What constitutes a delay entitling to compensation under Dubai law

To submit a compensation claim for a construction project delay in Dubai, the claimant must first establish that the delay constitutes a breach under the UAE Civil Transactions Law (Federal Decree-Law No. 5 of 1985) and the Dubai Procurement Regulations, then follow the pre-action notice, documentation, and filing procedures before the Dubai Courts or the relevant arbitration centre.

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WHAT CONSTITUTES A DELAY ENTITLING TO COMPENSATION UNDER DUBAI LAW?

A delay entitles the aggrieved party to compensation when the contractor fails to complete the works within the time stipulated in the contract, and the delay is not excused by force majeure, variations approved by the employer, or other contractual exemptions. Under the UAE Civil Transactions Law, a party that suffers loss due to another's failure to perform its contractual obligations is entitled to damages that restore the injured party to the position it would have been in had the contract been performed properly【https://dlp.dubai.gov.ae/Legislation%20Ar%20Reference/1997/%D9%82%D8%A7%D9%86%D9】. The Dubai Procurement Regulations further specify that if the contractor's delay exceeds the grace period, a daily penalty of 2 % of the value of the delayed works applies, capped at 10 % of those works, and the employer may procure the works at the contractor's cost plus an additional 10 % if the penalty reaches its maximum【https://dlp.dubai.gov.ae/Legislation%20Ar%20Reference/1997/%D9%82%D8%A7%D9%86%D�】. The Arabic text of UAE legislation as published in the Official Gazette prevails over any translation.

WHAT STEPS MUST BE TAKEN BEFORE FILING A CLAIM?

Before initiating formal proceedings, the claimant must serve a written notice of delay on the contractor, referencing the relevant contract clause and demanding either an explanation, a revised programme, or the commencement of remedial works. The notice should be sent via registered mail or courier to preserve proof of receipt, and a reasonable period-typically 14 to 21 days-must be allowed for the contractor to respond. If the contractor fails to cure the delay within that period, the claimant may then issue a formal claim letter outlining the losses incurred, the legal basis, and the relief sought. This pre-action step is required by the Dubai Courts' Practice Directions, which encourage settlement before litigation and demonstrate that the claimant has mitigated its losses.

WHAT DOCUMENTS ARE REQUIRED TO SUPPORT THE CLAIM?

The claimant must compile a comprehensive dossier that includes: (1) the signed construction contract and any amendments; (2) the approved programme of works and any updated schedules; (3) correspondence evidencing the delay notices and the contractor's responses; (4) site progress reports, photographs, and independent expert reports confirming the extent of delay; (5) records of additional costs incurred, such as extended site overhead, financing charges, and penalty payments to third parties; and (6) a quantified loss calculation linking each expense to the delay period. All documents should be paginated, indexed, and accompanied by a cover sheet summarising the claim's value. The Dubai Courts require that exhibits be filed in Arabic or accompanied by a certified translation, and the Arabic text of UAE legislation as published in the Official Gazette prevails over any translation.

HOW IS THE COMPENSATION AMOUNT CALCULATED?

Compensation is calculated to place the claimant in the position it would have occupied had the contractor performed on time. This includes direct losses such as idle labour and equipment, increased financing costs, and any loss of profit or revenue directly attributable to the delay. Indirect losses, such as reputational harm, are generally not recoverable unless expressly stipulated in the contract. The Dubai Procurement Regulations provide a formula for liquidated damages: 2 % per week (or part thereof) of the value of the delayed works, not exceeding 10 % in total. If the liquidated damages clause is deemed a penalty and therefore unenforceable, the court will assess actual damages based on evidence. The claimant must submit a detailed schedule of loss, supported by invoices, bank statements, and expert testimony, to enable the court to quantify the award.

WHAT IS THE TIMELINE FOR FILING AND ADJUDICATING THE CLAIM?

Under the UAE Civil Procedures Law, a claim for breach of contract must be filed within ten years from the date the cause of action arose, although the Dubai Courts often apply a shorter limitation period for construction disputes based on the contract's defect liability period, typically two years after practical completion. Once the statement of claim is filed, the court will issue a summons to the defendant, and the first hearing is usually scheduled within four to six weeks. The parties may then exchange pleadings, attend a case management conference, and engage in expert testimony. If the matter proceeds to trial, judgment is typically rendered within six to twelve months from the date of filing, depending on the court's docket and the complexity of the expert evidence. Arbitration under the DIFC or ADGM frameworks follows similar timelines, with awards often issued within six to nine months after the commencement of proceedings.

WHAT ARE THE POSSIBLE OUTCOMES IF THE CLAIM IS SUCCESSFUL OR REJECTED?

If the court finds that the contractor's delay constitutes a breach and awards compensation, the judgment will specify the sum payable, interest from the date of loss until payment, and court fees. The judgment is enforceable in Dubai through execution proceedings, which may include attachment of the contractor's bank accounts or seizure of assets. If the claim is rejected, the claimant may appeal the decision within thirty days of the judgment, provided there is a substantive ground such as misapplication of law or failure to consider essential evidence. In either scenario, the parties may also consider settlement at any stage, and the Dubai Courts encourage mediation to reduce costs and preserve business relationships.

FREQUENTLY ASKED QUESTIONS

What law governs liquidated damages for construction delays in Dubai?
The Dubai Procurement Regulations, issued under the Dubai Government's procurement framework, set the liquidated damages rate at 2 % per week of the value of the delayed works, capped at 10 % of those works【https://dlp.dubai.gov.ae/Legislation%20Ar%20Reference/1997/%D9%82%D8%A7%D9%86%D�】. The Arabic text of UAE legislation as published in the Official Gazette prevails over any translation.

Can I claim loss of profit due to a delayed project?
Loss of profit is recoverable if it is a direct and foreseeable consequence of the contractor's breach and is proven with sufficient certainty. The UAE Civil Transactions Law requires that damages be compensatory, not punitive, and that the claimant demonstrate a causal link between the delay and the lost profit【https://dlp.dubai.gov.ae/Legislation%20Ar%20Reference/1997/%D9%82%D8%A7%D9%86%D�】. The Arabic text of UAE legislation as published in the Official Gazette prevails over any translation.

Is expert testimony necessary to prove delay?
While not strictly mandatory, expert testimony is commonly used to establish the extent of delay, the adequacy of the contractor's programme, and the valuation of losses. The Dubai Courts often appoint an independent expert when the technical issues are complex, and the expert's report carries significant weight in the judgment【https://dlp.dubai.gov.ae/Legislation%20Ar%20Reference/1997/%D9%82%D8%A7%D9%86%D�】. The Arabic text of UAE legislation as published in the Official Gazette prevails over any translation.

If your matter involves claim for compensation for delay of a construction project in Dubai in the United Arab Emirates, you are welcome to request a consultation with Nour Attorneys. Our team can assess your position under the law currently in force and outline the options available to you. Request a consultation

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