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Covid-19 impact: How fast has dispute resolution transitioned to a digital model in UAE?

Covid-19 impact: How fast has dispute resolution transitioned to a digital model in UAE?

As the UAE ventures towards a phased resumption of economic activities, an increase in disputes is expected

Dispute resolution practitioners in the UAE are preparing themselves for a tsunami of disputes. The drop in the oil price and the impact of Covid-19 on the leisure and infrastructure sectors has created a perfect storm.

Preserving cash flow is a key driver for hard hit businesses. Litigation and arbitration will be a necessary tool to achieve this, as parties test the effectiveness of contract terms such as force majeure and price adjustment clauses.

The areas where we are seeing an increase in litigation and arbitration are:

· Debt recovery action and the enforcement of security by major banks, as payment defaults increase;

· Claims for force majeure and related claims mainly in the real estate, hospitality and construction industries where projects are being delayed or terminated and property prices have fallen to historic lows;

· Insurance related disputes where parties look to make claims under existing insurance policies. Unsurprisingly, we are seeing increased claims under business interruption coverage;

· Disputes between landlord and tenant – particularly regarding the termination of leases. The impact appears to cut across both residential and commercial tenants;

· Cyber related incidents and claims, which are on the rise as a natural consequence of the increased working from home necessitated by the lockdown with employees increasingly utilising less secure networks;

· Cross border restructuring and insolvency matters, such as for instance the recent administration of NMC Health in the UK and the consequential impact on its local subsidiary, NMC LLC.

The UAE is well-placed to meet the legal challenges posed by the coronavirus pandemic.

In recent times the UAE – onshore UAE, the DIFC and the ADGM – has made monumental progress in implementing steps to bring the UAE dispute resolution regimes in line with international best practice and standards.

The implementation of the UAE’s Federal Arbitration Law in the summer of 2018 and subsequent amendments to the UAE’s Civil Procedures Law by Cabinet Resolution No. 57 of 2018 have made real and positive changes to the conduct of arbitration and the enforcement of arbitral awards as well as foreign judgments.

More recently, the key amendments made on May 27, 2020, by the ADGM, Abu Dhabi’s financial free zone, to its founding law establish it as a significant rival to the DIFC Court.

Unlike the 2008/2009 global financial crisis, the UAE’s legal systems and infrastructure are well equipped to deal with the influx of these claims. In particular most courts and arbitral institutions are now efficiently applying the latest technology. The progress of claims should now speed up given the recent opening up of the UAE.

The effect of the pandemic has been to accelerate the transformation of dispute resolution to a fully digital model, with the parties working from electronic bundles and participants (including the judge and tribunal members) attending hearings remotely by video-conference.

Although a fully online hearing presents its own challenges, parties and their representatives are rapidly adapting to the new world.

As an alternative to litigation and arbitration, mediation (both formal and adhoc) is likely to assume increasing importance. Mediation offers parties the opportunity to reduce legal costs and achieve a commercial compromise which reflects the changing risks brought about by the pandemic. There appears to be a marked change in the mindset of parties who have historically resisted the use of alternative forms of dispute resolution such as mediation. We believe that in the current circumstances, we may see the emergence of mediation as a primary form of dispute resolution not only in the UAE but in the wider region.

Zoe O’Sullivan QC of Serle Court Chambers, London, and Deirdre Walker of Norton Rose Fulbright, Dubai

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