黑洞社区

The bonds are guarantees put up by contractors as security for developers under the terms of most UAE contracts and are usually worth 10% of the contract value. They differ from performance bonds in the UK because they are typically provided on an 鈥渙n demand鈥� basis, meaning sums are paid out before the client has to prove work is faulty.

Legal experts have warned that as more bonds are called in by under-pressure developers in the region, particularly in Dubai, contractors will increasingly face cash flow difficulties.

Paul Taylor, a partner at HBJ Gateley Wareing, said: 鈥淚t has become the first port of call for many clients trying to ease cash flow.鈥�

One major contractor in the region, which declined to be named, said the calling in of bonds was a growing problem for contractors working with 鈥渓ess scrupulous developers鈥�.

It has become the first port of call for many clients trying to ease cash flow

Paul Taylor, lawyer

Another said: 鈥淚t鈥檚 a sensitive subject. We鈥檙e trying to avoid contracts that include on-demand bonds 鈥� with varying success.鈥�

Paul Suckling, a partner in law firm Holman Fenwick Willan, added: 鈥淭wo years ago, calling in bonds would have been seen as the final straw 鈥� it was unheard of. Now, clients are much more commercially aware; it鈥檚 a worrying time for contractors working in the UAE.鈥�

Contractors can contest a claim, but lawyers warn that this can take years to resolve.

Developers have also started to increase the value of performance bonds, with one lawyer saying he was aware of a contractor with a bond that was worth 30% of a project.