Commercial Disputes Dubai: A Comprehensive Guide to Resolution and Litigation in UAE

Commercial Disputes Dubai are settled by either lawsuit or arbitration. While arbitration is rapidly expanding as an effective alternative conflict resolution process, litigation in court remains the principal avenue of dispute settlement in the UAE. Commercial disputes in the UAE are generally resolved commercial litigation disputes in the UAE by civil and commercial dispute arbitration.

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Commercial Disputes Dubai

Businesses can opt to pursue issues in UAE courts or, in many situations, seek resolution through arbitration. With three judicial systems to choose from, firms that favor litigation must grasp the differences between each system before including a dispute resolution clause in their commercial contracts and acting on it.

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Commercial Disputes Dubai Resolution System

Commercial disputes in the UAE provide disputing parties with three judicial systems to resolve their problems through litigation, each functioning under a separate jurisdictional scheme. These are the offshore local courts and offshore courts, which are comprised of two common law-free zones. Onshore UAE courts and offshore free zones follow separate procedures and processes.

The UAE’s onshore local courts follow the civil law system, and until recently, all proceedings were held in Arabic. English has now been included as a secondary language in some courts, although we have yet to see it used in practice. The onshore courts follow both federal and municipal laws, which differ depending on the emirate.

The offshore courts have common law jurisdiction and operate independently of the domestic court system. This includes the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), both of which have implemented their laws in specific sectors while also adopting English and Welsh laws to differing degrees.

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Onshore Vs Offshore Litigation

In all seven emirates, the onshore court system is divided into three levels: courts of first instance, courts of appeal, and local courts of cassation (or the Federal Supreme Court at the federal level). Sharjah, Fujairah, Ajman, and Umm Al Quwain are all part of the federal judicial system, with the Federal Supreme Court serving as the final level of appeal. Abu Dhabi, Dubai, and Ras Al Khaimah all have distinct judicial systems, with the courts of cassation in those emirates serving as the final level of appeal.

Appeals from the courts of first instance are virtually always lodged. Further appeals from courts of appeal to courts of cassation or the Federal Supreme Court are often limited to legal issues, but they are not unusual. The decisions of the Federal Supreme Court and municipal courts of cassation are final and binding but can be challenged in specific instances. As a result, proceedings can be long because losing parties are likely to file appeals.

In some cases, the UAE onshore courts have exclusive jurisdiction that cannot be waived, such as in commercial agencies, employment, and some real estate disputes. Furthermore, onshore UAE courts have authority over all criminal proceedings.

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Dubai International Financial Center Court System

The DIFC court system comprises two levels: The Court of First Instance and the Court of Appeal. Aside from these courts, the DIFC system includes a Small Claims Tribunal and other specialized court divisions that handle technology and construction, arbitration, and the digital economy. The Court of Appeal decisions in the DIFC legal system are final and binding; they cannot be challenged.

The DIFC courts have exclusive jurisdiction over certain matters, such as civil or commercial claims to which the DIFC, its bodies, or its establishments are parties; civil or commercial claims arising from a contract finalized or performed within the DIFC; and civil or commercial claims arising from a transaction performed within the DIFC and related to DIFC activities. The parties might also ‘opt-in’ to the jurisdiction of the DIFC courts by mutual agreement.

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Abu Dhabi Global Market Court System

The ADGM courts also include a Court of First Instance and a Court of Appeal. The Court of First Instance has comparable divisions as the DIFC courts, including a small claims division and a civil division.

The ADGM courts, like the DIFC courts, have jurisdiction over disputes involving the ADGM, any ADGM authorities, or ADGM establishments; those arising out of or related to contracts or transactions entered into or performed, in whole or in part, in the ADGM; and those arising from incidents that occurred, in whole or in part, in the ADGM. Parties can also ‘opt-in’ to the ADGM courts’ jurisdiction through an agreement.

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Time Bars

Before beginning a dispute, time-limit limitations under various UAE laws must be noticed and followed, depending on the nature of the claim. To this extent, legal procedures cannot normally take place once the following time limits have been met:

• Non-commercial contracts are valid for 15 years (Article 473 UAE Civil Code).
• Commercial contracts are valid for five years (Article 92 UAE Commercial Transactions Law, 2022).
• Building contract for defects: 10 years (Article 880 of the UAE Civil Code).

However, time-limit rules may be waived if the courts determine that a party has a “lawful cause” for failing to comply with the statutory limitation period (Article 481 UAE Civil Code). In contrast, the DIFC courts have shorter limitation periods:

• Contract breaches (Article 123 DIFC Contract Law 2004).
• Employment disputes (Article 10 DIFC Employment Law 2019).

Similarly, the ADGM court system’s limitation periods are consistent with English law: six years for breach of contract and three years for personal injury.

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Procedure & Practice

As previously stated, Arabic is the predominant language in local onshore courts, notwithstanding recent revisions in some courts, but English is used in the two offshore court systems. Parties from common law jurisdictions will be familiar with many of the procedures and processes used in common law courts, such as adversarial proceedings that allow for the oral presentation of arguments and the scrutiny of witnesses. In contrast, the civil onshore system is inquisitorial, with most processes taking place in writing. There are more crucial distinctions for parties to consider.

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Choosing of Law

While the UAE Civil Code permits parties to an agreement to freely choose the controlling law, in reality, local onshore courts are more likely to adopt UAE law to settle disputes before them. In contrast, the DIFC and ADGM courts will adhere to the parties’ selected governing law.

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Privilege and ‘Without Prejudice’ Communications

The UAE’s onshore legal system does not accept the idea of “privilege,” except for attorney-client privilege. Unlike in common law, in offshore courts, parties cannot refuse to produce documents in proceedings based on privilege. On the other hand, the DIFC courts not only accept the idea of privilege but also define it as the right not to disclose documents to opposing parties.

Furthermore, the UAE onshore courts do not recognize the idea of “without prejudice” communications, which means that any communications exchanged during settlement discussions or other dispute resolution initiatives, such as mediation, may be disclosed to the court.

This is not the case with offshore free zones, which both embrace the concepts of “without prejudice” and “without prejudice save in terms of transmission costs”. Parties must therefore exercise caution when attempting to settle disputes and entering into formal settlement processes after getting legal advice appropriate to the relevant jurisdiction.

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Temporary Remedies

Parties should also evaluate the possibility of interim remedies in onshore courts. Because the UAE is a civil law jurisdiction, there are some common law remedies that onshore courts are often skeptical about. Such remedies, based on common law, are more generally available in offshore courts.

Onshore courts have limited authority to issue injunctions to prevent or compel parties to act. Relief is often provided in the form of attachments to bank accounts or, in exceptional cases, travel bans, where there is evidence that considerable funds owed have not been paid.

Most onshore courts will seek to impose pecuniary damages in most circumstances. Common law offshore jurisdictions provide a broader variety of interim remedies, as is customary in such jurisdictions.

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The Arbitration

In addition to litigation, parties can typically resolve their disagreements through arbitration. Arbitration needs the cooperation of all parties, therefore agreements must include an explicit agreement to arbitrate, signed by representatives of each party who are legally authorized to execute such agreements on their behalf.

Following the passage of the Federal Arbitration Law in 2018, the UAE is viewed as a more arbitration-friendly country. The DIFC and the ADGM provide alternate and equally pro-arbitration jurisdictions for arbitrations, with their arbitration statutes – the DIFC Arbitration Law 2008 and the ADGM Arbitration Regulations 2015, respectively.

The parties’ choice of seat determines which of the local UAE courts, DIFC courts, or ADGM courts have supervisory jurisdiction over the arbitral proceedings. Each seat has different perks and downsides. Its selection requires careful consideration.

Employment, as well as some real estate and commercial agency disputes, cannot be arbitrated. Additional limits may apply when dealing with government or quasi-government entities, where, depending on the emirate of incorporation, special permission may be necessary to arbitrate and/or to arbitrate in a seat outside of that emirate. In addition to the foregoing, various specialized federal courts were formed to handle specific types of matters. There are several types of courts, including:

• Information technology.
• Consumer protection.
• Trans-border crimes.
• State security.

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Essential Arbitration Institutions

There are various Key Arbitration Institutions designated to handle specific types of claims. Some of these include:

Abu Dhabi Commercial & Conciliation & Arbitration Center

In 1993, the Abu Dhabi Chamber founded the Abu Dhabi Commercial Conciliation and Arbitration Centre to resolve trade disputes through conciliation and arbitration. The center maintained panels to register the names of specialists in conciliation, arbitration, expertise, and translation.

Conciliation takes place through a mediator accredited by the center or chosen by both disputing parties. The conciliator’s decision in a disagreement is not regarded as binding, but it serves as a recommendation on a proposal for dispute resolution. Unless the parties expressly pick English, Arabic is the default language.

Dubai International Arbitration Center

Dubai has an autonomous arbitration institution called the Dubai International Arbitration Centre (DIAC), which superseded the earlier Centre for Commercial Conciliation and Arbitration. Read the DIAC Arbitration Rules.

International Islamic Center for Reconciliation & Arbitration

The International Islamic Centre for Reconciliation and Arbitration (IICRA) is a non-profit organization focused on Islamic finance. The center resolves financial and commercial issues between financial or business organizations and their clients, as well as between them and third parties that wish to resolve conflicts through reconciliation or arbitration by Islamic law and Sharia principles. The center operates locally, within the GCC, and worldwide. The parties must agree for IICRA to exercise jurisdiction.

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Commercial Disputes Dubai Litigation Steps

Federal Law No. 11 of 1992 (Civil Procedures Law) covers the method for hearing commercial issues in court, including appeals and implementation of verdicts. Typically, the steps in a commercial civil dispute are as follows.

Rubbing a Case

The plaintiff must commence proceedings before the court of first instance, which has jurisdiction to hear the case, by filing a statement of claim. The claim should include all necessary case data, such as the names of the parties, the subject matter of the lawsuit, the demands and justifications for the claims, and the court in which the lawsuit is filed. When the statement of claim is filed, the defendant is notified of the claim. The defendant is required to produce a memorandum of defense.

Hearing Case

The pleadings are typically held in public, with the plaintiff having the right to present his case first, accompanied with evidence. The defendant would then deliver their defense and any relevant evidence.

Expert Report

According to UAE evidence law, Federal Law No. 10 of 1992, the court has the authority to designate one or more experts to render expert opinions in civil and commercial disputes. Experts are often individuals who are included on the Ministry of Justice’s expert schedule. The experts are obligated to follow the procedure outlined in the Evidence Law.

The expert will gather the parties involved in the case, create an initial report, solicit feedback, and present the final report to the court. The report will include the results of the expert’s work, their opinion, and the reasons for that conclusion. The expert’s opinion is not binding on the court, and if the court delivers a judgment that contradicts the expert’s opinion, the grounds for the deviation must be disclosed in the ruling.

The Judgment

After the pleadings are concluded, the court will rule on the case by issuing the judgment. The judgment would include the name of the court that issued the judgment, the date and venue, the type of case, and the names of the judges, among other things. The judgment will specify the reasoning for the decision.

The Enforcement

Once the judgment is received, the relevant party will petition for its execution. As part of the execution proceedings, the court may attach or take the debtor’s moveable property, debts, stocks, bonds, shares, and real estate, as well as impose bankruptcy proceedings. An arrest warrant might also be obtained against the debtor. The court can also impose a travel prohibition on the debtor.

The Appeal

In general, verdicts are appealable. However, if a person has implicitly or overtly accepted a sentence or decision, it cannot be challenged. The judgments of the first-instance courts can be appealed to the court of appeals.

Appeals from the court of appeals may be filed before the cassation appeal on specific grounds, such as if the appealed judgment was based on a breach of law, an error in application or interpretation, or a nullity in the judgment or the procedure that affected it.

Judgments from the court of first instance can be appealed within 30 days of their issuance unless a statute requires otherwise. The period for appealing to cassation is 60 days.

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International Experience & Regional Knowledge

Our worldwide skills and thorough understanding of the legal and commercial situation in our region are unparalleled. Our varied, multilingual team includes both regionally trained lawyers and those with extensive worldwide experience.

One of the reasons we achieve such fantastic results for clients is that we have long-standing excellent relationships with governments and authorities around the region. We understand how different jurisdictions interact and the complexities of the legal landscape, so we can give customers logical cross-border conflict resolution options.

With professional dispute lawyers on the ground and audience rights before courts in 10 jurisdictions, we have the expertise and size to handle the most complicated issues. We advise clients throughout the United Arab Emirates, Saudi Arabia, Kuwait, Egypt, Oman, Qatar, Bahrain, Iraq, Jordan, and Morocco.

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Commercial Focus & Technical Capability

Clients chose us for our technical knowledge and business emphasis. We begin each case by learning about our client’s business so that we can provide a clear strategy, manage risks, and find creative solutions. With the capacity to immediately get to the heart of the matter, we seek the best answer for our client and their specific situation. When litigation becomes required, we weigh commercial objectives against legal, business, and reputational risks to provide the best solution.

Our Dispute Resolution team is one of only two firms ranked in Band 1 for MENA-wide dispute resolution capabilities by Chambers and Partners. Furthermore, our UAE disputes team has been ranked in Band 1 by Chambers and Partners for the previous four years and in Qatar for the past two.

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Commercial Disputes Dubai highlights the importance of understanding the various avenues for resolving conflicts in the UAE. With a dedicated commercial dispute resolution team, businesses can explore effective alternative dispute resolution methods, including out-of-court settlements. As a member of Dubai’s dynamic legal landscape, companies can benefit from the expertise available for a variety of DIFC Court cases. By leveraging these resources, businesses can navigate commercial disputes efficiently, ensuring minimal disruption and fostering a more harmonious business environment in the region.