United Arab Emirates: Consumer Protection in the UAE

Last Updated: 10 June 2010
Article by Marcus Wallman

Following on from our article in last month's Law Update (Issue 228) regarding the recently established consumer protection website, www.consumerrights.ae, this is the first in a series of three articles which will consider the UAE's Consumer Protection Law which was introduced in 2006 (the "Law") and its implementing Regulations which were enacted in 2007 (the "Regulations"). We are also adding a new firm brochure entitled "Consumer Protection Laws in the UAE" to those available on our website http://www.tamimi.com/ and would encourage any clients wishing to obtain an overview of consumer protection laws applicable to business' in the UAE to take the time to read it.

Recently, there have been a number of consumer protection related matters reported in the media which has turned a spotlight onto this area of law. Most notably on the worldwide stage has been the recall of millions of vehicles by a number of major vehicle manufacturers earlier in the year. In Dubai, cafés and restaurants (other than those attached to hotels or clubs) were prohibited from adding service charges to their bills.

Federal and local authorities have been undertaking steps to promote awareness of consumer protection laws among the community and to provide consumers with greater access to remedies in the event that they fall victim to breaches of these laws. Late last year announcements were made that consumers will soon have access to special purpose consumer courts in Abu Dhabi, Dubai and Ras al Khaimah. The Dubai Department of Economic Development's recent establishment of www.consumerrights.ae website is another example of the steps that are being taken to provide assistance to consumers.

Product liability is one of consumer protection law's three areas of regulation. It deals with a supplier's liability to consumers as a result of defects in the nature of the products it sells. Design and manufacturing defects are often referred to as "inherent" because the defect may not known to exist at the time of a product's sale.

The second area is trade practices law. This area deals with a supplier's obligations in the context of the sale of goods and services and covers issues such as labeling requirements, warranties, after sales service obligations and so on. The third area is competition law which applies to business practices which restrict free trade and competition in whole markets. These second and third areas will be considered in later articles.

Product Liability

There are essentially three causes of product liability. They are defective design, defective manufacture and failure to properly instruct consumers on the proper use of a product or warn consumers of latent dangers in a product. The aim of product liability laws is to minimise the damage caused by defective products and to compensate those who have been affected.

In the UAE, product liability law is addressed by provisions in Chapter 4 of the Law and in the implementing Regulations.

Department of Consumer Protection

The Law and Regulations are administered by the Department of Consumer Protection (the "Department") within the Ministry of Economy (the "Ministry"). The Department has stated that it will remain the contact point for consumer complaints, through its telephone hotline and internet site portals (assisted by the individual Emirates as evidenced on the www.consumerrights.ae website). The intention is that the Department will refer appropriate complaints to the relevant Emirate's consumer court (once established) for adjudication. It would appear that the Department will act as a 'quality filter' to ensure that frivolous and vexatious claims do not waste valuable court time and resources.

Consumer Court Matters

What matters are likely to be considered by the consumer courts? The Department has stated that these will be complaints concerning suppliers' fraudulent activities and other malpractices such as price fixing, deception and collusion. However, based on other countries' experience, these latter malpractices are very complex, high level, macroeconomic matters which only the Department itself could pursue by virtue of its consumer advocate role and evidence-gathering powers of investigation. 

By contrast, individual consumer complaints arise from single transactions involving the sale of goods or services where consumers did not get what they paid for, and are largely product liability and trade practices matters, being loss or damage due to a defective product and loss or damage due to illegal trade practices.

These complaints are often straightforward with fact situations that are easy to prove in evidence. Examples of the necessary evidence are the invoice for the product purchased from the supplier, the expiration date of its warranty period (a written product warranty or period prescribed by law) and the invoices for the costs of rectifying the injury or damage which resulted. Product liability and trade practices matters can be expected to be the actual focus of consumer court adjudications. High level competition matters will probably be pursued by the Department though other UAE courts.

Product Liability Law

The UAE's product liability laws are consistent with those of other countries, suppliers are liable for damages caused to UAE consumers by their use of defective products. In particular, products must comply with UAE standards, be properly labeled and leafleted and carry appropriate warnings.

To Recall Or Not Recall, That Is The Question

A large number of the provisions contained in the Regulations deal with the issue of recall of defective products. As clearly demonstrated by recent motor vehicle recalls, a product recall can have a major economic and reputational impact on the manufacturer and distributors of those goods being recalled. It is important that manufacturers and distributors are aware of the obligations imposed upon them under the Regulations with regard to product recalls.

The definition of "defect" in the Regulations is wide and covers faults in the "designing, processing or manufacturing of any good, its non-suitability, deformation or damage before, during or as a result of use, or due to the non-conformity or non-compliance sufficiently with the Approved Standards Specifications, the warranty, or specifications declared or to be declared by the provider; or any acknowledgement or advertisement relating to or posted on the goods".

The Regulations require that providers must adopt the recall provisions set out in the Regulations in a number of circumstances including if a defect is found by the supplier in the goods or if complaints are received from consumers regarding defects in the goods. The recall provisions contained in the Regulations require that the Ministry be given a detailed notice of any recall within 14 days of any such recall and also set out the type of advertisements that must be placed in local newspapers and the information that must be contained in such advertisements in order to effect a recall.

The Regulations raise a number of questions, both with regard to the necessity of instituting a recall and the timing of such recalls. On a strict interpretation of the Regulations, given that a "defect" is defined to include a fault due to non-compliance with a warranty, a provider would be required to institute recall procedures in the event of any justified warranty claim by a consumer. Clearly this is not the intent of the Regulations as there will often be occasions where warranty claims are made and replacement products provided or the product repaired (obligations in this regard will be discussed in more detail in next month's Law Update article) but where the recall of an entire product line is not justified. 

In our opinion, the requirement for instituting a product recall will be based on the following considerations. The first is whether the defect is such that there is a reasonable likelihood that it will affect all or a material proportion of a certain type or batch of products. That is, is the fault inherent in the product and likely to have been replicated?  Where a fault appears in one product that can be reasonably expected to be a result of chance, for example perhaps some dirt happened to be trapped in a single camera lens during production but all the other lens' were unaffected, then it would clearly be unreasonable for the entire product line to be recalled even though this type of fault would be classified as a "defect" under the regulations (due to non-compliance with a warranty and having a manufacturing fault). Indeed, the ability to replace a product with another that does not have the defect is evidence in itself that the defect is not systemic. Rather, in our view, the Regulations' intent is to require recalls in situations where there is a fault that is reasonably likely to affect all or a material proportion of the products, for example an inherent design flaw that has been incorporated into an entire production run of products.

The second consideration is the impact of a potential defect. Clearly, defects which put the health and safety of consumers at risk will be taken very seriously by the Ministry and immediate and comprehensive recall procedures will be required to be put in place.  Article 17 of the Regulations specifically allows the Ministry to institute recall procedures immediately itself where there exists a threat to the consumer (usually the Ministry can only institute recall procedures following the failure of a provider to do so). In our opinion, where health and safety is not an issue, it would also be reasonable to consider the nature and extent of the defect in light of the product itself. Defects which may not affect the performance of a product and which may be unnoticeable unless you knew where to look may not justify a recall procedure. Each case needs to be considered on it facts. However, if in doubt, we would always advise that the Ministry's guidance be sought in respect of any specific situation.

A further area that is not clearly set out in the Regulations is the issue of the timeframe within which the provider needs to institute a recall. As mentioned above, the Regulations refer to a 14 day timeframe in which the Ministry has to be notified of any recalls. This timeframe relates to notifying the Ministry and not the timeframe in which the provider itself needs to institute the recall. However, in our opinion, except in cases where there are health and safety concerns, it would be reasonable to interpret this timeframe as also relating to the time in which recall procedures must be instituted by the provider. Where there are health and safety issues involved, it would be advisable for a provider to institute recall procedures as soon as possible after discovery of a defect. This issue has been considered specifically by the Ministry in the context of the car industry as discussed further below.

In the event of a recall, the Regulations state that the consumer shall have the right to select the remedy, being either replacement or repair of the good of refund of the purchase price provided, however, that the type and nature of the defective goods together with the time taken in remedying the defect shall be taken into consideration. It would, for example, be unreasonable for a customer to demand a replacement vehicle where the defect could be easily repaired in 10 minutes by way of a replacement part.

As mentioned above, the Ministry has recently focused on the vehicle industry and held a meeting with the major UAE vehicle dealerships to discuss how dealers should handle mechanical defects and recalls. The Ministry made it clear to vehicle dealers that any defects which pose a safety risk must be reported to the Ministry within 24 hours of discovery while any other defects must be reported within the 14 days timeframe referred to in the Regulations. It follows that if the Ministry has to be informed of defects that result in safety concerns within 24 hours of such defects being discovered then it is reasonable to assume that recall procedures must be implemented within this timeframe. It is important that individual industries keep abreast of any determinations made by the Ministry with regard to recalls which may be industry specific.  

Penalties

In addition to the costs of compensating consumers for their losses and rectifying the defects, there are penalties provided for in the Law and Regulations for breaches. 

A fine of not less than AED 10,000 will apply if a product does not have a conspicuous warning of the risks associated with using it. In all other cases the fine is not less than AED 1,000. In addition, the court may direct that the product be confiscated or destroyed along with the equipment and raw materials used in its manufacture. Furthermore, not recalling a defective product is deemed by the Regulations to be a crime under the UAE's Suppression of Cheating and Fraudulence in Commercial Transactions Law.

The Law also contains a very broad power granted to the Minister of Economy to suspend trading by any business that does not comply with the Law for up to a week and to also refer the issue of permanent closure of the business and disposal of any goods which do not comply with the Law to the courts.

Conclusion

This area of the law has not created much interest or controversy to date but that may be about to change. As the consumer courts become operational and UAE consumers become more aware of their rights and how to pursue them, product liability may well become more visible.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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