Saudi Arabia continues to experience exceptional expansion in its construction and infrastructure sectors. Fuelled by a portfolio of transformative giga-projects, the Kingdom has become one of the most active construction markets globally. From NEOM and The Line to the Red Sea Global and Diriyah Gate developments, the scale and ambition of ongoing projects are vast.
While these initiatives present significant opportunities, they have also led to a notable rise in construction disputes. The combination of complex project structures, evolving regulations, and high-value contracts has created a legal and operational environment where disputes are increasingly common. Understanding the dynamics behind these disputes is critical for contractors, developers, consultants, and legal counsel working in the Kingdom.
The Evolving Construction Landscape
The Kingdom’s construction sector is defined by large-scale, fast-paced developments involving both local and international players. Projects often include multi-tiered arrangements with main contractors, subcontractors, specialist consultants, government bodies, and investment authorities. The interaction of these parties across complex contractual frameworks can create friction, particularly when expectations are misaligned.
Recent developments have further accelerated the market, including increased privatisation efforts, heightened foreign investment, and tighter regulatory enforcement. As timelines compress and budgets expand, so too does the potential for disputes over scope, delivery, and compliance.
Key Drivers of Disputes
Construction disputes in Saudi Arabia often arise from the following recurring issues:
- Delays in Delivery: Time overruns continue to be a major flashpoint. Causes include regulatory approval bottlenecks, labour and material shortages, weather-related disruptions, and changes in design or scope. Claims for time extensions and associated costs are frequently contested.
- Cost Escalations and Variations: Unexpected changes to contract scope, disagreements over variation orders, or price fluctuations in materials often lead to financial disputes. Without precise variation mechanisms and strong documentation, parties can find themselves at odds.
- Quality and Technical Non-Compliance: Divergences between what is built and what is contractually expected remain a leading cause of conflict. Issues may relate to construction standards, use of substandard materials, or misinterpretation of technical drawings and specifications.
- Ambiguous Risk Allocation: Poorly drafted or inadequately localised contracts often lead to confusion over risk ownership. This is particularly problematic when dealing with force majeure, regulatory intervention, or unforeseen ground conditions.
Contractual Frameworks and Pitfalls
While many projects in Saudi Arabia continue to use FIDIC-based standard forms, these contracts are typically amended to reflect local legal and regulatory norms. Saudi laws, including the Civil Transactions Law, Public Procurement Law, and sector-specific mandates also govern contracts.
A persistent challenge lies in the failure to tailor contracts to project-specific risks appropriately. Vague drafting around critical areas such as delay claims, extension of time, force majeure events, and payment procedures can result in costly disputes. Precision in language and alignment with current legal standards are essential.
Well-drafted contracts should outline:
- Clear procedures for notices and approvals
- Defined timelines for claim submissions
- Consequences of non-compliance
- Dispute resolution mechanisms that are enforceable in the Kingdom
Trends in Dispute Resolution
In recent years, Saudi Arabia has made significant efforts to enhance its dispute resolution infrastructure. The commercial courts remain available, but alternative dispute resolution mechanisms are increasingly preferred.
- Arbitration under the SCCA
The Saudi Centre for Commercial Arbitration (SCCA) has seen a substantial increase in usage for construction disputes. It offers an efficient, neutral, and enforceable forum for resolving disputes. With updated rules (as of early 2025), the SCCA now supports expedited procedures, remote hearings, and digital filings, making it more accessible to international parties. - Mediation as a Strategic Tool
Mediation is gaining wider acceptance as a first-line resolution tool. It allows parties to preserve commercial relationships and avoid lengthy proceedings. The Ministry of Justice has recently launched initiatives promoting pre-litigation mediation across several sectors, including construction. - International Enforceability
Saudi Arabia’s continued commitment to the New York Convention ensures that arbitral awards from approved institutions are enforceable, offering reassurance to foreign investors and contractors.
Legal and Regulatory Developments
The Kingdom is actively reforming its regulatory landscape to foster transparency, accountability, and investor confidence. Notable recent developments include:
- Updates to the Saudi Building Code to ensure higher safety and sustainability standards
- Enhanced project oversight mechanisms, especially for state-backed projects
- Enforcement of more precise payment terms, including retention management and milestone-based payment schedules
- Introduction of the Civil Transactions Law (2023), which harmonises many contractual principles with international standards while preserving Sharia foundations
In parallel, digital transformation is playing a key role in reducing disputes. Tools such as Building Information Modelling (BIM), e-invoicing, and integrated project management platforms are now standard in significant projects. These technologies improve transparency, coordination, and evidence retention.
Frontline Lessons and Practical Insights
From recent projects and disputes, several practical lessons stand out:
- Prioritise Documentation
Meticulous recordkeeping remains the cornerstone of claim substantiation. Daily site records, approvals, meeting minutes, and variation logs should be maintained and reviewed regularly. - Align Contracts with Reality
Avoid overly standardised templates. Contracts must be customised to the realities of each project, particularly where multiple jurisdictions or public-private interfaces are involved. - Address Risks Proactively
Early identification of risks, clear escalation procedures, and regular legal review can significantly reduce the likelihood of disputes. - Engage with ADR Early
Disputes need not escalate to formal proceedings. Well-timed use of mediation or early neutral evaluation can resolve issues faster and at lower cost. - Understand the Local Legal Landscape
Familiarity with local law, procedure, and regulatory practice is vital. Legal counsel with in-Kingdom experience is essential for strategic decision-making and dispute prevention.
Looking Ahead
Construction disputes remain a real and present challenge in Saudi Arabia’s fast-moving development sector. However, the Kingdom’s maturing legal framework, enhanced dispute resolution institutions, and greater regulatory clarity offer a path to more efficient and predictable outcomes.
As Vision 2030 projects continue to move from planning into execution, proactive legal and commercial risk management will be vital. With robust contracts, effective project governance, and early engagement with disputes, parties can navigate Saudi Arabia’s complex construction landscape with greater confidence and clarity.