31 mars 2020

Coronavirus and dispute resolution in Dubai


It goes without saying that the ongoing COVID-19 (coronavirus) pandemic has significantly disrupted business operations around the world, resulting in potentially severe legal ramifications.

Use of video conferencing in dispute hearings

In these uncertain times, parties to a dispute may find themselves concerned that the forthcoming final hearing of their matter will no longer go ahead as scheduled. Indeed, we have received many enquiries regarding whether a hearing that was supposed to take place in person can be conducted entirely over video conference to avoid protracted delay caused by the outbreak of the coronavirus.

Attendance at a hearing via video conference is becoming more common in the UAE, with the DIFC-LCIA Arbitral Rules make specific provision for it – the UAE Federal Law 6 of 2018 on Arbitration referring to "modern techniques" of communication – and both the DIFC and Onshore UAE Courts have conducted hearings electronically.

However, these means tend to be employed only on smaller interlocutory matters where there is no witness evidence, or where one of the witnesses cannot attend the hearing in person for cross-examination.

Conducting an entire hearing – which could potentially last anywhere from a number of days to a number of weeks –  by video conferencing is less common, and there are a number of questions you will have to ask yourself to decide whether the option is right for your case.

The following are some of the suggested considerations:

  • the number of locations from which people will be calling (two or three videolinks may be achievable, but nine or 10 may be technologically cumbersome).
  • the time zones in which the various attendees are located
  • whether all of the attendees have reliable internet connections with the requisite bandwidth
  • whether VOIP services are permitted in your country (for instance, in the UAE, only certain VOIP providers are licenced)
  • the number of documents you will need to refer to, and how these will be shared
  • whether the jurisdiction in question permits the use of video conference (if not, this may be raised on enforcement in any judgment or award)
  • what protocols need to be agreed for the swearing in and affirmation of witness evidence, so that there can be no disagreement on enforcement about whether witnesses were properly called
  • how you will securely conduct sidebar discussions when you need to discuss tactics and approach (if your team is spread across multiple locations)
  • whether the use of technology will be detrimental to the flow of complex cross-examination, and
  • whether attendees require any specialist equipment (if using a specific provider when conducting the virtual hearings).

Checklist for contractors

The COVID-19 pandemic and the restrictions introduced to end it could cause legal headaches for contractors, whose projects may stall due to:

  • the quarantining of labour
  • key members of the team being stuck abroad
  • delays in supply chains, and
  • delays in receiving approvals and signoffs.

Here is a brief checklist of things you can do to help support any delay claims you may need to submit as a result of coronavirus-related delays:

  • Check whether the pandemic falls under the definition of "force majeure" in your contract, and how this will affect any claims – force majeure events usually award time, but not costs (please note that whether the COVID-19 pandemic constitutes force majeure as a matter of law is dealt with separately below, but your contract may have a specific, limited definition of force majeure which will be applied).
  • If it is not force majeure, which provisions of the contract may entitle you to claim?
  • Check your contract for the notice provisions relating to claims, and ensure that you are providing notice not only on time, but with the amount of detail required by the contract.
  • If claims need to be substantiated in due course, keep as many records as possible, including any circulars and directives from authorities which may relate to the suspension of work.
  • If the contractor's representative provides letters suggesting that works should continue (or pointing to the contractor as the cause of delays), ensure that all letters are responded to in detail.
  • Make sure that you continue to comply with any provisions in the contract relating to the security of site and health and safety, to the extent you are not restricted.
  • Ensure that all licences and authorisations remain current and are not permitted to lapse.

Force majeure vs frustration

"Force majeure" refers to the general principle that performance of a contract has been interrupted by an "act of god". While UAE law does not provide an exhaustive list of events which may constitute force majeure – and it is currently unclear whether COVID-19 will be treated as such – the list commonly referred to includes floods, earthquakes and war.

That said, your contract might already provide a definition of force majeure, and the events that will be captured by it, meaning that it is important to familiarise yourself with the terms of your contract before relying on such provisions.

If you are intending to rely on force majeure to excuse your performance of a contract, it is important to note that UAE law states that a party relying on such an argument must demonstrate that the event or circumstance of the force majeure was both unforeseeable and rendered performance impossible for both parties (ie it does not simply make performance harder).

This does set a relatively high standard and, particularly if your contract contains force majeure provisions, those terms are likely to be interpreted and implemented strictly.

When relying on force majeure, it is also necessary to understand the effect of successfully making a claim. In most construction contracts, for instance, the existence of a force majeure event can permit the suspension of performance by the parties while the event or circumstance of the force majeure is ongoing, and may result in an award of time but not costs.

If the force majeure remains for a specified period of time, it may also permit termination. However, under UAE law, once force majeure is proven, the contract is deemed rescinded (ie parties revert to their pre-contractual positions, and where possible, damages are to be awarded).

This means that contractual provisions relating to force majeure can provide more flexibility where a situation (such as the COVID-19 pandemic) is temporary, and there is a possibility that works may resume. On that basis, if your contract does not provide for force majeure, and you believe that performance may resume in future, you may consider it unnecessary to bring a claim for force majeure as it could result in the entirety of the contract being prematurely cancelled.

Therefore, if you believe that claiming force majeure isn't viable in your specific circumstances, you can always investigate a claim for frustration (ie a claim that the performance of the contract is rendered more onerous as a result of unforeseen events). This can result in compensation being payable.

Often, your contract will provide a gateway for this type of claim, the most common in the construction industry being where there is an "upsetting of the economic balance of the contract", or where costs are incurred as a result of complying with a government directive or law.

The contract will usually refer to and provide an appropriate remedy, but under UAE law, the courts can make an adjustment to the contract to reflect the change in circumstances.  For example, Article 249 of the UAE Civil Code grants judges wide discretionary power to amend the parties' obligations where the economic balance of the contract is concerned, which may be preferable to having the contract cancelled via a force majeure claim.

Contact our team

Our lawyers are equipped to work remotely, and you can reach them through all the usual communication channels. We look forward to receiving your inquiries and feedback.

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