Introduction
The concept of “without prejudice” communication plays a crucial role in facilitating settlement discussions. Commonly recognised in many common law jurisdictions, including England and Wales, the principle ensures that any admissions made during settlement negotiations cannot be used as evidence in court or other legal proceedings.
UAE laws do not explicitly provide for the without prejudice principle. In the past, judges in the UAE’s onshore courts considered the content and intent of the communication and did not exclude such evidence on the basis of the without prejudice principle. Consequently, parties were required to exercise caution by avoiding written records of settlement negotiations. This approach at times hindered settlement attempts.
In this client alert, we consider a recent Dubai court judgment which for the first time upholds the concept of without prejudice. We also explore the reasoning behind this judgment and the broader impact on the practice of law in the UAE.
Dubai Court judgment providing for without prejudice communications
A judgment issued on 3 April 2024 by the Dubai Court of Appeal in case no. 31/2024 – Commercial Appeal (Appeal Judgment), which was upheld by the Dubai Court of Cassation on 22 October 2024 in case no. 486/2024 – Commercial Cassation (Cassation Judgment), for the first time sets out the UAE’s judicial definition of the without prejudice concept. These rulings emphasise that confidentiality of settlement negotiations must be maintained and clarify the conditions under which such communications are protected from disclosure in onshore court proceedings.
Background
The case involves a commercial dispute in Dubai where the plaintiff accused the defendant of failing to transfer the agreed amount of USDT cryptocurrency after receiving a cash payment. Expert verification confirmed a shortfall based on witness testimonies. The defendant admitted to receiving less than claimed but contested the expert’s findings. A court-appointed experts’ committee concluded a lower amount was due, compared to that concluded by the first expert, based on the defendant’s admissions. The plaintiff appealed, arguing that the Court of First Instance did not properly evaluate evidence, including WhatsApp communications during settlement negotiations, where the defendant allegedly admitted to owing the higher amount.
Court’s decision and applied test
The Court of Appeal upheld the lower court’s judgment, ruling that statements made during settlement negotiations were inadmissible as evidence.
The Appeal Judgment addressed the issue of communications made during settlement negotiations and held that those statements cannot be taken as evidence or admission against the party who made them if the negotiations yield no amicable resolution. That is because the said “Statement [was made] without prejudice”. Furthermore, the court emphasised that such statements gain immunity, protecting them from being considered as evidence before the court.
In reaching its conclusion, the Court of Appeal applied the principle of without prejudice by excluding settlement communications from evidence submitted to the court. Although it is not clear from the Appeal Judgment whether the settlement communications between the parties were marked “without prejudice”, there was a clear intent to facilitate settlement through these communications. It can be inferred that the courts do not require that the communications be marked “without prejudice” as long as there is clear intent that confirms the existence of settlement efforts.
The Cassation Judgment upheld the Appeal Judgment, reiterating the principle that communications made throughout the course of failed settlement negotiations cannot be considered as evidence or admissions as they were made without prejudice and are inadmissible as evidence against the party who made them.
The Court of Cassation further clarified that even if the settlement negotiations were unsuccessful, communications made during settlement negotiations remain protected and cannot be considered as evidence in court proceedings.
Impact on future settlement negotiations in onshore proceedings
The judgments demonstrate a significant evolution in the Dubai courts. While the UAE does not have a system of judicial precedent, the judgments will have strong persuasive effect in future commercial disputes. As such, confidential communications made without prejudice during settlement negotiations should be protected from disclosure.
Legal practitioners and parties involved in commercial settlement negotiations should be mindful of this principle. They should ensure that any communications exchanged during settlement discussions clearly indicate that they are made during negotiations and are agreed to be confidential and without prejudice. Parties may also refer to the Dubai courts’ judgments in the body of their communications to further emphasise their confidentiality.
It remains to be seen whether the UAE enacts an explicit rule or a decision is issued by the Authority for the Unification of Conflicting Judicial Principles clarifying the UAE law’s position regarding the without prejudice concept. That would be a welcome development as it would eliminate any remaining risk to parties engaging in without prejudice negotiations.
Conclusion
The recent judgment by the Dubai Court of Cassation signifies a transformative step toward aligning UAE legal practice with international standards regarding the principle of without prejudice. By ensuring the confidentiality of settlement communications, the ruling fosters a conducive environment for open and honest negotiation, encouraging parties to resolve disputes amicably without fear of legal repercussions. As the UAE continues to develop its legal framework, these decisions provide valuable guidance for practitioners and businesses, highlighting the importance of adopting clear settlement protocols. While further legislative clarity would solidify these advancements, the judgments represent a promising evolution in the UAE’s approach to commercial dispute resolution.
Client Alert 2025-002
