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Is it time KSA’s private sector widely implements adjudication to resolve construction disputes?

The Construction industry is a major contributor to Saudi Arabia’s economy and accounts for over 6% of the country’s gross domestic product. The private sector plays a key role in the construction sector and in 2017, commissioned approximately half of the projects in the Kingdom (measured by value) and spent more than SAR 100 billion in construction activities.

The Kingdom’s bold yet achievable Vision 2030 seeks to diversify the economy, including developing public service sectors such as health, education, infrastructure, recreation and tourism.  These changes will provide huge opportunities to the private sector, particularly in the areas of leisure and hospitality. Economic analysts expect that the Saudi Arabia’s construction market will register a compound annual growth rate of 6% over the next five years (save for any resultant growth impact due to COVID-19 outbreak).

In line with Vision 2030, an astonishing volume and variety of construction projects are either currently underway or are in the pipeline in Saudi Arabia.  While Government sector contracts are typically governed by the Government Tenders and Procurement Law that, inter alia, provides the standardised contract forms and addresses the dispute resolution procedures, there is no such standardisation in the private sector and consequently, the content and quality of construction contracts varies widely with the only requirements being the parties’ consent and compliance with Sharia Law. As such, the parties are free to choose the conditions of the agreement between them.

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Originally published in Construction Week Online.

This publication presents the views, thoughts or opinions of the author and not necessarily those of HKA. Whilst we take every care to ensure the accuracy of this information at the time of publication, the content is not intended to deal with all aspects of the subject referred to, should not be relied upon and does not constitute advice of any kind. This publication is protected by copyright © ITP Media, Construction Week Online.

Companies operating in the private sector often lack the experience, knowledge of contract mechanisms and awareness of dispute resolution to resolve proactively or settle even the most straightforward and low value construction disputes.”
Adeeb Elahi, Managing Consultant, HKA
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