The decline in oil prices to the $40s from the highs of $110s over the past year has put pressure on the region’s government budgets and affected business sentiment. Adding to such a mix is the geopolitical turmoil which in turn means that disputes are on the rise as some businesses pause certain commitments given the turbulence.
These include commercial and shipping, as well as those related to real estate and construction, among others.
The Middle East experienced significant economic growth over the past 10 years fuelled by high oil prices. Such prosperity resulted in an unprecedented business and construction boom in the Middle East. The global financial crisis of 2008 exposed the weaknesses, resulting in a market crash and resulting disputes.
The boom of 2012 to early 2014 again saw an increase in business and construction activity. However, stormy days are upon us again. A resulting increase in disputes is inevitable.
Given the traditional roots of Eastern culture, there is an emphasis on amicable settlement of disputes in the UAE. Failing such a settlement and if no arbitration clause is contained in the contract, the dispute is referred to the court. The court system consists of: (i) a Court of First Instance; (ii) a Court of Appeal; and (iii) a Court of Cassation.
Court hearings are generally held in public and all court proceedings are in Arabic. However, there is usually little or no oral hearing. Also, the public cannot inspect the court file. Only the parties to the litigation and their lawyers have access to these records.
As a result, although all proceedings are in theory public, they remain virtually confidential in practice. In the UAE, judgements of the higher courts are not binding on the lower courts and each case is decided on its own merits and facts.
The UAE operates under a civil law system and statutes are the primary source of law. Another is Sharia which is a body of religious laws, ethical and legal rules. Sharia is founded on familiar concepts of justice, fairness and equity, and the practical result in commercial matters is often the same as that reached under many Western law jurisdictions.
Proceedings are started by filing a claim in the relevant court office on payment of the required court fee. On application by the claimant, payment of court fees can be deferred in exceptional cases. The court fee depends on the value of the claim, and has a maximum cap of Dh40,000. This fee is payable either on an application for provisional relief, or on filing the main lawsuit.
The claim must meet procedural requirements, include the names and addresses of the parties to the action, and include details of the claim. Documents in support are usually annexed to the claim and must be translated into Arabic. The court issues a summons with a hearing date endorsed on it for service on the defendant, with a copy of the claim and any supporting documents filed by the claimant.
Once an answer has been filed, the trial is adjourned for the claimant to respond. Further adjournments are given so that memoranda can be filed by the parties. Once the court believes that the case has been sufficiently pleaded, it reserves the matter for judgement.
The entire proceeding is based on written submissions supported by documentary evidence. The court usually appoints an expert to assist it and usually accepts their report.
As an alternative to court, arbitration proceedings have become increasingly popular as a means of settlement of disputes and many parties elect for a resolution by arbitration under their contracts.
For example, the Dubai Chamber of Commerce and Industry established the Dubai International Arbitration Centre (DIAC), in effect a rebranding of the commercial conciliation and arbitration services available since 1994. The DIAC has issued arbitration rules and maintains a list of arbitrators.
The Abu Dhabi Chamber of Commerce and Industry also has an arbitration centre that has issued its own set of procedural rules. Foreign arbitration institutions, most notably the International Chamber of Commerce’s Court of Arbitration, are also often used in large disputes.
Also, the Dubai International Financial Centre/London Court of International Arbitration (DIFC/LCIA) Centre is based in the Dubai International Financial Centre in Dubai.
It is important to note that there are effectively no rights of appeal available with respect to the merits of an arbitration award in the UAE. Also, the UAE federal arbitration legislation is currently contained only in a short section of the UAE Civil Procedure Code and requires a court ratification of awards.
Importantly, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards was adopted by the UAE in 2006 and applies to all arbitration proceedings conducted in the UAE.
A decrease in economic prospects in the Middle East will necessarily lead to an increase in disputes as businesses pause certain commitments. Resulting disputes can be referred to and resolved through the courts or by arbitration in the UAE.
The writer is a Partner at the law firm of Afridi & Angell. He is also a registered professional engineer.