United Arab Emirates: Limitation Funds: A Landmark Decision In Dubai

Last Updated: 24 January 2018
Article by Robert Lawrence

A recent decision of a specialist tribunal in Dubai could have far-reaching consequences for the maritime industry. In this article Robert Thomas QC, of Quadrant Chambers, and Robert Lawrence and Leonard Soudagar, of Clyde & Co, examine how it is now possible, in certain circumstances, for a shipowner to set up a limitation fund in the UAE. The decision is of interest to shipowners worldwide given the low limits that would apply and the scope for the specialist tribunal to hear disputes that are entirely unconnected with the UAE, but there is a real concern that there is now an uneven playing field in the UAE.

There is clear anecdotal evidence that the "on shore" courts in the UAE have been unwilling to grant limitation decrees or permit limitation funds to be constituted even in obvious cases.

What is the Dubai World Tribunal (DWT)?

The DWT was originally constituted in 2009 as a specialist tribunal in the aftermath of the international financial crisis to relieve the local courts' caseload and in circumstances where the Government of Dubai was under severe financial pressure and concerned that this might affect the stability of the government-owned Dubai World group of companies.

Unsurprisingly, therefore, Decree (57) of 2009 ("the decree"), which gave life to the DWT, focused primarily on establishing a set of insolvency rules and procedures based on those already applicable in the Dubai International Financial Centre ("the DIFC"). These in turn were based on US and UK law and therefore quite different from those which would otherwise have applied in the UAE. Unlike the DIFC, however, the DWT was mandated to apply UAE law to the disputes before it. The decree (as subsequently amended) also provided that the DWT was to have jurisdiction over "all claims and demands by and against Dubai World or any of its subsidiaries" to the exclusion of the local "on shore" courts.

As the Government of Dubai sought to restructure its business interests, the DWT saw a significant workload in its early years, most notably resolving disputes relating to the real estate company, Nakheel, a former Dubai World subsidiary. However, as the world economic outlook improved and the restructuring progressed, the tribunal's workload decreased to such an extent that in 2017 there were only two cases started before the DWT and it is understood that there have been discussions about disbanding it.


The Tribunal's judgment in one of those two 2017 cases may, however, lead to renewed interest in the DWT, particularly from the maritime sector. In a judgment in Claim No DWT 0001-2017, the MV CMA CGM CENTAURUS, published on 22 January 2018 the DWT accepted the shipowner's argument that it had jurisdiction to and should make an order permitting the constitution of a limitation fund pursuant to the Convention on Limitation of Liability for Maritime Claims 1976 ("the 1976 Convention") which the UAE had implemented by Federal Decree No (118) of 1997.

In so finding, the DWT (which included one former English Admiralty Judge) was untroubled by the fact that a limitation decree is a unique legal concept which is generally understood as being "good against the world" (including parties not specifically joined in the proceedings) or by the fact that its rules contain none of the relevant procedures required to govern and administer a limitation action. Its response that it had regularly adjudicated on property rights within the UAE and therefore effectively made rulings in rem and good against "the whole world" is, it is suggested, an inexact analogy and the consequences of its judgment may well be felt far beyond Dubai.


The judgment would appear to pave the way for the DWT's special jurisdiction to be invoked in maritime disputes that are entirely unconnected with the UAE.

By way of example, if a container ship (the largest of which may now carry not far short of 20,000 containers) was involved in an incident in the Singapore straits, the fact that there was on board a single consignment of cargo belonging to a Dubai World company would justify the commencement of a limitation action before the DWT, even if no claim was brought by that entity. This is because, as part of its judgment, the DWT found that, on the internationally controversial question of the meaning of Article 11 of the 1976 Convention, UAE law follows the English Court of Appeal decision in The Western Regent and does not require any substantive claim to have been made against the shipowner in the jurisdiction before limitation proceedings may be commenced.

Another consequence of the judgment is the real risk of an uneven playing field developing within Dubai. There is clear anecdotal evidence that the "on shore" courts in the UAE have been unwilling to grant limitation decrees or permit limitation funds to be constituted even in obvious cases. The DWT considered this issue in its judgment but dismissed it as irrelevant on the basis that no evidence to support the proposition had been put before it. This is unfortunate not least because both first instance and Court of Appeal judgments are not publicly available in the UAE, while ultimately only some Court of Cassation judgments are, and it was not, therefore, possible to provide such evidence. Since, however, both these courts and the DWT are applying the law of the UAE, the potential conflict is clear.

This also illustrates one of the difficulties which arises from the DWT's mandate to apply the law of the UAE. None of its members are qualified in that jurisdiction and, unlike almost all national courts, therefore, they often find themselves unable to make findings as to the law which they are applying without assistance from local lawyers (ie effectively experts). This is further illustrated in the judgment where the DWT expressed itself as unwilling to accept the submission that, as a matter of UAE law, a P&I Club letter of undertaking ("LoU") was not acceptable as security (for the release of a vessel from arrest and therefore by analogy for the constitution of a limitation fund) and instead cash or a local bank guarantee would be required. Once again, the Tribunal cited the lack of evidence as the reason for rejecting that submission.


The result of the judgment is that before the DWT at least, the law, practice and procedures for constituting a limitation fund and seeking a limitation decree are very similar to those of the UK. The important difference from the shipowner's point of view, however, is that (unlike the UK) the UAE has not acceded to the 1996 Protocol and that, therefore, the figure to which it will be able to limit its liability will be substantially smaller. For any incident in which a Dubai World entity may be involved, seeking to limit in an action brought before the DWT may, therefore, be an attractive choice.

If you have any questions, please do not hesitate to speak to Robert Lawrence and Leonard Soudagar, the co-authors of this update, and the solicitors acting for DP World in "The CENTAURUS".

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions