Commercial Disputes: Litigation is Crucial Step While Arbitration can be Alternative

In the United Arab Emirates (UAE), resolving commercial disputes typically involves either litigation or arbitration. Although arbitration is increasingly favoured for its efficiency, litigation remains the primary method for resolving disputes in the UAE. 

An examination of the essential aspects of commercial litigation in the United Arab Emirates encompasses procedural protocols, evidentiary considerations, and judicial decision-making.

Commercial litigation spans a broad spectrum of conflicts, ranging from corporate disputes and company liquidations to bankruptcy proceedings, insolvency matters pertaining to partnerships, trade disputes, and debt recovery cases. 

Litigation

Resolving commercial disputes in the UAE requires navigating a legal system influenced by Shariah and civil law, including litigation.

Parties in dispute can opt for litigation, presenting their case before the courts, particularly the Court of First Instance in the respective emirate.

The UAE follows a civil law system, where cases are adjudicated based on their merits and facts. Court proceedings are conducted in Arabic, necessitating the involvement of a UAE National lawyer. All court submissions must be translated into Arabic, accompanied by legal attestations if required.

Court System Overview

Emirates except Abu Dhabi and Ras Al Khaimah (RAK) are integrated into the Federal Judicial system. These emirates follow a standard structure, consisting of:

• Court of First Instance
• Court of Appeal
• Court of Cassation (RAK, however, lacks a Court of Cassation, with all appeals directed to the Supreme Court of Abu Dhabi).

The UAE operates under a civil law system, with distinct legal structures in free zones like the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM).

These zones, governed by English or common law, feature specialised commercial courts conducting proceedings in English. Conversely, onshore UAE courts operate in Arabic, requiring all submissions to adhere to Arabic regulations.

Limitation Period

Commercial disputes are bound by limitation periods dictating the timeframe for filing lawsuits. Federal Law No. 5 of 1985 (Civil Code) generally sets a 15-year limitation, subject to statutory adjustments depending on the claim nature.

Different Stages Followed by UAE Courts

Stage I: Registration of Case: Proceedings commence with the submission of a pleading/plaint accompanied by court fees, varying from 3-6 per cent with a maximum cap of Dh40,000. Upon registration, the court issues a summons to the defendant along with a hearing date.

Stage II: Service of Summons: Summons are served to the defendant via courier, email, or a court officer. If the defendant fails to acknowledge receipt, the court may adjourn the matter for another hearing.

Service can also be made through affixing the summons on the defendant’s property or publication in local newspapers. For defendants residing abroad, a summons is served through diplomatic channels or electronic means.

Stage III: Hearing: Once the defendant responds, the court schedules a hearing for the claimant's reply. Further hearings occur until both parties submit memorandums and supporting documents. Failure of the defendant to attend may result in an ex-parte judgment. Additionally, the court may appoint a third-party expert for technical matters.

Commercial Litigation Steps

Governed by Federal Law No. 11 of 1992 (Civil Procedures Law), commercial litigation in the UAE follows a structured process:
Filing a Case: Plaintiffs initiate proceedings in the court of first instance by submitting a detailed statement of claim, notifying defendants who must respond with a memorandum of defense.

Hearing of the Case: Pleadings are public, with the plaintiff presenting their case followed by the defendant's defense and evidence submission.
Expert Report: Courts may appoint experts, registered in the Ministry of Justice, to offer opinions. Expert reports are shared with parties, though non-binding  and may deviate from court judgments.
Judgment: The court issues a judgment outlining the case's basis, including court details, case type, and judges' names.
Enforcement: Following judgment receipt, the prevailing party files an execution application. Courts may seize assets, impose bankruptcy, or issue arrest warrants or travel bans against debtors.
Appeal: Parties may appeal judgments, except when explicitly or implicitly accepted. Appeals are filed within set timeframes, with subsequent appeals to higher courts based on specific grounds.

To effectively deal with commercial disputes in the UAE, it is important to have a good grasp of legal frameworks and procedural intricacies.

While arbitration can be an alternative, litigation is still a crucial step. People involved in commercial disputes within the jurisdiction should have a good understanding of the nuances of the UAE's legal system and the steps involved in commercial litigation to achieve the best possible outcome.

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