by Nick Carnell

Nick Carnell, partner, Kennedys, believes it should be easier for parties to resolve disputes outside of the courts after launching proceedings.

UAE Law No. 11 of 1992 Concerning Civil Procedures sets out the procedural rules governing the conduct of legal proceedings within the United Arab Emirates.

A feature of this statute is that while it is lengthy (some 331 articles) and detailed; it contains virtually nothing about how parties may settle their disputes once proceedings have commenced.

Indeed, the only part of the law which deals with the issue of settlement is found in Articles 189 – 196, which provide for a debtor to make offers of settlement. They allow the court to make rulings on the validity of the offer without providing any criteria for determining what shall be considered valid.

In particular, there is nothing in the statute which might encourage the parties to attempt to settle their differences during the proceedings. There is certainly nothing which would enable the parties to conduct negotiations in a way which encourages full and frank discussion, confident that such discussions would not be drawn to the attention of the court and used to indicate some admission of weakness or liability.

In Common Law jurisdictions this is generally referred to as the “Without Prejudice” rule. Parties are actively encouraged to attempt to settle their differences during the proceedings.
To facilitate these discussions they are encouraged to make concessions, and (with certain exceptions) where such offers are marked “Without Prejudice”, those offers cannot be drawn to the attention of the judge.

The English Civil Procedure Rules and their equivalents contain a sophisticated mechanism for making offers of settlement and these rules form a crucial part of the conduct of any dispute.

The effect is that the parties can attempt to reach settlement while at the same time pursuing the litigation in the knowledge that if the negotiations fail, the matter can be determined by the court.

The parties are actively encouraged to compromise, and in some instances costs penalties can be imposed if the parties insist on having their “day in court”.

This, of course, is as much a policy issue as a legal one. In US and Commonwealth jurisdictions it is well established that the courts exist to assist the parties to resolve their disputes and that pursuing a matter to trial should be regarded as a last resort.

The result is that only a fraction of all actions ever go to trial. The majority of litigants regard the purpose of proceedings as a means to achieve an acceptable compromise.

If nothing else most are aware of the inherent uncertainty of going to trial and appreciate that the advantage of reaching a compromise is that it achieves certainty and finality.

Lawyers are taught that clients are generally to be discouraged from standing on matters of principle.

The absence of a mechanism for parties to negotiate without their discussions coming to the attention of the judge has a number of consequences. Firstly it makes settlement significantly harder.

Negotiation has to be conducted in a way which will not harm the parties’ positions – the parties are probably reduced to oral exchanges which if necessary can be denied. Obviously, this makes it more likely that cases will go to trial.

It also means that a party which starts proceedings must be prepared for the action to go to trial because the alternatives are limited.

This hinders the use of mediation or other forms of alternative dispute resolution which depend on confidential negotiation. Necessarily it discourages parties from making concessions because to do so is not only seen as a sign of weakness but it will be held against them before the judge.

But bad points can also be taken and run because there is nothing to stop them.

While in many jurisdictions litigation has become the equivalent of the von Clausewitz notion that “War is simply diplomacy by other means” in the UAE a party must steel himself to the idea that once begun, the matter will go the distance.

Paradoxically, this will inevitably discourage parties from using the courts in the UAE. An even stranger notion is that this is at odds with the culture of a region in which the ability to negotiate has played such an important part.

The irony is that this has been enshrined in the Rules of DIFC Court where the notion of “justice by reconciliation” (mediation in all but name) plays a prominent role.

Of course none of this has any bearing on arbitration. Neither the Dubai International Arbitration Centre rules nor Articles 213 – 218 of the Procedural Law (which deals with arbitration) make any mention of this.

It is suggested there is no reason why an arbitrator should not allow parties to discuss matters confidentially without drawing them to his attention. He can direct that offers of settlement shall be made which he can be told about only when he considers costs.

The point is that the dispute resolution business ought to be about resolving disputes. The purpose of litigation ought to provide a means where this is made easier rather than harder. The absence of a without prejudice doctrine hinders this.

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