Finally, disgruntled Dubai investors who have been waiting for justice are mustering up some courage and seeking legal action against errant developers who have failed to keep their promises. For most investors, it has been an arduous task taking the matters to court. But now, a number of buyers are taking the alternative dispute resolution route of arbitration and approaching the Dubai International Arbitration Centre (DIAC) in a bid to retrieve their hard-earned cash. Jerry Parks, partner at legal services firm Taylor Wessing, says there is an increased interest in arbitration from investors who invested in off-plan properties. "We are finding that many more people are now interested in arbitration because they are running out of patience. In the past, investors gave the developers some time, but now they are realising that if the project is unlikely to go ahead, they may be entitled to their money back," says Jerry.
Clients are free to represent themselves at the arbitration, but usually people prefer to go with someone who has already done it before and knows the procedure. While arbitration is gaining popularity, you need to keep in mind that it is not only expensive, but time- consuming as well. "It is likely to take a minimum of one year. Also, once you have an award, you will usually have to enforce that through Dubai Courts, which will take a further few months," says Jerry. Here's a look at the step by step process of arbitration for those who are considering this legal option.
1. Know your case
Don't rush into it. First and foremost, it's important to know everything about your claim as arbitration is an expensive proposition. "You should be pretty confident about your case; if there is some doubt there, then it becomes a difficult decision to make due to the relatively high costs involved," says Scott Flint, associate, Taylor Wessing.
If you decide to go through a legal firm, it will first take a look at the contracts and advise you on whether you have a strong case or not.
The legal expert will ask you to provide a number of documents, including correspondence details, in an effort to extract as much information as possible. The documents required include the sales and purchase agreement (SPA), mortgage documentation, correspondence with the developer regarding reasons for delay or change in completion dates, and payment requests. "We assess the whole situation and then give our advice based on the documents and surrounding facts. We will inform the client about the strength of their legal position and examine whether they have made sufficient efforts to resolve the issue with the developer outside of arbitration."
If you decide to go ahead with arbitration, the legal expert will give a fee estimate and an estimate of the costs to be paid to the arbitration centre. For this step, the law firm charges a fixed fee that is relatively small. "Since arbitration is such a big commitment, it is worth spending a small initial fee to obtain a proper review and advice. This will assist in building a strong platform from which to file a claim," says Scott.
Taking into account the costs and time frames, you may opt not to go for arbitration immediately. In such cases, a legal expert could help you correspond with the developer to negotiate a deal.
2. File a claim
Usually in Dubai, most claims are filed at Dubai International Arbitration Centre (DIAC) in the Chamber of Commerce. You can file a detailed claim or a very basic one, depending on the strategy you want to adopt: filing a detailed claim gives the developer full information about what you are claiming and provides him with a lot of time to put together a defence and coherent argument against your claim — you are revealing everything at an early stage. However, "If the client and his or her advisors think that there is a good chance of a settlement, then filing a detailed case may be a good idea," says Scott. "The developer may look at a particularly strong and detailed case and decide it would prefer to settle outside of arbitration." However, more often than not, Scott says that clients file a very basic claim. The developer then has a 30-day period to put in a response, which is called an ‘answer to the request'. The answer will also be basic if the claim is basic.
3. Find out the fees
The next step is to appoint an arbitrator, which is done by correspondence. Both the complainant and the developer will appoint arbitrators, who are then approved by DIAC. "Both parties have a chance to object to an appointment if they think there is a conflict of interest or that the arbitrator is not properly suited," says Scott. The next stage is that the centre will assess its costs. This is done by looking at the claimed amount: using its fee calculator, DIAC will assess the arbitrator's fee for the individual case and then both parties are required to pay the fee before the matter can proceed. "Often, there is quite a lengthy time frame to allow the parties to pay because it is so expensive and often takes a number of months. The parties may attempt to reach a settlement in that time," says Scott. There is a disturbing trend in arbitration claims wherein developers sometimes choose not to pay their share in order to derail the claim since, legally, a developer can still be heard through the arbitration and be represented even if it doesn't pay its fee. "In such cases, clients may decide to pay the developer's share as well if they want to go ahead with the claim. If successful, the client will recover the entire fee as part of the final award. But this is bit of a risk because they have to put in double the amount at the beginning," says Scott.
4. Fix hearing dates
Once the fees have been paid, there is a first hearing. This is used for parties to agree to timelines and dates for fulfilling certain tasks. A target final hearing date will be fixed and all relevant proceedings will need to be completed between the first and final hearing dates. The proceedings include exchanging witness statements, appointing an expert to carry out a report on the construction status, more opportunities to file pleadings and responding to the defendant's answer to the request. "There is about a 12-month period between the initial meeting between the DIAC tribunal and parties and the final hearing, with a lot of correspondence in between. It is not necessary to have more than two hearings in straightforward cases," says Scott. Once you get a final decision, it has to be ratified and enforced by the Dubai Courts. "It's at the discretion of the arbitrator, but most will accept that if you have to sue somebody to enforce a right, and you are successful, you ought not to be penalised with costs," concludes Scott.
