Engineering and construction in Middle East and Africa

In summary

This year’s edition discusses the recent trends in engineering and construction projects in the Middle East and Africa (MEA), and some of the large construction-related arbitration cases reported during the year in review. The contribution also analyses the main developments in arbitration laws, centres, rules, and statistics in the region, and the challenges faced by arbitration users in jurisdiction marked by the presence of several legal traditions.

Discussion points

• Regional trends: green megaprojects in the Middle East and Africa
• Recent arbitration cases related to construction projects
• Arbitration’s increasing popularity in the MEA region, and recent pro-arbitration developments
• Challenges faced by parties and practitioners in hybrid legal systems

Referenced in this article

• CRCICA Arbitration Rules 2024
• arbitrateAD Arbitration Rules 2024
• Malawi International Arbitration Act 2024
• NNPC v Fung Tai Eng Co. Ltd.
• Narciso v Nash
• Dubai Court of Cassation Case No. 821/2023 (Commercial)
• Dubai Court of Cassation Case No. 756/2024 (Commercial)
• Dubai Court of Cassation Case No. 735/2024 (Civil)

Introduction

This year’s contribution provides an overview of the recent trends, legal developments and important arbitration-related case law and arbitration awards relating to engineering and construction disputes in the Middle East and Africa region. Given the large number of countries and jurisdictions in the region under review, certain choices have had to be made for this edition. However, the authors have strived to address the most significant and interesting trends and news, for both legal practitioners and users and enthusiasts.

Regional trends: the (mega)projects in the MEA region

Megaprojects continue to mushroom in the Middle East. Last year, we mentioned the NEON Project in Saudi Arabia, a unique urban area spanning over 170km from the Red Sea to the northeast mountains. This year it is another megaproject (also part of Saudi Arabia’s ‘Vision 2030’ programme) that started construction: the New Murabba development in Riyadh (Saudi Arabia’s capital city). The project aims to create a large and modern downtown area, with one of the main features being the Mukaab, an enormous cube (400 metres tall on each side) reportedly able to encompass 20 Empire State Buildings. The Mukaab will be home to residential spaces, hotels, entertainment venues, stores and more besides.^[1]

Green megaprojects are also on the rise. In Oman, Hydrom (Oman’s state-owned company created to develop green hydrogen) announced in May 2024 the conclusion of two contracts worth US$11 billion to increase the country’s production of green hydrogen. These contracts will include important construction works, and a brand new ammonia plant will be constructed in the Salalah Free Zone, with new wind and solar renewable energy infrastructure also coming to life.^[2] In Egypt, the Egyptian Electricity Transmission Company contracted with UAE-based Masdar and Infinity Power for the supply of renewable energy, which entails the construction of an onshore wind farm estimated to produce 810,000 megawatt hours a year in Ras-Ghareb.^[3]

In Africa, the construction industry is increasingly embracing sustainability as governments and developers recognise the need for resilient, eco-friendly infrastructure to accommodate the continent's rapid urbanisation and environmental challenges. From green building projects in Rwanda to renewable energy projects in Namibia, these initiatives aim to reduce energy consumption, use environmentally friendly materials, and adapt to climate change. With the support of international funding and local innovation, Africa is making strides towards integrating sustainability into its urban landscapes.

The Rwandan Government has been particularly active. Among the initiatives, the Green City Kigali project (GCK) was released in September 2024. The GCK represents a significant step towards sustainable urban development in Rwanda, aligning with both environmental goals and economic growth. Located on Kinyinya Hill in the Gasabo District, this initiative is rooted in the Kigali Master Plan 2050 and Rwanda’s ‘Vision 2050’ to integrate principles of sustainable and inclusive development. By promoting affordable housing, efficient resource use, and culturally sensitive urban planning, it aims to provide a model for eco-friendly urbanisation in Africa.^[4] The GCK project will kick off with a pilot phase, covering 16 hectares of affordable housing plot, set to begin in 2025. This initial phase is expected to be completed by 2030.^[5] The full GCK project value is estimated at US$1.5 billion.^[6] The contractors involved in the GCK project are a mix of international and local entities.^[7] The architecture, structural engineering, civil engineering and MEP engineering will be handled by FBW Group, an East African firm.^[8]

The construction of the new Kigali International Airport constitutes another important project in the country, and is now well on track. Qatar Airways, the main pilot and investor of this significant project, has recently awarded the contract for the construction of the new airport to three companies: Portugal’s Mota-Engil, Qatar’s UCC, and Greece’s Consolidated Contractors Company (CCC).^[9]

Last year’s edition of the present review also drew the reader’s attention to the Lobito Corridor project, a transformative infrastructure project aimed at enhancing regional trade and connectivity across Southern Africa. The project focuses on upgrading and expanding the railway network stretching from the Port of Lobito on Angola's Atlantic coast to Zambia and the Democratic Republic of Congo (DRC). This corridor will serve to facilitate the export of minerals like copper and cobalt, critical components for the energy transition.^[10] In August 2024, a container vessel departed from Angola's Port of Lobito, transporting Lobito Atlantic Railway's first copper shipment from the DRC to the United States. The railway journey from the DRC to the Port of Lobito took six days, roughly 30 days quicker than a journey by road.^[11]

In North Africa, Morocco is developing the ‘Grand Stade Hassan II’ in Casablanca as part of its commitment to hosting the 2030 FIFA World Cup. This stadium is set to become the largest football venue in the world,^[12] with a seating capacity of 115,000.^[13] The project incorporates significant groundworks, started in 2024, to stabilise the 100-hectare site and also to meet FIFA standards for the 2030 FIFA World Cup.^[14] The design, inspired by Moroccan traditions like the moussem, marries modern functionality with cultural expression, creating a space that respects both the environment and Morocco's rich heritage.^[15]

In Southern Africa, Namibia boasts some of the world's greatest potential for solar and wind energy generation. The country, however, currently relies on imports for over 60% of its energy needs, primarily from neighbouring countries. Namibia's hydrogen strategy aims to achieve a production target of 10-15 million tonnes (Mt) of hydrogen equivalent annually by 2050, an output that would account for 5-8% of the projected global trade volume at that time,^[16] establishing the country as a key hydrogen hub. Today, eight projects are at different stages of development.^[17] One of the major projects, the Daures Green Hydrogen Village, has completed 66% of its first construction phase.^[18] Another of those key projects is the Hyphen Hydrogen Energy Project, expected to employ 15,000 construction workers (for the first phase, which will start in 2025 and is estimated to take between four and five years).^[19]

Large projects continue to attract large disputes

Over the past year, it has been reported that a consortium led by Dana Gas (a company based in the UAE) has launched an arbitration against Canada’s Enerflex in relation to a project aiming to build a natural gas processing facility in Iraq.^[20] The consortium’s claim appears to arise from delays to the project reportedly caused in part by repeated rocket attacks in the region. Another dispute reported during the period in review relates to events of force majeure. The case involves BP, who are reported to intend launching an arbitration for more than US$530 million against McDermott, in relation to a contract for the installation of pipelines under the sea for an LNG project in Senegal and Mauritania. The dispute would be linked to McDermott’s early departure from the project following a dispute with BP on the impact of force majeure on the contract.^[21]

In North Africa, Sonelgaz (the Algerian state-owned company in charge of electricity and gas distribution) filed a €413 million claim against Duro Felguera, a construction group from Spain, for the suspension of work on a project for the construction of a thermal power plant in the province of Delpha. The Spanish company says it suspended the works due to breaches of contract by Sobelgaz.^[22] Finally, in West Africa, a consortium filed a US$3.7 billion claim against a Ghanaian state authority in relation to a terminated concession to build and operate a port logistics terminal. The consortium alleges that the state authority would have unlawfully interfered with the execution of the contract, and later decided to terminate the concession.^[23]

These recent arbitration cases and awards provide illustrative examples of the common types of claims (and counterclaims) encountered in construction disputes. Among these disputes, extension of time, disruption, and force majeure-related claims appear to remain the most prominent. Geopolitical factors, including instances of armed conflict, have surfaced as a frequent source of issues on construction projects in certain areas in the region. Another prominent category of claims in construction disputes involves early termination of contracts. Such type of claim is also usually accompanied by claim for abusive calls of bank guarantees, especially when termination and call are made when a project is nearing completion.

Developments in the arbitration sphere – Middle East and Africa

Recent statistics show that the success of arbitration to resolve construction disputes remains on the rise in the MEA region. For example, the Dubai International Arbitration Centre (DIAC) published its annual report for the year 2023 in October 2024. This report showcases an overall 11% increase in the number of arbitrations handled by the Centre,^[24] with the construction and real estate cases ‘continu[ing] to dominate the Centre’s caseload in 2023, representing almost 60% of all DIAC arbitrations.’^[25] The report further indicates that ‘construction contracts were the most common type in DIAC Arbitrations in 2023, accounting for 40% of all underlying contracts.’^[26] Statistics from the London Court of International Arbitration (LCIA) also display the popularity of arbitration in the Middle East as ‘the percentage [16%] of parties from the MENA regions represents the second highest proportion of parties in LCIA arbitration’, with the most important increase attributable to Saudi Arabia (from 0.8% in 2022 to 4.2% in 2023).^[27] The same report also shows the increasing interest in arbitration in Africa, with the percentage of parties from this continent having doubled in 2023.^[28]

Saudi Arabia deserves a special mention in this contribution, as it did in the 2024 edition. In line with the country’s recent development in its arbitration infrastructure, through the development of the Saudi Centre for Commercial Arbitration (SCCA) and the modernisation of its arbitration law (as mentioned in last year’s edition), Saudi Arabia is expanding its arbitration ecosystem. In March 2024, the Saudi capital welcomed the first Riyadh International Dispute Week (RIDW), a huge success that saw around 5,000 delegates from nearly 80 countries (including the author of this article) flock to the city to attend some 90 events that focused on arbitration and the green transition. ^[29]

The strong drive for arbitration in the MEA region is also reflected in the many arbitration-related developments experienced by the region in the past year. In North Africa, 2024 saw the entry into force of the new Arbitration Rules of the Cairo Regional Centre for International Commercial Arbitration (CRCICA), the oldest arbitration centre and one of the most popular in the MEA region. With these new rules, the CRCICA sought to modernise their rules to reflect contemporary practices as well as add a range of issues that were not covered by the 12-year-old previous rules. Among the interesting and noticeable changes, the new CRCICA Arbitration Rules now contain provisions on: (i) the consolidation of two or more arbitrations;^[30] (ii) formulation of claims from multiple contracts in one single arbitration;^[31] and (iii) the early dismissal of claims by the arbitral tribunal.^[32] Another noteworthy addition concerns third-party funding. The new arbitration rules now require parties using third-party funders to disclose the existence and identity of said third-party funder.^[33] The new rules also embrace the use of technology in arbitration, with new provisions such as article 17(3) providing that a tribunal may ‘utilize any technological means as it considers appropriate to conduct the proceedings’ or article 28(2) which allows hearings to be held remotely by videoconference or in a hybrid form.

In the Gulf countries, 2024 marked the beginning of the new Abu Dhabi International Arbitration Centre (arbitrateAD) in the UAE. This new centre replaces the Abu Dhabi Commercial and Conciliation Centre (ADCCA) and aims at improving the quality and efficiency of arbitral processes. Among the various developments (from the ADCCAC rules of 2013), the new arbitrateAD rules also create an independent court of arbitration within the centre,^[34] which will oversee the administration of proceedings under arbitrateAD. The centre will also be the only one in the region to scrutinise awards before their issuance by the arbitral tribunal.^[35] Among the new features, the new arbitrateAD rules include provisions on the joinder and the consolidation of arbitrations, as well as emergency and expedited arbitration.^[36]

This new and modernised arbitration centre should be good news for both local and international actors in the region, and should not suffer from the same difficulties as those that affected the abolition of the DIFC-LCIA Centre and its transfer to the new DIAC in Dubai,^[37] a change that has already given rise to several contradictory decisions worldwide. In a case that gave rise to a decision of June 2024, the (offshore) Court of First Instance of the Dubai International Finance Centre (DIFC) was asked to resolve a dispute about the impact of the DIFC-LCIA’s abolition on arbitration agreements. The Abu Dhabi ‘onshore’ courts had already ruled on the enforceability of those agreements, but the offshore jurisdiction had not yet ruled on the matter. Perhaps unsurprisingly, the DIFC Court decided that arbitration clauses referring to the (now defunct) DIFC-LCIA institution continued to be enforceable and should be administered by the DIAC^[38]. These decisions in the UAE contrast with other decisions abroad, notably in the USA, where courts have held that DIFC-LCIA arbitration agreement were unenforceable.^[39]

Sub-Saharan Africa also experienced significant arbitration-related developments in the past year. Following Nigeria in 2023, Malawi has now adopted a new arbitration law in 2024. The International Arbitration Act 2024, aims, as for other new arbitration laws in the region, to modernise Malawi’s arbitration law to align with international standard. The Act, among others, incorporates the UNCITRAL Model Law and aims to give effect to Malawi’s obligations under the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, to which Malawi acceded in March 2021.

In Nigeria, a recent judgment from the Supreme Court has sought to reaffirm the country’s desire to present itself as a friendly arbitration jurisdiction, as we witnessed last year with the entry into force of Nigeria’s new arbitration law. In its decision, the Supreme Court referred to the non-appealable nature of arbitral awards and the limited scope of judicial review of awards by the Nigerian courts. The Nigerian Supreme Court also strongly criticised the use of multiple challenges to ultimately prolong the disputes and avoid the payments of the damages due. According to the Supreme Court a misuse of challenges should be ‘strongly deprecated and penalised by the courts, otherwise, the primary purport of [an] alternative dispute resolution mechanism of arbitration would be eventually subverted in the country, thereby making it unattractive.’^[40].

Finally, special mention should be made of the Kigali International Arbitration Centre (KIAC). This relatively recent centre established in 2012 continues to attract attention, as illustrated by the number of reported cases - over 200 - since the centre’s creation. Moreover, the reported 40% of international cases is an impressive figure. Confirming its growing success, the KIAC now features in the GAR’s list of institutions worth a closer look,^[41] and Kigali will host the first ICCA Conference in June 2025.

Onshore meets offshore; and the common law meets the civil law

Several arbitration-related court cases in the period under review must be highlighted, especially in Dubai where a series of important judgments were rendered by the courts. In two sets of cases, with judgments separated by only eight months, the Dubai Court of Cassation had surprised practitioners by upholding a judgment of the Dubai Court of Appeal which had ruled that an arbitral tribunal had no authority to award the parties’ legal (and expert) fees. In another decision in November, the Court of Cassation took an entirely different stand, and found that those costs were recoverable.

In the first of those cases, the Court decided that the costs were not recoverable unless expressly provided by: (i) the specific wording of the arbitration agreement; (ii) an agreement between the parties’ representative duly authorised to do so in their power of attorneys; or (iii) the arbitration rules selected by the parties. According to the Dubai Court of Appeal, whose reasoning was followed by the Court of Cassation, a tribunal’s authority therefore only extends to the award of costs for the tribunal’s own costs (and, if applicable, the costs and expenses of tribunal’s appointed experts).^[42]

That decision was certainly questionable, considering that UAE Arbitration law does not provide any exclusion of the tribunal’s authority to award costs, and the ICC Rules (applicable in the arbitration which gave rise to the Dubai decision) have long been construed as allowing the recovery of the parties’ legal and experts’ fees. This decision is also important for construction arbitration practitioners due to the number of complex construction disputes in the region, which very often entail high expert and legal fees for the parties. To a certain extent, this decision and the surprise it has generated echo the duality of legal systems that prevails in the Gulf with, on the one hand, the common law tradition (present in the offshore courts) traditionally more inclined towards the award of legal costs to winning parties and, on the other hand, the civil law tradition which often limits such recoverability to fixed sums, often insignificant given the amounts at stake.

Importantly, the Dubai Court of Cassation appears to have reversed its stance several months later, in a decision dated 19 November 2024. In this subsequent ruling, the Court of Cassation ruled that the ICC Rules entitle tribunals to award legal costs. The Court reasoned that when a law or rule is unambiguous, it cannot be altered so as to modify its meaning. In the case of the ICC Rules, the Court held that article 38(1) is clear as it allows arbitral tribunal to award reasonable legal costs.^[43] The recent decision is much welcomed by the arbitration, especially considering the uncertainty that had arisen following the previous decision from the same Court, and as it aligns with international arbitration practice.

Another important judgment for construction practitioners was rendered by the Dubai Court of Cassation on 29 October 2024 about unilateral arbitration agreement. This case concerned a subcontractor who had filed a claim against its main contractor before the Dubai onshore court, in an attempt to obtain payment of the works performed under two different subcontracts. Both subcontracts contained identical unilateral arbitration clauses providing for the referral of disputes, at the sole discretion of the main contractor, either to arbitration or to the local courts in the UAE. In first instance and on appeal, the main contractor argued that the proceedings should be dismissed because it wished the disputes to be resolved by arbitration, as the clauses allowed it to do.

The Dubai Court of Cassation considered that a unilateral (or asymmetric) arbitration agreement (ie, an agreement providing one party with the option to choose between arbitration and court proceedings, option not opened to the other party) is not a valid arbitration agreement under UAE law and thus does not prevent onshore courts to hear the related dispute(s). According to the Court the asymmetric/unilateral arbitration clause was not enforceable because it does not amount to a clear agreement to resolve the dispute between the parties solely by arbitration, and therefore not a valid arbitration agreement unequivocally binding both parties.^[44]

The Court of Cassation’s decision departs from the accepted practice in offshore UAE courts, such as in the DIFC, which recognises the enforceability of unilateral/asymmetric arbitration agreement.^[45] This is again illustrative of the tensions that may arise in the UAE, and the challenges for both parties and practitioners. The question of (un)enforceability of unilateral or asymmetric arbitration clause is particularly relevant for construction matters, as these types of clauses may be helpful in construction contracts. One can think, for example, about the need to consolidate disputes in the same forum (court or arbitration) where some of the subcontracts include a choice for arbitration and others opt for court proceedings.

Outlook and conclusions

This year is again marked by (green) megaprojects all over the Middle East and Africa Region, and arbitration remains a popular method to settle engineering and construction-related disputes. These trends are evidenced by the arbitration centre’s statistics, and by the region’s willingness to further promote arbitration. Green megaprojects are also on the rise, whether through new projects aiming to produce green electricity, or with projects aiming to provide eco-friendly urbanisation as with the Green City in Kigali.

Key developments in the arbitration sphere include, among others, the new CRCICA Rules, the establishment of the brand new arbitreAD centre, in replacement of the old ADCCAC, or the new Malawi International Act, enacted to modernise Malawi’s arbitration law and to align it with international standard, as Nigeria did last year.

Endnotes