United Arab Emirates: Commercial Dispute Resolution Q&A

Last Updated: 7 August 2019
Article by Hassan Elhais

UAE has seen a considerable increase in the business opportunities and foreign investors in last decade. Accordingly, the lawmakers have amended the laws in order to have an effective dispute resolution mechanism. Such strong and stable institutions can accommodate both foreign and domestic investors in accordance with their requirements.

The commercial disputes in UAE are generally resolved through litigation or arbitration. Wherein arbitration is nowadays the most common and widespread medium for resolving such disputes. The country follows the civil law system with an inquisitive approach of the court. The Corporate Lawyers of Dubai in this article have provided complete information regarding the dispute resolution process in UAE with regards to 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 the commercial dispute?

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:

A. Litigation

The disputing parties can refer the matter before the courts specifically 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 in translated in Arabic bearing legal attestations (if required by courts). Proceedings before UAE courts are through written pleadings supported by documents.

All the Emirates except Abu Dhabi and Ras Al Khaimah (RAK) are a part of the Federal Judicial system. The foregoing Emirates have an independent judicial system. However, each Emirate follows the similar structure as below:

  • Court of First Instance;
  • Court of Appeal;
  • Court of Cassation (RAK does not have Court of Cassation and all the appeals are presented before the Supreme Court of Abu Dhabi.)

B. Dubai International Financial Centre (DIFC)

Apart from the civil courts, the Emirate of Dubai has its own financial free zone that is DIFC which has its own 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 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 DIFC court has jurisdiction to enforce foreign financial judgments. However, this had recently caught the attention of Dubai Courts when 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. So far, if there is a conflict between jurisdictions, Dubai courts will be favoured over DIFC Courts.

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. Common Law system is the foundation for civil and commercial law in ADGM which is based on 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 division, Enforcement courts enforcing judgments of 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 completely digitalized courtroom platform.

2. What is a structure for UAE courts where commercial disputes are referred?

There are no particular courts for resolving commercial disputes, and all the commercial cases are tried by the civil courts in the following structure:

  1. Court of First Instance:
  2. Court of Appeal;
  3. 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 [arty 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 in lieu of 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' fails to settle the issue amicably, the matter will be registered before the Court of First Instance. Nevertheless, if the parties resolved the case before the Committee, the decision will be recorded and signed by both the parties, which is binding and enforceable.

Whereas a different picture can be witnessed in Dubai and RAK courts as 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:

  1. Dispute regarding the partition of common property;
  2. Disputes where parties mutually agree to settle through the Centre;
  3. Disputes are pertaining to outstanding debt worth AED 100,000.

In the aforementioned cases, the matter should be initially referred to the Centre. Whereas, 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.

Further, Federal Law Number 18 of 1993 pertaining to Commercial Law (the Commercial Code) provides for limitation period in certain cases mentioned below:

  • Contract disputes are time-barred for 15 years;
  • Matters related to bounced cheque must be filed within 3 years;
  • Insurance disputes should be registered within 3 years;
  • Any claim arising out of Tort must be referred within 3 years;
  • Any claim due to defects in the architecture of a building must be registered within 10 years;
  • The agreement for the carriage of goods by sea must be in 1 year;
  • Employment matters to be recorded within 1 year.

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. The court fees in all the Emirates vary from 3-6% with a maximum cap of AED 40,000 which must be paid by the claimant. In several jurisdictions 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 or notice for registration of a case is through by court in various steps that are either by courier, email, or a court officer. It is important for the defendant to acknowledge the receipt of summons, However, if the court officer is unable to deliver the summons to defendant and defendant fails to attend the hearing the court will adjourn the matter for another hearing. Also, if the personal service was not possible, the service should be made by affixing the summons on the defendant's property or through publication in two local newspapers (Arabic and English).

If the defendant resides outside the country, the summons will be served through diplomatic channels, including Ministry of Foreign Affairs and UAE Embassy in the country of Defendant. It can also be through electronic means.

Stage III: Hearing

Once a response is submitted by the Defendant, the court will adjourn the hearing for claimant's reply on another date. Further hearing dates will be issued; until both, the parties submit the memorandums and documents to support their claim. However, if the defendant post several attempts failed to attend the hearing, the court will pass an ex-parte judgment. Also, the court can 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 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 his debt;
  • If the claim is based on a specific amount;
  • The claim was against the guarantor.

The demand to seek such 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 application should be served to the defendant who then has 15 days from the date of judgment to set aside 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 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 from 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 involve 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:

  1. Travel ban until the final judgment;
  2. An order to seize 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 through 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 Expert. The experts are usually appointed in for seeking opinion on several matters which require appropriate knowledge and skills such as in financial or technical matter. All the courts have a list of experts through which the experts are appointed. The court does not allow the parties to decide an expert due to issues of biases mutually.

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 and more. 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. The post is receiving both parties' comments; if the court is of the opinion that further investigations are required, the matter can be again referred to the same or 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 pertaining to 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. Patties 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 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 will 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 further right to file an appeal before the Court of Cassation within 60 days from receiving the judgment from Court of Appeal on the grounds of law.

8. What procedures are followed to enforce a local or a foreign judgment in UAE?

Enforcing Local Judgment

Either party upon receiving the judgment form a competent court may file for execution after 30 days from the date of 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:

  1. Sale of debtor's property;
  2. Sale of his shares in the market;
  3. Arrest warrant against the debtor.

Enforcing Foreign Judgment

UAE is a signatory to several bilateral treaties and judicial co-operation to recognize and enforce arbitral awards. Under Riyadh Convention to which UAE is a signatory, all other signatory countries can enforce the judgment passed from their courts in UAE.

Whereas, for countries where UAE has not signed any treaty, the requirements mentioned in the Civil Code must be satisfied which are highlighted as below:

  • Courts of UAE must have jurisdiction 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 should be in line with the laws.

9. What are the main Alternative Dispute Resolution methods available in UAE for resolving commercial disputes?

Alternative dispute resolution methods involve arbitration, mediation and conciliation. For arbitration, the Chamber of Commerce has their rules and regulations and authority which can undertake cases filed to resolve through ADR such as Dubai International Arbitration Centre, Abu Dhabi Commercial Conciliation and Arbitration Centre. Apart from the government recognized, the two financial free zones, DIAC and ADGM also have their own arbitration Centre that is DIFC-LCIA. Further, UAE has passed Federal Law Number 6 of 2018 on Arbitration in UAE, which sets out guidelines for undertaking arbitration.

For conciliation and mediation, the courts in different cases offer amicable settlement which is discussed in question 1.

10. What are the primary organisations which offer ADR for commercial disputes?

There are numerous ADR organizations resolving commercial disputes between the parties through a mutual consent which are as follows:

  • Dubai International Arbitration Centre;
  • Abu Dhabi Commercial Conciliation and Arbitration Centre;
  • Dubai International Financial Centre- London Court of International Arbitration;
  • Reconciliation and Settlement committee;
  • Amicable Dispute Settlement Centre.

Each arbitration centre has their own rules and regulations governing the disputes and the procedure for referring disputes before them.

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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