Complex Made Simple

Interview: ‘UAE’s dispute resolution landscape is changing’

In both the courts and arbitration, we are seeing a significant rise of shareholder disputes, where partners are looking to exit a joint venture early for example

While construction disputes continue to be prevalent in the UAE and the region in general, we have seen a shift to a greater variety of disputes across different sectors in the last 18 months The development of the legal tech industry is catching up and we are seeing more and more technologies being developed for use by lawyers The year 2018 saw one of the major legislative developments in the field of arbitration in the UAE

While litigation and arbitration still remain the main forms of dispute resolution in the UAE, mediation and negotiation are also becoming increasingly popular. Then again, labour courts in the UAE are extremely employee-friendly and the perception that wealthy employers are always at an advantage is misplaced. Andrew Mackenzie, Partner-Head of International Arbitration & Construction at Baker McKenzie Habib Al Mulla, speaks to AME about these and more. 

Which sectors are we seeing dispute resolutions (DR) being more prevalent in? 

While construction disputes continue to be prevalent in the UAE and the region in general, we have seen a shift to a greater variety of disputes across different sectors in the last 18 months.  

In the local courts, employment disputes continue to be litigated as well as criminal complaints for breach of trust (in particular against managers of LLCs) and disputes related to commercial agency.

In both the courts and arbitration, we are seeing a significant rise of shareholder disputes, where partners are looking to exit a joint venture early for example. This brings with it a whole host of interesting and at times untested issues in the region. For example, where IP is involved, the law is still catching up with the rapidly evolving business reality and yet these questions as to ownership and protection of IP rights are being tested before courts and arbitral tribunals now.

Read: Dubai Chamber workshop discusses UAE Labour Law

What is the role of technology like AI in DR?

While the presence of legal technology is certainly rising exponentially, it has been used in DR for years. AI, for example, has been and continues to be used by e-discovery platforms with the use of technology-assisted review, to process and categorise large volumes of documents.

But the rise of tech and telecoms powerhouses in the recent years has seen a rapid adoption of emerging technologies such as smart devices, AI, robots, cloud computing, blockchain, etc in the industry. The development of the legal tech industry is catching up and we are seeing more and more technologies being developed for use by lawyers on a day-to-day basis.

An interesting development is the structuring of big data and application of AI to ‘predict’ behaviors and outcomes that different legal strategies will produce. While this cannot replace the analytical work carried out by lawyers, it is certainly an interesting area of development and if used properly, could be hugely beneficial in assisting lawyers and clients to resolve disputes more efficiently.

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When it comes to employees, are they at a financial disadvantage when trying to enter into DR with employers who have better means and time on their hands?

No, to the contrary, the UAE Labour Law and its application by the Labour Courts tend to be overwhelmingly employee-friendly. Employees are normally exempted from paying court fees before registering their claims with the court. In practice, officials of the Ministry of Human Resources and Emiratisation (MOHRE) recognize that employees do not have the same resources as their counterparts and will assist employees with preparing their statement of claim. In addition, during the course of the proceedings, employees who cannot afford to retain lawyers may resort to any of the MOHRE centers (such as; Al Adid Center) to obtain assistance with court submissions. 

We have also seen the Court allowing employees to evidence their claims by appointing experts or hearing to their witnesses. Sometimes, the Court will reduce the professional fees payable to the Court expert so that the employee can afford to pay it and evidence the claim.  

What percentage of disputes is won by employers vs employees, women vs men and private vs government?

It is difficult to give a percentage for cases won by employers. In general, the prospects of success largely depend on the circumstances of each case. Generally speaking, employees are usually awarded substantiated entitlements only on top of their statutory rights.

In our experience, the gender of the litigants and/or the type of the entity does not affect the outcome of the litigation. 

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What are some of the new regulations in DR?

2018 saw one of the major legislative developments in the field of arbitration in the UAE. Indeed, the UAE’s first stand-alone Arbitration Law was enacted (UAE Federal Law No. 6 of 2018) and entered into force on 14 June 2018. This law embodies a more modern and favourable approach to arbitration, with fewer restrictions imposed on the arbitral parties and the arbitral tribunal.

In 2019, two new Dubai arbitration-related laws were enacted: Decree No. 17 of 2019 approving the new statute of the Dubai International Arbitration Center (the “DIAC“) and Decree no. 31 of 2019 forming the board of trustees of the DIAC.

The new DIAC statute which is annexed to the law (the “Statute“) has repealed and replaced the previous DIAC statute adopted by a 2009 Decree (No. 58 of 2009).

In terms of employment laws, two major developments in 2019 were the amendment of the UAE Federal Labour Law and the introduction of the DIFC Employee Workplace Savings Plan (“DEWS“), repealing the current regime for end of services gratuity in the DIFC.  The key updates of the Federal Labour Law include a general prohibition against discrimination that would prejudice equal opportunity employment. The amendments also make clear that the issuance of a termination notice to a female employee on the grounds of their pregnancy will be deemed arbitrary and is prohibited. However, no additional compensation or penalty is provided for breach. 

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2019 also saw the amendment of the UAE Federal Insolvency Law, which applies to non-merchant natural persons who are facing financial distress and are unable to settle their debts. The law introduces the “Voluntary Settlement” plan, which in a way is the equivalent of “Preventive Composition” under the UAE Bankruptcy Law of 2016 (and its amendments).

The new law provides streamlined insolvency procedures, which can be initiated by either the debtor or the creditors. Once the insolvency proceedings commence, all debts, whether secured or not, become due and payable and the debtor is prohibited from administering or transacting over any of his/her assets (ie, making payments in excess of AED 5,000 without the Trustee’s approval).

When DR fails, what’s the next step?

Formal dispute resolution by way of litigation or arbitration are only some of the routes that clients explore when seeking to resolve their differences. There are a number of alternative dispute resolution methods, such as negotiation, expert determination and mediation, available to parties. We see parties who are able to resolve their disputes amicably, by accommodating settlement negotiations with key decision-makers in their respective organizations. We also see many parties enter into formal legal proceedings, only to realize later on that they can successfully agree to a settlement out-of-court. These options are not only available if formal legal proceedings ‘fail’, but also before or during the legal proceedings.