Tag: Dispute Resolution

 

The Decree, which came into force on 20th September 2021, abolished the Emirates Maritime Arbitration Centre (EMAC) and the DIFC Arbitration Institute (DAI) with immediate effect and has raised multiple queries in the legal and business communities, particularly as to whether parties should still opt for EMAC or DIFC-LCIA arbitration clauses in agreements that are presently being drafted.

Pursuant to the Decree, the Dubai International Arbitration Centre (DIAC) will replace all rights and obligations of the now abolished EMAC and DAI. The DIAC has been granted a period of no more than six months to effectively replace EMAC and the DAI.

Although the Decree does not abolish or even make reference to the DIFC-LCIA Arbitration Centre, the DIFC-LCIA Arbitration Centre was established consequent to an agreement entered into between the DAI and the LCIA; meaning that, the abolishment of the DAI calls to question (at the very least) the mandate under which the DIFC-LCIA Arbitration Centre continues to operate. It is expected that there will be further regulation, perhaps in the form of administrative orders, that will hopefully clarify the status of the DIFC-LCIA Arbitration Centre.

However, for present purposes, two questions arise, (i) what effect does an EMAC/DIFC-LCIA arbitration clause have consequent to the Decree; and (ii) should parties continue to include EMAC/DIFC-LCIA arbitration clauses in their agreements.

Pursuant to Article 6 (a) of the Decree, all agreements executed as at the date the Decree came into force (i.e., 20 September 2021) that contain a clause providing for “arbitration in the Canceled Arbitration Centers” (i.e., EMAC and by implication DIFC-LCIA) “shall be valid and effective”, and the DIAC shall replace “the Canceled Arbitration Centers” in “hearing and resolving disputes arising from such agreements” unless parties agree otherwise:

All agreements concluded as at the date of entry into force of this Decree for resorting to arbitration in the Canceled Arbitration Centers shall be valid and effective, and the Dubai International Arbitration Centre shall replace these centers in hearing and resolving disputes arising from these agreements, unless the parties thereto agree to otherwise. [LexisNexis translation]

The Decree therefore provides some comfort to parties who have opted for EMAC/DIFC-LCIA arbitration clauses in agreements that were entered into on or before 20 September 2021, as the Decree specifically provides that such arbitration agreements will be valid and effective.

In addition, Article 8 (c) of the Decree provides that the arbitration rules of “the Canceled Arbitration Centers” (i.e., the EMAC rules and by implication, the DIFC-LCIA rules) and the DIAC will continue to apply until DIAC approves its new arbitration rules. This, however, raises another concern. If an EMAC arbitration, for example, is initiated after 20 September 2021 (and prior to DIAC issuing its new arbitration rules), does it mean that in terms of Article 6 (a) and Article 8 (c) of the Decree, the arbitration must be initiated under the EMAC arbitration rules and thereafter, the new DIAC arbitration rules become applicable once issued by the DIAC? If so, such eventuality is likely to raise multiple practical and legal issues.

The next issue to consider is what effect an EMAC/DIFC-LCIA arbitration clause has in an agreement that was concluded after 20 September 2021. Would such an agreement be valid? And which institution will administer such an arbitration? A strict interpretation of Article 6 (a) of the Decree would suggest that the comfort given in Article 6 (a) of the Decree is limited only to agreements concluded on or before 20 September 2021. For agreements entered into after 20 September 2021, there is unfortunately no definite answer to this question as of now.

It remains to be seen whether further regulations to be promulgated pursuant to the Decree will expressly provide that any reference to an EMAC/DIFC-LCIA arbitration clause will be construed as a reference to an arbitration administered under the DIAC arbitration rules. Similar provision was made when the DIAC was first created in 2007 and references to arbitration under the Dubai Chamber of Commerce Rules were deemed to be a reference to the DIAC Rules.

Until there is more clarity, the prudent approach would be not to opt for EMAC or DIFC-LCIA arbitration clauses in agreements that are presently being drafted. We understand that the relevant authorities are in discussion regarding these issues, and we expect clarifications to be issued soon. ■

Parties in the process of arbitrating disputes, thinking of commencing arbitration, or even thinking of including arbitration provisions in a contract have been given a lot to think about, thanks to the changes introduced by Decree 34 of 2021. It is early days yet, and we need to see how matters develop. With that caveat out of the way, here is a rough guide of what Decree 34 could mean for parties in arbitration in the UAE.

 

You are party to an ongoing arbitration under the DIAC Rules

Carry on, you’re the least affected by the Decree.

 

You are party to an ongoing arbitration under the DIFC-LCIA or EMAC Rules

Unfortunately, you are at the opposite end of the spectrum. Although the Decree appears to contemplate that ongoing DIFC-LCIA and EMAC arbitration proceedings will continue without interruption, the language of the Decree also appears to make this conditional on the DIAC and its administrative body taking over supervision of any such proceedings. Afridi & Angell’s Legal Alert of 23 September 2021 addresses this scenario. Article 8(c) of the Decree provides that the DIFC-LCIA and EMAC Rules will continue to be applied to the extent they do not conflict with the Decree and the Statute, until the approval of the arbitration and conciliation rules of the DIAC by the DIAC Board of Directors. This seems to suggest that the DIFC-LCIA Rules and EMAC Rules will be disapplied once a new set of DIAC Rules are approved. Parties and arbitrators will need to tread carefully in order to avoid potential challenges to final awards.

 

You have ongoing litigation (either before the Dubai Court or the DIFC Court) in relation to arbitration

These matters will carry on. Article 7 of the Decree provides that the two courts will continue to hear all cases, petitions and appeals related to arbitration awards/procedures issued by tribunals appointed by the DIAC, DIFC-LCIA and EMAC.

 

You have a contract which provides for arbitration under the DIAC Rules

If you have made provision for the seat of the arbitration (e.g. Dubai, or the DIFC), that provision will be upheld and applied. However, if you have not made provision, the default seat will be the DIFC. Prior to the Decree, onshore Dubai would have been the default seat. Keep an eye out for revisions to the DIAC Rules – the version of the rules that will apply if a dispute goes to arbitration will depend on the language used in your dispute resolution clause.

 

You have a contract which provides for arbitration under the DIFC-LCIA or EMAC Rules

Although Article 6(A) of the Decree provides that all agreements which have been concluded by 20 September 2021 providing for arbitration under the DIFC-LCIA or EMAC Rules shall be considered as valid and effective, assuming that you do not run the risk of your claim being time-barred, you should consider waiting to see how matters develop before taking any steps. Article 6(A) goes on to provide that the DIAC will replace the DIFC-LCIA and EMAC in hearing and resolving disputes arising from these agreements. The DIAC has six months to effectively replace the EMAC and the DIFC Arbitration Institute, and a lot of the uncertainties should be resolved during this time. It may be necessary to consider amending your dispute resolution clause, depending how matters develop.

 

You are drafting a contract, and wondering what to put in as a dispute resolution clause

For the time being, and until the prevailing uncertainties are clarified, avoid opting for DIFC-LCIA or EMAC arbitration clauses. You can still opt for other institutional rules and have the DIFC as the seat of arbitration. The DIAC Rules, despite being possibly one of the oldest sets of institutional rules in the UAE, are suitable for most disputes. It is anticipated that the DIAC Rules will be overhauled very soon, and the recent amendments provide that the DIAC Court of Arbitration and the Board of Directors are empowered to issue and amend the DIAC Rules. ■

 

***

 

Regardless of which category you find yourself in, do not panic. Dubai is very nimble and proactive, and should soon iron out any issues that need to be addressed. Afridi & Angell’s dispute resolution team has extensive experience in advising on and representing clients in arbitrations. Should you have any questions, please contact the author or your usual Afridi & Angell contact.

The Decree, which came into force on 20th September 2021, has abolished the Emirates Maritime Arbitration Centre (EMAC) and the DIFC Arbitration Institute (DAI). The Decree has taken the local legal and business community by surprise, and has given rise to legitimate concerns as to its impact on arbitration proceedings presently underway.

The Decree abolishes EMAC and the DAI with immediate effect and transfers all their assets, rights and obligations to the Dubai International Arbitration Centre (DIAC), which will in effect, replace EMAC and DAI. To this end, the DIAC has been granted a period of not more than six months to effectively replace EMAC and the DAI. The DIFC-LCIA Arbitration Centre was established consequent to an agreement entered into between the DAI and the LCIA; meaning that, the abolishment of the DAI (at the very least) calls to question the continuation of DIFC-LCIA Arbitration Centre.

This alert very briefly highlights some of the questions that arise, by reference in particular to proceedings being undertaken under DIFC-LCIA Arbitration Rules (Rules), and considers the steps that might be required to mitigate potential challenges to the integrity of arbitration proceedings and any arbitration award that is issued under the Rules.

While each case will need to be examined on its own particular circumstances, some of the more immediate concerns that arise are as follows:

First, although the Decree appears to contemplate that ongoing DIFC-LCIA arbitration proceedings will continue without interruption, the language of the Decree also appears to make this conditional on the DIAC and its administrative body taking over supervision of any such proceedings.  Article 6(b) states as follows:

The arbitral tribunals and committees formed as at the date of entry into force of this Decree at the Canceled Arbitration Centers and the Dubai International Arbitration Centre shall continue to hear and resolve all arbitration cases before them without interruption and in accordance with the rules and procedures adopted by them in this regard, unless the arbitration parties agree to otherwise, provided that the Dubai International Arbitration Centre and its Administrative Body shall undertake supervision over these cases. [LexisNexis translation]

Therefore, a question arises as to how the proceedings would continue without interruption pending the replacement of the DIFC-LCIA Arbitration Centre with the DIAC.  Parties to an arbitration and their arbitrators will need to consider what steps might need to be adopted in order to cover the interim period, otherwise potential challenges to a final award can conceivably be made on the basis, for example, that the arbitration procedure adopted was not in accordance with the agreement of the parties, or was otherwise defective.

Secondly, the role of the DIFC-LCIA Arbitration Centre and the LCIA Court is an integral part of the Rules and, therefore, in circumstances where the effect of the Decree calls into question the very existence of the DIFC-LCIA Arbitration Centre, tribunals and parties will need to consider how the arbitration can in fact continue under the Rules if the DIFC-LCIA Arbitration Centre is removed from maintaining its traditional function which is embedded under the very same Rules. One such example is that Article 26.7 of the Rules requires the DIFC-LCIA Registrar to transmit the final award to the parties “authenticated by the Registrar as an DIFC-LCIA Arbitration Centre Award”.  This may no longer be possible.

Although the DIFC-LCIA Arbitration Centre has very recently published an update assuring parties that it continues to deal with the day-to-day management of cases under the Rules, it is unclear by what authority it continues to do so, given that the DAI stands abolished as of 20th September 2021. This too could potentially translate into challenges to awards (or a refusal by a Court to recognize awards).

Thirdly, an important practical consideration for tribunal members will be the status of the tribunal fees and disbursements that might need to be incurred to attend hearings, particularly where arbitrators based outside of the UAE plan to incur travel and accommodation costs to attend hearings in person.  Given that all functions concerning payments of fees are to be taken over by the DIAC, arbitrators will need to account for potential delays in the reimbursement of expenses and payment of fees.

Parties and arbitrators will need to give careful consideration to these factors and, notwithstanding the apparent intention under Article 6(b) of the Decree that proceedings should continue uninterrupted, parties and arbitrators will need to consider whether it might be prudent to stay or suspend proceedings until such time as the DIAC formally steps in, or until the parties and tribunal enter into an agreement that comprehensively covers some of the concerns highlighted above. A delay to proceedings would in such circumstances be inevitable, but the inconvenience will need to be balanced with the possible disastrous outcome if an award is set aside because of a failure to properly address the ramifications of the Decree.

No doubt this development will eventually settle into a new norm, but until then, both arbitrators and parties should tread carefully. ■

The UAE’s Civil Procedure Code was enacted in 1992 as Federal Law No. 11, and the first amendments to the Code were made more than a decade later in 2005. Since 2014, almost each successive year has seen amendments being made, the most extensive of which were the regulations issued under Civil Procedure Code (the Regulations) which came into effect on 16 February 2019. The Regulations themselves were amended in 2020 by Cabinet Decision No. 33/2020.

 

Federal Decree No. 15 of 2020 (the Decree) and Cabinet Resolution No. 75 of 2021 (the Resolution) comprise the latest set of amendments to the Civil Procedure Code and the Regulations, and cover a range of issues from service of defendants, to the conduct of proceedings, and the execution of judgments. This article examines some of the more notable changes introduced by the Decree and the Resolution.

 

The creation of Single-Level Courts 

The Decree makes provisions for the UAE Minister of Justice or the head of the Judicial Authority of an Emirate to create a Single-Level Court, which shall comprise of three judges, one each drawn from the Court of First Instance of the Emirate, the Court of Appeal of the Emirate, and the Court of Cassation of the Emirate or the Federal Supreme Court (to allow for the fact that save for the Emirates of Abu Dhabi, Dubai and Ras al Khaimah, the final level of appeal for the other Emirates is the Federal Supreme Court). The Single-Level Court was first proposed several years ago and, when established, will have jurisdiction where parties have agreed to submit themselves to the jurisdiction of that court, or where the subject matter falling within its jurisdiction is identified by regulations issued under the Civil Procedure Code (which is yet to happen). The court will only have jurisdiction over disputes which have a ‘definite value’  (i.e.  would  exclude  claims  for  unassessed damages) which is over AED 500,000. The judgments of the Single-Level Court will not be subject to appeal, except where the judgment is subjected to review under the provisions of Article 169 of the Civil Procedure Code, reversal pursuant to Article 187(bis) (discussed below) or where the judgment is defective as the parties were not properly summoned.  

 

Review of Court of Cassation judgments – a step towards further recognising judge-made law  

The UAE, being a civil law jurisdiction, does not have a system of binding judicial precedent as understood in common law systems. That said, while a single judgment of the UAE Courts does not bind, a line of authority established by the superior courts is influential, for example the principle that arbitration is an exceptional form of dispute resolution. Federal Law No. 10 of 2019 created a judicial tribunal comprising judges from the Federal Supreme Court and the Courts of Cassation to unify the federal and local judicial principles and precedents issued by these courts and to eliminate potential conflicts.

 

The role of judicial principles within the framework of UAE law is further recognised by the Decree, which identifies conflict with judicial principles as one of the grounds for appealing a judgment of a Court of Cassation. Prior to the Decree, Article 187 of the Civil Procedure Code provided that a judgment of a Court of Cassation was not subject to appeal, but was subject to review in certain limited circumstances set out in sub-articles 1, 2 and 3 of Article 169 of the Civil Procedure Code (being fraud, forgery or false testimony, and suppression of conclusive evidence respectively). The Decree adds Article 187(bis) which provides that the Court of Cassation may at its own initiative or at the application of the party against who the judgment is issued, reverse a decision, among others, in the following cases:  

 

– where a procedural error (either by the court directly or by one of its departments) affecting the conclusion of the decision/judgment has occurred;

 

– where the decision/judgment is based on a repealed law, and a different outcome would result if the current law is applied; and

 

– the decision/judgment violates judicial principles established by the panel, or other entire court circuits, or if it violates the principles established by the court, or the principles established by the judicial tribunal created by Federal Law 10 of 2019.    

 

Where a party wishes to seek this remedy, an application for reversal should be made to the President of the Federal Supreme Court/Court of Cassation, with a deposit of AED 20,000. Applications may only be made within one year of the initial judgment. If the application for reversal is accepted, the matter will be remanded back to the court which issued the decision for reconsideration.

 

The amendments do leave some matters unresolved. There is no clear guidance as to what constitutes a judicial principle. The Decree is also silent regarding judgments of any courts other than the Federal Supreme Court and Courts of Cassation which may have become final, e.g. by reason of not being appealed, although the language suggests that this mechanism is limited to judgments of the Federal Supreme Court and Courts of Cassation.

 

Amendments regarding Payment Order applications

One of the key changes introduced through the Regulations was the expansion of the summary procedure known as Payment Orders, previously confined to disputes involving commercial instruments, to disputes which involve a written confirmation of debt. The Cabinet Resolution makes further changes to the law governing this procedure, notably the following:

 

– Amending Article 64 of the Regulations to require the judge to provide justification for the court’s decision when granting or denying a Payment Order application in relation to implementation of a commercial contract. Previously, justification was required only where the judge rejected an application.

 

– An appeal against a Payment Order (appeals are available where the value of the claim is more than AED 50,000) now may be made within 30 days of the decision. Previously, it was 15 days. The amendment also requires a detailed memorandum of appeal to be filed at the time of filing the appeal. Previously, a simple notice of appeal sufficed. Where the value of the claim is less than AED 50,000, a challenge must be made by way of an objection (or a ‘grievance’ as commonly referred to) within 15 days – the law with respect to such challenges has not changed.

 

– The Cabinet Resolution provides that in an appeal originating from a case has been filed as ordinary proceedings but the supervisory judge has instead issued a Payment Order, and the Court of Appeal takes the view that the requirements for issuing a Payment Order has not been met, the Court of Appeal may remand the matter to the Court of First Instance to be heard as an ordinary claim. Prior to the amendment, if the Court of Appeal takes the view that the requirements for issuing a Payment Order have not been met, the application would be dismissed.

 

Summoning of parties  

A constant theme in the amendments to the Civil Procedure Code since 2017 is the attempt to streamline the process of serving court process on defendants. The Cabinet Resolution take further steps in this direction by providing that:

– summons may be served by recorded audio or video calls, short message services, smart applications, email, fax, or any other means agreed between the parties from the method of service recognised in the Regulations;

 

– summons may be served at the defendant’s domicile, residence, or on their attorney, spouses, relatives or servants and that refusal to accept summons will be deemed to result in personal service; and

 

– summons may be served at a place of work on the defendant, his/her manager or the management of the workplace.  

 

If service cannot be affected as above, summons shall be served among others by publication on the court’s website or in newspapers, including a foreign language newspaper where the party sought to be summoned is not a UAE national. In practice service of summons can still be a time-consuming exercise in the UAE courts (less so in the Dubai Courts), and it is hoped that the changes made by the Cabinet Resolution will make this a more efficient process.    

 

Added scope for ad-hoc courts

Article 30(bis) of the Civil Procedure Code provides that the Minister of Justice or the head of the Judicial Authority of an Emirate may create an ad-hoc court presided by one judge and assisted by two local or international experts to hear and determine certain matters that would otherwise fall within the jurisdiction of the major circuit of courts. The Cabinet Resolution clarifies that the ad-hoc courts will have the jurisdiction to hear civil, real estate, commercial and inheritance cases, and such disputes that the parties agree will be subject to the jurisdiction of the ad-hoc courts. Where there is such an agreement, other courts should decline jurisdiction, provided that the defendant in the matter asserts a jurisdictional objection before addressing the court on the merits of the dispute (i.e. similar to the position when asserting a jurisdictional objection based on the existence of an arbitration agreement). Each ad-hoc court will have a ‘preparation judge’ who shall exercise the powers of supervising judge and case manager. The ‘preparation judge’ is required to encourage settlement of disputes, and if a settlement is reached, the minutes of settlement shall acquire the status of a writ of execution. If settlement is not possible, the ‘preparation judge’ must, within 30 days, prepare a memorandum of opinion considering the parties’ position and the applicable law, and the matter will be referred to the competent court for adjudication in the ordinary manner. ■  

In a decision issued in July 2021, the Dubai Court of Appeal held that an arbitration clause should be construed narrowly, and emphasized that everything that may be waived or prevents its [i.e., the arbitration clause’s] application must be sought.   

 

In finding that the Dubai Courts have jurisdiction over the dispute, the Dubai Court of Appeal referred to judgments of the Dubai Court of Cassation characterizing arbitration as an exceptional means of dispute resolution and, being a departure from the general rule that the courts have jurisdiction over disputes, arbitration clauses must be interpreted narrowly, and everything that may be waived or prevents its application must be sought. The latter phrase in particular is of interest, as it suggests that the Court will need to be satisfied that there exists no issue that might affect the applicability of an arbitration clause.    

The dispute resolution clause in question, while containing the provisions regarding the number of arbitrators, the seat and the language of the arbitration, included language stating that any referral to arbitration will be ‘without prejudice’ to the jurisdiction of the UAE Courts and ‘subject to agreement between the parties’. The Court of Appeal recognized that parties may agree to arbitration as a method of dispute resolution, provided that it does not conflict with public order. However, in this case the Court of Appeal found that there was no evidence that an agreement was reached between the parties to resolve disputes through arbitration as set out in the dispute resolution clause, and that consequently the forum for dispute resolution is the Dubai Court.    

 

This judgment highlights the need to have a carefully drafted dispute resolution clause, particularly where the parties wish to have disputes resolved through arbitration.  

 

The principle that arbitration clauses must be interpreted narrowly is a well-established one, and the language that everything that may be waived or prevents its [i.e., the arbitration clause’s] application must be sought appears to have been used by the Dubai Court of Cassation as far back as in Petition No. 192 of 2007. This principle and precedent was part of a strategy successfully deployed by Afridi & Angell in a recent case before the Dubai Court of First Instance to argue that the Dubai Courts had jurisdiction over a dispute in which the plaintiff and one of the defendants had an arbitration agreement. The dispute in question arose from a real estate contract containing an arbitration clause. The developer at the time the contract was entered into had been replaced by the time the dispute arose, and the new developers were added as defendants to the court proceeding by the purchaser (our client). The court found that as the added parties did not have an arbitration agreement with the plaintiff, the court had jurisdiction over all of the defendants, notwithstanding that the plaintiff and the initial defendant had an agreement to resolve disputes through arbitration. ■  

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. ■