Thursday, July 29, 2021

A New Mediation Regime in the UAE

Introduction

Mediation has deep roots in Arabic culture through the concept of sulh (reconciliation). On 29 April 2021, the UAE passed Federal Law No. 6/2021 “On Mediation for the Settlement of Civil and Commercial Disputes” (“Mediation Law“). The Mediation Law provides a holistic framework for mediation practices in the UAE. 

Background

Prior to the Mediation Law, the UAE onshore legal system provided limited options for mediation. In particular, Federal Law No. 26/1999 regarding the Establishment of Conciliation and Reconciliation Committees at the Federal Courts, facilitated mediation through the provision of dispute reconciliation committees. Parties were encouraged to engage in pre-action mediation in order to settle civil, commercial and labour disputes.

Similarly, there are many Emirate-level and industry-specific forms of mediation offered across the UAE. In Dubai, for example, the Dubai Centre for Amicable Settlement of Disputes (DCASD) was established in 2012 pursuant to Dubai Law No. 16/2009 on the Establishment of the Centre for Amicable Settlement of Disputes. The DCASD, forming part of the Dubai Courts, allows parties to reach an amicable settlement through the involvement of mediators, reviewing the dispute (along with the settlement achieved) and referring it back to the Dubai courts. 

Historically, the two main issues that prevented the success of mediation were the lack of a robust framework and the lack of ‘without prejudice’ communications. The Mediation Law addresses these issues and, most importantly, upholds ‘without prejudice’ communications. 

Mediation Law

Confidentiality
The Mediation Law addresses the previous issue of privilege by guaranteeing confidentiality. Any materials, agreements or concessions made by the parties during the mediation cannot be used before any court, unless approved by all parties. The confidentiality provisions will not apply to any settlement agreement since it would need to be enforceable by a court. 

Judicial Mediation
There are two types of mediation regimes: judicial mediation and non-judicial mediation. Each type follows a different procedure, as is outlined by this Law, but both require the involvement of mediation centres. Unless a centre is involved, the parties will not be able to benefit from the provisions of the Mediation Law. 

Judicial mediation occurs after parties resort to litigation for dispute resolution. It allows courts to refer disputes to mediation at any stage of the judicial proceedings if the parties agree to mediation; one of the parties requests mediation; or a mediation agreement applies. In the event the courts refer the dispute to mediation, this cannot be appealed. 

Non-Judicial Mediation
As the name suggests, this type of mediation occurs before parties resort to litigation. In order to mediate, the parties must submit their mediation agreement and an application to the mediation centre. The application must include the following: (i) approval of all involved parties to recourse to mediation (including an undertaking from the applicant to attend the mediation and to provide the mediator with the necessary information and documents related to the dispute); (ii) subject-matter of the dispute; (iii) appointment of a Special Mediator; and (iv) agreed duration of the mediation.

The Mediation Agreement
In order to be valid, a mediation agreement (whether entered into prior to or during a dispute) must include (i) the subject matter of the dispute; (ii) the mediator or a process of appointing one; and (iii) the language of the mediation (NB: if the language of the mediation is not Arabic, all documents must be translated into Arabic in accordance with the Mediation Law). 

Mediators
A Mediator can be appointed in two ways: (i) by the parties in their mediation agreement (referred to as a Special Mediator); or (ii) by a judge from the official lists of mediators (i.e. those that are registered with the centres). Any party may object to the appointed mediator and, in this case, the courts will appoint an alternate mediator. 

The Mediation Law also makes it clear that no mediator can act as an arbitrator or an expert in a dispute involving the parties (even after the termination of a mediation). Mediators are also prevented from testifying for or against a party to a mediation. Additionally, mediators cannot act in disputes where they are related to one of the parties. It is expected that further guidance will be published in the Code of Business Conduct for Mediators in due course. 

Mediation Procedure
Generally, the mediation process is flexible and a mediator may take any procedure deemed necessary for reconciliation and resolution of the dispute. The mediator is allowed to seek assistance from relevant experts from those registered in the list of experts available to the UAE courts. The Mediation Law also allows for mediations to take place in person and remotely. 

Mediation Centres
The Mediation Law permits and envisages that independent and international mediation centres could be established in the UAE through obtaining requisite licences. There are no current details concerning the licensing of mediation centres and it is expected that this will be released in due course. 

Fees 
The initial fees must be paid to a mediation centre prior to the commencement of the mediation. Costs are likely to vary across the centres and the only restriction that the Mediation Law envisages is that a Special Mediator may not be paid more than 5% of the value of the dispute. 

If a judicial mediation is successful, the litigants will be able to recover the entire judicial fees paid to the courts. In case the dispute is only partially resolved, the parties may recover 50% of their judicial fees. 

Termination of Mediation
Mediations may be terminated if (i) a settlement is reached; (ii) the parties and the mediator agree to termination; (iii) any party chooses not to continue with the mediation; (iv) judicial mediation is deemed ineffective for the dispute; (v) a party is absent for two consecutive mediation sessions; or (vi) the deadline for the mediation has lapsed.

In the event that settlement is reached, the mediator must submit the settlement agreement and a report to the Court for ratification. Once ratified, the Court will issue a report regarding the total or partial termination of the dispute. The Court will then issue a writ of execution on the terms of the settlement agreement, which can be executed in the same way as a UAE court judgment. 

It is important to note that the Mediation Law allows for a party to challenge a settlement agreement reached in the mediation on a number of limited grounds. The grounds are (i) any party was partially or totally lacking capacity; (ii) the settlement agreement was reached after the duration of the mediation expired or is otherwise invalid or voidable; or (iii) any party fails to present their defence due to not being notified. 

Commentary

We expect that despite the Mediation Law, non-judicial mediation is unlikely to be impacted in the short-term. Access to judicial mediation, however, is likely to be favoured by litigants in the UAE courts. We also suspect that, once more mediation centres are established and the mediation process (including any objections to settlement agreements) is tested in the UAE courts, mediation will gain more prominence. 

We also expect that access to judicial mediation may act as an additional ‘litigation’ tool for many parties. For example, a party, which may not have been successful in an informal negotiation with its counterparty, may commence litigation in the UAE courts and then request for judicial mediation. The obvious advantages are (i) the ability to have ‘one final go’ to reach a settlement; (ii) demonstrate one’s seriousness to its counterparty; and (iii) raise attention of the dispute to the senior management of an entity, to the extent it was not involved in the informal negotiations.

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