October 15, 2021

T-Break

Let'S Talk Law

Snapshot: civil asset recovery in United Arab Emirates

Civil asset recovery – jurisdictional issues

Parallel proceedings

Is there any restriction on civil proceedings progressing in parallel with, or in advance of, criminal proceedings concerning the same subject matter?

Article 28 of Federal Law No. 35 of 1992 (the Penal Procedure Code) (available on the United Arab Emirates (UAE) law database) provides that concurrent proceedings in the UAE civil courts should be stayed until a final judgment is rendered in criminal proceedings. This is without prejudice to the right to seek provisional or interim remedies.

A party may advance a civil claim in criminal proceedings, which will ordinarily only be determined in criminal proceedings if it is directly related to the alleged crime. The criminal court may decide to transfer the civil claim to the civil courts. A claimant may withdraw his or her civil claim during criminal proceedings without prejudice to his or her right to file an alternative claim before the civil courts.

Forum

In which court should proceedings be brought?

The judicial system is divided between the federal judiciary and emirate-level judicial departments. Each emirate has the right to maintain its own local judicial department. Abu Dhabi, Dubai and Ras Al Khaimah have their own independent judicial departments with distinct and separate courts. Ajman, Fujairah, Sharjah and Umm Al Quwain are under the federal court system.

Civil proceedings are commenced in the Court of First Instance, which has judicial circuits that include civil and commercial circuits.

The Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) are financial free zones established under federal law, which are exempt from the civil and commercial laws of the UAE. Both jurisdictions have their own procedural and substantive laws, and separate courts operating within an English-language common law system.

The courts of the ADGM and the DIFC tend to be referred to as ‘offshore’ and the Arabic-language civil law courts outside these free zones as ‘onshore’. 

A claimant must consider in which emirate any proceedings should be brought, whether the onshore courts (being courts of general jurisdiction) or the DIFC or the ADGM courts have jurisdiction (the latter being courts of special statutory jurisdiction) and whether such jurisdiction is exclusive. Relevant factors are likely to include, for example, the identity and domicile of the defendant or its assets, the cause of action and subject matter, the relief sought, and the applicable law.

Limitation

What are the time limits for starting civil court proceedings?

Under UAE law, there is a general long stop date of 15 years for civil claims. There are, however, many specific time limits that are set out in various laws and apply to different categories of claims as follows.

  • Commercial contracts: 10 years from the due date for the fulfilment of the obligation. 
  • Guarantees: six months from the date on which payment fell due.
  • Dishonoured cheques: two years after the expiry of the presentation period.
  • Act causing harm (similar to a tortious claim): three years from the date the victim became aware of the occurrence of the harm and of the identity of the person responsible for it, subject to the following requirements:
    • if such claim arises out of a crime and the criminal proceedings are extant after the expiry of the above time limit, the claim shall not be time-barred; and
    • in any event, any claim for an act causing harm must be commenced within 15 years from the date on which the harmful act took place. 

 

Under DIFC law, there is a general limitation period of six years after the date of the events that give rise to the proceedings. Specific time limits include:

  • for contracts, six years after the cause of action accrued;
  • for negligence, occupiers’ liability or misrepresentation, 15 years after the cause of action accrued; and
  • for fraud, six years after the aggrieved party becomes aware of the fraud if contract-based, otherwise there is no time limit. 

 

ADGM law generally adopts the limitation periods applied under English law, for example:

  • for contracts, within six years of the date of the breach;
  • for deeds, within 12 years of the date of breach;
  • for tort, within six years of the date the damage is suffered; and
  • for fraud, within six years from when the claimant discovered the fraud or when the claimant could have discovered it with reasonable diligence.

 

Jurisdiction

In what circumstances does the civil court have jurisdiction? How can a defendant challenge jurisdiction?

Onshore

These are the courts of general jurisdiction. Article 20 of Federal Law No. 11 of 1992 as amended (the Civil Procedure Code) (CPC) states that:

 

With the exception of actions in rem relating to real estate abroad, the courts shall have jurisdiction to hear actions brought against nationals and claims brought against foreigners who have a domicile or place of residence in the State.

 

The courts also have jurisdiction over actions against a party that has no residence in the UAE in circumstances set out in article 21 CPC, which includes disputes involving a contract executed or largely performed in the UAE.

Articles 31–40 CPC prescribe the courts’ local jurisdiction (ie, which court between the courts of the different emirates is the competent court). Those provisions mainly relate to the domicile of the defendant, the formation of the contract and the place of performance. Alternatively, the courts of the emirate in which the claimant is domiciled may have jurisdiction under article 40.

Generally, the courts will not decline jurisdiction based on a jurisdiction clause where the court would otherwise have jurisdiction unless there is a binding arbitration agreement.

A jurisdictional challenge should be raised by a defendant at the first hearing.

 

Offshore

These are courts of special statutory jurisdiction. They have jurisdiction where the parties have agreed in writing to submit their dispute to such jurisdiction or where there is otherwise a sufficient nexus of the claim to the jurisdiction as prescribed by applicable DIFC or ADGM law (eg, actions involving as a party an establishment in the offshore jurisdiction, contracts formed or performed there, or an incident that occurred there).

A defendant who wishes to dispute the court’s jurisdiction to try the claim, or who wishes to argue that the court should not exercise its jurisdiction, may apply to the court for an order declaring that it has no such jurisdiction or should not exercise any jurisdiction that it may have. A defendant who wishes to make such an application must first file and serve an acknowledgement of service, and make an application supported by evidence.

Civil asset recovery – procedure

Admissibility of evidence

What rules apply to the admissibility of evidence in civil proceedings?

Federal Law No. 10 of 1992 (the Law of Evidence) includes few rules on the admissibility of documentary evidence in onshore courts. There is no concept of privilege as understood in common law jurisdictions. The general position is that a document is admissible as evidence unless its authenticity is challenged by another party or called into question by the court. Regarding the weight of evidence, each document submitted, whenever possible, should be an original document, while copy documents are also admissible evidence. Copy documents are susceptible to a challenge of their authenticity by the opposing party but not solely by reason of being copies. Electronic documents and communications are expressly recognised as admissible evidence and printed copies of emails can stand as good evidence.

All non-Arabic documents submitted must be accompanied by translations into Arabic certified by a translator licensed by the Ministry of Justice.

Factual witness evidence (eg, written witness statements) is discouraged and will only be permitted following an application. In practice, it is rare for factual witness evidence to be adduced.

In offshore courts, there is a general rule of admissibility of documents and written witness evidence. All submitted non-English documents must be accompanied by translations into English.

A party may seek to have an opponent’s evidence excluded on the basis that it is irrelevant to the issues in dispute, privileged or improperly obtained, among other things.

Expert evidence is admissible only with the permission of the court.

Witnesses

What powers are available to compel witnesses to give evidence?

Onshore, the Law of Evidence provides that if a witness:

  • fails to attend after being duly summoned by a party or the court, a fine shall be imposed by the court of 1,000 to 2,000 dirhams;
  • fails to attend after being fined, a fine of 2,000 to 10,000 dirhams may be imposed and a subpoena may be issued; or
  • appears and abstains from taking the oath, or from answering without legal justification, he or she shall be sentenced to a penalty prescribed in Federal Law No. 3 of 1987 as amended (the Penal Code).

 

Article 253 of the Penal Code provides that a person who gives false testimony, denies the truth or keeps silent faces a minimum custodial sentence of three months.

In offshore courts, witness summons may be used when a witness is unwilling to provide evidence. This compels a witness to provide certain documents or give oral evidence, or both. The witness must be offered or paid travel expenses and compensation for loss of time.

A deponent who willfully refuses to obey an order of the court following a summons may be subject to sanctions and liable for costs.

Publicly available information

What sources of information about assets are publicly available?

The availability of public information varies across free zones and emirates. There are currently over 40 free zones in the United Arab Emirates (UAE), most of which maintain their own commercial, regulatory and other industry-specific registries, each with varying disclosure requirements. Some free zones – particularly the DIFC and the ADGM – offer a greater degree of transparency compared to those that allow for offshore company registration, principally the Jebel Ali Free Zone and the Ras Al Khaimah International Corporate Centre.

Basic company registration details – including status, date of incorporation and registered address – are generally available for companies registered onshore and in various free zones, but public shareholding disclosure requirements are fairly limited. There is a centralised commercial registry with basic information on company registration and licence details; however, in general, more accurate and up-to-date information can be found on the local free zone registries. Corporate filings, including financial statements and annual reports, are not publicly available for private companies.

Despite some of these limitations, a broader picture on assets can be established by piecing together data from multiple sources, including company announcements and disclosures. This information can often be found in Arabic or English (archived) daily newspapers, and can include references to ownership and changes in shareholding. Other public notices, including services of process and litigation filings, are available online, which may reference creditor actions and indicate whether any existing assets are frozen or otherwise encumbered. Miscellaneous industry-specific data, such as information on real estate, works-in-progress and escrow accounts, are also available online. 

To obtain a comprehensive picture of assets, this publicly available information should be coupled with local enquires to supplement any information gaps, in addition to broader public record searches such as local-language media, current and archived internet data, social media, and corporate data aggregator platforms. It is also always important to cast a wide net during public record research to capture information on UAE assets that may be contained in corporate filings lodged overseas.

Cooperation with law enforcement agencies

Can information and evidence be obtained from law enforcement and regulatory agencies for use in civil proceedings?

Law enforcement and regulatory agencies are unlikely to voluntarily provide information and evidence to parties for use in civil proceedings.

Onshore, article 20(2) of the Law of Evidence grants the courts the power to order any administrative body to present any information or documents it has in its possession that are necessary for the hearing of the case.

Offshore, a party may apply to the court for a third-party disclosure order, although this may raise jurisdictional issues and possibly wider public policy issues, depending on the respondent’s identity.

Third-party disclosure

How can information be obtained from third parties not suspected of wrongdoing?

Onshore, article 20(1) of the Law of Evidence provides that the courts may join a party to proceedings specifically for the purpose of ordering that it must produce a document in its possession, although in practice this is an extraordinary measure.

Offshore, a party may apply to the court for an order that requires a third party to disclose information or documents in its possession that are relevant to the claim. For example:

  • an order for non-party disclosure, which requires that:
    • the documents for which production is sought are likely to support the applicant’s case or adversely affect the case of one of the other parties to the proceedings; and
    • production is necessary to dispose fairly of the claim; and
  • an order directing a party to provide information about the location of relevant property or assets.

 

Civil asset recovery – remedies and relief

Non-compliance with court orders

How do courts punish failure to comply with court orders?

Onshore courts may impose fines on parties for failing to comply with court orders (articles 42, 70 and 71 CPC). In the event that a party fails to produce evidence where there is a legal obligation to do so, (except as otherwise provided for in the law) this amounts to a criminal offence of obstructing judicial proceedings and can be punished with imprisonment of up to six months or a fine of up to 5,000 dirhams (article 268 of Federal Law No. 3 of 1987 as amended (the Penal Code)).

Offshore courts have wide discretion to specify the consequences of non-compliance when making an order or on application for sanctions by the non-defaulting party. This may include cost-related consequences for the defaulting party, or (where contumacious) the strike-out of a statement of case or part thereof. Non-compliance may also be punishable by committal for contempt of court; for example, when a party breaches an injunction or an order for examination of a judgment debtor. A defaulting party may apply for relief from sanctions.

Obtaining evidence from other jurisdictions

How can information be obtained through courts in other jurisdictions to assist in the civil proceedings?

A formal request may be made to the Ministry of Justice (MOJ) to request judicial assistance from another jurisdiction under an applicable treaty or letters rogatory on the basis of reciprocity in both onshore and offshore courts. A list of bilateral judicial cooperation agreements can be found on the MOJ website.

Assisting courts in other jurisdictions

What assistance will the civil court give in connection with civil asset recovery proceedings in other jurisdictions?

This will depend on applicable judicial cooperation and mutual recognition agreements or letters rogatory through the principle of reciprocity in both onshore and offshore courts.

Causes of action

What are the main causes of action in civil asset recovery cases, and do they include proprietary claims?

Typically, causes of action arise out of the following in onshore courts:

  • contract, including fraudulent inducement and misrepresentation;
  • acts causing harm (tort or delict liability), including fraud and deception (Part 3 of Federal Law No. 5 of 1985) (the Civil Code); and
  • unjust enrichment or unjustified expropriation (Part 4 of the Civil Code).

 

Similar to English law, causes of action in offshore courts include but are not limited to:

  • breach of contract, including fraudulent acts;
  • deceit;
  • unlawful means conspiracy;
  • misappropriation;
  • fraudulent transfer;
  • conversion; and
  • unjust enrichment.

 

Remedies

What remedies are available in a civil recovery action?

Onshore, damages are the primary and usual remedy, assessed by the compensatory principle (ie, on the basis of loss suffered). Damages can include an award of loss of profit and interest. Other remedies include orders for seizure, delivery of property and restitution equivalent. Damages for unjust enrichment are available where a party has unjustly obtained a benefit.

Similar to the English courts, a very wide range of common law remedies are available in the offshore courts, including equitable remedies (eg, restitution, damages, seizure, constructive trust and account of profits).

Judgment without full trial

Can a victim obtain a judgment without the need for a full trial?

There is no provision for summary judgment in onshore courts. However, courts may issue a default judgment if the defendant has been duly served and fails to appear in the proceedings without good reason.

Offshore, summary and default judgment procedures are available (generally following English court procedures).

Post-judgment relief

What post-judgment relief is available to successful claimants?

Onshore, the claimant may obtain attachment orders over real estate and movable property. The claimant may also apply for a travel ban against, or the detention of, the defendant if he or she is an individual or the general manager of a corporate judgment debtor, who may then be judicially questioned regarding relevant assets.

Offshore, the claimant may (among other things) obtain freezing orders, charging orders and attachments of future assets or earnings. The claimant may also appoint a receiver, order a debtor to attend court and provide information to enable a judgment creditor to enforce a judgment.

Enforcement

What methods of enforcement are available?

Onshore, the principal method of enforcement is the attachment of any real estate or movable property and the subsequent execution of judgment through the judicial sale of such assets at auction. Garnishment is also available. The proceeds of execution will be distributed to the claimant subject to any other third-party claims. The method of enforcement is the same in offshore courts; by applying for charging orders and orders for sale of property. Third-party debt orders are also available.

Funding and costs

What funding arrangements are available to parties contemplating or involved in litigation and do the courts have any powers to manage the overall cost of that litigation?

Onshore, there is no prohibition on conditional fee agreements, but contingency fee agreements are prohibited. There are no prohibitions or restrictions on third-party funding.

Courts retain discretion in relation to costs. However, in practice, the successful party is usually only awarded court fees and a nominal sum for legal fees at the conclusion of the case (generally around 1,000 to 2,000 dirhams). There are generally no interim costs orders.

Offshore, there is no prohibition on conditional fee agreements. Contingency fee agreements are, however, prohibited in the DIFC. The ADGM permits certain Damages Based Agreements.

Third-party funding is permitted in the DIFC, subject to regulation under DIFC Practice Direction No. 2 of 2017. Third-party funding in the ADGM is subject to the ADGM Litigation Funding Rules 2019.

Costs are recoverable by parties in the offshore courts following the principles of English law, while the courts have broad powers and discretion in relation to costs on an interim and final basis.