Arabtec is to recommence its legal action against Meydan, reviving one of Dubai’s biggest construction disputes since the financial crisis.
It comes three years after the pair agreed to out-of-court talks to resolve their dispute over the redevelopment of the horse racing venue
Arabtec is now recommencing its bid to recover its half of a Dh2.8 billion claim lodged for work it carried out to build the Meydan Racecourse.
The news comes as Meydan prepares this weekend to host the Dubai World Cup, the world’s richest horse race.
Arabtec had been part of a joint venture with the Malaysian contractor WCT which filed the Dh2.8bn case against Meydan in 2009 with Dubai International Arbitration Centre (Diac) after it had been removed from the project and had its bond recalled. Meydan launched a Dh3.5bn counter-claim against the pair in 2012.
Arabtec and Meydan said in February 2013 that they were both withdrawing their claims against each other to hold out-of-court talks, with a joint statement declaring that “four years of legal proceedings have failed to make sufficient progress, so we have decided to find a faster and more practicable way forward to resolve matters”.
WCT continued to pursue its claim for its Dh1.4bn portion, and won its claim last July, with Diac awarding the company Dh1.1bn, plus legal costs of Dh26.7 million and arbitration costs of Dh8.2m.
However, Arabtec has been unable to reach a deal with Meydan, and its board of directors took a decision this week to resume its claim.
Steven Salo, Arabtec’s head of investor relations, told The National that “an amicable solution has not been reached” with Meydan.
He added that the claim was “part of our strategy to ensure all of the group’s entities seek the recovery of receivables” owed to them.
Meydan Group did not respond to a request for comment.
The dispute relates to a contract awarded by Meydan to WCT/Arabtec in September 2007 to build the Meydan Racecourse. Meydan cancelled the contract in December 2008, citing “non-adherence to the agreed time schedule for construction”.
Meydan continued the building programme working with subcontractors, and the racecouse eventually opened for business in 2010.
The course, which also has a hotel and a mile-long grandstand with a capacity to house 60,000 spectators, is home to the Dubai World Cup, billed as the richest horse race in history with a $10m prize pot. The 2016 World Cup takes place on Saturday.
Last month, Arabtec declared a preliminary loss of Dh2.3bn for 2015, which it blamed on a difficult regional construction market and some poorly performing projects. Revenue declined by 12 per cent to Dh7.3bn.
“Due to the backdrop, the group is even more focused on maintaining its working capital position and ensuring collection of its receivables,” the company said in a statement to the Dubai Financial Market. “Accordingly, all of the group’s entities are vigorously seeking full recovery of receivables due and, where necessary, enforcing the group’s rights where payments are not made.”
Last June, the building consultancy Arcadis said that construction disputes in the region had risen to their highest levels since 2011, when cases filed following the 2008 global financial crisis were at their peak. Its annual global construction disputes survey found the value of disputes had jumped by 88 per cent year-on-year to $76.7m.
However, James Foster, the head of construction disputes at the law firm Gowling WLG in Dubai, said that the nature of disputes had changed since 2011.
“What we’re seeing with construction disputes is that they’re not being caused by a lack of cash, which had been the case five or six years ago, but because projects have become a bit too big for the skillsets of those delivering them.
“Sometimes, a case is brought because a project is delayed. This could be for any number of reasons – for example, because a major subcontractor has failed to deliver, or because of a design issue.”
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