11 January 2023
Mission possible: the quest for speedy dispute resolution in Dubai – 1 of 3 Insights
When negotiating a contract and seeking to agree which court or arbitral centre will have exclusive jurisdiction to resolve any dispute that might arise, there are a number of factors to consider. One of those is the speed with which a claim can be resolved, including whether a particular forum offers an expedited process or any other features which might help parties obtain an award faster than another forum.
In this three-part series of articles, we consider Dubai’s three main dispute resolution forums, namely the Dubai Courts, the Courts of the Dubai International Financial Centre (DIFC Courts) and the Dubai International Arbitration Centre (DIAC), to consider how they may assist parties in this regard.
In this first Article, we look at the expedited procedures and features available in the Dubai Courts, taking into account the UAE’s new Civil Procedure Law (Federal Law 42 of 2022) which came into force on 2 January 2023 (the “New CPL”), having replaced its long-standing predecessor, UAE Federal Law No. 11 of 1992 (as amended) (the “Old CPL”).
Until 2018, under the Old CPL the expedited payment order process was mainly used by financial institutions to quickly enforce dishonoured cheques or letters of credit against a debtor. Cabinet Resolution No. 57 of 2018 (as amended) modified the process so that creditors could, in appropriate cases, use it to quickly obtain a court order to recover an unpaid debt, together with interest, or moveable property. This procedure has now been carried through to the New CPL relatively unchanged.
Article 143 of the New CPL provides that to obtain a payment order (or writ of debt) an applicant must prove that their right to payment is established in writing (electronically or on paper), is due for payment and is a known sum of money or moveable property. Whilst these steps appear straightforward, the Courts have previously clarified that an applicant must provide written evidence that the debt has either been acknowledged or accepted by the debtor.
The process is quick. Article 144 provides that a creditor need only give the debtor at least five days’ written notice to pay the outstanding debt and can, thereafter, file an ex-parte application in the Dubai Court for a payment order. If the petition is successful, a decision should be issued by the judge within 3 business days of filing the petition. Once served on the debtor, and depending on the value of the payment order, the debtor has either 15 or 30 days to bring a grievance or an appeal of the order, whichever is appropriate. Notwithstanding any appeal, the claimant can proceed with expedited execution of the payment order.
Furthermore, even if a party inadvertently files a standard claim and it transpires that it satisfies the conditions for a payment order, the court can issue a payment order rather than wasting time by dismissing the case for being incorrectly filed as a standard claim. This change was introduced by Cabinet Decision No. 75 of 2021 and has also been carried through in Article 150 of the New CPL.
In conclusion, if a case is deemed suitable, the payment order process can save significant time and cost compared to the standard claim process. Unfortunately, the major stumbling block for a creditor is obtaining written evidence that the debt has been acknowledged and/or accepted by the debtor. In turn, this severely limits the opportunities for this expedited process to be used by creditors and, even in the most straightforward cases, a claimant will usually need to follow the lengthy standard claim process.
In January 2022, the UAE’s Commercial Transactions Law was amended by Federal Decree 14 of 2022 (Article 637 (bis)) to provide that a bounced cheque constituted a writ of execution as defined in the Old CPL. This has allowed the bearer of a bounced cheque to apply directly to the execution court for it to take enforcement action against the debtor’s assets.
Article 143(2) of the New CPL reflects that change in the UAE’s Commercial Transactions Law confirming that cheques are considered a writ of execution under Article 212(2)(d) (i.e. “Other papers on which the law confers such status”). It also clarifies, for the avoidance of doubt, that the payment order process will not apply to cheques.
Accordingly, in cases where a party is holding a bounced security cheque, for example, it may proceed directly to the execution court for enforcement against the debtor’s assets. This expedited process can save parties the valuable time of having to first obtain a court order.
On 13 September 2021, the Dubai Courts issued Circular No. 9 of 2021 in respect of intellectual property, construction and liquidation related claims, requiring claimants to file an expert report by an authorised expert with any claim in those areas. The Circular confirmed that the Dubai Courts could reject the registration of any claim not accompanied by such expert report.
Although, the claimant’s expert report might not supersede the later appointment of a court-appointed expert (under Article 45 of the New CPL), in cases of a technical nature this requirement under Circular No. 9 of 2021 can indirectly assist with expediting the case. For example, it should help the claimant to bring only worthwhile claims that are supported by the expert report and not waste time pursuing unsupported allegations. Further, with the submission of an expert report with the claim, the judge can understand the technical issues at an early stage, thereby, potentially reducing the number of written submissions required during the case.
Articles 247 to 251 of the New CPL (formerly 252 to 256 in the Old CPL) sets out the procedure for obtaining a precautionary attachment order over the defendant’s property prior to bringing a substantive claim on the merits of a dispute. The claimant will have to produce credible evidence of its substantive claim, the amount of debt due and that there is a risk of the defendant dissipating its assets to avoid enforcement of a later judgment. In practice, a defendant’s bank accounts are the most common asset attached, although other assets might include real property, office equipment, machinery, vehicles, furniture, shares, office equipment etc.
In terms of expediting a case, as attachment orders often prove difficult to remove once in place, defendants may be open to reaching an early commercial settlement, thereby, indirectly leading to a resolution of the claim early on.
The New CPL has introduced a potential landmark change to the appeal process. Upon filing an appeal of a first instance decision, Article 167(2) and (3) of the New CPL provides for a preliminary review stage by the Appeal Court “in chambers” within 20 working days. Following this review, the Court shall decide whether, amongst other things, if the appeal is inadmissible or dismissed. If it is admissible, the court may schedule a hearing for examining the merits of the appeal.
In practice, this process could be similar to the requirement in the DIFC Courts for an appellant to file an application for “permission to appeal”. In that case, a party may only proceed if the DIFC Court decides that the appeal would have a real prospect of success or there is some other compelling reason why the appeal should be heard.
If the Dubai Courts apply a similar threshold, the consequence may be that any spurious appeals will be dismissed at this early stage of the appeal process. In turn, a claimant could then enforce their first instance decision and avoid the traditional process of having to fight an appeal in the Court of Appeal and again in the Court of Cassation.
Finally, if a second appeal is necessary, Article 178 of the New CPL provides that the deadline for filing an appeal to the Court of Cassation is now 30 days, reduced from 60 days under the Old CPL. This indicates once again the Dubai Courts intention to avoid undue delay and resolve future claims more efficiently.
Among any court or arbitral centre’s principles is the aim to deal with cases expeditiously. The three main dispute resolution forums in Dubai are no different and there is a continued drive in Dubai towards faster dispute resolution.
Whilst we have covered here some features of the Dubai Courts, you can also refer to our next articles which will consider the expedited features in the DIFC Courts and the DIAC.
With different procedures on offer in different forums, there is no one-size-fits-all solution. It is therefore important for parties to take proper advice and give full consideration to the dispute resolution provisions at an early stage. Whilst these clauses often appear at the bottom of a contract, they should be towards the top of the priority list in any contract negotiation.
11 January 2023
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21 February 2023