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Dubai Court Know How – Litigation and dispute resolution in the UAE: better the devil you know? Not always

Posted by 7starsdubai on December 21, 2008

Written by Chris Mills
First published in Asian-CounselOctober 07



A cautionary discussion on how to best handle litigation and dispute resolution in the United Arab Emirates

Do not believe that you are immune from litigation in the United Arab Emirates (UAE) when you are engaged with trade to and from the UAE simply because your contract or bill of lading contains a law and jurisdiction clause providing for any disputes to be resolved in a particular forum.

The local courts guard their jurisdiction jealously and the jurisdiction of the UAE courts is a matter of public policy. For example, both the UAE Maritime Code and the UAE Civil Procedure Code contain provisions dealing with jurisdiction. Put simply, this means that if the event giving rise to a dispute involves a connection with the UAE, it is likely that a claimant will be able to invoke the jurisdiction of the UAE courts.

The exception to this is foreign arbitration clauses. Such clauses are recognised and upheld by the UAE courts if reliance is placed on the arbitration clause by the defendant at the very first hearing at which the parties appear or are represented. Contracting parties are often comforted in the belief that by using arbitration clauses based on tried and tested rules and institutions they will have a more predictable result than if they commit themselves either to the courts of a less developed judicial system or to a young arbitration system.

The jurisdiction of the courts

Within each of the seven emirates of the UAE there are two types of courts:

  • Civil courts; and
  • Sharia courts.

The jurisdiction of the two types of courts can broadly be seen to be distinct as follows:

  • the Civil courts have exclusive jurisdiction over civil, commercial, banking and maritime matters; and
  • the Sharia courts have exclusive jurisdiction with all family law matters.

However, both the civil courts and the Sharia courts have non-exclusive jurisdiction in respect of criminal proceedings although (in practice) most criminal matters are heard by the civil courts.

In both sets of courts, the codified provisions of the law of the country will apply. However, in the absence of any specific legislation, Islamic Sharia will be applied. Since it is likely that those reading this article will only, if ever, be involved in the civil courts, I will concentrate here on the civil courts.

The local court at the place where the defendant is to be found will always have jurisdiction for the proceedings. Occasionally, however, it may be perceived to be in claimants’ interest to issue proceedings in their own country. One of the obvious advantages to issuing proceedings in, for example, England, is familiarity with the English legal system and recoverability of costs incurred in a successful action. The pursuit of proceedings outside the country of domicile of the defendant, however, may not achieve the desired result because there may be no reciprocal agreement with the UAE for the execution of judgments obtained in the foreign country. The UAE has bilateral agreements with few countries outside of the GCC region.

The UAE courts will, in certain circumstances, recognise a judgment of a foreign Court if the criteria set out in articles 235-238 of the Civil Procedure Code are met as follows:

  • that the UAE courts did not have jurisdiction in the dispute;
  • that the foreign court had the requisite jurisdiction under the applicable international rules to hear the dispute;
  • that the defendant in question had been summoned to appear and had duly appeared before the foreign court;
  • that the judgment is final under the law of the court issuing the same; and
  • that the judgment does not conflict with any judgment or order previously issued by an UAE court and is not contrary to the public morals or order of the UAE.

Under Article 21 of the Civil Procedure Code, in summary, the UAE courts will assume jurisdiction when:

  • one of the parties is domiciled in the UAE;
  • the claim concerns an asset which is located in the UAE;
  • the claim concerns a contract under which the contractual obligation should have been or was performed, concluded, executed, completed or relevant payments were made in the UAE;
  • the claim is in respect of insolvency, which has been declared in the UAE;
  • the claim is against a UAE national or expatriate who is domiciled in the UAE;  and
  • the claim concerns a party who is employed in the UAE.

As will be seen, therefore, the UAE courts have very wide jurisdiction and if one were to pursue a UAE defendant in the English courts, even if one were to obtain judgment in the English action, applying the criteria set out in articles 235 to 238 of the Civil Procedure Code, the UAE courts may not allow that judgment to be enforced in the UAE.

It is pertinent to note that it would not be sufficient for a plaintiff to oust the jurisdiction of the UAE court by pointing to a jurisdiction clause in its terms and conditions of business because, when the courts of the UAE would have jurisdiction pursuant to the jurisdiction procedures of the Civil Procedure Code, as a matter of public policy, the agreement to give jurisdiction to a foreign court will not be upheld by the UAE Courts.

It should, perhaps, be mentioned again here, as I did earlier, that the UAE courts will, however, uphold an agreement to refer a dispute to arbitration in a foreign jurisdiction, in certain circumstances.  I will discuss later in this article some issues relating to arbitration.

The law for dealing with trading, shipping and commercial disputes

The UAE has a codified system of law.  The core codes, which will deal with most international trade, shipping and commercial disputes, are the Maritime Code, the Commercial Code, the Civil Code, the Civil Procedure Code, the Law of Evidence and the Criminal Code. 

Sections of the Maritime Code will be familiar to some as they are based upon the Hague-Visby Rules. Provisions relating to marine insurance look recognisable to those familiar with the English 1906 Act. In the Commercial Code one can find provisions relating to carriage of goods by road and air, which clearly have been influenced by the CMR Convention and the amended Warsaw Convention. 

Litigation procedure in the UAE is governed by the Civil Procedure Code and there is also a UAE Law of Evidence. 

I mention the Criminal Code because, more so than in common law countries, there often is more overlap between civil and criminal causes of action in the Middle East (for example bounced cheque cases).

Arrest and attachment of assets

Right of arrest of vessels in the UAE is pretty much the same as one would find elsewhere, and the nature of claims for which an arrest can be obtained would not surprise anyone. These include damage sustained by the vessel by reason of a collision; assistance and salvage; claims under a charterparty; claims arising from contracts for the carriage of goods under a charterparty or bill of lading; supplies of products or equipment necessary for the utilisation or maintenance of the vessel; crew wages; and maritime mortgage.

Pursuant to Article 116 of the Maritime Code, any person seeking to recover a maritime debt may “arrest the vessel to which the debt relates, or any other vessel owned by the debtor if such vessel was owned by him at the time the debt arose.”  One cannot arrest “associated” ships, only true sister ships. The local court will consider whether it has jurisdiction to hear the claim. There are five grounds in Article 122 of the Maritime Code on which the court will have jurisdiction:

  • if the claimant has a usual place of residence or head office in the state;
  • if the maritime debt arose in the state;
  • if the maritime debt arose during a voyage during which the arrest was effected on the vessel;
  • if the maritime debt arose out of a collision or assistance over which the court has jurisdiction; and
  • if the debt is secured by maritime mortgage against the arrested vessel.

The Civil Procedure Code contains a provision (Article 22), which can be construed (and there is a Court of Cassation authority for this) to allow a claimant to arrest a vessel in order to obtain security for proceedings in another jurisdiction. Accordingly, if the UAE proceedings were stayed, in theory, an application can be made for any security provided in the UAE to act as security in relation to the foreign proceedings. 

The claimant will need to produce sufficient documentary evidence to support a prima facie claim giving rise to a right of arrest.

It is possible for the local courts to require counter security in the form of a bank guarantee before granting an arrest order.  This is becoming the exception rather than the rule. If such counter security is required, it is often pitched at around AED100,000 to AED150,000. This is intended to be security for damages for wrongful arrest.  I am not aware, however, of any case where a ship owner has successfully brought an action for wrongful arrest. 

In addition, in Dubai, (but currently not in any of the other six emirates of the UAE) the court requires an undertaking to be signed by the arresting party by which that party undertakes to pay all charges, taxes and expenses relating to the maintenance, towage and any works aimed at keeping the vessel afloat until the arrest is lifted. This arose from an unfortunate incident a few years ago, where an arrested vessel was abandoned by its owner and, when it began to sink, also abandoned by the arresting party, leaving the Dubai authorities to sort out the resulting mess and initially fund the salvage costs. However, such costs would form a charge against the vessel and its proceeds of sale. 

If there is no agreement between the parties regarding the form of security for the claimant’s claim, meaning that security has to be posted with the court, the UAE Court will not consider, for example, a P&I Club letter of undertaking to be sufficient security. The owners or demise charterer of the vessel will have no alternative but to provide a bank guarantee or to deposit funds with the court to secure the release of the vessel from arrest.

Known as priority debts under the Maritime Code, these are the closest thing that we have to maritime liens.  The advantage of being able to claim a priority is that the debts follow the vessel into the hands of any purchaser of the vessel and the claims are not lost on a sale of the vessel (unless it is a judicial sale or certain provisions of the Maritime Code dealing with advertising are met).

There are also time limits by which priority rights must be asserted (one year other than for claims relating to debts for supplies for which the time limit is six months); but there is the possibility of the time limit being extended by up to three years if it is not possible to arrest the ship to which the priority right attaches in the territorial water of the state in which the claimant has his place of residence or head office. 

Provisional attachment

In suitable cases it is possible to make an application for precautionary attachment prior to the commencement of the substantive suit (something akin to a freezing injunction).  An application for precautionary attachment can be made ex parte (i.e., without the defendant being present or represented).  The grant of an ex parte order for precautionary attachment is within the discretion of the judge hearing the application.  It should be stressed that the grant of a precautionary attachment does not give the creditor who has obtained that attachment priority over other unsecured creditors in respect of the assets that have been attached.  It is used as a method of protecting the status quo prior to judgment and can be used to prevent a defendant from leaving the UAE.  Obtaining an ex parte order for provisional attachment is usually easier than obtaining, for example, a freezing order in the UK. 

If the application is refused, the defendant will never even know that an application has been attempted.  The judge refusing the application is not obliged to give reasons why he has refused and the only way to challenge his decision is to file an appeal against it, which is an appeal on notice and so somewhat negates the purpose of such attachment because it gives the defendant time to move its assets!

In the right case where a precautionary attachment is obtained, it can be extremely difficult for a defendant to discharge. The court process for the discharge of such an attachment (known as an Objection) can be slow and extremely frustrating for a defendant. Even if the court does discharge the order on an application made by the defendant for discharge, that First Instance decision can be appealed by a claimant. 

As with arrest of vessels, I am not aware of any case where a defendant has successfully pursued an action against a plaintiff for damages for wrongful attachment. The reasoning is that the defendant would have to show something more than mere negligence on the plaintiff’s part in seeking and obtaining an attachment and would, for example, have to prove malice and/or bad faith, which would be an extremely difficult burden of proof for a defendant to discharge.

When one obtains a precautionary attachment order, it is necessary to commence a substantive suit within eight days of the attachment being granted.  Failure to do so results in the lapse of the attachment. 

Interest and legal costs

Pre-judgment interest

In straightforward debt recovery cases it is sometimes possible to persuade the court to award pre-judgment interest.  Otherwise, the only prospect of being able to obtain pre-judgment interest will be if there is a contractually agreed term providing for it.  Even then, it is not guaranteed that pre-judgment interest will be awarded (particularly if the provision regarding interest is contained in standard terms and conditions of business that have not been negotiated).

There are some jurisdictions in the region (Saudi Arabia, for example) where interest will never be awarded.

Post-judgment interest

In the UAE it is the invariable rule that post judgment interest will be awarded from the date of judgment until the date of payment. The standard judgment rate is nine percent per annum. That is generally the case also in other GCC countries (again with the exception of Saudi Arabia).

Court fees

Court fees for an arrest or attachment in Dubai are approximately 3.75 percent of the amount of the claim, subject to a maximum of AED15,000. For substantive proceedings, the court fees in Dubai are 7.5 percent of the amount of the claim with a cap of AED30,000. In the other emirates, the court fees on the arrest are only AED1,000 and for the substantive suit the fee is five percent of the amount of the claim with a cap of AED30,000. 

Court fees paid by a successful litigant are recoverable from the losing party as part of the judgment.

Lawyers’ fees

Unfortunately, lawyers’ fees are not recoverable, save to an entire nominal extent (perhaps the equivalent of a few hundred dollars).


Given constraints of space, I do not propose here to go into great detail regarding arbitration in the UAE.

Suffice to say that in the UAE, domestic arbitration proceedings are governed by articles 203-218 of the UAE Civil Procedure Code. There are also regulations concerning arbitration and disputes arising out of contracts to which the Dubai Government or any of its subsidiary departments is a party. These are set out in Law No.6 of 1997. The UAE is also a party to the International Convention for the Settlement of Investment Disputes (more commonly known as ICSID).

The new rules of the Dubai International Arbitration Centre have been published in the last few months and were gazetted in May of 2007. They are a vast improvement on the old rules and ought to help enhance Dubai as a jurisdiction for arbitration.

There is also a new draft Arbitration Law. The UAE is not among the countries in the region that have adopted the Model Law of the United Nations Commission on International Trade Law for Arbitration (the UNCITRAL Model Law), although a review of the translation into English of the draft law leads us to believe that the drafters of the UAE Arbitration Law have looked at the UNCITRAL Model Law for some guidance in their drafting.

Until recently, the UAE lagged behind other GCC countries in the introduction of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention). All of the other GCC countries signed up to the convention before the UAE (Bahrain: 1998; Kuwait: 1978; Qatar: 2003; Oman: 1999; Saudi Arabia: 1994). The UAE became a party to the Convention on 16 November 2006. Hopefully, the courts’ tendency to interfere with Arbitration awards will now be curtailed as a result of the signing up of the UAE to the New York Convention.

Dubai International Financial Centre Court

A very interesting local development in Dubai is the establishment of the Dubai International Financial Centre (DIFC) Court. This required an amendment to the Constitution of the UAE because the court falls outside of the federal court system. It also required UAE civil laws to be excluded and its own legal system to be created.

The DIFC Court operates on the basis of the Common Law, rather than the Civil Law; the language of the courts is English; and it has its own set of Procedural Rules. The Interim Rules are currently those of the English Commercial Court, although the DIFC Court’s own Rules are close to being completed.

One of the criticisms of the UAE court system is that there are no specialist courts with specialist judges. In England, for example, there are specialist Admiralty, Commercial and Chancery Courts. The establishment of the DIFC Court is, therefore, an exceptional step taken by the Government of Dubai to enhance investor confidence in the DIFC. Given the rapid pace at which the economy of the UAE is expanding and, inevitably, with that will come disputes, one can only hope that, in time, perhaps specialist Commercial and Admiralty Courts, even if they are divisions of the Federal Court system (rather than a separate court such as the DIFC has established), may be introduced, presided over by judges with experience of (or specialist training in) shipping, insurance, international trade and commercial matters.

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