the construction laws can only be studied from a holistic perspective as opposed to laws that specifically support negotiation as a means of dispute resolution in the UAEs construction industry (Al Tamimi & Company 2011). This perspective is based on the provisions of FIDIC contracts that form the backbone of the UAEs construction laws. According to Mansoor (2010), FIDIC contracts put provisions for dispute resolution mechanisms. However, the contracts contain &undefined amicable settlement process& before the parties initiate adjudication and litigation (Mansoor 2010, p.21). This means that FIDIC contracts in the context of the UAEs construction industry contain provisions for the undefined process of harmonious settlement and arbitration clauses. There is therefore provided for ADR means of dispute resolution implicitly in the FIDIC type of contracts.
The general implication of these FIDIC provision
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