United Arab Emirates
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
The UAE operates a dual legal system comprising of an “onshore” and “offshore” jurisdiction. The onshore system encompasses the legal framework applicable within the boundaries of the mainland UAE consisting of seven Emirates, subject to federal laws and regulations. In addition to the onshore system, the UAE has established specialized financial free zones, such as the Abu Dhabi Global Market (“ADGM”) and the Dubai International Financial Center (“DIFC”), which are the two leading financial free zones in the UAE, operating under a distinct common-law based legal framework.
UAE Onshore domestic courts “local courts”:
ADR is only mandatory in the UAE Onshore Courts in relation to conciliation (defined below) referred by the courts on specific matters (discussed below). However as a general trend, the parties to a dispute are now actively being encouraged by the UAE Onshore Courts to negotiate a settlement prior to engaging in litigation or arbitration proceedings. ADR mechanisms have gained particular momentum in recent years, and the UAE Onshore Courts have taken positive steps to formalize ADR procedures, some of which take the form of court-mandated processes, and others are independent bodies which can be used by the parties on agreement.
Previously, on a federal level, mediation and conciliation procedures were governed by two separate laws, Federal Law No. 6 of 2019 on Mediation for the Settlement of Civil and Commercial Disputes (the “Old UAE Mediation Law”) which governed both judicial and non-judicial mediation, and Federal Law No. 17 of 2016 on the Establishment of Mediation and Conciliation Centers in Civil and Commercial Disputes (the “UAE Conciliation Law”) which governed conciliation and the establishment of court-annexed mediation centers for civil and commercial disputes. On an Emirate-level, Dubai and Abu Dhabi had established mediation and conciliation centers governed by separate laws and resolutions issued from the local judicial authorities. As of December 27, 2023, Federal Decree Law No. 43 of 2023 on Mediation and Conciliation in Civil and Commercial Disputes (the “UAE Mediation Law”) consolidates the mediation and conciliation frameworks referred to above and repeal the Old UAE Mediation Law and the Conciliation Law. Importantly, it will be the first to codify the distinction between conciliation and mediation.
Mediation is a voluntary process by which the parties to a dispute appoint a neutral third party (a mediator) to facilitate negotiations between them and assist in reaching an amicable settlement. The UAE Mediation Law provides for “judicial” or “court-referred” mediations: 1) the competent court may refer the dispute to mediation at any stage of the proceedings. This referral can be on the basis of the court’s request with the parties’ consent, at the parties’ request, or for the purpose of implementing a mediation agreement. The court’s referral decision shall specify matters such as (i) the parties’ consent to resort to mediation; (ii) their undertaking to attend the mediation sessions; (iii) provide the appointed mediator with the relevant information and documents of the dispute; (iv) the subject of the mediation; (v) its duration; and (vi) costs of the mediation and cost allocation. Once issued, the court’s referral decision cannot be appealed; 2) the parties may also agree to resort directly to an institutional or ad-hoc mediation in execution of a mediation agreement, prior to commencing litigation or arbitration proceedings. The parties will typically be required to submit their mediation agreement and an application to the mediation center consisting of (i) the approval of all parties to resort to mediation); (ii) the subject matter of the dispute; (iii) the appointment of a mediator; and (iv) the agreed duration of the mediation. In effect, a mediator can be appointed (i) by the parties by way of a mediation agreement; or (ii) by the competent court, by reference to a list of mediators maintained by the Federal Judicial Inspection Department or the local judicial authority, that consists of retired members of the judiciary, practicing and non-practicing advocates and experts registered with the Ministry of Justice.
Conciliation is where a neutral third party (a conciliator) seeks to assist the parties in reaching an amicable settlement. Conciliation may be voluntarily initiated by the parties, and mandated prior to commencing court litigation in instances where (i) the value of the dispute does not exceed five million dirhams, and/or (ii) the dispute is between spouses or relatives.
As mentioned above, alongside the UAE Onshore Courts, the ADGM and the DIFC also provide for ADR procedures within their respective regimes.
DIFC Courts
All disputes (civil and commercial) are subject to mediation provisions as prescribed by the DIFC Courts. This includes disputes between (i) companies that are registered in the DIFC; (ii) companies that have a presence in the DIFC; (iii) individuals who reside in the DIFC; and/or disputes arising from contracts that are governed by DIFC law.
Parties are encouraged (but are not compelled) to consider ADR mechanisms to settle their disputes by the rules of the DIFC Courts (“RDC”) and judges of the DIFC Courts. Under Part 27 of the RDC, ADR mechanisms are said to encompass (but are not confined to) mediation and conciliation.
Echoing efforts made to widen the reach and strengthen the framework of ADR procedures, the DIFC Courts have announced their endeavor to launch a “Mediation Service” in the most recent DIFC Courts Strategic Work Plan for 2022-2024 by providing for stand-alone mediation rules that govern mediations to be referred to a dedicated Mediation Center within the DIFC Courts. We anticipate the Center and its rules to be in force during the course of next year.
ADGM
The ADGM legal framework is similarly based on English law provides a comprehensive framework around mediation procedures for the benefit of parties that wish to “opt-in” to the jurisdiction of the ADGM or to parties subject to its jurisdiction. Whilst Mediation or conciliation are not mandatory pre-requisites to litigating or arbitrating, Practice Direction 13 for the ADGM Courts and Part 36 of the ADGM Court Procedure Rules 2016 (“CPRs”) provide for both court-referred and voluntary mediation procedures and unlike the position in the DIFC, the ADGM Courts can make an order referring a dispute to court-annexed mediation, at any stage of the proceedings, where in the opinion of the Court, mediation appears appropriate, notwithstanding the consent of the parties (or lack thereof).
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
UAE Onshore domestic courts “local courts”
Whilst the right to litigate or arbitrate is not directly affected by engaging in ADR, engaging in judicial or non-judicial mediation will suspend all legal and judicial time limits and only resume after the conclusion of the mediation process, unless a settlement is reached. In the case of a judicial mediation, time is interrupted from the issuance of the court’s decision to refer the dispute to mediation. The UAE Mediation Law also provides the court discretionary power to take the necessary interim measures, pending the outcome of the mediation. Where the parties engage in an ad-hoc mediation process, time is interrupted as of the commencement of the mediation procedures.
DIFC and ADGM
Similarly, the DIFC and ADGM Courts can exercise their discretion to refer parties to mediation at any time of the proceedings. Under the DIFC Practical Guidance Note No. 1 of 2021, such referral has the effect of staying the proceedings under the end of the mediation process. Under Part 27 of the RDC, the judge may also adjourn the proceedings to enable the parties to settle by means of ADR and in doing so, he may also extend the time for compliance with any court orders or rules. Under Practice Direction 13 for the ADGM Courts, where parties have voluntarily opted to refer the dispute to mediation after commencement of the proceedings, they must apply to the court for an order to suspend the proceedings and any time limits prescribed by the rules. Separately, a failure by the parties to engage in ADR can result in adverse costs order being made against a party who has been found to have unreasonably refused an invitation to participate in ADR, or refused to participate, even if such party is later successful in the proceedings.
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
UAE Onshore domestic courts “local courts”
No but as mentioned above, the UAE Mediation Law provides that conciliation is mandated for civil and commercial disputes (i) that do not exceed AED 5 million in value; and (ii) those in which parties are spouses or relatives (up to the fourth degree) whatever their value, as a pre-requisite to litigation. Failure to complete the mandatory conciliation stage means the case cannot be brought before any court, unless amicable settlement has been unsuccessful. That said, the following disputes do not fall within the mandatory conciliation process: urgent and interim orders and cases; cases to which the government is a party; rental cases heard before the special rental dispute committee; labor cases; personal status cases; any other cases decided to be heard before a center, committee or other entity of similar jurisdiction. There have also been a number of notable initiatives which reinforce the UAE’s commitment to strengthening the ADR framework in the country. These include the recent Dubai International Arbitration Center (“DIAC”) mediation rules (the “DIAC Mediation Rules”) issued on July 12, 2023 which provide a stand-alone set of rules to administer any mediation applications submitted to the DIAC.
DIFC and ADGM
Engaging in ADR as a pre-requisite to litigating or arbitrating the case is not compulsory in the DIFC or ADGM (that said, please see below for potential costs implication if the parties unreasonably refuse to engage in ADR below).
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes. The parties can agree in advance that they will or may try one or more ADR method to resolve any dispute that may arise and many commercial contracts will include dispute resolution clauses to the effect.
UAE Onshore domestic courts “local courts”
In fact, it is a key requirement under the UAE Mediation Law that mediation agreements be in written form, signed by an individual(s) authorized to commit the entity in question to mediation, and set out the (i) subject matter of the dispute, (ii) the means of mediator appointment (or a named mediator); and (iii) the language of the mediation.
ADGM
Where the parties wish to refer the dispute to court-annexed mediation, prior to commencement of proceedings, they may complete and jointly submit a request for court-annexed mediation in the form provided by the ADGM practice directions. The request must be signed by all parties and include: (i) names and contact details of the parties and their legal representatives (if applicable); (ii) details of the dispute in neutral terms and in summary form; (iii) separate account of the details if the parties cannot agree; and (iv) any supporting documents upon which the parties intend to rely.
When does ADR generally take place?
Generally, ADR can take place any time from pre-issue of claim to appeal but the optimum timing in any dispute will depend on the particular circumstances, including whether the issues in dispute are sufficiently clear.
DIFC
Under both the RDC and the CPRs, the court may invite the parties to consider ADR (typically at the case management conference stage) on its own initiative or upon application of any party should it appear that the issues in dispute can be appropriately settled by means of ADR and the parties have yet to make such attempt.
ADGM
A dispute may be referred to court-annexed mediation, voluntarily, by all parties prior to commencement of proceedings, and after commencement of the proceedings by way of an application by the parties, or by an order of the court.
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
UAE Onshore domestic courts “local courts”
No. It is important to note that the concept of “without prejudice” does not operate in the onshore UAE Courts, so information used in the course of mediation can potentially be subsequently used against a party. That said, both the UAE Mediation Law and the DIAC Mediation Rules address this issue and provide that any materials, agreements or concessions made by the parties during the mediation cannot be used before any court, unless approved by all parties. Parties involved in the mediation or conciliation process are also prohibited from disclosing any information raised in the course of procedures. However, these confidentiality rules do not apply to a settlement agreement for the purposes of its enforcement before the court. Where parties are involved in negotiations or discussions with a view to settle their disputes, we would strongly recommend that prior advice is sought on strategies for dealing with any “without prejudice” concerns parties who may wish to protect the confidentiality of these discussions may have, such as by advising on confidentiality agreements or the entering into mediation or conciliation agreements.
DIFC and ADGM
The position is slightly different in the DIFC and ADGM Courts by virtue of the common law principles adopted in both jurisdictions which recognize and uphold without prejudice privilege. Under the RDC, any mediation (or conciliation) communications (whether in written or oral form) which occur between the parties either before or after a claim has been filed before the DIFC Courts will be treated as having been made on a without prejudice basis pursuant to Practice Direction No. 6 of 2014. Evidence of which can only be admitted under the applicable exceptions to confidentiality.
Similarly, the CPRs provide for the confidentiality of all communications made in the course of a mediation and any information, views or statements (whether oral or written) disclosed are made on a strictly without prejudice basis.
Does the output from ADR create precedents?
No. ADR does not create a precedent nor does the UAE follow a doctrine of binding precedent that is applied in courts.
Who bears the costs of ADR?
ADR costs are generally shared between the parties, albeit it is open to the parties to agree a different cost allocation as part of the settlement terms.
DIFC and ADGM
There can be costs implications on a party who has unreasonably failed to follow the court’s directive to settle out of court. Genuine attempts to settle a losing dispute may have a positive influence on the costs calculation, and vice versa, a lack of effort may have a negative impact and lead to a higher cost assessment. Indeed, Part 38 of the RDC allows a judge assessing costs imposed on a party to consider the conduct of parties in attempting to resolve the dispute. Part 36 of the CPRs also allows the court to take into accounts the parties’ conduct (including any attempt to resolve by mediation) in exercising its discretion as to costs.
Is your jurisdiction subject to any specific rules for cross border ADR?
There is currently no regime in force in respect of cross border disputes subject to ADR. In May 2022, the UAE announced that it will be a signatory to The United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention) but has not yet taken formal steps to this effect.
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
The UAE Mediation Law provides that a mediator or conciliator is prohibited from subsequently taking the following appointments, in a dispute involving any of the parties, even after conclusion of the mediation or conciliation procedures.
- to act as an arbitrator, expert or counsel;
- to testify against any of the parties to the dispute (unless authorized by the concerned party or the testimony relates to a crime); or
- to act as a mediator or conciliator in a dispute where one of the parties is a spouse or a relative.
It is worth noting that where parties have agreed to conduct mediation procedures in a language other than Arabic, a full certified translation of the documents and submissions relied upon and made will need to be arranged.
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