Small Claims – Small Costs – Small Worries

01 Sep 2015

For the majority of owners and managers of small to medium sized enterprises located within the UAE, the prospect of being a party to litigation is not only daunting, stressful and an experience one would not wish to repeat; it can also be a financially draining one too.

Typically, a case filed in the Dubai Courts or the UAE Federal Courts, will result in court and expert fees usually being included in any amount awarded under a judgment. However, only nominal legal fees will be awarded to the successful party, usually in the region of AED 1000. This means that each party will have to foot the bill for their own legal representation, even if they won the case.  As a result of this, SMEs often find that they just cannot afford to be a party to litigation, even where they have a very good prospect of succeeding at court.

The election of the DIFC Small Claims Tribunal (SCT) as the jurisdiction within a business’ contracts and/or terms and conditions, eliminates the requirements to appoint legal representation, as legal representation is not required (or indeed generally permitted) under this regime. The objective of the SCT is to provide swift, accessible and cost-effective resolution to parties’ disputes. Parties are able to represent themselves (where an individual party) or full-time officers or employees (including in-house counsel) may represent a corporate party. Proceedings and documents are to be conducted/produced in English.

Claims can be filed online and the cost for filing a claim in the SCT is:

• Employment claims - 2% of the value of the claim with a minimum of USD 100.
• Filing fees for claims relating to rental disputes which do not exceed AED 500,000 - 5% of the value of the claim with a minimum of USD 100.
• Filing fees for all other claims - 5% of the value of the claim with a minimum of USD 100. Claims can be filed online and the costs associated with filing a case

The SCT will hear and determine claims within the jurisdiction of the DIFC Courts:

(1)    where the amount of the claim or the value of the subject matter of the claim does not exceed AED 500,000 or;

(2)    where the claim relates to the employment or former employment of a party; and

all parties elect in writing that it be heard by the SCT (there is no value limit for the SCT’s elective jurisdiction in the context of employment claims); or

(3)   which do not fall within the provisions of sub-paragraphs (1) or (2) above, but in respect of which:

(a) the amount of the claim or the value of the subject matter of the claim does not exceed AED 1,000,000; and

(b) all parties to the claim elect in writing that it be heard by the SCT, and such election is made in the underlying contract (if any) or subsequent to execution of that contract; or

(4) such other claims as may be ordered or directed by the Chief Justice to be heard by the SCT from time to time.

Around 90% of claims filed in the SCT will be settled at the consultation stage(s), where a settlement is attempted to be reached before a judicial officer or judge of the SCT. Where not possible to settle, the matter will proceed to a full hearing in front of a different SCT judge.

By making some minor adjustments to present contracts, SMEs can elect into the SCT jurisdiction and potentially save themselves a great deal of anxiety and costs, so that they can “live to fight another day”.

Note from author: - the SCT may not be the most appropriate choice of jurisdiction for your business. For advice on jurisdiction and applicable law clauses, please contact Nichola Reece-Burton on nichola@jamesberrylaw.ae