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In our previous post, an article was published about the part one(1) of the introduction to insurance titled Introduction to Insurance in UAE Part 1 briefing you about insurance and here is the insight of the briefed post giving you more details.
However, if the insured has a ‘reasonable excuse' for the delay, a term in the insurance policy that provides that late notification means an insured's rights shall ‘lapse' under an insurance policy, will be void under UAE law.54 Further, ‘arbitrary' clauses are void (i.e., where a breach not connected to the occurrence of the insured risk is potentially invalid); this could include breach of a notification provision.55
If an insured fails to provide all information requested by insurers following notification, this can amount to a reason to deny the claim in circumstances where such information is required to ascertain the incident or the extent of the loss56 and where the insured has no reasonable excuse for the delay.57
The limitation period for claims under insurance contracts is three years from the occurrence of the incident, or from the date of the insured having knowledge of that occurrence.58 The limitation period in respect of marine insurance is generally two years from the date of the incident or where a third party makes a claim against the insured.59 Further, limitation is suspended under marine insurance by ‘registered letter or delivery of other documents relating to the claim',60 or a ‘legal excuse'.61
Good faith and claims
Parties to contracts (including insurance contracts) governed by UAE law are subject to the obligation to perform the contract in ‘good faith'; this includes an obligation on the insurer to exercise good faith in paying claims.62 It follows that it may, theoretically, be possible for the insured to claim damages for breach of this duty of good faith when adjusting and settling claims (i.e., this would be similar to the punitive ‘bad faith' claims), to claim damages for consequential losses flowing from the insurer's breach, or both.
IV DISPUTE RESOLUTION
i Jurisdiction, choice of law and arbitration clauses
The courts have jurisdiction over any dispute arising out of an insurance policy where the domicile of the insured is within the jurisdiction.63 The courts also have jurisdiction over claims brought against UAE nationals (i.e., a UAE legal entity) or a foreign legal entity with a domicile or place of residence in the UAE.64 Any agreement to the contrary is void under UAE law.65
In theory, UAE law recognises choice of law clauses. However, the courts will not apply laws that are contrary to shariah or public policy (a concept that is broadly construed). Moreover, there are specific matters where a court will not uphold a foreign choice of law clause, for example: real property,66 contracts entered into or performed in the UAE67 and employment matters. In practice, however, foreign choice of law provisions will likely be ignored by a UAE court.
Arbitration clauses are recognised and enforced in the UAE. However, there are certain formalities that need to be observed for an arbitration clause to be valid under UAE law. An arbitration agreement must be evidenced in writing and must be signed by someone who has the specific authority to settle disputes.68
ii Litigation
Litigation stages, including appeals
Litigation in the UAE is divided into three stages: (1) court of first instance; (2) court of appeal; and (3) the Federal Supreme Court (colloquially referred to as the Court of Cassation in the emirates, which have their own judicial system).
In the event a claimant seeks to file a claim in the courts of Abu Dhabi or Dubai, it must first file the claim with the Abu Dhabi Settlement and Reconciliation Committee (in respect of civil, commercial and labour claims) or the Centre for Amicable Settlement of Disputes (for the majority of claims in Dubai save for a few exempt categories)69 respectively.
Substantive proceedings are then commenced in the UAE court by the filing of: a statement of claim along with; a power of attorney (POA) issued in favour of a local advocate; and the appropriate court fee. Once these are filed, the court will schedule a hearing date and the defendant will be served with the claim.
Separate hearings for the defendant to submit its POA and its defence, and for any further submissions, will be scheduled and held until the court considers that it has enough information either to appoint a court expert or pass judgment.
Either party has an automatic right to appeal judgments of the court of first instance to the court of appeal.70 Appeals to the Court of Cassation from the court of appeal can only be made on points of law (in accordance with the specific grounds set out in the Civil Procedure Code).71
The judgment creditor should apply to the Execution Court in order to enforce the judgment against the defendant.
Evidence
A party is required to present evidence that it relies on in support of its claims or defence and there is no obligation to disclose documents that are relevant or helpful to the other party. The court may be asked to order the specific disclosure of a document.72 Oral witness testimony is possible on application to the court, but is uncommon.
Where causes of action are based on documentary evidence and there is a dispute about the validity of a document, the original documents must be produced.73
All submissions to the court, including documentary evidence, must be filed in Arabic. Any evidence in any other language will need to be translated and certified by a legal translation company registered and certified with the Ministry of Justice.
Experts are appointed by the court from a panel of experts according to their particular specialisation. The parties may also agree to use a particular expert from the panel. If appointed, the expert will set a meeting with the parties and allow the parties to submit further documents in addition to those already submitted to the court (including the parties' own expert evidence). Once the expert has filed his or her report, the parties are given the opportunity to comment on it.
While the opinion of the expert is not binding on the court,74 the court will usually follow the recommendations in the expert's report. Significantly, the factual findings of an official document (which are those in which a public official or person employed in public service certifies what has taken place before him or her or what he or she has been informed of by the parties concerned within the limit of his or her authority and jurisdiction, such as a police report) is binding upon a UAE court.75
Costs
In the UAE, only nominal legal costs are recoverable by a successful party (often in the region of 5,000 dirhams) at each stage of proceedings. Court filing fees and expert fees are, however, recoverable as part of the final (successful) judgment awarded by the court.
iii Arbitration
Format of insurance arbitrations
The applicable UAE insurance law recognises arbitration agreements. As above, in respect of insurance contracts, the arbitration clause must be set out in a separate agreement signed by by both parties.76 Ad hoc arbitration is also recognised in the UAE.
Arbitration proceedings in the UAE (i.e., onshore) are governed at the federal level by Articles 203 to 218 of the Civil Procedure Code,77 whereas different arbitration laws will govern offshore arbitrations.78
The arbitration provisions of the Civil Procedure Code are not based on the UNCITRAL Model Law and these federal law provisions are largely underdeveloped, as compared to the DIFC and the ADGM arbitration laws, which are modelled on the UNCITRAL Model Law and in accordance with international standards of best practice.
Procedure and evidence
There are a number of arbitration centres and institutions, both onshore and offshore. Onshore centres and institutions include the Dubai International Arbitration Centre, the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai. There are also other domestic arbitration centres, such as in Sharjah and Ras Al Khaimah. Examples of offshore institutions include the DIFC-LCIA Arbitration Centre and the ADGM. Each institution will have its own procedural rules that will apply insofar as they do not contradict the mandatory rules of the Civil Procedure Code or the offshore law as applicable.
The UAE is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) since 2006. While there has been uncertainty around the enforcement of arbitral awards in the UAE under the Convention, recently, UAE courts have more readily recognised enforcement of foreign arbitral awards.79 UAE arbitral awards should also be enforceable in other Convention signatory states.
Costs
Arbitrators can award costs at their discretion. A party may apply to the courts to vary the tribunal's assessment of costs; however, the usual position is that the unsuccessful party pays the winner's costs.
iv Alternative dispute resolution
In relation to insurance claims, UAE onshore legal proceedings will be subject to the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai, as explained in subsection iii, supra. In respect of other emirates, there are no other insurance-specific alternative dispute resolution centres.
v Mediation
Parties can mediate disputes at the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai.
V YEAR IN REVIEW
i Regulation
Financial regulations came into force in 2016 requiring insurers that are operating in the UAE to maintain significant internal systems and risk management policies to comply with their obligations, including risk-based solvency capital requirements, establishment of a risk management system and rules requiring investment of company assets in a prudent manner.
In mid-2016, HAAD announced a number of amendments to the Abu Dhabi health insurance programme. A significant change to one of the plans80 stipulates that beneficiaries under the plan will receive 80 per cent of the coverage of the fees for treatment at private healthcare facilities, but will continue to benefit from 100 per cent coverage for treatment at governmental healthcare facilities in Abu Dhabi.81 The UAE now requires that health insurance is in place as a prerequisite to the issuance or renewal of an Emirati resident visa.
At the end of September 2016, the Insurance Authority issued the unification (i.e., standardisation) of motor vehicle insurance policies. In addition, on 18 December 2016, the Insurance Authority issued the vehicle Insurance Rates Regulation, which adopted minimum and maximum limits of premium rates. Insurance companies, agents and brokers are precluded from imposing or collecting any additional premiums over and above the specified rates.
ii Insurance Law reform
No recent insurance law reforms have taken place. A new Commercial Companies Law has recently come into force in the UAE that is likely to have implications for directors and officers (D&O) insurance.82 D&O insurance has not been widely purchased in the UAE to date. This may change as a result of the new Commercial Companies Law widening the duties and liabilities of directors and officers (including managers) and broadening sanctions for breaches of those duties.
As a result of the widening duties and liabilities of directors and officers under the Commercial Companies Law, it is unclear whether a company can legally indemnify a director or officer (such that it could claim under a side B (corporate reimbursement) cover). In the light of this uncertainty, any director or officer should look carefully at their side A cover, which is likely to be the responsive cover.
iii Dispute resolution
In October 2016, the DIFC's Dispute Resolution Authority (DRA) and the Jebel Ali Free Zone Authority (JAFZA) entered into a memorandum of understanding in which the authorities agreed to allow access to the DIFC courts for JAFZA companies, and to allow these companies to freely choose to use DIFC laws and the DIFC courts as a jurisdiction for dispute resolution.
Moreover, Decree No. 19 of 2016 has created a new judicial authority to exclusively deal with conflicts of disputes between the DIFC courts and the Dubai courts. Prior to this, all matters regarding conflicts of disputes were generally referred to the Union Supreme Court and it is envisaged that this Decree will obviate such referrals and the attendant delays. However, it remains to be seen how the Decree will be applied in practice with its first decision setting back the status of the DIFC courts as a ‘conduit jurisdiction'.83
VI OUTLOOK AND CONCLUSIONS
i Regulation
The Insurance Authority is taking a more proactive approach to the regulation of the insurance and reinsurance market. With respect to vehicle insurance, the Insurance Authority is considering proposals to compel insurance companies to insure electrical vehicles. Significant focus has been on managing market conduct to ensure client protection and promoting transparency and fairness for all parties. Future regulation of the insurance market is expected to be drafted with the same principles in mind.
ii Insurance law reform and procedural developments
Early in 2016, a committee was established to review the Maritime Code and determine whether it could benefit from revision and updating. At the time of writing, no such revisions or updates have been published but this is an area to watch to see whether there is an overhaul of marine insurance law in the UAE.
iii Dispute resolution
The proposed, and highly anticipated Federal Law on Arbitration is likely to be a unifying (i.e., standardising) law and it is anticipated that it will increase the UAE's profile as a destination for alternative dispute resolution as it is based on the UNCITRAL Model Law, and is expected to replace the existing federal regime under Articles 203-218 of the Civil Procedure Code.
Since the DIFC courts have taken a proactive approach to enforcement of foreign arbitral awards, it has become a popular conduit through which parties can enforce foreign arbitral awards onshore.
Initiatives, such as the memorandum of understanding between the DRA and JAFZA, and Decree 19, are becoming more common as the various jurisdictions work towards the Dubai Plan 2021 and the UAE Vision 2021.
Footnotes
1 Sam Wakerley and John Barlow are partners, and Josianne El Antoury is an associate, at Holman Fenwick Willan Middle East LLP.
2 UAE Insurance Authority Annual Report on the UAE Insurance Sector 2015.
3 An analysis of DIFC law as well as other offshore jurisdictions (such as the ADGM) are beyond the scope of this chapter.
4 However, in relation to insurance contracts, strictly speaking, the arbitration clause must be set out in a separate agreement agreed to by both parties as per Article 1028(1)(d) of the Civil Code.
5 For example: labour disputes; temporary and summary actions or orders; proceedings where the government is named as a party; and proceedings that are outside the Civil Court's jurisdiction.
6 Article 26 of the Insurance Law provides that: ‘It is not permissible to carry out insurance with an insurance company outside the state on property in the state, or on the liabilities arising from the same. It is not permissible either to broker for insuring such property or liabilities except with a company registered in accordance with the provisions hereof.' In practice, the Insurance Authority prohibits any insurance products from being provided by foreign insurers irrespective of the type of risk being insured.
7 The Insurance Authority's Board Resolution No. 3 of 2010.
8 Article 3(12) of the Insurance Authority's Board Resolution No. 3 of 2010.
9 While bancassurance arrangements are practised in the UAE, the Insurance Authority's board of directors' decision of 2016 concerning the instructions on marketing insurance policies through banks is still in draft form and is yet to be enacted.
10 Article 10 of the Insurance Authority's Board Resolution No. 3 of 2010.
11 According to Article 2 Cabinet Decision No. 23 of 2009 concerning Charges, Supervision, Control and Transactions of Insurance.
12 Section 1, Article 3 of Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies (Financial Regulations).
13 Section 2, Article 4(1)(a) of Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies.
14 www.ia.gov.ae/en/news/pages/financial-regulations.aspx
15 Section 2, Article 8(1) of Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies.
16 Federal Law No 18 of 1993.
17 Federal Law No 5 of 1985.
18 Articles 1026-1055 of the Civil Code.
19 Along with the Insurance Law and the Insurance Authority Board Resolution No. 3 of 2010.
20 Articles 399-420 of the Maritime Commercial Code (Federal Law No. 26 of 1981).
21 An analysis of takaful insurance is beyond the scope of this chapter.
22 Article 1026(1) of the Civil Code.
23 Articles 125-148 of the Civil Code.
24 Article 1026(1) of the Civil Code.
25 Article 1035 of the Civil Code.
26 Court of Cassation judgment No. 281 of 1993.
27 Article 368 of the Maritime Code.
28 Article 246(1) of the Civil Code.
29 Article 3 of the Insurance Authority's Board Resolution No. 3 of 2010.
30 Article 1033 of the Civil Code.
31 Article 388 of the Maritime Code.
32 Article 6 of the Insurance Authority's Board Resolution No. 3 of 2010.
33 Federal Law No. 1 of 2006.
34 Article 7 of the Insurance Authority's Board Resolution No. 3 of 2010.
35 Article 373 of the Maritime Code.
36 Article 28 of the Insurance Law.
37 Article 104 of the Insurance Law.
38 Articles 258(2) and 259 of the Civil Code. There is often confusion in this area as the Civil Code also provides that the criterion in construing contracts is intentions and meanings and not words and form (as per Article 258(1) of the Civil Code).
39 Article 265(1) of the Civil Code.
40 Article 265(2) of the Civil Code.
41 Article 266(1) of the Civil Code.
42 Article 266(2) of the Civil Code. See, for example: Dubai Court of Cassation Case No. 125/2009 which held that a Construction All Risk insurance policy was a contract of adhesion under Article 266 of the Civil Code and therefore any ambiguity should be resolved against the insurer; Dubai Court of Cassation Case No. 247/2003 also held, in a life insurance case, that any ambiguity should always be resolved in favour of the insured.
43 Article 7 of the Insurance Authority's Board Resolution No. 3 of 2010.
44 Article 1028(c) of the Civil Code.
45 Article 7(2)(a) of the Insurance Authority's Board Resolution No. 3 of 2010; Article 28 of the UAE Insurance Law.
46 Article 28 of the Insurance Law.
47 Article 1028(d) of the Civil Code; Article 7(2) of the Insurance Authority's Board Resolution No. 3 of 2010.
48 Article 1028 of the Civil Code.
49 Article 246(2) of the Civil Code.
50 Article 26(4) of the Resolution of the Board of Directors of the Insurance Authority No. 15 of 2013 concerning insurance brokers regulation (the Insurance Authority's Brokers Regulations).
51 Article 3(3) of the Insurance Authority's Brokers Regulations.
52 Article 3(4) of the Insurance Authority's Brokers Regulations.
53 Article 7(5) of the Insurance Authority's Board Resolution No. 3 of 2010.
54 Article 1028(b) of the Civil Code.
55 Article 1028(e) of the Civil Code.
56 Article 9(6) of the Insurance Authority's Board Resolution No. 3 of 2010.
57 Article 1028(b) of the Civil Code.
58 Article 1036 of the Civil Code.
59 Article 399(1) of the Commercial Maritime Code.
60 Article 399(3) of the Commercial Maritime Code.
61 Article 399(1) and (2) of the Commercial Maritime Code.
62 Articles 246 and 1034 of the Civil Code, Article 3 (2) of the Insurance Authority Directive (Code of Conduct for Insurance Companies issued by the Insurance Authority (Insurance Authority Resolution No. 3 of 2010)).
63 Article 37 of the Civil Procedure Code (Federal Law 11 of 1992), which requires that insurance policy claims should be filed with the Court having jurisdiction over the place in which the beneficiaries are domiciled.
64 Article 20 of the Civil Procedure Code.
65 Article 24 of the Civil Procedure Code.
66 Article 21(2) of the Civil Procedure Code.
67 Article 21(3) of the Civil Procedure Code.
68 Article 203 of the Civil Procedure Code. In respect of insurance contracts for example and as identified above, an arbitration clause must be in a special agreement and separate from the general printed conditions of the policy (Article 1028(1)(d) of the Civil Code).
69 For example: labour disputes; temporary and summary actions or orders; proceedings where the government is named as a party and proceedings which are outside the Civil Court's jurisdiction.
70 Article 158 of the Civil Procedure Code.
71 Article 173 of the Civil Procedure Code.
72 Article 18(1) of the Law of Evidence in Civil and Commercial Transactions (Federal No. 10 of 1992).
73 Article 45 of the Civil Procedure Code.
74 Article 90(1) of the Law of Evidence.
75 Articles 7 and 8 of the Law of Evidence.
76 As per Article 1028(1)(d) of the Civil Code.
77 As above, Article 203 states that an arbitration agreement must be evidenced in writing and signed by someone who has the specific authority to settle disputes.
78 For example, the DIFC Arbitration Law 2008 apply in the DIFC and the ADGM Arbitration Regulations 2015 apply in Abu Dhabi.
79 For example, see Case No. 693 of 2015 where the Court of Cassation recognised for enforcement a London-based arbitration award.
80 The ‘Thiqa' plan, which is a minimum standard health insurance plan for UAE nationals.
81 Changes to the Basic Plan (which is a minimum standard for expatriates with a visa issued in Abu Dhabi only) include allowing workers above the age of 40 to co-pay their insurance premium, up to 50 per cent, as agreed between the employee and employer. In addition, all employees (domestic workers working at Emirati households are currently exempt) under this Basic Plan will be required to pay 50 per cent of the insurance policy's premium for their dependants (wife and up to three children).
82 Federal Law No. 2 of 2015.
83 The Judicial Tribunal's first decision has ordered the DIFC Courts to (1) ‘cease to entertain' a claimant's application for the recognition and enforcement of a 965 million dirhams arbitration award of the Dubai International Arbitration Centre against a DIFC-based company (Daman Real Estate); and (2) refer the matter to the onshore Dubai courts for trial.
You can also read the previous post on the part 1 titled, Introduction to Insurance Part 1
In our previous post, an article was published about the part one(1) of the introduction to insurance titled Introduction to Insurance in UAE Part 1 briefing you about insurance and here is the insight of the briefed post giving you more details.
However, if the insured has a ‘reasonable excuse' for the delay, a term in the insurance policy that provides that late notification means an insured's rights shall ‘lapse' under an insurance policy, will be void under UAE law.54 Further, ‘arbitrary' clauses are void (i.e., where a breach not connected to the occurrence of the insured risk is potentially invalid); this could include breach of a notification provision.55
If an insured fails to provide all information requested by insurers following notification, this can amount to a reason to deny the claim in circumstances where such information is required to ascertain the incident or the extent of the loss56 and where the insured has no reasonable excuse for the delay.57
The limitation period for claims under insurance contracts is three years from the occurrence of the incident, or from the date of the insured having knowledge of that occurrence.58 The limitation period in respect of marine insurance is generally two years from the date of the incident or where a third party makes a claim against the insured.59 Further, limitation is suspended under marine insurance by ‘registered letter or delivery of other documents relating to the claim',60 or a ‘legal excuse'.61
Good faith and claims
Parties to contracts (including insurance contracts) governed by UAE law are subject to the obligation to perform the contract in ‘good faith'; this includes an obligation on the insurer to exercise good faith in paying claims.62 It follows that it may, theoretically, be possible for the insured to claim damages for breach of this duty of good faith when adjusting and settling claims (i.e., this would be similar to the punitive ‘bad faith' claims), to claim damages for consequential losses flowing from the insurer's breach, or both.
IV DISPUTE RESOLUTION
i Jurisdiction, choice of law and arbitration clauses
The courts have jurisdiction over any dispute arising out of an insurance policy where the domicile of the insured is within the jurisdiction.63 The courts also have jurisdiction over claims brought against UAE nationals (i.e., a UAE legal entity) or a foreign legal entity with a domicile or place of residence in the UAE.64 Any agreement to the contrary is void under UAE law.65
In theory, UAE law recognises choice of law clauses. However, the courts will not apply laws that are contrary to shariah or public policy (a concept that is broadly construed). Moreover, there are specific matters where a court will not uphold a foreign choice of law clause, for example: real property,66 contracts entered into or performed in the UAE67 and employment matters. In practice, however, foreign choice of law provisions will likely be ignored by a UAE court.
Arbitration clauses are recognised and enforced in the UAE. However, there are certain formalities that need to be observed for an arbitration clause to be valid under UAE law. An arbitration agreement must be evidenced in writing and must be signed by someone who has the specific authority to settle disputes.68
ii Litigation
Litigation stages, including appeals
Litigation in the UAE is divided into three stages: (1) court of first instance; (2) court of appeal; and (3) the Federal Supreme Court (colloquially referred to as the Court of Cassation in the emirates, which have their own judicial system).
In the event a claimant seeks to file a claim in the courts of Abu Dhabi or Dubai, it must first file the claim with the Abu Dhabi Settlement and Reconciliation Committee (in respect of civil, commercial and labour claims) or the Centre for Amicable Settlement of Disputes (for the majority of claims in Dubai save for a few exempt categories)69 respectively.
Substantive proceedings are then commenced in the UAE court by the filing of: a statement of claim along with; a power of attorney (POA) issued in favour of a local advocate; and the appropriate court fee. Once these are filed, the court will schedule a hearing date and the defendant will be served with the claim.
Separate hearings for the defendant to submit its POA and its defence, and for any further submissions, will be scheduled and held until the court considers that it has enough information either to appoint a court expert or pass judgment.
Either party has an automatic right to appeal judgments of the court of first instance to the court of appeal.70 Appeals to the Court of Cassation from the court of appeal can only be made on points of law (in accordance with the specific grounds set out in the Civil Procedure Code).71
The judgment creditor should apply to the Execution Court in order to enforce the judgment against the defendant.
Evidence
A party is required to present evidence that it relies on in support of its claims or defence and there is no obligation to disclose documents that are relevant or helpful to the other party. The court may be asked to order the specific disclosure of a document.72 Oral witness testimony is possible on application to the court, but is uncommon.
Where causes of action are based on documentary evidence and there is a dispute about the validity of a document, the original documents must be produced.73
All submissions to the court, including documentary evidence, must be filed in Arabic. Any evidence in any other language will need to be translated and certified by a legal translation company registered and certified with the Ministry of Justice.
Experts are appointed by the court from a panel of experts according to their particular specialisation. The parties may also agree to use a particular expert from the panel. If appointed, the expert will set a meeting with the parties and allow the parties to submit further documents in addition to those already submitted to the court (including the parties' own expert evidence). Once the expert has filed his or her report, the parties are given the opportunity to comment on it.
While the opinion of the expert is not binding on the court,74 the court will usually follow the recommendations in the expert's report. Significantly, the factual findings of an official document (which are those in which a public official or person employed in public service certifies what has taken place before him or her or what he or she has been informed of by the parties concerned within the limit of his or her authority and jurisdiction, such as a police report) is binding upon a UAE court.75
Costs
In the UAE, only nominal legal costs are recoverable by a successful party (often in the region of 5,000 dirhams) at each stage of proceedings. Court filing fees and expert fees are, however, recoverable as part of the final (successful) judgment awarded by the court.
iii Arbitration
Format of insurance arbitrations
The applicable UAE insurance law recognises arbitration agreements. As above, in respect of insurance contracts, the arbitration clause must be set out in a separate agreement signed by by both parties.76 Ad hoc arbitration is also recognised in the UAE.
Arbitration proceedings in the UAE (i.e., onshore) are governed at the federal level by Articles 203 to 218 of the Civil Procedure Code,77 whereas different arbitration laws will govern offshore arbitrations.78
The arbitration provisions of the Civil Procedure Code are not based on the UNCITRAL Model Law and these federal law provisions are largely underdeveloped, as compared to the DIFC and the ADGM arbitration laws, which are modelled on the UNCITRAL Model Law and in accordance with international standards of best practice.
Procedure and evidence
There are a number of arbitration centres and institutions, both onshore and offshore. Onshore centres and institutions include the Dubai International Arbitration Centre, the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai. There are also other domestic arbitration centres, such as in Sharjah and Ras Al Khaimah. Examples of offshore institutions include the DIFC-LCIA Arbitration Centre and the ADGM. Each institution will have its own procedural rules that will apply insofar as they do not contradict the mandatory rules of the Civil Procedure Code or the offshore law as applicable.
The UAE is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) since 2006. While there has been uncertainty around the enforcement of arbitral awards in the UAE under the Convention, recently, UAE courts have more readily recognised enforcement of foreign arbitral awards.79 UAE arbitral awards should also be enforceable in other Convention signatory states.
Costs
Arbitrators can award costs at their discretion. A party may apply to the courts to vary the tribunal's assessment of costs; however, the usual position is that the unsuccessful party pays the winner's costs.
iv Alternative dispute resolution
In relation to insurance claims, UAE onshore legal proceedings will be subject to the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai, as explained in subsection iii, supra. In respect of other emirates, there are no other insurance-specific alternative dispute resolution centres.
v Mediation
Parties can mediate disputes at the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai.
V YEAR IN REVIEW
i Regulation
Financial regulations came into force in 2016 requiring insurers that are operating in the UAE to maintain significant internal systems and risk management policies to comply with their obligations, including risk-based solvency capital requirements, establishment of a risk management system and rules requiring investment of company assets in a prudent manner.
In mid-2016, HAAD announced a number of amendments to the Abu Dhabi health insurance programme. A significant change to one of the plans80 stipulates that beneficiaries under the plan will receive 80 per cent of the coverage of the fees for treatment at private healthcare facilities, but will continue to benefit from 100 per cent coverage for treatment at governmental healthcare facilities in Abu Dhabi.81 The UAE now requires that health insurance is in place as a prerequisite to the issuance or renewal of an Emirati resident visa.
At the end of September 2016, the Insurance Authority issued the unification (i.e., standardisation) of motor vehicle insurance policies. In addition, on 18 December 2016, the Insurance Authority issued the vehicle Insurance Rates Regulation, which adopted minimum and maximum limits of premium rates. Insurance companies, agents and brokers are precluded from imposing or collecting any additional premiums over and above the specified rates.
ii Insurance Law reform
No recent insurance law reforms have taken place. A new Commercial Companies Law has recently come into force in the UAE that is likely to have implications for directors and officers (D&O) insurance.82 D&O insurance has not been widely purchased in the UAE to date. This may change as a result of the new Commercial Companies Law widening the duties and liabilities of directors and officers (including managers) and broadening sanctions for breaches of those duties.
As a result of the widening duties and liabilities of directors and officers under the Commercial Companies Law, it is unclear whether a company can legally indemnify a director or officer (such that it could claim under a side B (corporate reimbursement) cover). In the light of this uncertainty, any director or officer should look carefully at their side A cover, which is likely to be the responsive cover.
iii Dispute resolution
In October 2016, the DIFC's Dispute Resolution Authority (DRA) and the Jebel Ali Free Zone Authority (JAFZA) entered into a memorandum of understanding in which the authorities agreed to allow access to the DIFC courts for JAFZA companies, and to allow these companies to freely choose to use DIFC laws and the DIFC courts as a jurisdiction for dispute resolution.
Moreover, Decree No. 19 of 2016 has created a new judicial authority to exclusively deal with conflicts of disputes between the DIFC courts and the Dubai courts. Prior to this, all matters regarding conflicts of disputes were generally referred to the Union Supreme Court and it is envisaged that this Decree will obviate such referrals and the attendant delays. However, it remains to be seen how the Decree will be applied in practice with its first decision setting back the status of the DIFC courts as a ‘conduit jurisdiction'.83
VI OUTLOOK AND CONCLUSIONS
i Regulation
The Insurance Authority is taking a more proactive approach to the regulation of the insurance and reinsurance market. With respect to vehicle insurance, the Insurance Authority is considering proposals to compel insurance companies to insure electrical vehicles. Significant focus has been on managing market conduct to ensure client protection and promoting transparency and fairness for all parties. Future regulation of the insurance market is expected to be drafted with the same principles in mind.
ii Insurance law reform and procedural developments
Early in 2016, a committee was established to review the Maritime Code and determine whether it could benefit from revision and updating. At the time of writing, no such revisions or updates have been published but this is an area to watch to see whether there is an overhaul of marine insurance law in the UAE.
iii Dispute resolution
The proposed, and highly anticipated Federal Law on Arbitration is likely to be a unifying (i.e., standardising) law and it is anticipated that it will increase the UAE's profile as a destination for alternative dispute resolution as it is based on the UNCITRAL Model Law, and is expected to replace the existing federal regime under Articles 203-218 of the Civil Procedure Code.
Since the DIFC courts have taken a proactive approach to enforcement of foreign arbitral awards, it has become a popular conduit through which parties can enforce foreign arbitral awards onshore.
Initiatives, such as the memorandum of understanding between the DRA and JAFZA, and Decree 19, are becoming more common as the various jurisdictions work towards the Dubai Plan 2021 and the UAE Vision 2021.
Footnotes
1 Sam Wakerley and John Barlow are partners, and Josianne El Antoury is an associate, at Holman Fenwick Willan Middle East LLP.
2 UAE Insurance Authority Annual Report on the UAE Insurance Sector 2015.
3 An analysis of DIFC law as well as other offshore jurisdictions (such as the ADGM) are beyond the scope of this chapter.
4 However, in relation to insurance contracts, strictly speaking, the arbitration clause must be set out in a separate agreement agreed to by both parties as per Article 1028(1)(d) of the Civil Code.
5 For example: labour disputes; temporary and summary actions or orders; proceedings where the government is named as a party; and proceedings that are outside the Civil Court's jurisdiction.
6 Article 26 of the Insurance Law provides that: ‘It is not permissible to carry out insurance with an insurance company outside the state on property in the state, or on the liabilities arising from the same. It is not permissible either to broker for insuring such property or liabilities except with a company registered in accordance with the provisions hereof.' In practice, the Insurance Authority prohibits any insurance products from being provided by foreign insurers irrespective of the type of risk being insured.
7 The Insurance Authority's Board Resolution No. 3 of 2010.
8 Article 3(12) of the Insurance Authority's Board Resolution No. 3 of 2010.
9 While bancassurance arrangements are practised in the UAE, the Insurance Authority's board of directors' decision of 2016 concerning the instructions on marketing insurance policies through banks is still in draft form and is yet to be enacted.
10 Article 10 of the Insurance Authority's Board Resolution No. 3 of 2010.
11 According to Article 2 Cabinet Decision No. 23 of 2009 concerning Charges, Supervision, Control and Transactions of Insurance.
12 Section 1, Article 3 of Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies (Financial Regulations).
13 Section 2, Article 4(1)(a) of Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies.
14 www.ia.gov.ae/en/news/pages/financial-regulations.aspx
15 Section 2, Article 8(1) of Decision No. 25 of 2014 Pertinent to Financial Regulations for Insurance Companies.
16 Federal Law No 18 of 1993.
17 Federal Law No 5 of 1985.
18 Articles 1026-1055 of the Civil Code.
19 Along with the Insurance Law and the Insurance Authority Board Resolution No. 3 of 2010.
20 Articles 399-420 of the Maritime Commercial Code (Federal Law No. 26 of 1981).
21 An analysis of takaful insurance is beyond the scope of this chapter.
22 Article 1026(1) of the Civil Code.
23 Articles 125-148 of the Civil Code.
24 Article 1026(1) of the Civil Code.
25 Article 1035 of the Civil Code.
26 Court of Cassation judgment No. 281 of 1993.
27 Article 368 of the Maritime Code.
28 Article 246(1) of the Civil Code.
29 Article 3 of the Insurance Authority's Board Resolution No. 3 of 2010.
30 Article 1033 of the Civil Code.
31 Article 388 of the Maritime Code.
32 Article 6 of the Insurance Authority's Board Resolution No. 3 of 2010.
33 Federal Law No. 1 of 2006.
34 Article 7 of the Insurance Authority's Board Resolution No. 3 of 2010.
35 Article 373 of the Maritime Code.
36 Article 28 of the Insurance Law.
37 Article 104 of the Insurance Law.
38 Articles 258(2) and 259 of the Civil Code. There is often confusion in this area as the Civil Code also provides that the criterion in construing contracts is intentions and meanings and not words and form (as per Article 258(1) of the Civil Code).
39 Article 265(1) of the Civil Code.
40 Article 265(2) of the Civil Code.
41 Article 266(1) of the Civil Code.
42 Article 266(2) of the Civil Code. See, for example: Dubai Court of Cassation Case No. 125/2009 which held that a Construction All Risk insurance policy was a contract of adhesion under Article 266 of the Civil Code and therefore any ambiguity should be resolved against the insurer; Dubai Court of Cassation Case No. 247/2003 also held, in a life insurance case, that any ambiguity should always be resolved in favour of the insured.
43 Article 7 of the Insurance Authority's Board Resolution No. 3 of 2010.
44 Article 1028(c) of the Civil Code.
45 Article 7(2)(a) of the Insurance Authority's Board Resolution No. 3 of 2010; Article 28 of the UAE Insurance Law.
46 Article 28 of the Insurance Law.
47 Article 1028(d) of the Civil Code; Article 7(2) of the Insurance Authority's Board Resolution No. 3 of 2010.
48 Article 1028 of the Civil Code.
49 Article 246(2) of the Civil Code.
50 Article 26(4) of the Resolution of the Board of Directors of the Insurance Authority No. 15 of 2013 concerning insurance brokers regulation (the Insurance Authority's Brokers Regulations).
51 Article 3(3) of the Insurance Authority's Brokers Regulations.
52 Article 3(4) of the Insurance Authority's Brokers Regulations.
53 Article 7(5) of the Insurance Authority's Board Resolution No. 3 of 2010.
54 Article 1028(b) of the Civil Code.
55 Article 1028(e) of the Civil Code.
56 Article 9(6) of the Insurance Authority's Board Resolution No. 3 of 2010.
57 Article 1028(b) of the Civil Code.
58 Article 1036 of the Civil Code.
59 Article 399(1) of the Commercial Maritime Code.
60 Article 399(3) of the Commercial Maritime Code.
61 Article 399(1) and (2) of the Commercial Maritime Code.
62 Articles 246 and 1034 of the Civil Code, Article 3 (2) of the Insurance Authority Directive (Code of Conduct for Insurance Companies issued by the Insurance Authority (Insurance Authority Resolution No. 3 of 2010)).
63 Article 37 of the Civil Procedure Code (Federal Law 11 of 1992), which requires that insurance policy claims should be filed with the Court having jurisdiction over the place in which the beneficiaries are domiciled.
64 Article 20 of the Civil Procedure Code.
65 Article 24 of the Civil Procedure Code.
66 Article 21(2) of the Civil Procedure Code.
67 Article 21(3) of the Civil Procedure Code.
68 Article 203 of the Civil Procedure Code. In respect of insurance contracts for example and as identified above, an arbitration clause must be in a special agreement and separate from the general printed conditions of the policy (Article 1028(1)(d) of the Civil Code).
69 For example: labour disputes; temporary and summary actions or orders; proceedings where the government is named as a party and proceedings which are outside the Civil Court's jurisdiction.
70 Article 158 of the Civil Procedure Code.
71 Article 173 of the Civil Procedure Code.
72 Article 18(1) of the Law of Evidence in Civil and Commercial Transactions (Federal No. 10 of 1992).
73 Article 45 of the Civil Procedure Code.
74 Article 90(1) of the Law of Evidence.
75 Articles 7 and 8 of the Law of Evidence.
76 As per Article 1028(1)(d) of the Civil Code.
77 As above, Article 203 states that an arbitration agreement must be evidenced in writing and signed by someone who has the specific authority to settle disputes.
78 For example, the DIFC Arbitration Law 2008 apply in the DIFC and the ADGM Arbitration Regulations 2015 apply in Abu Dhabi.
79 For example, see Case No. 693 of 2015 where the Court of Cassation recognised for enforcement a London-based arbitration award.
80 The ‘Thiqa' plan, which is a minimum standard health insurance plan for UAE nationals.
81 Changes to the Basic Plan (which is a minimum standard for expatriates with a visa issued in Abu Dhabi only) include allowing workers above the age of 40 to co-pay their insurance premium, up to 50 per cent, as agreed between the employee and employer. In addition, all employees (domestic workers working at Emirati households are currently exempt) under this Basic Plan will be required to pay 50 per cent of the insurance policy's premium for their dependants (wife and up to three children).
82 Federal Law No. 2 of 2015.
83 The Judicial Tribunal's first decision has ordered the DIFC Courts to (1) ‘cease to entertain' a claimant's application for the recognition and enforcement of a 965 million dirhams arbitration award of the Dubai International Arbitration Centre against a DIFC-based company (Daman Real Estate); and (2) refer the matter to the onshore Dubai courts for trial.
You can also read the previous post on the part 1 titled, Introduction to Insurance Part 1