Month: December 2017

Introduction to Terms of Reference in UAE

In law and indeed in many blogs pertaining to law, you will come across the phrase ‘Terms of Reference’. In broad, simple terms, this is a document in which scope and limitations are to be defined.

This document is used in International Arbitrations signed as an agreement between the parties and the arbitrator which defines the time period (usually 6 months if not defined), terms, language and place of arbitration. The intention is to make the arbitration proceedings quicker and to facilitate the implementation (execution) of the outcome of that arbitration.

Terms and conditions defined in a Terms of Reference govern the arbitration proceedings under civil and arbitration rule in the UAE.

Operating under these express Terms of Reference has the added benefit of ensuring there is far less opportunity or possibility for an arbitration award to be annulled.

The information provided in the Terms of Reference should include the dispute itself, right of appeal, submissions of particulars (the facts) and defense of the parties involved.

Challenging Arbitration in UAE (Article 216)

The conditions under which the parties to an arbitration award may challenge (make a request to annul) its validity are governed by Article 216 as follows:

a- If the required number of arbitrators to hear the case were not present or where the arbitrators were not legally appointed, qualified or competent.
b- If the arbitration award was reached with reference to inadequate, out of date or non-existent terms of reference.
c- If the award was made based on Terms of Reference in which the specific dispute is not mentioned, or if the arbitrator exceeds the limits of jurisdiction given under those Terms of Reference.

It is becoming increasingly common for the losing party to challenge an arbitration award by filing an annulment case claiming it to be invalid due to the person signing the contract not having official permission although an experienced legal professional in the arbitration field will be aware of this point and be well prepared to effectively deal with it.

There is a possibility that both parties gave up the right to object to an award by virtue of not objecting in the first possible instance. This highights the importnce of having help and guidance from persons who are not only competant in arbiration protocol but also who have experience with the local processes and procedures.

Personal Guarantee in the UAE

A personal guarantee is the legal promise to pay an amount of debt by for which that person will be held responsible in the event they are unable to pay the amount.

Implementation of Shariah law has lead to UAE Laws on personal guarantee being amended and as per Article 1068 as follows,

  • A guarantee given by a guarantor compels him or her to meet their obligation to the guaranteed person on time and, if failing to do so can incur a fine issued by a competent judge.
  • In case of a penal sentence (jail term) being issued in relation to failure to meet a personal guarantee, the guarantor may be compelled to pay a specified amount in addition.

The increase in trade due to the strong economic growth in the UAE has resulted in a higher number of transactions which require quick debt collection method to be adapted.

The most common mode used by institutions and traders is the post-dated or undated cheque which is fast and safe as compared to other methods.

Maritime Law – Assets to Be Taken Through Arrest

The Federal Maritime Law (FML) lays the foundation for the possible seizure (arrest) of a vessel under certain conditions to claim against a maritime debt. All laws relating to maritime transactions are governed by the Federal Maritime Law of 1981.

For the purpose of clarity, a ‘Vessel’ is defined as a structure such as a ship or a container.

Assets such as a vessel owned by a party against which a judgement has been issued are subject to seizure against that claim or judgement. This can include vessels that are not specifically mentioned in the claim itself unless the claim relates specifically to the use of that vessel.

The Federal Maritime Law (FML) covers debts that can be claimed against damage, salvage, disputes, mortgage, insurance and more.

The selling price and the date on which a vessel will be sold are to be decided by the court and the sale will only be carried out after a final judgement has been issued.