CSCEC-8 Dubai Wins Construction Payment Dispute in DIFC Courts

The Dubai Branch of China Construction Eighth Engineering Division Corp., Ltd. (“CSCEC-8 Dubai”) has prevailed in a commercial dispute against a local Dubai real estate developer, with the DIFC Courts granting a default judgment that fully upheld the claims of the Chinese enterprise.

CSCEC-8 Dubai had entered into a general contracting agreement for a commercial complex project with UAE-based developer Oriental Pearls Real Estate Development LLC. The contract stipulated the exclusive jurisdiction of the DIFC Courts. Following the completion and handover of the project, the developer persistently defaulted on the outstanding construction payments, withheld the performance and advance payment guarantees, refused to negotiate, and deliberately evaded service of court documents by making itself unreachable. CSCEC-8 Dubai then instructed a Middle East-focused international commercial legal team to initiate litigation.

The case involved three key legal issues:

First, the validity of judicial service in the context of an offshore developer intentionally becoming uncontactable. After the defendant refused to accept physical service of documents, the claimant applied for electronic service and submitted corroborating email correspondence. The court accepted the validity of service in accordance with local procedural rules, thereby allowing the default proceedings to advance.

Second, the evidentiary standard for determining the amounts owed, including the principal construction debt and additional charges. The developer had withheld payment without cause after completion and delivery. Based on a complete set of construction evidence, the court found the developer to be in fundamental breach of contract and ordered it to pay all outstanding sums together with compensation for delay.

Third, the legal effect and discharge obligations relating to expired performance guarantees. The developer’s refusal to cancel the expired guarantees exposed the Chinese party to ongoing risk of claims. The court clarified that the developer had no right to retain the guarantees after project completion, and ordered the return of the guarantee instruments and compensation for potential losses suffered by the Chinese party. This ruling addresses a notable jurisprudential gap in the Middle East regarding similar guarantee disputes.

The DIFC Court of First Instance issued a default judgment, granting full relief to CSCEC-8 Dubai. The court ordered the developer to pay AED 58 million in outstanding construction payments and AED 4,754,200 in compensation, with payment to be made within a prescribed period; to cancel all expired guarantees and return the relevant instruments; and to bear in full any losses arising from claims made under those guarantees. The developer was also ordered to pay all litigation costs. The case has since become a landmark reference for Chinese-funded engineering enterprises seeking to enforce their rights through the DIFC Courts.

This case clarifies three key practical challenges in Dubai construction projects: recovery of outstanding payments, service of process, and the handling of guarantees. It provides a judicial reference for Chinese engineering enterprises entering the UAE market and confirms that the DIFC Courts offer equal protection of the rights and interests of Chinese parties. Even where a developer becomes uncontactable, Chinese enterprises may recover outstanding sums and eliminate guarantee-related risks through default judgment. The decision thereby bolsters the confidence of domestic infrastructure companies in investing and undertaking construction projects in the UAE.