Overview

On 15 September 2009, Law No. 16 of 2009 establishing the Centre for Amicable Settlement of Disputes (the "ADR Law"), was published in Dubai's Official Gazette. The ADR Law establishes the new centre, which is to operate as an affiliated body of the Dubai Courts.

The publication of the ADR Law demonstrates that the Government wishes to encourage and increase the use of alternative dispute resolution (ADR) in Dubai. It will only apply to cases which commenced after it came into effect.

While there is some uncertainty about how the ADR Law will operate in practice, it is expected to apply to civil and commercial matters and will not apply to certain categories of case including those involving the Government. As a matter of law, it will not apply to disputes under the jurisdiction of the Dubai International Financial Centre (DIFC) courts.

Significantly, the ADR Law will make it compulsory for parties to refer disputes to the centre which would otherwise be heard before the Dubai Courts. The centre is expected to use a process of conciliation in order to bring about settlements. Cases may only proceed to the Courts once the parties have referred their dispute to the centre and have been unable to reach settlement within one month of the referral.

Scope of the ADR law

Article 4 of the ADR Law states that it will cover cases "defined by a resolution of the Chairman of the Dubai Courts, regardless of its value or nature". It is therefore expected to cover civil and commercial cases, and may also cover cases involving private family or real estate disputes. However, it is not clear to what extent, if any, there might be an overlap between cases referred to the centre and cases that may also be referred to the Rent Committee, for example, to determine landlord/ tenant disputes, or to the specialist Dubai Property Court, to determine other land-connected disputes.

The ADR Law indicates that certain categories of dispute will be excluded from the centre's jurisdiction, including:

  • Cases to which the Government is a party;
  • Cases involving applications for summary judgment or enforcement of a judgment or order; and
  • Cases that do not fall under "the existing jurisdiction of the courts".

The reference to cases not falling under "the existing jurisdiction of the courts" may include disputes which are subject to an arbitration agreement. If so, parties should be at liberty to commence arbitration without the involvement of the centre. In addition, the ADR Law will apply to the Courts of Dubai and, therefore, excludes any disputes falling under the jurisdiction of the DIFC Courts.

The DIFC Courts have their own rules regarding alternative dispute resolution, found in Part 27 of the Rules of the DIFC Court (justice by reconciliation). While emphasising its primary role as a forum for deciding civil and commercial cases, the DIFC Court encourages parties to consider the use of justice by reconciliation (such as mediation and conciliation) as an alternative means of resolving disputes or, if not the whole dispute then particular issues in dispute. Although the DIFC Court will not compel parties to engage in justice by reconciliation as a prerequisite to litigation, it will, if appropriate, invite the parties to consider justice by reconciliation at the Case Management Conference, and may adjourn the case for a specified period of time to encourage and enable the parties to use justice by reconciliation.

In addition, the DIFC-LCIA Arbitration Centre, established in February 2008, offers mediation as well as arbitration services to users of the Centre using the rules contained in the LCIA mediation procedure.

Conciliation as a method of alternative dispute resolution is not new in the wider UAE. There are existing conciliatory schemes available in the federal courts, where all cases coming before federal judges are first referred to a conciliation desk presided by a junior judge of the federal court. However, the scheme is not mandatory as regards the respondent to the dispute, who is allowed to choose whether or not to participate in the conciliation or proceed straight to litigation.

Format of ADR hearings

The description of the centre's functions contained in the ADR Law indicates a type of conciliation process for the settlement of disputes. The parties and/or their legal representatives will be summoned before the centre to present their cases (including any evidence upon which they rely) to a panel of experts presided by a Judge of the Dubai Court of First Instance having supervisory jurisdiction over the dispute.

Although the panel itself will be comprised of experts, the centre may, if it considers it appropriate to do so, seek the assistance of an external expert to give evidence on relevant technical issues. The centre will be responsible for deciding the issues that the expert report must address, the date that the report is due, the amount of the expert's fees and may also determine which party is to be responsible for those fees.

The procedure to be followed by the panel will be outlined in a document called the chairman's ordinance, which will specify a period of one month for the amicable resolution of a dispute. Importantly, any limitation periods affecting the dispute are suspended from the date that the dispute is registered with the centre.

An incentive to settle is provided to participants in the form of a refund of half of the upfront fees payable for registration of a dispute with the centre, upon the parties reaching settlement.

If settlement is reached, a settlement agreement must be signed by all the parties. Article 12 of the ADR Law provides that a settlement agreement signed under the auspices of the centre will be directly enforceable in the Dubai Courts as a writ of execution. It is therefore not necessary for a party to the settlement to bring proceedings for breach of contract against a non-performing party.

Comment

Efforts to encourage parties to resolve their disputes informally without the need for court or arbitration proceedings are of course to be encouraged. Whilst there is some uncertainty as to how the ADR Law will be implemented in practice, the general intention behind this development is therefore to be welcomed. It is perhaps no coincidence that the new law comes at a time when the volume of disputes in Dubai and the region is expected to rise significantly following the global economic downturn and the impact this has had on key local industries such as construction and financial services.

There are likely to be mixed views on the desirability of compulsory ADR. Many will welcome it as a simple and effective way of keeping some disputes out of court, which will save time and costs for the parties, free up court time and achieve certainty for the parties. However, some may not welcome the compulsory nature of the process since many cases will not be suitable for ADR, in particular if, at the time the ADR hearing takes place, the case is not sufficiently developed for an informed conciliation process to take place or if the parties have already attempted unsuccessfully to settle their dispute.

Mandatory referral to ADR is rare in the context of commercial cases, although such initiatives have been introduced in jurisdictions ranging from Ontario in Canada to Greece, India, Indonesia, and certain states in the US (notably Delaware and Illinois). These international developments are relatively new, and experiences vary as to their effectiveness.