BonelliErede lawyers explain why differences between common law and civil law systems—which influence Middle East jurisdictions—can significantly impact dispute outcomes:
The construction industry is a major part of the Middle East economy, worth about $41 billion in 2024 and expected to grow to $50.4 billion by 2029, according to market reports. The latest report from the Dubai International Arbitration Centre (DIAC), published in 2023, shows that around 50% of construction disputes are settled through arbitration. Arbitration is the preferred method, especially when foreign parties are involved.
With these trends, the arbitration scene in the Middle East has seen many important changes in recent years. Different regions and arbitration centers are competing to become the main choice for where disputes are handled, which institution manages them, and which laws apply. For example, Saudi law now requires that the laws of Saudi Arabia must be used for disputes between foreign companies and a Saudi government entity if the contract is worth more than SAR 100 million (about US$26.7 million).
In a diverse and complex area like the Middle East, with many different legal traditions and cultures, choosing the right law for construction contracts is a crucial decision. Most Middle Eastern legal systems are based on civil law and influenced by Islamic law, except for Oman and Saudi Arabia, which are mainly based on Sharia law.
However, Saudi Arabia has recently introduced a new Civil Code that started in December 2023. This new code is a significant step in updating Saudi Arabia’s legal system. The civil law in Middle Eastern countries is mostly based on Egyptian law, which was heavily influenced by the French civil legal system.
Often, parties involved in disputes do not give enough importance to choosing the right law. They usually prefer to use their own law because they are more familiar with it and their chosen lawyers know it well. However, this choice can greatly affect the outcome of construction disputes, something negotiators often ignore. The way a contract clause is understood and how a legal issue is resolved can be very different depending on the law applied, especially whether it follows the common law or civil law system.
