UAEs Legal Reforms Push Arbitration To Centre Stage

There seems to be this impression among some clients that UAE laws are sometimes opaque, and that investors prefer to deal with the DIFC or the ADGM rule book, which is based on common law.

While it is true that there is an alternate framework that has been provided in the UAE, it is of some amusement that this perception continues to exist despite the clear and accelerating progress judicial reforms have taken on a continual basis. In recent months alone, laws have been passed to make the bouncing of cheques (up to a certain amount) a misdemeanour, rather than a criminal offence, including the bouncing of rental cheques.

This amendment has far reaching consequences, not only for the courts from a reduced caseload (we have already seen a drop of about 40 per cent in such cases in the first month), but also for entire sectors, such as banking where debtors will have to work closely with banks to restructure their liabilities in a cost-effective way. And not necessarily assume an adversarial manner.

This is only the most recent example that I can give in a continuing process that has been enacted, increasingly on a proactive basis, to ensure that cases are dealt with in an expeditious and cost-effective manner. They are also generally private and less adversarial than the common law courts, and accordingly provide for certain advantages.

The UAE courts are well-versed in dealing with foreign investors, and have done so in a manner that has been increasingly praised by the international community in areas ranging from construction to real estate. And more recently, even in newly developing business lines such as eCommerce.

While academic studies throughout the world indicate that the pace of judicial reform always lags the evolution of industries, it is also true that there can be a distinction made between proactive jurisdictions and some of the slower moving ones. Dubai and the UAE, in opening up alternate platforms, have allowed for the pace of judicial change to accelerate.

There is dynamism and a healthy sense of completion that has been witnessed as competing platforms learn from global best practices, as well as from each other. This fosters an environment that takes into account the feedback of all stakeholders in a world of increasing change and complexity.

The strides that have been made in the arbitration space are of particular note, especially with the passage of the new insolvency law. Shareholder disputes are often the most acrimonious to deal with, and accordingly are sometimes most expensive and time-consuming.

It is here that the arbitration centres provide maximum flexibility to all parties in resolving what can be a very complex scenario, as well as provide the advantage of language. Even litigation laws are broadening to increasingly allow for a wide scope of arbitration proceedings.

There is cognisance that many of the ways that things are done now will change considerably within a five-year time frame, from simple things such as getting a license to broader commercial transactions that at some point may include the use of cryptocurrency. In my opinion, it is likely that arbitration will see a greater caseload than the courts in the years ahead.

At the same time, given the complexity in commercial dealings, there will always be certain areas that will be the forte of the courts. These include increased vigilance and enforcement of laws that govern money laundering. In a CRS framework, apprehensions have been expressed in certain quarters. However, it is probable that the UAE will become more proactive and stringent in this framework as it achieves the goals of placing transparency at the forefront of its legal system.

In the final analysis, investors and market participants in the UAE have the luxury of choosing a wide variety of platforms by which to resolve their disputes, a factor that is not available in most countries. It is this feature of judicial activism and reform that further cements the UAE’s position of being one of the leading centres of commerce and trade in the world.

The writer is Senior Partner at NM Advocates, which has a joint venture with GCP Group.