Mediation under Federal Decree-Law

Federal Decree-Law No. 40/2023 on Mediation in UAE: Transforming dispute resolution with efficient, confidential procedures in civil/commercial sectors

An Insight into the Federal Decree-Law No. 40/2023 on Mediation and Conciliation

Overview

In a landmark move, the United Arab Emirates has introduced the Federal Decree-Law No. 40/2023 (“The Federal Mediation and Conciliation Law”), a pivotal legislation that significantly reforms the process of mediation and conciliation in civil and commercial disputes. This decree, embodying progressive legal thought, not only aligns the UAE with international dispute resolution standards but also modernizes its legal framework to foster a more efficient, confidential, and amicable settlement of disputes. In this newsletter, we delve into the nuances of this law, exploring its key features, procedures, and the transformative impact it is poised to have on the legal and commercial sectors in the UAE.

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In the context of the UAE’s legal landscape, this law holds immense importance. It signifies a shift towards more collaborative and non-adversarial methods of resolving disputes, aligning with global trends in legal practice. This approach not only expedites dispute resolution but also reduces the burden on the judicial system. By embracing alternative dispute resolution mechanisms, the UAE demonstrates its commitment to fostering a business-friendly environment, encouraging investment, and enhancing its legal system’s efficiency and accessibility.

The principles governing mediation and conciliation, as outlined in the Federal Mediation and Conciliation Law, are foundational to ensuring that these processes are effective, fair, and uphold the highest standards of dispute resolution. These principles include voluntariness, confidentiality, neutrality, and impartiality of the mediators and conciliators. They also emphasize the importance of informed consent by the parties involved and respect for the legal rights of all stakeholders. These principles are crucial in maintaining the integrity of the mediation and conciliation process, ensuring it is a viable and trusted alternative to traditional litigation methods.

The General Provisions of the Federal Mediation and Conciliation Law, as outlined in Chapter One, establish crucial definitions shaping the framework of mediation and conciliation in civil and commercial disputes in the UAE. Key definitions include the distinction between ‘State,’ ‘Council,’ ‘Department,’ and ‘Centre,’ and the characterization of ‘Parties’ involved in disputes. The law differentiates between ‘Mediation’ and ‘Conciliation,’ identifying both as methods for amicable dispute resolution, with mediation being optional and conciliation sometimes mandatory. It further clarifies the roles of ‘Mediator’ and ‘Conciliator,’ and introduces the concept of an ‘Electronic Platform for Mediation and Conciliation,’ modernizing the process. These definitions are vital in understanding the application and scope of this transformative law.

Under the Federal Mediation and Conciliation Law, the key difference between mediation and conciliation lies in their application and approach. Mediation is an optional method for resolving disputes, where parties voluntarily seek the assistance of a mediator, a neutral third party. The mediator facilitates discussions but doesn’t impose a solution. In contrast, conciliation is often mandatory in certain cases before filing a lawsuit. The conciliator, also a neutral third party, plays a more active role in guiding the parties towards a binding settlement agreement. This distinction reflects the degree of formality and the role of the third-party facilitator in each process.

Mediation and Conciliation Centers

The establishment of Mediation and Conciliation Centres is a key component of the UAE’s approach to modernizing its dispute resolution framework. These centres are responsible for administering mediation and conciliation processes. Their role includes overseeing the implementation of these alternative dispute resolution methods, ensuring adherence to the legal framework, and facilitating the effective resolution of civil and commercial disputes. The establishment of these centres, along with the introduction of an Electronic Platform for Mediation and Conciliation, marks a significant step towards making dispute resolution more efficient and accessible.

Mediators’ Lists

The Federal Mediation and Conciliation Law establishes a system for registering Mediators, drawn from experts in legal and business fields known for their integrity and impartiality. These lists are maintained by the Department or local judicial authority and include retired judiciary members, experienced lawyers, and other qualified experts. The process for registration, renewal, and removal of Mediators is determined by the Council or local judicial authority.

The Mediators’ Lists are designed to comprise individuals with notable expertise, integrity, and impartiality. These include retired judiciary members, lawyers with at least five years of experience before joining the non-practicing lawyers’ schedule, and other highly qualified legal and business experts, including international experts. The selection of these mediators ensures a high standard of mediation, drawing on a pool of professionals recognized for their skills and ethical standing.

Ensuring Confidentiality and Integrity in Mediation and Conciliation

The law emphasizes the confidentiality of mediation and conciliation procedures. It prohibits disclosure of any information, documents, or concessions made during these procedures, unless with all parties’ consent or as required by law for reporting crimes. However, this confidentiality does not extend to settlement agreements and documents necessary for their enforcement. Violations of confidentiality by mediators or conciliators can lead to disciplinary action and civil or criminal liability. Additionally, the decree outlines specific prohibitions for mediators and conciliators, including restrictions on acting as arbitrators, experts, or attorneys in related disputes, and giving testimony against parties involved. It also mentions certain limitations regarding disputes previously heard under conciliation or mediation.

Consensual Mediation

Consensual Mediation allows parties to resolve disputes amicably before filing a lawsuit. It mandates a written Mediation Agreement specifying the dispute’s subject, mediator appointment, language, and fees. The initiation of Consensual Mediation pauses legal deadlines until its completion or the signing of a Settlement Agreement. The process involves applying to the Supervising Judge, and the Federal Mediation and Conciliation Law outlines specific procedures and effects of resorting to Consensual Mediation.

The process for Consensual Mediation under the Decree-Law involves several steps.

  • Firstly, parties must agree to a Mediation Agreement specifying the mediation’s language, subject matter, mediator appointment, and fees. This agreement initiates the mediation process, pausing legal deadlines.
  • An application is then submitted to the Supervising Judge, including the Mediation Agreement and relevant dispute documents. The application must express the desire for mediation, specify the dispute’s details, appoint a mediator, and define the mediation period.
  • The Supervising Judge oversees various aspects of the mediation, including expenses and settlement agreement approval.
  • If a lawsuit is already filed, the court may suspend the case until mediation completion, unless the Mediation Agreement is deemed void or unenforceable.

The Mediation agreement

The Mediation Agreement under the Decree-Law can be established either before or after a dispute arises. It must be created by a legally capable person or an authorized representative of a legal entity. The agreement remains valid beyond the death of a party or dissolution of a legal entity and is enforceable by their successors unless otherwise agreed. It requires a written form, signed by the parties, and can include electronic communication. The agreement should specify the dispute, appoint a mediator or outline their selection process, and may allow for mediation in a language other than Arabic, subject to translation requirements.

Court-Referred Mediation

The process of Court-Referred Mediation under the Federal Mediation and Conciliation Law involves several key steps:

  • Referral Decision: The court can refer a case to mediation at any stage, based on parties’ consent, request, or a pre-existing mediation agreement.
  • Mediator Appointment: A private mediator can be appointed based on the mediation agreement, or the court may appoint one from the Mediators’ Lists.
  • Mediation Procedures: The mediator schedules and conducts sessions, with parties either attending in person or represented by legal representatives. The mediator can hold collective or separate sessions.
  • Ending Mediation: Mediation ends in various scenarios, like parties reaching a settlement, agreement to end mediation, or mediator declaring the process futile.
  • Ratification and Objection: A settlement agreement reached is submitted for ratification, making it binding and enforceable. There are provisions for objecting to the ratified agreement.
  • Mediation Expenses: Parties are responsible for initial expenses, with provisions for refund and adjustment based on the outcome of the mediation.

Conciliation

Value of the claim

The Centre has exclusive authority to handle civil and commercial disputes valued at up to five million dirhams, and disputes between spouses or relatives up to the fourth degree, regardless of their value. Additionally, parties involved in disputes exceeding five million dirhams have the option to agree to conciliation at the Centre, either before or during the litigation process.

Types of disputes

Specific types of disputes that are excluded from conciliation under the Centre’s jurisdiction. These include

  • urgent and interim orders,
  • cases involving government entities,
  • rental disputes handled by specialized committees,
  • labour-related cases,
  • personal status cases, and
  • any cases designated to be heard by other specialized centres, committees, or entities. This provision ensures that certain complex or specialized disputes are handled by appropriate legal forums.

Fees

The Federal Mediation and Conciliation Law states that no judicial fees are required for disputes and applications submitted to the Centre. The law further explains that cases within the Centre’s jurisdiction must be presented to the Centre first, and legal deadlines are paused upon filing a dispute with the Centre, resuming only after conciliation completion. Additionally, in cases referred by a court to the Centre, court fees may be refunded if the dispute is settled through conciliation.

Appointment of Conciliators

The appointment and qualification of conciliators are governed by stringent criteria set by high-ranking judicial authorities. These criteria include having a clean legal record, particularly in terms of crimes impacting honour and honesty, and being recognized for integrity, neutrality, and expertise. Additionally, they must complete specific courses and examinations. The appointment process itself is formalized through decisions by top-level ministers or local judicial authorities. The remuneration system for conciliators is established by the Cabinet or local authorities, and newly appointed conciliators are required to take a legal oath committing to honest and faithful service.

Conciliation Procedure

The conciliation procedure involves parties attending sessions either personally or through legal representatives. The conciliator sets and communicates the session details, facilitates discussions on the dispute, and aims to guide parties towards an amicable resolution. They have the authority to access relevant documents and evidence and can involve third parties or experts if agreed upon by the parties involved. The conciliator’s role is to facilitate the process without being bound by specific legal procedural laws, focusing on achieving a settlement.

Period

The conciliation process aims to resolve disputes within a 21-working-day period, extendable if needed. Conciliation ends upon parties reaching a settlement, opting out, conciliator’s decision on feasibility, or at the end of the set period. Unresolved disputes are referred back to the court. A successful settlement is documented, ratified, and enforced like a court judgment.

Conclusion

The Federal Mediation and Conciliation Law marks a significant step in the UAE’s legal system. It establishes a structured and efficient process for mediation and conciliation, offering an alternative to conventional litigation. The law sets clear guidelines for the appointment of mediators and conciliators, their roles, and the procedures they must follow. By providing a framework for amicable dispute resolution, it aims to expedite the settlement process while reducing the burden on courts, thereby enhancing the legal and commercial environment in the UAE.

Author’s Bio:

Nikhat Sardar Khan, a distinguished legal expert with extensive experience in the UAE’s legal landscape, currently heads the Department of Litigation, ADR and Corporate at Hilal & Associates Advocates & Legal Consultants. Her expertise encompasses complex litigation and dispute resolution in commercial matters, banking, finance, corporate practice, and more. As a qualified arbitrator and experienced mediator, she holds certifications from prestigious institutions like the Chartered Institute of Arbitrators (FCIArb) and The Royal Institution of Chartered Surveyors (RICS). Her legal acumen, honed over decades of practice in both India and the UAE, positions her as a formidable figure in the field of law.

Nikhat Sardar Khan (FCIArb)(RICS)
Head of DIFC Litigation, Corporate & Arbitration- UAE,
MENA and India.
Arbitrator | Mediator | DIFC Practitioner
Email: nikhat@hilalassociates.com

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