United Arab Emirates has made its mark as the go-to jurisdiction for commercial trade for countries all across the globe. While there is no doubt that UAE is the preferred destination for setting up new businesses, opening up branches of foreign offices and high volume of transactions that take place on a daily basis, this also means that disputes are common in this jurisdiction.

What are the methods of dispute resolution in commercial transactions in the UAE?

Broadly, there are two methods of dispute resolution available for commercial trade in the UAE. 

These are: litigation and arbitration. 

While dispute resolution through arbitration is picking up pace and may be preferred in extremely high value disputes having an international character, predominantly, it is the courts which are used for solving commercial disputes. 

Background on the Judicial System of UAE

The UAE is made up of seven Emirates – Abu Dhabi (Abu Dhabi city is the federal capital of the UAE), Dubai, Ras Al Khaimah, Ajman, Sharjah, Fujairah and Umm Al Quwain.

The legal structure of the UAE judiciary is organized into two systems: the federal judiciary and the local judiciary. Abu Dhabi, Dubai and Ras Al Khaimah maintain their independent judicial system at the local/Emirate level for matters that are not assigned to the federal judiciary in accordance with the Constitution. 

Each judicial system has three degrees of courts for litigation. These are: 

  1. Court of First Instance
  2. Court of Appeal 
  3. Federal Supreme Court at the federal level and the Court of Cassation at the local level. 

In accordance with Article 25 of the Civil Procedure Law (Federal Law No. 11/1992), the Court of First Instance is the primary court of dispute and is entitled to consider civil, commercial, administrative, labour and personal status disputes. Decisions issued by the Court of First Instance can be appealed before the appellate courts having jurisdiction. Appeals from the judgments of the appellate courts can be filed with the cassation/supreme court on specified grounds. 

Court Proceedings

In case the dispute is to be resolved through litigation, court proceedings will have to initiated by the claimant. 

The first step in this process involves registering a claim by filing a statement of claim with the Court of First Instance (case management office), along with the supporting documents. The claim should have all the relevant information including the name and details of the plaintiff, the details of the defendant, the subject matter and demands, etc.

Once the defendant is notified, the defendant is required to submit his memorandum of defence along with the supporting documents. 

The court will then hear the matter. It may also appoint an expert in case the issues involved are technical and require the opinion of an expert. The expert will hear the parties and prepare a report, along with its recommendations and the reasons for its recommendation.

The expert's report will not be binding on the court. 

Once the pleadings are completed, the court will issue its judgment which can be appealed. The judgment is required to be reasoned, and will set the grounds on which the decision has been made.

An appeal should be filed by the aggrieved party to the appellate court within a period of 30 days from the date of judgement, unless the law specifies otherwise.

Conclusion

While commercial disputes are common given the growth of business in the UAE, it is crucial to hire a local lawyer for dispute resolution, especially since the court's language is Arabic and therefore, a local lawyer who would be able to guide you on the steps and represent you in court is invaluable.

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.