The recent news that Carillion, the UK’s second-largest construction company, will enter into compulsory liquidation has sent shockwaves throughout the sector and put thousands of jobs at risk. While the true cause of Carillion’s collapse remains a developing story, delayed payments from Middle East contracts and the expensive withdrawal from other projects in the Middle East are commonly cited as significant contributory factors. While Carillion joint ventures remain active in the United Arab Emirates (UAE) and Oman, the major risks involved in doing business in the Middle East remain a key feature in the Carillion story.

There is currently some dispute as to how much these disputes in the Middle East contributed to Carillion’s liquidation, with Carillion’s auditors and Middle Eastern companies contesting evidence given by Carillion’s chief executive. Nonetheless, the storyline of the Middle East’s role in the collapse has taken shape and is unlikely to dissipate in the near future. Accordingly, this substantial and far-reaching collapse feeds into a widespread and misleading cautionary tale that doing business in the Middle East & North Africa (MENA) region is too risky to be worthwhile.

The fear of uncertainty in the MENA region is a topic of concern among business owners and other stakeholders as they consider entering into the region’s markets, or as they consider steps forward on projects already initiated. However, the recent opening up of Saudi Arabia and additional regional efforts to create judicial collaboration and increased standardisation on other rule of law topics, signal a promising shift in the regional legal landscape.

Apr-Jun 2018 issue

DIFC Courts