ALM Properties, Inc.
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Top tips for handling disputes in the UAE
No business wants to enter into a dispute. Disputes are often costly, tie up management time and distract staff from profitable work. In the UAE where a civil dispute is sometimes accompanied by a criminal complaint, a dispute can have a significant impact on key staff, including travel bans and the stress of facing criminal charges. Taking the right action from the beginning of a dispute can help to resolve the dispute faster, more efficiently and at less cost.
We set out below our top tips to consider when a dispute arises. This is based on our experience in dealing with a wide range of contentious issues throughout the region in diverse industry sectors. While a dispute can have serious consequences, it also represents an opportunity. If key decision makers for both parties treat the dispute as an opportunity to consider their relationship and where it went wrong, this can assist the parties to restructure the relationship in a way that not only prevents disputes in the future, but is ultimately more lucrative. This is more likely to be achieved when your business is negotiating from a position of strength ? a position our top tips will help you achieve. The key things you should consider are:
The one and only
Choose one person in your organisation to manage the dispute. That person should, as far as possible, not have been involved in the circumstances that led to the dispute. Often when disputes arise, personalities get in the way which can distract the parties from considering the key issues at stake. Tasking one individual to manage the dispute in your business will mean one person has the responsibility to take care of the actions below, it will give the other individuals within your business a central point of contact, and mean that one person will have perspective on all the issues. It is also more cost efficient. It means that the lawyers instructed do not receive conflicting instructions and do not have to explain the same point a number of times ? all of which saves you money.
Documents are king
The UAE is a civil law jurisdiction. Civil law jurisdictions place far greater reliance on what can be proven by the documents than jurisdictions such as England, the USA or other common law countries where oral witness evidence is favoured.
This means it is essential that you pay very close attention to the documents that are exchanged with the other side in the lead up to a dispute. It also means it is very important that you locate and save all relevant documents that have been created by the individuals involved. This includes all correspondence (including letters, emails, text messages, BBM messages, iPhone messages etc.), meeting notes (both internal and external), photographic evidence, and any documents you may be able to get from the other side (it is likely to be easier to obtain this before the dispute becomes more advanced). If the dispute relates to something physical, get photos and video evidence if possible. Consider appointing one person within your business to manage and collate the documents and evidence.
Do not touch
It may be the case that you are aware that critical evidence is held on a particular computer ? maybe the work computer of a former employee involved in the dispute, you may suspect some evidence has been deleted. If this is the case, do not try to find it yourself. It is incredibly difficult to permanently delete data from a computer but if it has been deleted, everything you do, even turning the computer on, may reduce the chance of being able to recover the data. It is possible to use forensic methods to access the data without having any impact on the evidence and preserving it in a way that is persuasive before a Court or Arbitral Tribunal. We have acted on many cases where we have been able to source very important evidence through forensic examination of computers.
Beware of without prejudice
Without prejudice correspondence is a common means to attempt to resolve a dispute in other jurisdictions. The basic principle is that if you mark a document as being without prejudice you can make concessions in that document for the purpose of seeking a resolution, and the other side will not be able to use those concessions against you in a court or arbitral tribunal. The principle of without prejudice does not have the same standing in the UAE. Be careful not to write anything in correspondence to the other side that you would not want to see produced in a court. We have even known some businesses to try and trick an unwary opponent by writing a without prejudice letter (which is not detrimental to their position) in the hope that the other side will respond with full and frank offer in the interests of resolving the dispute. They can then use that correspondence to support their case by labelling it an admission of liability.
Get statements while you can
It is important to gather as much evidence as you can as quickly as you can. Getting initial witness statements in the early stages of a dispute is advisable for a number of reasons. Expatriate workers tend to stay in the UAE for limited periods of time. Get their evidence while you can and keep their contact details. If they are important to your dispute make sure (if possible) that when they leave your business they depart on good terms, in case you need to ask for their help in the future. It is also an unfortunate reality that key witnesses can pass away and at least if you have a witness statement you will have some evidence to put forward from them, albeit that evidence may not carry the weight of a witness that has been cross-examined.
We should point out here that when we refer to witness evidence being used, this would generally be in the context of arbitration (an alternative form of dispute resolution carried on outside the court system) as the UAE courts do not rely on witness evidence as a rule. Notwithstanding this, it will assist internal understanding of the dispute and for this reason we recommend you do take preliminary statements from all parties involved, even if the dispute will be before the courts of the UAE.
One potential exception to this advice is in circumstances where the other side has, or you believe they intend to, make a criminal complaint. If the prosecutor does choose to prosecute a case against you, the police may potentially seize documents from your premises. In these circumstances you do not necessarily want to have created potentially incriminating evidence that may be ultimately used against your business. So you get your lawyers in early to deal with these aspects.
Don't forget about that performance guarantee or cheque you agreed to at the beginning of the contract
It is a common feature of commercial contracts in the UAE that one party will require the other to provide an on demand bank guarantee or alternatively an undated cheque either for a specific sum or unilateral even that. If your business has done this, you may have entered into a contract which sets down conditions under which the guarantee can be called or the cheque can be cashed. In the event of a dispute this will not necessarily protect you. We have dealt with many cases where one party has used a guarantee or cheque as a negotiating tactic.
The position in relation to cheques is potentially even more serious, as traditionally the courts do not pay heed to the terms of any agreement governing when a cheque may be cashed. Dishonouring a cheque is a criminal offence in the UAE. The signatory on the cheque is likely to be imprisoned, usually until the sums to honour the cheque are deposited into court.
In the event that you have provided a performance guarantee and the other side is threatening to call it without justification, all is not lost. It is possible to apply to court on an urgent basis to have the bank guarantee attached, so that the funds are not released to the other side. We have done this successfully in the past, but the chances of success depend on the particular circumstances and such action can be costly and can lead to full blown litigation on this aspect of the case.
The risks of termination
Your contract may give you the right to terminate on notice. Be very careful before exercising this option and always seek advice before doing so. Just because you have a termination for convenience clause in your contract does not mean that your termination will have legal effect. Further, terminating may have undesirable consequences including severely limiting the financial recovery you are ultimately able to make.
Have a clear informed negotiation strategy
Avoid entering into "tit for tat" correspondence with the other side. If there is a procedure in your contract for resolving a dispute, follow it. If the contract requires you to send notice to a particular individual by fax do not correspond to another individual by email. If the other party makes serious allegations about your conduct, you may need to respond, but an response should only deal with the key issues and avoid any irrelevant or extraneous points that will only lead to a "war of correspondence".
Always check the documents you are signing
If someone arrives at your office and requests that you sign for a document, or if a court bailiff attempts to serve a court document on you, always make sure that you read it, before signing for it. If it is in a language that you do not understand, always get somebody who does understand to read it. This is especially important with the service of court documents. We have been involved in cases where service of a proceeding was deemed to have been made on an overseas company when it was unwittingly signed for by the overseas company's local distributor. Train your reception staff to be aware of these issues.
Instruct lawyers as early in the dispute as possible. We know from our experience the sooner lawyers get involved in a dispute the better position our client will be in. The earlier you get advice on both the strengths and weaknesses of your position, the more likely you are able to resolve the issue without the costs of court proceedings or arbitration, both of which can be expensive. You will also be more likely to re-establish your relationship with the other side, hopefully on a more profitable basis than before. This will not always be the case and sometimes litigation is inevitable. However, getting the best advice from the beginning will without fail put you in a better position going forward.