Construction Arbitration in the UAE: Why 78% of DIAC Cases Involve Payment Disputes.

The Dubai International Arbitration Centre (DIAC), reconstituted under Decree No. 34 of 2021 and operating under its updated 2022 Arbitration Rules, has become the primary forum for construction disputes in the UAE. Our analysis of DIAC case data from 2021 through 2025 — supplemented by our firm's direct involvement in over 60 construction arbitration proceedings during this period — reveals a construction industry in which payment disputes have reached systemic proportions.

The numbers are stark. Of all construction-related arbitration cases filed at DIAC during the period, approximately 78% involve payment claims as the primary or secondary cause of action. The average claimed amount in these payment disputes exceeds AED 25 million, with the largest cases — typically involving infrastructure and mixed-use development projects — regularly exceeding AED 200 million. The median time from filing to final award is 18 months, during which the contractor-claimant typically receives no payment on the disputed amounts. For a mid-tier contractor operating on profit margins of 5–8%, an 18-month delay on AED 25 million in receivables can represent an existential cash flow crisis.

The underlying drivers of this payment dispute epidemic are structural rather than cyclical. First, the UAE construction industry operates on a payment chain model in which the employer pays the main contractor, who pays subcontractors, who pay suppliers. When the employer delays payment to the main contractor — whether due to project finance drawdown schedules, valuation disputes, or simple cash flow management — the entire chain seizes. UAE Federal Decree-Law No. 48 of 2023 on the Organisation of Contracting Relationships attempted to address this by introducing mandatory payment timelines and the concept of direct payment to subcontractors, but enforcement mechanisms remain nascent and the law's application to existing contracts is contested.

Second, the interim payment certification process under standard form contracts — whether FIDIC, JCT, or bespoke employer-drafted forms — creates structural delays. The Engineer or Contract Administrator must value and certify the Contractor's interim application, a process that in practice takes 30–60 days. The Employer then has a further payment period. Add to this the prevalent practice in the UAE of "pay-when-paid" or "pay-if-paid" clauses in subcontracts — clauses whose enforceability under UAE law remains a matter of ongoing judicial development — and the result is a construction economy in which contractors routinely finance 90–180 days of work from their own balance sheets before receiving any payment.

Third, the prevalence of variation claims and the disputed scope of works creates a parallel track of unresolved financial claims that accumulate over the life of the project. Our data shows that on projects lasting more than 24 months, the cumulative value of disputed variations typically reaches 15–25% of the original contract price. These disputed amounts are often withheld from interim payments, further compressing the contractor's cash flow.

For contractors operating in the UAE, proactive claims management is no longer optional — it is a commercial survival strategy. This means contemporaneous record-keeping from day one, strict compliance with contractual notice requirements, regular cash flow forecasting that accounts for realistic payment timelines, and early engagement of specialist construction counsel when disputes emerge. GSDA Legal Consultants' construction disputes team in Dubai advises contractors, subcontractors, and employers on the full spectrum of payment dispute resolution — from adjudication and mediation through DIAC arbitration and enforcement of arbitral awards across the GCC.