The DIFC Courts, often the court of choice for many UAE-based SMEs, can settle the majority of its Small Claims Tribunal (SCT) cases within just a few weeks.
SMEs in the UAE can consider a variety of options when choosing a method to resolve their disputes. Settling disputes through an alternative dispute resolution mechanism - arbitration - is always less costly and less time-consuming.
However, court proceedings are sometimes inevitable.
According to the Constitution of the United Arab Emirates from 1971, the civil law system and the Sharia are the main sources of legislation. The official language used in court proceedings is Arabic.
In addition, the DIFC Courts, the English language common-law judicial system based in the Dubai International Financial Centre, was established in 2004 by the late HH Sheikh Maktoum bin Rashid Al Maktoum, Ruler of Dubai, to deal with matters arising in this free zone. The jurisdiction of the DIFC Courts was initially limited to the geographical area of the DIFC, but a 2011 decree of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister of the UAE and Ruler of Dubai, opened the DIFC Courts’ jurisdiction to businesses from all across the GCC region.
The DIFC Courts is independent from, but complementary to, the UAE’s Arabic-language civil law system.
The DIFC Courts is composed of:
• The Small Claims Tribunal (SCT)
The only operating tribunal of its kind in the region, the SCT was set up to enable access to justice in a swift and efficient manner without the need for lawyers.
• The Court of First Instance
The Court of First Instance has exclusive jurisdiction over any civil or commercial case when it relates to the DIFC. The CFI proceedings are heard by one Judge.
• The Court of Appeal
The Court of Appeal, which comprises a panel of three judges, is the highest court in the DIFC Courts. There is no appeal from this Court’s decision.
The SCT operates with a community approach that promotes settlement. It can here claims within the jurisdiction of the DIFC in three cases. (Please see the table below)
The SCT hearings are held in private with a presiding judge where parties are usually not represented by lawyers. Additionally, the DIFC Courts aims to settle the majority of SCT cases within four weeks from the commencement of the claim.
“The SCT claims tend to be smaller and less complex,” says Amna Sultan Al Owais, deputy registrar at the DIFC Courts and deputy chief executive of the Dispute Resolution Authority. “Hearings take place without lawyers in a private, informal setting, leading to faster, cheaper, and more amicable – even friendly – resolution of disputes. People are freed up to move on quickly and to get back to focusing on their business.”
At present, all parties in an SCT case must be present at a hearing, including the judge. However, as part of the DIFC Courts’ strategy to become ‘the world’s leading commercial court’ by 2021, the DIFC Courts is now reconfiguring part of the Small Claims Tribunal so that one room provides for remote access via Skype-type technology.
The GCC’s first ‘virtual court’ will enable claimants to have their cases heard remotely. “The most common misunderstanding about the SCT is its jurisdiction – by this we mean the power to make legal decisions and judgements,” continues Al Owais.
“We automatically cover disputes which are connected to the DIFC. And since 2011 we can handle disputes across Dubai, the UAE, indeed anywhere in the world, where both sides have opted in to the DIFC Courts’ jurisdiction for commercial and civil matters. Naturally, this also applies to the SCT cases, but parties outside of and unrelated to the DIFC free zone must opt-in to the DIFC Courts’ jurisdiction in their contracts using a valid opt-in clause.
“This is an increasingly popular option for many companies in the UAE, especially when people want to have their disputes heard in English. The SCT also offers businesses and individuals the advantages of an efficient and flexible model that resolves 90 percent of cases conclude within four weeks; confidential proceedings, and reduced costs because parties represent themselves.
“We have noticed that in cases when the dispute falls outside of the DIFC Courts’ jurisdiction, businesses often express an interest in updating their contracts to ensure the SCT has jurisdiction.
"The positive experience of going through the SCT helps businesses determine what is the best choice for them in crafting their dispute resolution strategy and how best to take advantage of us at the SCT."
Al Owais advises all interested parties to read the SCT rules on the DIFC Courts website, or consult the SCT Registry team to clarify any points around procedures or requirements.
In addition, she says, they should plan for the worst when negotiating a contract.
“Assume that a dispute could well happen and plan to avoid it,” Al Owais says. “Do agree on a dispute resolution clause, and talk it through as you agree the contract so that both sides are clear what will happen in the event of a contractual argument.”
“After a filing a claim with the SCT, we encourage parties to be open to settling the dispute, which will save them both time and money.”
Once the defendant has filed their defence, a consultation will be arranged where both parties can meet in order to attempt to settle the dispute. A certified mediator will manage the meeting, which is informal and private. Due to the emphasis on finding amicable resolution, many disputes are settled at this stage, maximising the possibility of maintaining a good future business relationship.
“Before the consultation, parties should seriously consider the costs of moving forward with the case in terms of time, money, and their relationship with the other party,” says Natasha Bakirci, assistant registrar at the DIFC Courts.
“They should think about what would be an acceptable settlement offer and what they are willing to compromise in the interest of settling the matter quickly and amicably. They should also think about the strength of their legal arguments.
“If a resolution is agreed during the consultation, the SCT will issue a Consent Order reflecting the agreement, which is treated as a final decision and carries the power of the DIFC Courts.”
During the consultation stage, a trained mediator will help both parties present their summary of the dispute and highlight what is important to them to settle it. The consultation is entirely confidential.
“Both sides are free to voice their concerns without fear that their statements will be held against them,” says Bakirci. “This informal environment helps to clear the air and promote negotiation, increasing the chances of an amicable resolution. This is particularly important in disputes over services or products, where the customer often feels they have not previously had an adequate opportunity to vent their frustration.
“If desired, parties are free to continue their settlement discussions after the consultation and can request a second consultation to meet with the mediator again. In many instances, cases that seemed to be heading for a hearing have been settled at a second consultation or in communication after the consultation, avoiding the need to go before the SCT judge.”
If the parties fail to settle their dispute, the SCT will schedule a hearing before a judge.
“Although informal, the basics are like any court case in that the judge will decide the dispute based on the relevant and applicable law,” explains Bakirci.
“Parties must make their legal arguments clearly in pre-hearing submissions and during the hearing. However, lawyers are still not permitted in the hearing unless the judge gives prior permission. This helps to keep proceedings simple.
“It is important to note that even at the hearing stage, parties can come to a settlement instead of moving forward with a judgement. This has happened in the past between consultancy firms and their clients, law firms and their clients, as well as in tenant/landlord disputes and for employment disputes.”
If parties do not comply with a Judgement or Order, the other party is free to file an enforcement case to force compliance.
“Enforcement proceedings depend on the jurisdiction in which the party seeks to enforce, or in legal terms, where the non-complying party has assets,” Bakirci adds.
“Enforcement within the DIFC free zone is a simple procedure once the enforcement case is filed with the DIFC Courts. Enforcement in Dubai, outside the DIFC, takes place through the Dubai Courts. To date, all of our enforcement cases have gone through smoothly, due to our excellent working relationship with the Courts. However, for enforcement in international jurisdictions, we would recommend that you take legal advice in advance of filing a case.”
Bakirci explains that although financial settlements are the typical outcome of the dispute resolution process, parties can also craft creative consent agreements, with the help of a SCT mediator.
“For example, instead of exchanging money to resolve the dispute, parties can agree to amend future business terms or payment plans,” she says.
“Our SCT mediators help the people think outside the box to settle disputes, rather than move forward with a judgement that takes yet more time and cost. This occurs especially with disputes between financial services companies and their customers or employees, and with disputes about ongoing construction projects.”
This autumn the DIFC Courts will organise a series of initiatives to increase awareness of the SCT, while SME owners in need of further assistance can always apply for The DIFC Courts Pro Bono Programme, which offers free legal advice to those who cannot afford it.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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