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July 17, 2019
Commercial disputes in UAE are generally resolved through litigation or arbitration. Wherein arbitration is nowadays the most widespread medium for resolving such disputes. The country follows the civil law system with an inquisitive approach to the court.
The Corporate Lawyers of Dubai in this article have provided complete information regarding the dispute resolution process in UAE concerning commercial disputes.
The lawyers of Dubai have made it simpler for international and domestic investors to understand the legal framework and the UAE court structure to resolve commercial disputes:
1. What are the primary dispute resolution mediums used for resolving commercial disputes?
The legal system of UAE is derived from the Constitution where Shariah and civil law are the main sources of legislation. There are several mediums available for investors to resolve commercial disputes as follows:
The disputing parties can refer the matter before the courts specifically the Court of First Instance of the respected Emirate. The country (except for some free zones) follows a civil law system wherein each case is decided on the basis of its facts and merits. Court proceedings are in Arabic through a UAE National lawyer.
All the documents submitted before the court must be translated into Arabic bearing legal attestations (if required by courts). Proceedings before UAE courts are through written pleadings supported by documents.
All the Emirates except Dubai, Abu Dhabi and Ras Al Khaimah (RAK) are a part of the Federal Judicial system. The aforementioned Emirates have an independent judicial system. However, each Emirate follows a similar structure as below:
Court of First Instance;
Court of Appeal;
Court of Cassation.
B. Dubai International Financial Centre (DIFC)
Apart from the civil courts, the Emirate of Dubai has a financial free zone, called the DIFC which has its laws and regulations and an independent judiciary to deal with cases arising within DIFC. It is a common law jurisdiction, and all the proceedings and documents are submitted in English. The jurisdiction of DIFC Courts is established by virtue of Dubai Law Number 16 of 2011 which empowers the DIFC Courts to entertain local and international cases and resolve commercial disputes, upon the mutual consent of the parties.
Recently, DIFC courts have held that they have jurisdiction to enforce foreign and domestic arbitral awards as they are a signatory to the New York Convention. The Court of Appeal of DIFC opined that the DIFC court has jurisdiction to enforce foreign financial judgments.
However, this caught the attention of Dubai Courts when the Dubai Court of First Instance nullified the judgment passed by DIFC courts ratifying an arbitral award, due to lack of jurisdiction. Thus, the question regarding DIFC courts' authority over approving foreign arbitral awards is still in conflict, and in order to resolve this conflict, Dubai Courts through Decree Number 19 of 2016 incorporated a Joint Judicial Tribunal.
C. Abu Dhabi Global Market (ADGM) Courts
ADGM is a financial free zone situated in Abu Dhabi established by virtue of Federal Law Number 8 of 2004, Federal Decree 15 of 2013 and Abu Dhabi Law Number 4 of 2013, having its own separate rules and regulations and its independent court and an arbitration centre.
The courts in ADGM only entertain matters arising within ADGM or between the companies registered with ADGM authority. The common Law system is the foundation for civil and commercial law in ADGM which is based on the English Law Regulations of 2015.
Further, ADGM has well-established English statutes which can govern civil and commercial matters. ADGM courts have categories and divisions such as Employment divisions, civil claim divisions, and enforcement courts enforcing judgments of the Abu Dhabi Judicial Department.
ADGM provides digital court services, wherein the cases and other documents are filed electronically, and the cases are managed through an online portal system. ADGM is the first institution to provide a completely digitized courtroom platform.
2. What is the structure of UAE courts where commercial disputes are referred to?
The commercial cases are tried by the civil courts in the following structure:
a. Court of First Instance:
b. Court of Appeal;
c. Court of Cassation.
The judges in the aforementioned courts may not have special expertise in trying these commercial matters. However, they hold the authority to appoint a third-party expert, if required. Further, it is pertinent to note that any commercial dispute prior to being referred before the civil courts, is registered before the Reconciliation and Settlement Committee (the Committee) which is appointed by the Ministry of Justice pursuant to Federal Law Number 26 of 1999 concerning the Establishment of Reconciliation Committee in Federal Courts.
The Committee tries the matter and provides a settlement opportunity to the parties which can avoid the litigation process. However, should the parties fail to settle the issue amicably, the matter will be registered before the Court of First Instance.
Nevertheless, if the parties resolve the case before the Committee, the decision will be recorded and signed by both parties, which is binding and enforceable.
On the other hand, under Dubai Law Number 16 of 2009, Dubai courts have established a Centre for Amicable Settlement (the Centre). The Centre has the authority to hear the following type of disputes, as set out in the Administrative Resolution No. 51 of 2020 Concerning the Jurisdiction of the Centre for Amicable Settlement of Disputes:
a. Dispute regarding the partition of common property;
b. Applications for ratification of amicable settlements and agreements, irrespective of their value ;
c. Disputes involving claims not exceeding AED 200,000. In the aforementioned cases, the matter should be initially referred to the Centre. Employment and family matters cannot be referred to the Centre.
3. What is the limitation period within which the commercial disputes shall be presented before the courts?
UAE Federal Law Number 5 of 1985 on the Civil Transactions Law (the Civil Code) provides for the general rules regarding the statutory limitation imposed on civil and commercial cases. Generally, a civil claim is barred by limitation after 15 years from the date the claim arose, unless otherwise specified by a statute.
Notwithstanding the foregoing, there are numerous exceptions to the general rule of law, as there are certain statutes which provide a different time limitation for different disputes.
4. What are the different stages followed by UAE courts in any court proceeding?
Stage I: Registration of Case
Any proceeding initiated in the Court of First Instance in the relevant Emirate must be through a pleading/plaint followed by respective court fees, depending upon the amount of the claim. In several jurisdictions, the court, upon passing an unfavourable judgment against the defendant, can order the defendant to reimburse the court fees to the claimant.
Any claim registered before the courts must meet all the requirements and must contain all relevant information regarding the claimant and the defendant and the dispute.
Upon registering the claim, the court issues summons (the claim and supportive documents submitted by the claimant) to be served on the defendant along with a hearing date.
Stage II: Service of Summons
The summons should contain the name and address of the Court and the names and addresses of all the parties. It must be directed to the respondent and include the date on which the respondent has to appear in court for the initial hearing.
The notice can be served to the Respondent in person, at his place of residence or domicile or his agent. The notice can also be served through voice or video recorded calls, SMS, fax, and even Whatsapp. If the notice is served through voice-recorded calls, the minutes mentioning the call contents, time, date and recipient, would be drafted, which will be treated as evidence and attached to the file of the case. The notice will be considered effective from the date of sending the e-mail, SMS or Whatsapp.
If the defendant resides outside the country and cannot be notified through means of technology, the summons will be served through diplomatic channels, including the Ministry of Foreign Affairs and the UAE Embassy in the country of Defendant.
Stage III: Hearing
Once a response is submitted by the Defendant, the court will adjourn the hearing for the claimant's reply to another date. Further hearing dates will be issued; until both, parties submit the memorandums and documents to support their claim.
However, if the defendant fails to attend the hearings, even after several attempts, the court will pass an ex-parte judgment. The court is also entitled to appoint a third-party expert, should the matter require technical knowledge and assistance.
5. Do the courts in UAE allow for interim reliefs? If yes, on what groups can such an application be brought before the court?
Generally, interim reliefs are not granted to the claimant. However, the competent court will grant the following:
A. Summary Judgment
The court is empowered under the Civil Code to pass a summary judgment if:
A creditor confirms in writing (including through electronic means) his debt;
If the claim is based on a specific amount;
The demand to seek such a claim was raised at least 5 days prior to submitting the application for summary judgment. If the court orders a summary judgment, in favour of either party the order along with the application should be served to the defendant who then has 15 days from the date of judgment to file a grievance against the order on reasonable grounds.
B. Preliminary Attachment Orders
The court upon being satisfied that there is a prima facie case against the defendant or if the order for attachment of property is not granted the Claimant even after receiving the favourable order will not be able to enforce the judgment will pass provisional orders for attachment of the property.
The party filing an application for attachment of property must provide supporting documents and specify the assets which need to be attached. Interim relief for the attachment of property completely depends upon the discretion of the court. Nevertheless, parties must submit evidence proving an imminent danger to the property which is the very basis of the claim.
Further, if it is proven in the court that the interim relief was sought on malicious grounds or with the intention of causing harm or delay in the proceedings, the claimant will be liable to pay damages decided by the court. In addition, the court may require the applicant to submit a bank guarantee or a letter of indemnity along with the application for interim relief.
C. Special Cases
The interim relief in special cases involves an application for a travel ban, where the claimant has a strong apprehension that the defendant might leave the country without settling the claim, the claimant may file an application to seek the following remedy:
C.1. Travel ban until the final judgment;
C.2. An order to seize the defendant's passport. If the defendant fails to offer his passport, he must submit a bank guarantee equal to the amount of the claim.
Further, in some circumstances, if the court is of the opinion that the evidence in the subject matter can be destroyed, they may appoint an expert to examine the situation and draft a report relying on which the court may grant interim relief.
6. What is the role of an expert in any court proceeding?
The appointment of third-party experts in the courts of law is in accordance with Federal Law Number 7 of 2012 Regarding the Expert Evidence before UAE Courts. Further, Federal Law Number 10 of 1992 Concerning the Evidence Law governs the appointment of an expert.
The experts are usually appointed for seeking opinions on several matters which require appropriate knowledge and skills, including financial or technical matters. The courts have a list of experts through which the experts are appointed.
The expert so appointed must comply with the rules and regulations set out by the Evidence Law, which includes arranging meetings with parties or their legal representatives and maintaining the minutes of the meeting, amongst others.
Once a report is drafted and submitted to the court, the court will issue a hearing date for both parties to comment on the report. After receiving comments from both parties, if the court is of the opinion that further investigations are required, the matter can be again referred to the same or a new expert. It is important to highlight that claimant is usually required to pay for expert fees, which can be reimbursed, should he receive a favourable judgment.
7. What are the rules on appeals in a court proceeding?
Any party aggrieved from the judgment of the Court of First Instance can file the case before the Court of Appeal. The appeal can be filed on the grounds of fact and law. Parties also have the right to present further submissions and evidence. All the appeals must be filed within 30 days from the date of receiving the judgment from the Court of First Instance. However, the time frame may be extended in some circumstances.
The appellant filing appeal has to submit the grounds for filing the appeal along with documentary evidence supporting the claim. Upon receiving the appeal, the court will notify the other party and provide a hearing date for the respondent's submission.
Subsequent hearing dates will be provided for submissions, and once the court is satisfied that the matter is pleaded, the court will order for judgment. Parties have the further right to file an appeal before the Court of Cassation within 60 days of receiving the judgment from the Court of Appeal on the grounds of law.
8. What procedures are followed to enforce a local or foreign judgment in the UAE?
Enforcing Local Judgment
The execution court will notify the other party to submit the claim amount, however, if he fails to the court can execute the judgment through:
a. Sale of debtor's property;
b. Sale of his shares in the market;
c. Arrest warrant against the debtor.
Enforcing Foreign Judgment
UAE is a signatory to several bilateral treaties and judicial cooperation to recognize and enforce arbitral awards. Under the Riyadh Convention to which UAE is a signatory, the judgments issued by the competent courts in the signatory countries can be enforced in the UAE.
Whereas, for countries where UAE has not signed any treaty, the requirements mentioned in Article 85 of the Cabinet Decision No. 57 of 2018 must be satisfied, which are highlighted below:
Courts of UAE must not be exclusively competent to try that matter;
Judgment should be issued by a competent foreign court;
The foreign court should have summoned the defendant;
The foreign court judgment should be binding and enforceable;
Judgment does not conflict with a judgment issued by the UAE courts and does not contain anything contrary to public order or morals.
9. What are the main Alternative Dispute Resolution methods available in the UAE for resolving commercial disputes?
Alternative dispute resolution methods involve arbitration, mediation and conciliation. For arbitration, Dubai International Arbitration Centre (DIAC) is the most common arbitration institute and recently underwent an overhaul and issued new arbitration rules for itself which have come into force on 21 March 2022.
Other arbitration institutes like the Emirates Maritime Arbitration Centre and the Dubai International Financial Centre Arbitration Institute (which administered the DIFC-LCIA arbitration centre) were abolished and their assets and operations merged with DIAC, pursuant to Decree No 34 of 2021 issued by the ruler of Dubai.
Abu Dhabi Conciliation and Arbitration Centre is another arbitration institute which organizes and conducts arbitration in Abu Dhabi.
In 2018, the UAE introduced a new arbitration law, called the Federal Law No. 6 of 2018 on Arbitration, which sets out guidelines for undertaking arbitration.
For conciliation and mediation, the courts in different cases offer an amicable settlement which is discussed in question 1.
10. What are the primary organisations which offer ADR for commercial disputes?
Numerous ADR organizations are resolving commercial disputes between the parties through mutual consent, and the key ones are the Dubai International Arbitration Centre and the Abu Dhabi Commercial Conciliation and Arbitration Centre.
Each arbitration centre has its own rules and regulations governing disputes and the procedure for referring disputes before them.