How to Manage Claims and Dispute Resolution in the Commercial/Business sector

Commercial sector in the UAE is booming, with foreign investments into the UAE continuing at an encouraging pace.

According to the UNCTAD World Investment Report 2022, the foreign investment in the UAE in 2021 was 20.7 billion USD (approx. 76 billion AED), which is higher than the foreign investment recorded in 2020.

Commercial Disputes – Litigation and Arbitration

With the growth of the commercial sector, the disputes in the sector are also rising. Commercial disputes are common, and often involve high stakes, having huge financial impact and depending on the parties and the provisions of the commercial contract, the commercial disputes may either be resolved through litigation or arbitration.

If the contract provides for litigation as a method of dispute resolution, then the competent court having jurisdiction will hear the matter.

Litigation

Value of Claims in Litigation

According to Cabinet Decision No. 57 of 2018 on the Regulation of Federal law No. 11 of 1992 on the Civil Procedure (Civil Procedure Regulations), minor circuit courts are competent to hear commercial matters, the value of which does not exceed AED 10 million and the value of the claim is assessed on the day of its filing and includes any interest, royalties, indemnities, expenses and other costs which are due on the day of the filing the lawsuit (Articles 23 and 24).

Article 25 of the Civil Procedure Regulations further provide that if the lawsuit relates to a contract’s validity, nullification or termination, its value will be assessed on the value of the subject matter of the contract and if the lawsuit relates to a continuous contract’s validity, nullification or termination, the value is estimated on the basis of the total monetary consideration for the contract’s entire period. In case of partially executed contract, a termination lawsuit is based on the remaining period of the contract.

Response to Claims in Litigation

The claimant files its statement of claims in the competent court, in accordance with Article 16 of the Civil Procedure Regulations. The statement of claims will set out, amongst others, the subject matter of the lawsuit, the demands and grounds based on which the demands are made.

Within ten days from the date of notification of the clam, the defendant will submit its memorandum of defense to the statement of claim, along with all supporting documents.

The competent court will then hear the matter and may also appoint an expert, if it deems necessary. The expert will submit its report to the court, the pleadings will be completed and the court will issue an order based on reasonable grounds. It is not mandatory for the court to accept the recommendation of the expert report.

Appeals

The order issued by the court of first instance is appealable to the appellate court within a period of 30 days, unless the law provides otherwise.

Arbitration

An alternative dispute mechanism which is increasingly being opted for in the commercial sector in the UAE is arbitration.

The UAE issued the Federal Law No. 6 of 2018, which is UAE’s law on arbitration. Like other jurisdictions, in the United Arab Emirates, there has been a steady move towards arbitration as a dispute resolution mechanism with several established arbitration institutions.

Under Article 2 of the UAE Arbitration Law, this law is applicable to an arbitration which is conducted in the UAE. That said, in case the parties agree that another law should govern the arbitration, then that law will be applicable provided that it is not contrary to public order and public morality.

Article 2 of the UAE Arbitration Law further states that this law is applicable to an international commercial arbitration carried out abroad if the UAE Arbitration Law has been chosen by the parties to govern the arbitration. The UAE Arbitration Law will also apply to any arbitration arising from a dispute in a legal relationship, irrespective of contract, which is governed by the UAE laws.

Arbitration institutions conduct and administer arbitration proceedings. In the UAE, Dubai International Arbitration Centre (DIAC) is the most common arbitration institute and recently underwent an overhaul and issued new arbitration rules for itself which have come into force on 21 March 2022.

Other arbitration institutes like the Emirates Maritime Arbitration Centre and the Dubai International Financial Centre Arbitration Institute (which administered the DIFC-LCIA arbitration centre) were abolished and their assets and operations merged with DIAC, pursuant to Decree No 34 of 2021 issued by the ruler of Dubai.

Abu Dhabi Commercial Conciliation and Arbitration Centre is another arbitration institute which organizes and conducts arbitration in Abu Dhabi.

Awatif Mohammad Shoqi Advocates & Legal Consultancy is a full-service law firm in UAE committed to delivering sound judgment to its clients on their most difficult and important matters.