Tag: Dispute Resolution

The past couple of years have seen significant changes in litigation in the UAE Courts. On 31 March 2021, in what appears to be yet another move to modernize litigation in Dubai, the President of the Dubai Court of First Instance issued Circular No. 2 of 2021 (the Circular). The Circular introduces the concept of a ‘pre-trial conference’ into litigation in the Dubai Courts. The Circular provides that:

 

• a pre-trial conference will be held between the parties under the supervision of a judge;
• the pre-trial meeting may be held in person or by remote communication technology; and
• the parties are to discuss matters which will assist in the case being disposed of without delay. The Circular lists the following by way of example:

 

• The possibility of settlement and expediting the trial process.
• The complexity of the case and the expected duration of the trial.
• Narrowing down the scope of disputed issues and issues pertaining to evidence.
• Scheduling a procedural timetable for the submission of written pleadings, documents, expert reports and other documents, and lists of witnesses (if any).

 

Common law practitioners, and clients who have experienced litigation in common law jurisdictions, will be familiar with the concept of a pre-trial conference, but what will pre-trial conferences look like in onshore Dubai – a jurisdiction in which a trial (as understood in a common law jurisdiction) does not exist?

 

No doubt time will tell. In the meantime, we set out below a couple of markers that may assist in tracking how this concept will be implemented in the UAE.

 

1. This is a step towards greater certainty – at least in matters of procedure. At present, there is no telling how many rounds of written submissions a Dubai court will require before fixing a matter for judgement. Litigants who file submissions at almost every hearing – regardless of whether the hearing is fixed for submissions to be filed by that party or not – are a frequent source of frustration and delay. Fixing a timetable in advance ought to remedy this.

 

2. Parties will be required to give more thought to the issues in dispute at the outset of the case, which ought to result in more focused pleadings being filed in court.

 

3. This could have a bearing on the use of court-appointed experts – but it most likely will not. Under current practice, the appointment of an expert by the court is the norm, rather than the exception. However, the decision to appoint an expert is driven primarily by the judges, as opposed to the parties. Consequently, the submissions by the parties at a pre-trial conference is unlikely to have a conclusive effect on whether or not an expert is appointed by the court. However, the pre-trial conference (particularly the requirements to discuss matters relating to presenting evidence) may have an effect on parties who attempt to file proceedings without evidence, or with light evidential support, and bank on the appointment of an expert to assist in the gathering of evidence.

 

4. It could be an avenue to require disclosure by litigants. The Circular requires the parties to narrow down the scope of disputed issues and, issues pertaining to evidence. In order to do so, ostensibly there needs to be a discussion regarding disputed facts and issues which in turn may lead to opportunities to question a counterparty regarding relevant facts and evidence.

 

5. Under the Civil Procedure Code Regulations issued in 2019, penalties were introduced to discourage parties from denying copied documents without a legal basis, and for failing to produce evidence in a timely manner. The Circular requires the parties to discuss the possibility of a settlement. It will be interesting to see whether penalties will be introduced for parties who declined a reasonable settlement at the pre-trial stage, and eventually have judgment rendered against them.

 

6. Finally, and perhaps most importantly, how the Circular will be implemented shall eventually be measured by the consequences of failing to comply with the orders issued at the pre-trial conference. What happens to a party who tries to bring up new or different issues not identified at the pre-trial conference? What are the consequences of deviating from the agreed procedural timetable? While the Circular is silent, we should expect guidance to follow.

 

The Circular is, without a doubt, a step in the right direction. However, how far of an actual travel in that direction, will depend on how the Circular will be implemented. Watch this space. ■

The DIFC Court of First Instance has, for the first time in its history, issued a judgement allowing the examination of witnesses resident in the UAE pursuant to two requests for judicial assistance (Letters Rogatory) from the District Court of the State of Minnesota, USA (the US Court).

 

The judgement, issued by Justice Robert French, clarifies the scope of Rules 30.65, 30.66 and 30.67 of the Rules of the DIFC Courts (the RDC).

 

Overview of Dispute

The Letters Rogatory were issued by the US Court further to the application of a Defendant in two claims relating to, among other things, product liability of a manufacturer. The Plaintiffs in both cases claimed losses and damages as a result of an accident which occurred in Sharjah by initiating proceedings before the US Court.

 

Given that a number of witnesses and authorities concerned with the first-hand events of the incident were resident in the UAE, the US Court, on the application of the Defendant, requested assistance from the DIFC Courts in obtaining the testimony of those witnesses and documents relating to the incident.

 

The Defendant issued Part 8 proceedings in the DIFC Courts pursuant to Rules 30.65, 30.66 and 30.67 of the RDC without naming any defendants. RDC 30.65 and RDC 30.66 specifies wide powers for the DIFC Courts to grant assistance to foreign courts:

 

RDC 30.65

 

Where an application is made to the Court for an order for evidence to be obtained in the DIFC and the Court is satisfied:

 

(1) that the application is made in pursuance of a request issued by or on behalf of a court or tribunal (“the requesting court”) exercising jurisdiction in:

 

(a) Dubai; or

 

(b) in any other part of the UAE;

 

(c) or in a country or territory outside the UAE; and

 

(2) that the evidence to which the application relates is to be obtained for the purposes of proceedings which either have been instituted before the requesting court or whose institution before that court is contemplated;

 

The Court shall have the powers conferred on it by the following provisions of this Section of this Part.”

 

RDC 30.66

 

The Court shall have the power, on an application under Rule 30.65, by order to make such provision for obtaining evidence in the DIFC as it may appear to the Court to be appropriate for the purpose of giving effect to the request in pursuant of which the application is made: and any such order may require a person specified therein to take such steps as the Court may consider appropriate for that purpose.

 

The Defendant requested the DIFC Courts to allow the examination of the witnesses and documents specified in the Letters Rogatory under oath or affirmation in the DIFC Courts by a practitioner authorized by the DIFC Courts’ Registrar.

 

The Judgement

In allowing the application of the Defendant in the US Proceedings, Justice Robert French held that the reliefs requested were “appropriate” after an analysis of the relevant provisions in the RDC as well as the DIFC Courts’ jurisdiction conferred upon it by Article 5(a) of the Judicial Authority Law No 12 of 2004 and Article 19(1)(d) of the DIFC Court Law No 10 which states as follows:

 

“The DIFC Court of First Instance has original jurisdiction pursuant to Article 5(A) of the Judicial Authority law to hearing any of the following:

 

…

 

(d) any application over which the DIFC Court has jurisdiction in accordance with DIFC Laws and Regulations.”

 

In his judgment, Justice French went on to hold that the DIFC Court Rules (i.e., the RDC), which are made by the President of the DIFC “answer the description of “DIFC Regulations”” for the purposes of Article 19(1)(d) of the DIFC Court Law.

 

Analysis

The judgement, which is a welcome development, would open avenues for international courts to request assistance from the DIFC Courts in disputes which involve witnesses resident in the UAE and who cannot otherwise be summoned to provide evidence before those courts for a number of reasons. In the past, such requests had to be directed through diplomatic channels to the “on-shore” courts of the UAE which would take a considerable amount of time to be communicated. The acceptance of such requests by the on-shore courts were largely subject to the existence of evidence of reciprocity among the UAE courts and the requesting court or the existence of specific treaties.

 

The judgement also confirms the DIFC Courts’ pragmatic approach to be an “international” common law court willing to expand its jurisdiction where required in the interests of justice.

 

Afridi & Angell’s Stuart Walker and Sulakshana Senanayake acted for the defendant in the US proceedings in obtaining the judgement from the DIFC Courts. ■

The Sharjah Court of Appeal recently declined to apply the principle of separability of an arbitration clause, on the basis that the underlying agreement (i.e. in which the arbitration clause was contained) was not defective or argued to be invalid by the appellant. This judgment has potentially significant implications for parties who intend to rely on an agreement which contains an arbitration clause to assert claims in court.

 

The separability of an arbitration clause is the legal principle that allows an agreement to arbitrate to be considered independently from the contract in which the agreement to arbitrate is contained. The effect of this principle is that even if the underlying agreement is held to be invalid, the arbitration clause in the agreement will remain valid (unless the agreement to arbitrate itself is found to be invalid for reasons other than the invalidity of the underlying agreement). However, as specific authority is required to create a valid arbitration agreement under the laws of the UAE, it is common to see this principle being relied on to bring claims in court, on the basis that the arbitration clause is invalid for want of authority, but the rest of the agreement is sound and may be relied upon to assert claims.

 

The principle of separability is recognised in the UAE’s Federal Arbitration Law (Federal Law No 6 of 2018), and the recognition of this principle was considered one of the highlights of the law. Article 6(1) of the Federal Arbitration Law provides as follows:

 

An arbitration clause shall be treated as an agreement independent from the other terms of contract. The nullity, recission or termination of the contract shall not affect the arbitration clause if it is valid per se, unless the matter relates to an incapacity among the parties.

 

The dispute before the Sharjah Courts arose in relation to a commercial agreement between a foreign company (the plaintiff) and a UAE company based in Sharjah (the defendant). The plaintiff instituted proceedings before the Sharjah Court of First Instance asserting certain contractual claims based on the agreement. The defendant took the position that the Sharjah Court had no jurisdiction because the agreement contained an arbitration clause.

 

The plaintiff argued that the individual who signed the agreement on its behalf had no authority to agree to arbitration on its behalf. The plaintiff sought to advance this argument by reference to the standards applicable under UAE law to establish the authority to agree to arbitration (or in this case, the lack thereof). The defendant took the position that the issue of authority to agree to arbitration should be determined with reference to the law applicable to the plaintiff (i.e. the law applied in the plaintiff’s country of incorporation), and not UAE law.

 

Although the question of authority was the principal issue addressed in the parties’ pleadings, the Sharjah Court of First Instance issued judgment dismissing the plaintiff’s case for the want of jurisdiction. The court held that the plaintiff may not simultaneously rely on the agreement as the basis of its claims and seek to dispute the validity of the arbitration clause contained therein. The plaintiff thereafter filed an appeal to the Sharjah Court of Appeal, and its principal argument was based on the separability of an arbitration clause. The Court of Appeal held against the plaintiff/appellant on the basis that the plaintiff/appellant has taken the position that the agreement is binding in asserting its claims and, as the agreement itself was not defective or invalid, the arbitration clause cannot be separated from the rest of the agreement.

 

It therefore appears from this judgment that a party asserting a claim in court may not seek to rely on the separability of an arbitration clause if it does not also assert that the underlying agreement itself suffers from some form of invalidity. It is likely that this judgment will be appealed to the Union Supreme Court. Until such time the Union Supreme Court issues its judgment, this judgment will give pause to parties who intend to assert contractual claims in court on the basis that the arbitration clause in their agreement is defective. ■

 

In the latest in a series of amendments to Federal Law No. 11 of 1992 (the UAE Civil Procedure Law) the recently issued Cabinet Resolution No. 33 of 2020 (the Resolution) brings about some important changes to how matters will be litigated in the UAE courts. The Resolution amends certain provisions of the regulations to the UAE Civil Procedure Code introduced by Cabinet Resolution No. 57 of 2018 (the Regulations), which introduced some of the most recent changes to civil litigation in recent years.   This inBrief highlights some of the changes made by the Resolution that will significantly impact litigants.

 

1. The service of summons on parties has changed

 

The Regulations provided that a litigant or its attorney may personally affect service, including service through ‘modern technology’. However, following the Resolution, the ability of a litigant or its attorney to affect service through ‘modern technology’ is removed. Consequently, parties and their attorneys may no longer use audio or video calls, text messages, emails, etc. to serve summons.

 

The Regulations as amended by the Resolution also refers to a law (yet to be issued) on the service of summons via private process servers.

 

The Regulations as amended recognises that service may be (in addition to audio and video calls, text messages, etc., which were previously recognised) affected through smart applications which, among other things may include messaging platforms such as WhatsApp. As noted above however, summoning through such platforms will not be available to parties and their attorneys, but only to courts and authorised private process servers.

 

The process server is required to ensure that where ‘modern technology’ is used, the correct numbers, addresses, etc. are used. It will be interesting to see how this will be applied in practice.

 

The Regulations as amended provides that Service of summons on companies may be affected at a branch or office of the company in the UAE, if the dispute relates to such branch or office, or at the main office of the company to the legal representative of the company. Prior to the Resolution, service at the main office or on the legal representative was possible only if service at the branch or office was unsuccessful.  If the main office is closed, or summons is refused, the server may now affix the copy of the summons at the premises without requiring prior permission from the court, which was required previously.

 

2. The Case Management Office (CMO) has added powers

 

CMOs were created some time ago in order to make litigation more efficient, with the aim of having the parties fully plead their case before the matter is referred to the judge.

 

Under the Resolution, supervisory judges are empowered to apply sanctions on parties, and to offer the parties an opportunity to settle their dispute.

 

If a party wishes to assert an argument that the action has been filed in the courts of the wrong Emirate (i.e. a challenge to the local jurisdiction of the court) or that the dispute should not be heard or the matter should be discontinued for a reason other than public policy, it should do so before the CMO.

 

Pursuant to the Resolution, the decision of a supervising judge of the CMO to refer a case to be heard under summary procedures for payment orders is no longer appealable.

 

3. Summary proceedings and the powers of the minor circuit courts have been expanded

 

Article 22 of the Regulations as amended provides that civil, commercial and labour claims of not more than AED 500,000 in value and claims challenging the validity of signatures are to be heard by the minor circuit of the court and disposed of in one hearing. This hearing must be fixed by the CMO within 15 days of the case being registered. A further 15-day extension may be made by the supervisory judge of the CMO, but no further extensions are permitted. If the court appoints an expert, a hearing must be fixed within three days of receiving the expert’s report.

 

Minor circuit courts may now hear disputes up to AED 10 million in value. The jurisdiction of the minor circuit court used to be AED 1 million.  In disputes below AED 50,000, the judgment of the minor circuit is final and binding.

 

4. Changes are made to the payment order process

 

One of the more significant changes that the Regulations introduced was the broadening the availability of payment orders, which was previously limited to debts arising out of certain commercial instruments, to include debts which are confirmed in writing (as set out in our inBrief of 11 June 2019). The Resolution introduces further changes:

 

• Damages may now be sought as relief in payment order applications. Prior to the Resolution, only the outstanding debt and interest thereon could be claimed. This significantly increases the scope of payment orders.

 

• An application for a payment order may now be filed where the underlying agreement between the parties was concluded or performed (or had to be performed). Previously, the application could only be filed where the debtor was resident.

 

• Where a payment order is granted, and the debtor files an objection, the decision on the objection is not subject to appeal if the value of the order is less than AED 50,000.

 

• Where the value of the order is more than AED 50,000, an appeal on an objection may be filed to the Court of Appeal. The Resolution provides that the Court of Appeal must make a decision on the merits, and cannot return the matter to the Court of First Instance.

 

5. The requirements for applying for a travel ban have been clarified

 

The Resolution amends the Regulations to give further clarity with respect to travel bans issued by the court. In summary:

 

• The debt owed must be for a specified amount (for example, a claim for damages will not qualify), which is unconditional and not be less than AED 10,000.

 

• There must be ‘serious reasons’ to believe that the debtor is a flight risk.

 

• The claim for payment must be supported by documentary evidence.

 

• The applicant must submit a guarantee to the court to cover losses or damages the debtor may suffer if the application for a travel ban is later found to be wrongful.

 

6. Provision has been made for conducting litigation more efficiently

 

The grounds for which a postponement may be sought is now limited. Postponement must be for an urgent reason, such as death, loss of capacity of a litigant, intervention of a third party, allegation of forgery, or to submit evidence of a criminal action being filed which is relevant to the merits of the dispute. Each postponement can be no more than two weeks. The Regulations have also been amended so that a court is required to issue its final judgment within 100 days from the matter being referred to it from the CMO. It will be interesting to see how strictly the courts comply with this deadline in practice.

 

7. Execution judges have broader discretion to accept payment plans 

 

Following the Resolution, execution judges have the discretion to accept instalments plans spanning up to three years to satisfy a judgment debt. Previously, it was limited to one year. This will be seen as a welcome development, particularly in the current economic circumstances.

 

If a party wishes to object to execution of a judgment, however, a deposit of AED 5,000 is payable. The deposit is forfeit if the objection is unsuccessful.

 

8. Representing a corporate entity

 

A person who appears in Court on behalf of a company must have a power of attorney attested by the Notary Public. Previously, an attested power of attorney was not required. In addition, a person (who is not an Advocate) representing a company must be an Emirati possessing a law degree, and who has been employed by the company for at least one year.

 

The Resolution came into effect on 1 May 2020. ■

 

Afridi & Angell was recently successful in obtaining interim orders from the Dubai Courts attaching bank guarantees pending commencement of arbitration proceedings. The first matter involved two guarantees issued as performance bonds in two separate construction contracts, both which contained an arbitration clause under the Dubai International Arbitration Centre (DIAC) Rules. The second matter involved an advance payment guarantee for a transport contract which contained an arbitration clause under the Singapore International Arbitration Centre (SIAC) Rules seated in Singapore. Some observations relating to these proceedings are set out below.

 

1. The applications for provisional relief in both cases were filed in the Dubai Court of Appeal. The Federal Arbitration Law (Law No. 6 of 2018) provides that a party may seek interim relief either from the tribunal, or the ‘Competent Court’, being the Court of Appeal of the relevant Emirate, and that the Chief Judge of the Court of Appeal may issue orders for interim relief at the request of a party or a tribunal in respect of existing or future arbitrations. In both matters, the orders were issued for arbitrations which had not yet commenced.

 

2. The court fee for provisional relief is AED 320 per application. In contrast, the court fee for interim relief in support of litigation can be as much as AED 20,020. A comparable fee was payable when obtaining interim relief in support of arbitration before the Federal Arbitration Law came into effect.

 

3. It can take up to two weeks for the court to issue its decision. In the past, it was common for applications for interim relief to be decided on the same day as the application being filed, or within 24 to 48 hours after filing. However, the electronic case registration process of the Dubai Courts usually means that a day or two will be taken up before the matter is placed before a judge. This should be borne in mind as interim relief is often time sensitive.

 

4. The application is determined ex-parte. Notice to the defendant is not issued by court prior to hearing the application for provisional relief.

 

5. A single application may be made for multiple contracts, provided that the parties to the contract are the same. In the first of the two matters, the guarantees which were attached were issued in relation to two separate projects and contracts. However, they were between the same parties, and the dispute resolution provisions were identical, and the Court of Appeal accepted a single application and ordered attachment over both guarantees.

 

6. A party which is not party to the arbitration agreement may be a party to an application for interim relief. In the second of the two matters, the guarantee was procured by a related third party which, although having certain rights under the transport contract was not a party to the arbitration agreement. This third party was named as a co-applicant, together with the party that was subject to the arbitration agreement. Although the court did not provide any reasoning, it is unlikely that the court would have accepted the application for interim relief under the Federal Arbitration Law if at least one of the applicants was not a party to the arbitration agreement.

 

7. It is no longer necessary to file a substantive suit in court. Under the Federal Arbitration Law, a ‘notice of a request for arbitration’ is deemed to satisfy the requirement of a substantive suit and a separate substantive suit need not be filed in court. In practical terms, the applicant should be ready to demonstrate to the court that the notice of arbitration was issued within eight days of the order for interim relief being granted. It should be noted that until last year, the time period for filing a substantive suit was eight days from the date on which the order for interim relief was implemented. However, following amendments to the UAE Civil Procedure Law in 2019, the time period is now eight days from the date on which the order for interim relief was issued.

 

It is important to bear in mind that, as there is no system of binding precedent in the UAE, it is possible that the court might take a different approach in future cases in relation to points 5 and 6. ■

The UAE has treaties with several countries for judicial co-operation and the mutual recognition and enforcement of judgments. These include Tunisia, the GCC countries, Algeria, France, Jordan, Egypt, Syria, Armenia, China, Sudan and Pakistan.

 

On 25 October 1999, the UAE entered into such a treaty with the Republic of India, via the Agreement on Juridical and Judicial Cooperation in Civil and Commercial Matters for the Service of Summons, Judicial Documents, Judicial Commissions, Execution of Judgments and Arbitral Awards. Notwithstanding this treaty, parties had experienced difficulty in enforcing a UAE judgment in India due to the Central Government of India not issuing a notification pursuant to Section 44A of the Code of Civil Procedure of India (CPC). Section 44A (Execution of decrees passed by Courts in reciprocating territory) requires the Central Government of India to issue a notification in the Official Gazette declaring the UAE as a reciprocating territory.

 

According to a secondary source, a district court in one of the States in India recently dismissed a petition for the enforcement of a Dubai judgment on the grounds that the notification required under Section 44A of the CPC had not been made.

 

To remedy this problem, the Indian Ministry of Law and Justice, issued a notification in the Gazette of India on 17 January 2020 declaring the UAE to be a reciprocating territory for the purposes of Section 44A of the CPC. Following this notification, a judgment passed by a UAE court will be viewed as a judgment from a reciprocating territory, and will remove an obstacle in enforcing UAE judgments in India. ■

 

1. There is a high possibility that you will have to present your case to an expert: Although the appointment of experts is more likely in disputes involving technical issues (e.g. maritime disputes, construction disputes, etc.), it is increasingly common for the UAE courts to refer disputes which, on the face of it do not require expert assistance, to experts. The courts have the power to do so in terms of Article 69 of the Federal Evidence Law (No. 10 of 1992 as amended) which provides that a court may delegate to one or more experts when necessary. Article 69 does not set out any criteria to be satisfied in exercising this power. The most frequent appointment is of accounting experts.

 

2. It is likely to be a pivotal stage of litigation: In the clear majority of cases, the courts adopt the conclusions of the expert, even though the expert’s report is not binding on the court. However, Article 90(2) of the Federal Evidence Law provides that if the court issues a judgment which contradicts the findings of the expert, the court must state the reasons why it disagrees with the expert’s findings. It is therefore important to ensure that your case is properly pleaded and understood by the expert.

 

3. You may object, on certain limited grounds, to the appointment of a person as an expert: A party may object to an expert if there is a reason to believe that he/she cannot perform his/her duties impartially, if he/she is related by blood or by law to one of the parties up to the fourth degree, is a proxy to one of them in his/her personal affairs, a guardian or tutor or working for one of the parties, or if he/she or his/her spouse is in actual litigation with one of the parties in the case or with his/her spouse. An objection must be filed within a week of the order appointing the expert.

 

4. Experts have wide discretion to carry out their functions: The order appointing an expert will set out a mandate for the expert, and will vest the expert with the authority and powers required to carry out his tasks, e.g. to visit the premises of the parties, examine documents, and hear witnesses without administering an oath to them. Parties can take the opportunity to ask the expert to require their opponents to produce certain documents, which is useful as document production in the courts is very limited.

 

5. You have an uphill task ahead of you if the expert does not give you a favourable report, but all is not lost: The parties are given an opportunity to comment on the expert’s report before the court issues judgment. A party may also request the court to refer the matter to a different expert, or a panel of experts, or an expert at the Ruler’s Court, although such requests are rarely granted. The court, on its own initiative or upon request of a party, may order the expert to be present in court to be questioned, although such orders are also rare.  Pursuant to Court Circular 4/2018 issued by the Dubai courts, parties are permitted to submit reports prepared by an expert for consideration by the judge. The privately appointed expert must be accredited by the courts, and his report should not criticize the court-appointed expert’s report (even though there may be disagreement regarding the findings).

 

6. An expert could be criminally liable if he provides a report that he knows to be false, or gives a false interpretation of facts: Article 257 of the UAE Penal Code (Federal Law No. 3 of 1987 as amended) provides for a sentence of imprisonment between one and five years. In practice however these are difficult allegations to prove.

 

7. An expert’s report may assist a party to obtain provisional relief: The UAE courts have the power to grant provisional relief pursuant to applications made without notice to the defendant. Such relief is sought primarily under the provisions of Article 252 of the UAE Civil Procedure Code or the Federal Maritime law. These discretionary orders are granted on the basis of documentary evidence filed by the applicant, and having a report from an expert accredited by the court can sometimes improve the odds of obtaining an order from the court. ■