Litigation in the UAE can be a complex and costly process, requiring businesses to be well-prepared to navigate the legal landscape effectively. Ensuring your company is litigation-ready helps mitigate risks, protect business interests, and improve the chances of a favorable outcome. Here's how you can prepare:
1. Strengthen Contractual Protections
a. Draft Clear Dispute Resolution Clauses
- Ensure all contracts specify governing law, jurisdiction, and dispute resolution mechanisms.
- Consider which court system best suits your company needs.
b. Include Strong Payment & Performance Clauses
- Define clear payment terms, penalties for non-compliance, and termination conditions.
- Secure debts with guarantees or post-dated cheques (keeping in mind their legal implications).
2. Establish a Robust Record-Keeping System and Maintain Well-Organized Documentation
- Store all contracts, emails, invoices, payment records, and correspondence securely.
- Ensure document retention policies comply with UAE laws and corporate best practices.
- Ensure that you have all your contractual counterparty's details including trade licenses, address, authorized signatory details and any other documentation relevant to your industry.
3. Assess Litigation Risks Regularly
a. Conduct Legal Risk Audits
- Identify potential litigation risks and ensure contractual compliance.
- Audit internal processes to minimize legal exposure.
b. Monitor Compliance with UAE Regulations
- Ensure compliance with commercial laws, labor laws, and sector-specific regulations.
- Stay updated on changes to UAE litigation laws and procedures.
4. Financial Preparedness for Litigation
a. Budget for Legal Costs
- Litigation in the UAE can be costly, with court fees, legal representation, and expert fees.
- Court fees can be up to 6% of claim value (capped in most courts).
b. Assess Counterparty's Financial Health
- Before initiating litigation, verify if the defendant has assets in the UAE for enforcement.
- Consider obtaining bank guarantees or collateral in contracts to secure claims.
5. Understand UAE Litigation Procedures
a. Be Aware of Court Structures
- Onshore Courts (Federal & Local Courts) operate under a civil law system, with proceedings in Arabic.
- DIFC & ADGM Courts follow an English common law system and can be an alternative for commercial disputes.
b. Prepare for Court-Appointed Experts
- Many UAE courts rely on court-appointed experts in technical cases (e.g., construction, financial disputes).
- Ensure your company maintains technical reports and third-party assessments.
6. Strengthen Internal Governance & Compliance
a. Train Internal Teams on Litigation Preparedness
- Educate management and key personnel on legal risks and dispute resolution strategies.
- Appoint internal legal liaisons who work closely with external counsel.
b. Implement Strong HR & Employment Practices
- Ensure employment contracts are compliant with UAE labor laws.
- Maintain detailed records of employee disputes to avoid wrongful termination claims.
b. Understand Arbitration Clauses
- If arbitration is an option, ensure contracts refer to recognized arbitration centers.
- Keep arbitration cost and enforceability in mind.
7. Engage External Legal Counsel Early
a. Have a Pre-Vetted Litigation Team
- Retain trusted UAE law firms experienced in litigation within onshore and offshore courts.
- Develop a litigation strategy in advance to react swiftly if a dispute arises.
b. Seek Legal Advice Before Filing or Defending a Case
- Early legal consultation can prevent mistakes that could weaken the case.
- Obtain legal opinions on the likelihood of success before committing to court proceedings.
To be litigation-ready in the UAE, companies must proactively strengthen contracts, maintain clear records, ensure financial readiness, and understand UAE litigation procedures. Additionally, considering alternative dispute resolution methods and engaging legal experts early can help minimize risks and ensure the best possible outcome in legal disputes.
By following these steps, businesses can effectively safeguard their interests and navigate potential disputes with confidence.
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.
