Introduction
Over the past 14 years, Dubai has embraced both civil and common law legal systems within its borders. In order to understand the concepts involved I have set out below the fundamentals of each system ending with a comparative look at the two systems as they are currently in use at this time.
Dubai Courts
The UAE is a Federated State consisting of seven Emirates being Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain. The UAE came into being as an independent Federated State on 2 December 1971 following Britain’s withdrawal from the Trucial States which had been set up as an informal British Protectorate between 1820 and 1892. Initially Ras Al Khaimah was not part of the UAE but joined as the seventh Emirate on 10 February 1972.
Under the constitution of the UAE the emirates are entitled to have both local and federal Courts with the UAE Supreme Court being established in Abu Dhabi. However, it should be noted that the legal systems in the Emirates of Abu Dhabi, Dubai and Ras Al Khaimah (RAK) do not answer to the UAE Supreme Court as they maintain their own local judicial systems which are independent of the federal Court system. Accordingly, Abu Dhabi, Dubai and RAK have their own Courts of First Instance, Courts of Appeal and Courts of Cassation.
There are however matters that can only be dealt with by the UAE Supreme Court and which the separate Court systems of Abu Dhabi, Dubai and RAK cannot consider. These are:
- disputes between member Emirates or between any one or more Emirate and the Federal Government;
- constitutionality of the federal laws and the constitutional legality of legislation enacted by local Emirates if they are challenged by the federal laws or the Constitution;
- examination of the constitutional legality of laws if such a request is referred by any state Court;
- constitutional interpretations if requested by a federal entity or any Emirate;
- interrogation of Ministers and senior federal officials on the basis of a request by the Federal Supreme Council;
- crimes directly affecting the interests of the federation; such as crimes relating to internal or external security, forgery of the official records or seals;
- conflict of jurisdiction between federal judicial authorities and the local judicial authorities; and
- conflict of jurisdiction between the judicial authority in one Emirate and the judicial authority in another Emirate and the classification of the principles relating to it in a federal law
Dubai Court of First Instance
The Court of First Instance is itself divided into Minor and Major Circuits where if the value of a claim is AED 10,000,000 or less it may be decided by a single judge in the Minor Circuit. Claims over AED 10,000,000 are decided by three judges in the Major Circuit although the Major Circuit may hear claim for less than AED 10,000,000 if the Court considers that they are complex.
However, it should be noted that a minor circuit may be mandated by decision of the Minister of Justice or head of the local competent judicial authority to hear and dispose of cases at one hearing where the value of the claim, in relation to civil, commercial and labour claims, is not more than AED 500,000 and where the claim is in relation to claims challenging the validity of signatures.
The Personal Status Courts (Sharia) deal with family cases including marriage, divorce, alimony, guardianship, custody and visitation, proof of maturity, proof of linage and inheritance whilst the Labour Courts deal with cases filed by private sector employers or employees and typically concern unpaid salaries, rejection of leave, end of service benefits and compensation for arbitrary dismissal.
Judgements delivered by the Court of First Instance shall be final if the value of the claim is not more than AED 50,000.
Starting a claim in the Dubai Courts
On payment of the relevant Court Fee, and this varies amongst the Emirates, the Claimant will file their claim documents in Arabic, which therefore requires all non-Arabic documents to be translated by an official translator. The Court’s Bailiff’s Office will then serve the claim upon the Defendant. Alternatively, the litigant or their Attorney may serve the claim if allowed by the court however, the litigant or Attorney may not effect service by ‘modern technology’ which is reserved to the court itself. In the event that service cannot be undertaken due to a failure to locate the Defendant or be effective at the Defendant’s last known registered address the Court or Case Management Office may allow service to be by publication.
Court Hearing
The parties’ legal representatives (who will be in person or Emirati lawyers) will provide their Powers of Attorney and the Claimant’s representative will provide the Court with their written memorandum (pleadings). At this point the Court will set a date for another hearing at which the Defendant’s representative will provide its written memorandum in response. Once again, the Court will set a further date for any written memorandum in response to the Defence. The Court appearances are in effect administrative hearings which allow the parties to submit their respective written memorandum and are not intended for any significant oral submissions by the parties’ representatives.
This process of setting new hearing dates for each subsequent written memorandum continues until the Court is satisfied that the parties have sufficiently set out their positions. On average the time allowed by the Court between each hearing date will be two weeks depending on the time needed to prepare the memorandum and the availability of the Court.
Experts
In the event that the Court considers that an expert is needed (to provide an opinion as to facts, an account or valuation, consider defective works, delays, etc) the Court will appoint an expert from its list of Court appointed experts. Either party may request that an expert be appointed by the Court or by agreement of an expert between the parties, provided that the expert should be from the list of Court appointed experts. The appointed expert will review the documents, meet the parties to discuss the case, and may also visit the premises of both parties, if required, and then submit the report to the Court. The report is usually relied upon by the Court to decide the factual and expert issues, however this does not mean that the Court will simply accept the report. The Court will then order both parties to provide their comments/memorandum in relation to the report. Thereafter, the Court will consider the report and the submissions provided by the Parties’ representatives before deciding whether to accept the report in whole or in part. Once the expert’s report has been accepted by the Court, the findings expressed therein will be relied upon by the Court in providing its judgment.
Judgment
Once the Court is satisfied that it has been provided with all the necessary memorandum and, where required the expert’s report, it will set a date for handing down judgment The length of time for a case to be heard and judgement handed down can be anywhere between 6 months and 2 years (where an expert is appointed).
Costs
The winning party is usually awarded costs, but these will be minimal covering Court Fees, expert costs and a nominal sum for advocacy.
Court of Appeal
If a party wishes to appeal a judgement from the Court of First Instance this will need to be made within 30 days of the date of the judgement. An appeal can be made in relation to facts and/or the law. Permission is not required to lodge an appeal, however the sum in dispute will need to be in excess of AED 50,000, unless the judgement does not involve a financial award.
It is not uncommon for the losing party to try and draw out proceedings for as long as they can to push any enforcement down the road as far as possible. Lawyers need to be aware of the tactics likely to be used so that they may guard against the matter being extended for an unconscionable length of time.
Judgements by the Court of Appeal shall be final if the value of the claim is not more than AED 500,000.
Court of Cassation
Once a judgement has been handed down from the Court of Appeal, a dissatisfied party may make an appeal to the Court of Cassation within 60 days from the date of the judgment. Any appeal may only be in relation to matters of law and for sums in dispute in excess of AED 500,000, unless the judgement does not involve a financial award.
As with the Court of Appeal the losing party may try to extend proceedings to avoid enforcement of the judgment for as long as possible.
DIFC Courts
The DIFC Courts are based on the common law system of England and Wales and were established under Dubai Law No.9 of 2004 at the same time as the DIFC Free Zone was established. The DIFC Courts began operating in 2006 and at that time were restricted to dealing with matters within the DIFC Free Zone. Since 2011 the DIFC Courts have had jurisdiction to hear any local or international case where the parties in dispute or the contract come within the DIFC’s jurisdiction or where parties have expressly agreed that the DIFC Courts should have jurisdiction over the contract and/or dispute.
The DIFC Courts are made up of the Small Claims Tribunal, the Court of First Instance, and the Court of Appeal. In addition, the DIFC have established an Arbitration Centre to deal with both Domestic and International disputes.
Small Claims Tribunal (SCT)
The SCT has been set up within the DIFC Court jurisdiction to deal with claim that are less than AED 500,000 in value. The SCT can be used for all commercial contracts that are either within the DIFC Courts jurisdiction or have an express DIFC Courts jurisdiction clause within the terms of the contract. The SCT is set up so as to allow parties to represent themselves without the need for lawyers. The first part of the SCT process is for a consultation between the parties and the Court with the intention of reaching a settlement. If this fails, then the matter proceeds to a hearing before judge. On average a case before the SCT will take 3 to 4 weeks.
The Court of Frist Instance
The Court of First Instance deals with all claims for civil or commercial matter and disputes that are within the DIFC Courts jurisdiction or have an express DIFC Courts jurisdiction clause within the terms of the contract. This allows the DIFC Courts to hear local or international cases and to resolve commercial disputes with the consent of all parties. At the time of entering into a contract the parties can decide to use either the local Court system which is based on civil law procedures or the DIFC Courts under the common law procedure.
Technology and Construction Division (TCD)
Within the DIFC Courts system is a specialist division that deals exclusively with matters and disputes related to technology and construction matters. Part 56 of the DIFC Court Rules allows claims to be heard by the TCD if they involve the following types of claim:
- building or other construction disputes;
- engineering disputes;
- claims by and against engineers, architects, surveyors, accountants and other specialised advisers relating to the services they provide;
- claims by and against the DIFC or any DIFC Body relating to their statutory duties concerning the development of land or the construction of buildings;
- claims relating to the design, supply and/or installation of computers, computer software and related network and information technology systems and services;
- claims between landlord and tenant for breach of a repairing covenant;
- claims between neighbours, owners and occupiers of land in trespass, nuisance etc;
- claims arising out of fires;
- claims involving taking of accounts where these are complicated; and
- challenges to decisions of arbitrators in construction and engineering disputes.
This list is not exhaustive.
The TCD is designed as a specialist Court that is experienced in and capable of considering complex engineering and technical matters with a set of tailored rules allowing such disputes to be dealt with more effectively and efficiently than may be the case before the general Court of First Instance. As noted by Chief Justice Michael Hwang:
“The TCD has been designed around the particular characteristics of highly complex technology and construction disputes, which can be resolved much more speedily and efficiently with the oversight of specialist judicial expertise”
The Court of Appeal
The Court of Appeal lays down the final orders and judgements of the DIFC Courts. This is the highest court from which there is no further appeal.
The only orders and judgements of the Court of Appeal that can be challenged are those that fall within ambit of the Judicial Tribunal where there is a question of conflicts of jurisdiction between the Dubai Courts and the DIFC Courts and decide which judgement should be enforced where conflicting judgements exist between the Dubai Courts and the DIFC Courts.
Claim and the Defence
A claim form is filed setting out the parties’ details and a brief summary of the dispute and the laws which are to apply. The claim is filed online using the DIFC Court’s e-portal and the payment of the appropriate Court fee. The Court fee is set in US dollars (USD) and based on a percentage of the value of the claim with percentage adjustments and caps depending on the value of the claim.
CURRENTLY PERCENTAGES AND CAPS ARE:
Up to USD 500,000 5% of the value of the claim and/or the property with a minimum of USD 1,500
USD 500,000 – USD 1 million USD 25,000 + 1% over USD 500,000
USD 1 million – USD 5 million USD 30,000 + 0.5% over USD 1 million
USD 5 million – USD 10 million USD 50,000 + 0.4% over USD 5 million
USD 10 million – USD 50 million USD 70,000 + 0.15% over USD 10 million
Over 50 million USD 130,000
The claim form is served upon the other party after filing with the Court. Service is to be by personal service, courier or electronic means. In the case of a party who cannot be served by these methods the Court will order that the claim can be served by leaving the documents as they may specify and could include the last known place of residence for individuals or the last know place of business for companies and firms. The claim is to be served no later than four months from the date of issue, thus any service must be in accordance with the DIFC Court Rules which states that service by electronic means will be served on the day it was sent unless sent after 4:000pm which will be considered to have been served the next day. If served by courier, it will be considered as served the second business day after it was sent. Proof of actual service will be needed if service is denied by the other party.
If the service is to be outside of the DIFC free zone but within the UAE the service will not be effective unless an Arabic translation accompanied the claim documents.
On service of the claim the Claimant will have seven days to file a Certificate of Service, this is to be filed online. On receipt of the claim the Defendant will have 28 days to file its Acknowledgement of Service where the claim did not include Particulars of Claim.
Where the Particulars of Claim have not been served with the Claim Form the Claimant will have 28 days to serve the Particulars of Claim from the date the Defendant filling the Acknowledgement of Service.
Once the Particulars of Claim have been served the Defendant will have 14 days to serve the Defence or where the Defendant has served an Acknowledgement of Service, 28 days from service of the Particulars of Claim upon the Defendant.
Case Management Conference (CMC)
Once the Particulars of Claim and Defence have been served the Court will direct that a CMC is held. This is to set down a timetable for the case, discuss the issues in dispute, review the steps already taken by the parties and what further steps are necessary including the need for experts, number of witnesses, the length and preliminary date for the hearing. The CMC can be in person before the judge or by video conference.
Evidence and Witnesses
The process of providing evidence revolves around witnesses of fact and, where required, expert witnesses. Evidence is introduced through the witness statements and expert reports which predominantly stand as the witness and experts’ evidence in chief upon which they will be cross examined upon.
Both the witness statements and expert reports are to be supported by a statement of truth and signed.
The proceedings in Court depend on oral submissions and evidence as set out in the witness statements and expert reports. All documentary evidence including the witness statements and expert reports should be produced as part of the trial bundles. Only the evidence included within the trial bundles can normally be admitted. New evidence may be admitted but only with permission of the Court and a good explanation of why such evidence was not previously available will need to be given. If the Court is dissatisfied with the explanation the new evidence may be refused.
Both factual evidence and legal arguments are presented by each party’s legal representative to a judge who will assess the evidence so presented along with the arguments on the contract terms, if in question, and legal submission before handing down judgement. The judgement will normally be detailed giving reasons for the Court’s decision. This allows both parties to be fully aware of why the case has been won or lost.
Whilst the length of time between the issuing of proceedings and receiving a judgement varies enormously depending on the complexity and breadth of the dispute, including any counterclaims, on average a case can be expected to take between 4 and 12 months.
Court of Appeal
The Court of Appeal (CA) consists of three judges with either the Chief Justice or Deputy Chief Justice acting as chair. In exceptional cases the CA may have more than three judges appointed to hear the appeal.
Appeals may be filed against Judgments and Awards made by the Court of First Instance. Additionally, the CA may hear cases dealing with the interpretation of any article of the DIFC’s laws at the request of any of the DIFC’s bodies or at the request of any of the DIFC’s establishments with the leave of the Chief Justice. The CA’s interpretation shall have the power of law.
As noted above, The CA provides the final order or judgement of the DIFC Courts and no appeal shall lie from a decision of the Court of Appeal save for matters that are within ambit of the Judicial Tribunal regarding a question of conflicts of jurisdiction between the Dubai Courts and the DIFC Courts.
COMPARISON
Documents and Submissions: English or Arabic?
All documents and submissions within the Dubai Courts system are to be presented in Arabic by Emirati Lawyers whilst the DIFC Courts require all documents and submissions to be in English and can be presented by any DIFC registered lawyer.
Methodology to arrive at the judgement
Whilst the end result in both the Dubai and DIFC Courts is to find the factual truth and decide the parties’ rights based on the law and the contract, the methods for getting there are distinctly different.
The Dubai Courts are governed by the civil law principles where the Court undertakes a form of inquisitorial approach by directing the parties to make written memorandums until they are satisfied that they have all the necessary information to make their decision. Where it is concluded by the Court that an expert is required to assess the evidence and/or provide an opinion on technical matters the Court will direct a Court appointed expert to undertake the necessary investigations and provide a report. This does not rely on the parties making and advocating their case as found within the common law system.
The DIFC Courts employ the common law approach which relies on the Court being presented with all necessary evidence including expert reports, where necessary, and all submissions as to the law and contract. The Court relies on an adversarial system and does not instigate investigations of the evidence of technical matters. Despite this at the CMC the judge will discuss the matter with counsel and give directions as to the steps which both parties are to take including, if necessary, a direction for experts. In this way the judge will take control of the matter to ensure that all relevant evidence and expert opinion is provided so that the Court may make its decision and hand down a reasoned judgement.
Injunctive Relief: an option or not
Another difference between the two Court systems is that the DIFC Courts can issue interim or injunctive relief in order to maintain the status quo so as to avoid, for example, security for costs, damage to a party, the dissipation of assets, preservation of evidence or ordering of acts to be desisted from. The Dubai Courts do not have the power to issue interim or injunctive relief although they are able to issue precautionary attachment of assets which is the equivalent of interim relief in relation to the preservation of assets.
Summary Judgement
Immediate Judgement (Summary Judgement) may be obtained in the DIFC Courts where no reasonable or arguable defence has been provided. In the Dubai Courts summary legal proceedings can be issued before the Court of First Instance (or other competent court) sitting as a summary Court. The summary Court is intended to protect or preserve an existing condition or right and can include precautionary attachments such as the preservation of assets and travel bans. The Court has also applied a mechanism for ex-parte judgment in payment order cases. The DIFC Courts expect both parties to have set out their cases within their pleadings from which it will be possible for the Court to decide, after suitable submissions and witness statements, at a hearing for immediate judgement, whether a defence is baseless or not.
Discovery and disclosure
In the DIFC Courts the parties are expected to undertake the process of discovery and issue a list of all relevant documents in their possession so that the other party can inspect and obtain copies. The parties cannot withhold documents that are damaging to their case and if they do so the Court can order specific disclosure of those documents. The Dubai Courts do not rely on disclosure of documents but rely on the parties to produce documents that they depend upon. Where an expert is appointed to assess the evidence that expert may request any documents that it is believed will assist in finding the facts.
Costs: all or nothing
Costs are claimable in both the Dubai and DIFC Courts. The difference here is that the Dubai Courts will only award Court Fees, expert costs and a nominal sum for advocacy whilst the DIFC will award Court Fees as well as legal and expert fees which are assessed on the standard basis (costs reasonably incurred and proportionate) or indemnity basis (cost incurred). As it can be seen the ability of obtaining costs are much greater within the DIFC Courts but importantly so are the risks in having to pay the other party’s costs.
Why is this important?
The choice of law and the forum that is used can be very important in any legal relationship and in particular when entering into commercial contracts. Whilst I have just dealt with the two significant jurisdictions and court structures within Dubai it should be remembered that the alternative choice of arbitration is also available. This will be dealt with in a later article.
Questions to be asked before finalising a contract would include which laws are more beneficial to the parties when considering the particular transaction, which jurisdictional system would allow any potential dispute to be dealt with in a most favourable way and allow the parties to obtain relief consistent with their own values.
If the parties are not well versed in Arabic and are unused to the civil law procedures would it be better to have the contract under DIFC law and give the DIFC Courts jurisdiction to hear any matter arising? Alternatively, would it be better for the contract to be governed by Dubai law and potential disputes dealt with by the Dubai Courts as it would be unnecessary to require a process that relies upon oral examination of witnesses and experts? Is the possibility of having legal costs awarded important, would the transaction be such that it may be useful to obtain an injunction (issues of copyright, prevention retention of evidence and assets etc.)? Would the complexity of the transaction along with the potentially different interpretation of each parties’ obligations and duties be such that this would influence the choice of law and the legal system?
Whilst all parties to any commercial transaction will wish for the best, a wise party will also plan for the possibility of encountering difficulties and consider the best way in which those difficulties could be overcome including which legal and court system would be most beneficial. The failure to consider the most suitable law and legal system before entering into a contract can have serious unintended consequences that could have been avoided with a little consideration prior to the contract being entered into.