Court Dismisses Firm’s Dh1M ‘Unfair Competition’ Lawsuit Against Ex-Employees

The Dubai Civil Court of First Instance has rejected a Dh1 million damages claim filed by a commercial establishment against three defendants, including two former employees accused of unfair competition, leaking confidential information and diverting clients.

The company sought material and moral compensation, plus 5 per cent legal interest, alleging that the defendants’ actions had harmed its business performance and reputation.

Court documents show that the first defendant worked as an accountant and sales manager from 2017 until late 2023, while the third defendant was employed as an administrative officer until January 2024. The firm claimed it detected a drop in sales after learning that the first defendant had launched a competing business -- allegedly supported by the administrative employee -- and that both had channelled clients to the new venture while still employed.

The plaintiff relied on a criminal ruling from Sharjah’s Court of First Instance, which had fined the first defendant Dh20,000 for disclosing company secrets and misusing corporate data. The conviction was upheld on appeal.

However, after examining the evidence, the Dubai court appointed an expert who found no direct relationship between the plaintiff and the new company linked to the former employee. The expert also confirmed that the employees were not bound by any contractual clause preventing them from joining or establishing a competing business after leaving their roles.

The report further revealed that the company’s sales had not decreased following the launch of the competing firm; instead, revenues rose in 2022 and 2023 when compared with 2021 -- the year the new entity was founded.

Additionally, the plaintiff failed to produce audited financial statements or documents proving monetary losses or profit reduction. The expert noted that the competing company’s transactions with two of the plaintiff’s clients took place only after the defendants’ employment had ended.

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