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Disputes are a fact of life. While we may not be able to control how and when they occur, we can control how we react to them and, to a certain extent, how they are resolved. Here we give you an overview of various options available in the UAE to settle property disputes.
Default position: courts
In the absence of any other agreement by the parties, a dispute over a property located in the UAE should be referred to the local court that has jurisdiction over the land where the property is situated. This is pursuant to Article 32 of the Civil Procedure Law and is a matter of public policy. Parties cannot contract out of the local court’s jurisdiction and any attempt to do so will fail.
A property located in a free zone will be subject to the local court as most free zones do not have the status of a separate jurisdiction.
The two exceptions are the Dubai International Financial Centre (DIFC) and the more recently established Abu Dhabi Global Market. These have their own courts and have jurisdiction to resolve disputes in respect of property located in their jurisdiction.
Some of the local courts have specialist systems to deal with particular property disputes. For example, in Dubai, rental disputes are resolved by the Dubai Rental Dispute Settlement Centre.
Although the default position for property disputes is the local courts, they will respect any agreement by the parties to arbitrate a dispute, including disputes relating to property. The agreement to arbitrate must be valid, and the award must not deal with issues of public policy.
Arbitration is a private dispute resolution process, and the only one in which a non-judge (the arbitrator) can impose on the parties a final resolution. It tends to be popular with international businesses and foreign nationals because it allows the dispute to be resolved in English in a process more familiar and clear than that in the local courts; and without appeals. Legal costs can also be recovered, which is not the case in the local courts. Some parties also take the view that a tribunal will be more neutral should one of the parties be Emirati, although, in fact, the local courts have a strong track record of neutrality.
However, no system is perfect, and arbitration has its issues. There is no appeal from an arbitral award, which means a poor decision will stand. Furthermore, although arbitral awards should be complied with voluntarily, if this is not the case, the winner will need to enforce the award in the local courts, which brings the risk that it may be set aside due to some irregularity. However, provided the process is conducted well, parties should be confident that a decision would be enforced.
Mediation is where the parties usually hire a skilled professional to facilitate settlement negotiations. The mediator does not determine the issues, but instead listens to the parties and then, over the course of a day (or longer if needed), has separate confidential meetings with each party to explore the issues and get to the root of the problem. Even if the process is not successful, for the modest costs involved, the parties will have the benefit of knowing that they did everything possible to avoid the inherent risk and more extensive costs and time of going to court or arbitration.
Tiered clauses are where the parties agree to a sequence of steps that have to be undertaken before the dispute can be referred to the courts or arbitration. For example, the steps may include parties having to give notice of a dispute and then spending 30 days negotiating at senior manager level, before attempting mediation and then going to the courts.
The benefit of such clauses is that they force the parties to attempt negotiation before initiating the expensive process of going to court or arbitration. The drawback is that they can cause delay, forcing the parties to wait out time limits when it may be apparent that no amicable settlement is possible.
• Avoid boilerplate language. There is no perfect system to resolve disputes and each method has its merits and should be considered for its suitability, and not simply carried over from a previous agreement.
• It is best to agree that the local law, where the property is situated, will be the governing law of the agreement. This is because many of the local laws will be mandatory; so choosing a foreign law will cause complications and will be of limited benefit.
• Whatever dispute forum is chosen, a well-drafted clause is crucial. A badly drafted clause will give rise to arguments, leading to delay, waste of money and possibly the failure of the clause.
• Try each system (be it litigation, arbitration or mediation) at least once. The fact that a case is lost in one forum should not, in itself, deter its use again. No forum can guarantee success, but at least a more informed choice can be made next time.
• Settling a dispute is almost always better than litigating it. Settling ensures certainty, avoids the risk of a wrong decision, and saves time and money. Settlements are also more likely to be complied with voluntarily.
Source: Robert Karrar-Lewsley, Special to Property Weekly
The author is Senior Counsel in the arbitration team of Al Tamimi & Company.