Commercial Dealings

Common commercial disputes in Dubai include breach of contract claims, partnership and shareholder disputes, agency and distribution agreement disputes, intellectual property infringement, debt recovery matters, disputes arising from mergers and acquisitions, franchise disputes, and competition law issues. Dubai’s position as a major business hub means that commercial disputes often involve parties from multiple jurisdictions.

Under UAE law, commercial contracts are interpreted according to the common intention of the parties, as expressed in the contract language. If the language is clear, the court will apply it as written. If there is ambiguity, the court may consider the circumstances surrounding the contract, the nature of the transaction, and commercial custom. Good faith is an important principle in UAE contract law, and parties are expected to perform their obligations honestly and fairly.

The general limitation period for commercial claims in the UAE is five years from the date the obligation became due, under the UAE Commercial Transactions Law (Federal Decree-Law No. 50 of 2022). However, certain types of claims have shorter limitation periods. For example, claims arising from the sale of goods may be subject to a one-year limitation period. It is important to seek legal advice promptly to ensure claims are brought within the applicable time limits.

Yes, penalty clauses (also known as liquidated damages clauses) are recognised under UAE law. However, UAE courts have the power to adjust the agreed penalty if it is found to be excessive or if the actual loss suffered is different from the agreed amount. This means that a penalty clause may not be enforced exactly as written if the court considers it disproportionate to the actual harm caused by the breach.

Commercial agents in the UAE are individuals or companies that represent foreign principals in marketing and selling their products or services. The UAE Commercial Agencies Law (Federal Decree-Law No. 03 of 2022) provides significant protections for registered commercial agents, including certain exclusive rights within their territory unless otherwise agreed in the contract. These protections make it important for foreign businesses to carefully consider agency arrangements before entering the UAE market.

To protect your business interests in a commercial contract, you should clearly define the scope of work, deliverables, and timelines; include detailed payment terms and consequences for late payment; address intellectual property ownership and confidentiality; include appropriate limitation of liability and indemnity clauses; specify the governing law and dispute resolution mechanism; and have the contract reviewed by a qualified commercial lawyer before signing.

Commercial disputes in Dubai can be resolved through negotiation, mediation, arbitration, or litigation. Many commercial contracts include arbitration clauses, with popular arbitration institutions including the DIAC (Dubai International Arbitration Centre) and the ICC. Litigation can be pursued in the Dubai Courts or, for matters with DIFC jurisdiction, the DIFC Courts. The choice of dispute resolution mechanism needs to be considered carefully when drafting contracts.

The UAE Competition Law (Federal Decree-Law No. 36 of 2023) prohibits anti-competitive practices including agreements that restrict competition, abuse of dominant market position, and anti-competitive mergers. Businesses operating in the UAE must ensure their practices comply with competition law to avoid penalties, which can include fines of up to ten percent of annual revenue. Certain sectors, including government-owned entities and small businesses (on case-by-case basis), may be exempt from some provisions.

Yes, foreign companies can bring legal proceedings in UAE courts, provided they can establish a territorial nexus to the state. As per thedifc  UAE Civil Procedure Law (Federal Decree-Law No. 42 of 2022). To establish standing in UAE courts, the dispute must meet specific jurisdictional triggers such as the contract was concluded/performed within the UAE, or the dispute concerns real estate or assets located in the UAE. However, there are practical considerations, such as the defendant needs to have a designated address for service in the UAE. Foreign companies may also choose to resolve disputes through arbitration, which can offer advantages in terms of enforcement of awards internationally.

A commercial lawyer in Dubai can assist with drafting and reviewing commercial contracts, advising on regulatory compliance, protecting intellectual property, handling commercial disputes through negotiation, arbitration, or litigation, advising on corporate structures and transactions, and providing ongoing legal support for business operations. Having experienced legal counsel can help prevent disputes and protect your business interests in the competitive UAE market.