Mediation Q&A: Dubai International Financial Centre (DIFC), Practical Law
by Zakir Mir, Infinigence Consulting
Reproduced from Practical Law, and Created for Thomson Reuters Practical Law.
Country Q&A | Law stated as at 31-Dec-2018 | Dubai International Financial Centre, United Arab Emirates
This article provides Dubai International Financial Centre (DIFC)-specific information concerning the key legal issues that need to be considered when mediating a dispute.
Judicial attitude towards mediations
1. Is mediation a commonly used alternative dispute mechanism in your jurisdiction, especially in relation to cross border disputes? What proportion of commercial disputes are settled through mediation? What is the judicial attitude towards mediation in relation to commercial disputes?
Although it cannot be described as common, mediation is encouraged and allowed by the DIFC court rules. Under Part 27, the court can encourage parties to resolve the dispute via means of judicial reconciliation, in other words mediation, and may at times adjourn the case for a period of time to encourage settlement. However, mediation is still a voluntary process. The DIFC also has facilities available for mediation and alternative dispute resolution, and mediation can be conducted under the administration of the DIFC. The judicial attitude towards mediation is one which would encourage it, but there is no compulsion on parties to mediate disputes before the trial process. There can be however some minor penalties imposed on a party under the DIFC court rules. When assessing costs, the court may consider the extent of the efforts made by a party to try to settle the matter out of court. Genuine attempts to settle a losing dispute may have a positive influence on the costs calculation, while a lack of effort may have a negative impact and lead to a higher cost assessment. It is difficult to assess the use of pre-trial settlement in the DIFC, as many disputes may be settled before the case being filed to avoid hefty legal fees. In these instances, without a detailed study, it is impossible to determine how common mediation is, as the relevant data is not readily available. What can be said is that many cases like these are in fact settled out of court, without reaching the DIFC court directly, and on these occasions, mediation can play a major role.
Commercial attitude towards mediation
2. How do commercial parties commonly view mediation? Do parties typically opt for institutional mediations or do they prefer the flexibility of independent/ad-hoc mediations?
Again, data is sparse with respect to what the exact preferences are of the "majority" of people. What can be safely said is that different clients have different preferences. Cash strapped clients are far more likely to want to delay the legal process and avoid paying for as long as possible. The choice often comes down to a cynical cost benefit analysis. The client will look at whether the mediation process would avoid future legal fees down the line, and delay the legal process further in a way that benefits them. Parties may, on the other hand, regard the mediation process as an unnecessary expense if they are not interested in settling at all, or perhaps unable to due to financial reasons. Institutional mediations are still considered quite expensive in the UAE, so ad-hoc mediation is a far more likely option.
Laws on mediation
3.Are there any national laws or regulations that govern the conduct of mediations in your jurisdiction?
The DIFC-LCIA arbitration centre maintains Mediation Rules which govern any mediation occurring under an agreement which stipulates mediation, and where the jurisdiction selected for dispute resolution under the contract is arbitration via the DIFC-LCIA arbitration centre. The Mediation Rules, however, simply describe the administrative structure of mediation (that is, how to appoint the mediator, commence mediations and so on). Under the DIFC court rules, the court can encourage settlements in a number of ways (see Question 1). However, there is no requirement to compel parties to engage in mediation, like in the family court structure in the civil law system for example.
International treaties on mediation
4. Is your jurisdiction a signatory to any international treaties on mediation? If so, please list the treaties.
The DIFC, being a jurisdiction within the Emirate of Dubai, which is a part of the United Arab Emirates, is unable to enter into any independent treaties as it is not an independent nation or territory. Mediation as a pre-condition to litigation
5. In the absence of a dispute resolution clause, which calls for mediation, are parties required to engage in mediation as a pre-condition to accessing the local courts?
Mediation is a voluntary process via the DIFC courts (see Question 1).
Costs consequences of refusing to mediate
6. Can local courts force parties to mediate, especially in commercial or employment disputes? Do local courts impose costs for:
• Delay in consenting to mediation?
• Failure to attend mediation?
• Refusal to participate in mediation, particularly if that party is also a losing party in subsequent court proceedings?
There can be implications with respect to the assessment of costs by the court, if the party failed to follow the courts directive or encouragement to make good faith efforts to settle out of court (see Question 1). Part 38.23 of the DIFC court rules specifically allows a judge assessing costs imposed on a party to consider the conduct of parties in attempting to resolve the dispute.
Limitation period
7. What is the limitation period for filing a civil and commercial claim? Is the limitation period for initiating judicial or arbitral proceedings extended/suspended in cases where parties attempt to settle their disputes through mediation? What are the formalities required to trigger such extension/suspension?
This depends on the law applicable to the dispute. For example, in DIFC contract law there is a six-year limitation period, which can be reduced to one year by mutual agreement. If the limitation period is not clearly mentioned in the governing law chosen by the parties, then the limitation period is determined by the law governing the matter. Parties to a dispute in the DIFC can contractually choose which jurisdiction's laws will govern the dispute. If this is not chosen, then the DIFC laws will apply. For example, if UAE laws are chosen, the limitation period could be 15 years in some cases. Whether the limitation period will be suspended where the parties are attempting mediation depends on the case.
The DIFC will apply the law of the contract and its own rules. It would also depend on the existence of any other possible legal excuse for suspension, such as incapacity. Disputes suitable for mediation
8. Are there any class or type of disputes that are not considered suitable, either by law or otherwise, for mediation in your jurisdiction?
Mediation can generally be used in most civil or commercial cases.
Mediation agreement
9. Is it customary in your jurisdiction to execute a written mediation agreement before the start of the mediation proceedings to record the rights and obligations of the parties and the mediator?
Not necessarily. At times the court will encourage mediation through the case management system, or an external party, such as a professional mediator, will adjudicate the proceedings.
The DIFC-LCIA also adjudicates some mediation proceedings and maintains the DIFC-LCIA rules of mediation to this effect. Parties can rely on the external provider (a mediation institution or mediator) to conduct the mediation, or enter into a contract to define the rules or procedures governing mediation.
Standard clauses for mediation agreement
10. Are there any clauses that would be usual to see in a mediation agreement and/or that are standard practice in your jurisdiction?
Generally, entering into a mediation agreement is not standard practice in the region. However, if the parties aim to avoid litigation and more adversarial processes in the future, it is important that the parties establish a mediation requirement in any contract. This will be found in the "Dispute Resolution" section of the contract and may read as follows:
"Prior to the commencement of any litigation proceedings, both parties hereby agree to submit
to mediation, with a mediator mutually agreed by the parties. If within 30 days of commencing
mediation, or the sending of a notice to commence mediation by one of the parties, the dispute
remains unresolved, either party may initiate legal proceedings."
To reinforce this clause, the wording can mention a specific venue for mediation, such as the DIFC-LCIA, or a specific location/mediator/firm as the mediator.
Timing of mediation
11. When do parties usually mediate?
Parties usually mediate at the beginning of the dispute, and before any resolution via the courts. At times, mediation can also occur at the recommendation of the court, or after the notice of the claim is received by one party. Once one party receives notice, it may feel more inclined to attend mediation, as it becomes clear that the other party is serious. As for requesting a stay, it is possible for the court to adjourn the case to allow for mediation (see Question 1).
Choosing a mediator
12. How do parties usually choose a mediator? What happens if the parties cannot reach an agreement?
The parties may agree on a mediator beforehand or decide on one before commencing mediation. What happens if the parties don't agree depends largely on what the contract signed between parties stipulates. For example, a contract may stipulate that if the parties fail to agree within 30 days, then either party may refer the dispute to the courts.
Mediation is an entirely voluntary process, so failing to decide on a mediator can also result in the matter continuing through the courts.
Conduct of mediation
13. How are mediation proceedings conducted in your jurisdiction?
Generally, mediation is an informal process, governed by the mediator. The mediator will give both parties a chance to communicate their respective positions and demands. The mediator will also try and offer their guidance, and find middle grounds between the parties to work with.
Although it is quite informal, mediation proceedings conducted under the DIFC court rules are entirely confidential and considered a closed-door process in most cases. Any information or admissions made during this process are generally not admissible in court unless required by law. This differs from the procedural rules for mainland Dubai. In Dubai, and the UAE, though settlement discussions are theoretically confidential, there have been cases where discussions and information exchanged during settlement have been used against a party.
Facilitative or evaluative mediation
14. What approach does the mediator usually take to the mediation, is this facilitative or evaluative?
Whether a facilitative or evaluative approach is used depends on person to person, and mediator to mediator. There is no strict requirement in relation to this.
Time frame for mediations
15. What is the general time frame for mediations in your jurisdiction? Is there any statutory period within which mediations must be completed?
Mediation sessions can vary from one to two hours, to one or two days. Occasionally they are longer, and if encouraged by the court, they may take place between hearings (over a period of a few weeks or months at most). It generally depends on the temperament of the parties and under which conditions mediation is being invoked. If one party is generally disinterested in mediation, or is being sued for debts owed, which are not paid as a result of financial difficulties, mediation may serve as a mere formality. There is no particular statutory period under which mediations must be completed.
Professional advisors in mediations
16. Are parties required to be represented by professional advisors, such as lawyers in mediation proceedings? If there is no requirement, are professional advisers usually present?
There is no such requirement, but it is usually the lawyers who coordinate mediation and settlement efforts. Lawyers will often charge a fee for pre-trial settlement and mediation procedures. If these fail, the litigation fees will then be used to take the case forward for the client. However, if the case is settled out of court via mediation, then the lawyer may charge a fee for mediation and drafting the final settlement agreement, while the client will save on further fees associated with litigation. This arrangement is designed to further encourage mediation.
Judges as mediators
17. Do judges ever act as mediators? If so, do they commonly give a view as to the merits of a dispute? Are they then removed from involvement in the case if the mediation is not successful?
It is possible that some judges would serve as mediators in certain settings, however, I have yet to come across this arrangement in my practice. Mediator's role post an unsuccessful mediation attempt
18. Are there any provisions under national law or institutional rules that prohibit a mediator to subsequently act as a judge, arbitrator or conciliator in relation to the same dispute?
Although not specifically prohibited by law, it would however be highly unusual to see a mediator acting in those capacities.
19. Are court-integrated or judicial mediations (conducted under the 'shadow' of the court) and online
mediations popular in your jurisdiction? If so, what types of disputes are considered suitable for such
mediations? Give details of any pilot schemes that currently exist in your jurisdiction. Are any of these
schemes compulsory?
Out of court settlements are encouraged and very common, therefore the mediation processes behind these settlements are arguably quite common. Most commercial disputes are considered suitable, particularly debt collection or contractual disputes.
Costs
20. Who bears the cost in mediations involving civil and commercial disputes?
As court fees are not usually involved, each party bears their own costs. Confidentiality in relation to mediation proceedings
21.Are mediation proceedings considered confidential? In the absence of an express clause in the mediation agreement, can confidentiality be implied in negotiations conducted through mediation?
Confidentiality can generally be implied in theory in the DIFC under the DIFC court rules. However, this is not always the case in the UAE, therefore clients are advised to conduct mediation proceedings with an express confidentiality clause or a written understanding in place.
Confidentiality obligations of the mediator
22. Does the confidentiality obligation extend to the mediator as well?
Under the DIFC-LCIA rules, mediation proceedings are considered private. However, mediation taking place outside the DIFC-LCIA can have more flexible rules, as established between the parties. In most cases, it would be beneficial to maintain the obligation of confidentiality for the mediator, and this can be spelt out in the mediation contract.
Mediation contracts should ideally restrict the information the mediator is required to give in court, and we have not come across the indemnity clauses as laid out in the Standard document Provided by Practical Law.
23. Can the local courts override confidentiality provisions and permit confidential information arising out of, or relating to, a mediation to be disclosed under any circumstances?
I have not come across any such situation.
Documenting a settlement
24. How do parties usually formalise any settlement? Is the mediator involved in drafting the settlement agreement?
Usually the parties' attorneys draft a binding settlement agreement. The mediator may provide their input, or draft some aspects, but it is usually the attorneys who then submit it to the court for ratification and approval.
Disposal of court proceedings
25. How are court proceedings disposed of if settlement is reached at mediation?
The court ratifies the settlement agreement, and it becomes binding on the parties. Either party may then execute against the settlement agreement.
Enforcing settlements
26. Are there any special procedures for enforcing a settlement agreement reached at mediation? Does this differ from a settlement agreement reached outside mediation? Is it easier to enforce a settlement agreement reached at mediation?
Yes, generally the execution procedures available in the UAE apply to settlements. These are the liquidation of assets, and collection from bank accounts or owned property in the UAE. The same process would apply to settled matters in case of default. However, the settled matter must first be approved by the competent court before execution procedures may be commenced.
The settled matter would be easier to enforce for the simple reason that the agreement of both parties leaves the court with less areas of law and fact to examine when ordering execution and judgment in favour of a party.
Mediation institutions and centres
27. What are the main institutions or centres that provide mediations services, including appointment of mediator in your jurisdiction?
The DIFC-LCIA arbitration centre provides mediation services, which are well known in Dubai and the DIFC. Mediation Q&A: Dubai International Financial Centre (DIFC), Practical Law Country Q&A...
Accreditation schemes for mediators
28. Is there an accreditation scheme or regulatory body for mediators in your jurisdiction? Describe the qualifications, continued professional education schemes and training courses that such institutions have in place for mediators
The DIFC academy of law may offer some courses, and accreditation schemes. Please refer to the Academy's website at https://www.draacademy.ae/.
Contributor details
Zakir Mir, Attorney-Consultant
Infinigence Consulting
T +97338247303
E zakir@zakirmir.com
Areas of practice: Commercial Law, Corporate and Immigration.