Existing mediation landscape
Mediation has deep historical roots in local culture. Whilst commercial disputes are often resolved through arbitration and court actions, it is certainly not unheard of for multi-million dollar commercial disputes to settle amicably in the majlis (Arabic: ‘a place for sitting’), guided by a respected third party. Formal mediation options for commercial disputes have also existed for some time. Both the Abu Dhabi and Dubai chambers of commerce offer mediation services to members, the Centre for Amicable Resolution of Disputes in Dubai provides compulsory mediation services for smaller claims and optional mediation for larger ones (Dubai Law No. 16 of 2009, as amended by Administrative Resolution No. 1 of 2017 and Administrative Resolution No. (51) of 2020), and mediation is available under rules applicable in the Dubai International Financial Centre Court and Abu Dhabi Global Market Court.
What has changed?
The UAE Mediation Law is landmark legislation. It creates a comprehensive regulatory structure for mediation throughout the UAE for the first time, ensuring that a consistent framework applies in all emirates. The law follows a global trend towards regulation that either strongly encourages or mandates mediation of civil disputes. For example, in the UK, local courts have power to encourage mediation, provided both parties consent, while in Australia, the courts have power to compel parties to mediate, regardless of their consent.
Key features of the new law
The new law provides for ‘Judicial Mediation’ and ‘Non-Judicial Mediation’ (Chapters 2 and 3 of the UAE Mediation Law).
In respect of Judicial Mediation, competent courts now have power to refer disputes to mediation at any stage of a case, provided the parties consent. The court’s referral decision must also specify various matters, including the parties’ undertaking to appear at the mediation and to provide the mediator with required information and documents, the subject of the mediation, its duration (which must not exceed three months, renewable once) and the division of mediation costs (Article 5 of the UAE Mediation Law).
In respect of Non-Judicial Mediation, parties who have entered into a mediation agreement may directly resort to a ‘Mediation and Conciliation Centre’ (defined as a centre established under Federal Law No. 17 of 2016 as amended or any other local law) before commencing any legal action (e.g., before the local courts or an arbitral tribunal). Parties must make an application for Non-Judicial Mediation to a supervising judge. The court will prevent either party to an active mediation from commencing legal action before the courts or through arbitration, unless the mediation agreement is invalid or impossible to implement (Articles 22(1) and 23 of the UAE Mediation Law).
Judicial Mediation and Non-Judicial Mediation are subject to similar procedures (Articles 9 and 23 of the UAE Mediation Law). A mediator must notify parties of the mediation sessions (including through electronic means) and parties can attend the mediation sessions in person or through their legal representatives under a special power of attorney and can engage advisors to attend sessions with them. Prior to the first session, each party to the dispute must submit a brief summary of its claims to the mediator (but not to the other party), accompanied by supporting documents and evidence. Mediation sessions can be held remotely and the mediator has broad powers to conduct sessions and use whatever methods appropriate to bring the parties closer together, including holding private sessions with each party. Whilst mediators do not have investigative powers, they may hear testimony of third parties with the parties’ consent and appoint technical experts to assist them. Such experts can be selected from the expert rosters of the Ministry of Justice or (importantly) the parties may select any other expert (Articles 10, 11 and 12 of the UAE Mediation Law).
An agreement to mediate must be made in writing and can be made before a dispute occurs (in a standalone agreement or as part of a contract) or after a dispute arises (even if legal proceedings have been instituted). A mediation agreement can also be incorporated by reference provided such reference is clear. The mediation agreement must define the dispute to be resolved and must appoint a mediator or indicate a method for appointment. It is permissible for parties to agree that mediation can be conducted in a language other than Arabic (Article 3 of the UAE Mediation Law).
In the UAE, there is no general legal concept of ‘without prejudice’ communications, which is often a source of concern for parties who are attempting to reach an amicable settlement. However, the UAE Mediation Law makes it very clear that mediation procedures conducted in accordance with the law are confidential and no documents and information provided within them, including agreements or compromises, can be invoked before any court or any other entity whatsoever, unless there is approval of all parties involved or the documents or information relate to a criminal act (Article 14 of the UAE Mediation Law).
- Mediators and mediation centres
The law permits establishment of private mediation centres and branches of foreign mediation centres, subject to licensing requirements. Parties may appoint a private mediator and failing agreement, the competent court will provide options for potential mediators who are registered on a list maintained by the Mediation and Conciliation Centre. Proposed mediators must confirm their neutrality and independence and have a continuing duty to disclose any facts or circumstances that would cause either party to doubt this (Articles 4, 6 and 25 of the UAE Mediation Law).
Private mediators can agree their fees with the parties, but these are not to exceed 5 per cent of the amount in dispute. The competent court will determine any non-agreed fees and mediation costs under an order of petition. Before the mediation commences, each party must pay an advance on the initial mediation costs to the Mediation and Conciliation Centre. If the dispute is successfully settled by mediation, the claimant in a Judicial Mediation will receive a refund of the judicial fees paid by it (Articles 6(3) and 21 of the UAE Mediation Law).
If the dispute is successfully settled, the mediator will provide a copy of the signed settlement agreement to the Mediation and Conciliation Centre, which will in turn submit the agreement to the competent court. The competent court will affirm the agreement and terminate the dispute, as the case may be. Once affirmed, the agreement shall be deemed a writ of execution and shall have the force of a court judgment (Articles 18 and 20 of the UAE Mediation Law).
Mediation framework: success factors
The UAE Mediation Law has high potential to encourage more commercial parties in the UAE to mediate disputes as an alternative to litigation. However, confidence in the process (and willingness to try it) will largely depend on a number of factors:
The UAE Mediation Law foreshadows critical supplementary regulation that will strengthen the federal mediation framework. For example, it refers to Cabinet resolutions that will determine the licensing and operational conditions for private mediation centres and the registration of mediators (Articles 4 and 25 of the UAE Mediation Law). Similarly, the Minister of Justice is set to issue a Code of Professional Conduct for Mediators (presumably setting detailed standards for their ethical conduct), while controls and procedures for virtual mediation (presumably concerning security, confidentiality, etc.) are in the pipeline (Articles 12 and 26(1) of the UAE Mediation Law). If all these matters are addressed in a timely manner, mediation is expected to become more popular.
- Experienced local mediators
The UAE Mediation Law clearly aspires to make available high calibre mediators. These are to be selected from among the retired members of the judiciary, practising and non-practising advocates registered with the Ministry of Justice, and global experts in the field of business and law who are reputed for their expertise, integrity and neutrality (Article 4(1) of the UAE Mediation Law). In order for the UAE legal and business communities to ‘buy in’ to mediation as a concept, it will be critical to develop a substantial talent pool of mediators from key UAE industries, including major construction, water and energy, commodities, tourism and hospitality. These must be persons with a deep understanding of local law, customs, culture and business relations (and preferably not ‘imported’ mediators with little local knowledge). Given the UAE’s status as a hub for international business, multi-lingual mediators (fluent in Arabic, English and other languages) must be available, and if demand for traditional in-person mediation remains strong, mediators based ‘on the ground’ will keep costs down. A comprehensive training system to accredit mediators (held in English and Arabic) must also be developed.
- Model mediation agreement
Following the lead of international mediation centres, the Mediation and Conciliation Centre will need to support the business community by providing a template mediation agreement in English and Arabic. This will ensure parties have access to a template that is compliant with the UAE Mediation Law and help manage their expectations of the mediation process.
Mediation will not be appropriate in all disputes, but its merits (including avoiding wasted time and costs, and preserving business relationships) are well known. Over the past 20 years, the UAE has made several strides towards strengthening its arbitration and local court frameworks. Now there is the groundwork for a vibrant, local mediation culture.