25 Jul 2018

Limitation periods in the United Arab Emirates

Authored by: Zarghona Fazal and Maria Lezala

In brief:

  • A limitation period is the period of time within which a party must file a claim or commence a legal action.
  • If a party does not file a claim within the relevant time period stipulated by the law, there is a risk that that party will lose its right to pursue their claim.
  • Limitation periods in the UAE are different to many other countries and are not expressed in one comprehensive statute, but are contained in multiple statutes.

As a leading UAE based law firm, we are often requested by our local and international clients to advise on limitation periods under UAE law. The purpose of this article is to set out the key limitation periods that we often come across in our practice, particularly limitation periods which have been imposed as a consequence of new laws coming into force.

What is a limitation period?

A limitation period is the period of time within which a party must file a claim or commence a legal action.  If the claim is not brought within the period stipulated under the relevant statute, there is a risk that that the claim will be considered “time-barred”. If the claim is considered time-barred, this can result in the claim being dismissed by the relevant court having jurisdiction over the matter. Accordingly, it is important to be aware of the limitation period applicable to a particular claim. 

It is also important to determine when a limitation period will start to run. Limitation periods can either start to run when: (i) a “cause of action” has occurred (for example a breach of contract) or (ii) when a party becomes aware of the event or the harm caused as a tort (for example personal injury).

We therefore strongly recommend that a party to a potential claim promptly seeks legal advice to determine the limitation period which applies to that claim and when that limitation period started running so that they can:

  1. ensure that their claim is commenced within the relevant limitation period; or
  2.  avoid wasting significant time and costs in pursuing a claim that is already time-barred.

Limitation periods under UAE Law

In the UAE, limitation periods are not expressed in one comprehensive statute but are contained in multiple statutes. Further, the length of the limitation period varies, depending on the cause of action. Federal Law No. 5 of 1985 regarding civil transactions (“Civil Code”) contains general provisions in relation to limitation periods (some which are included in the table below). For example, a claim is time-barred after 15 years, unless a specific statute states otherwise.

Notwithstanding the above, we have set out a general guide to limitation periods in the UAE in the tables below.

One of the key limitation periods to be aware of is the limitation period for a claim for breach of contract. We have been approached by many clients (including in-house counsel at large multinational and local companies, and even international law firms) who believe that the limitation period for a breach of contract (including a commercial contract) in the UAE is 15 years. What they are often not aware of is that the limitation period for commercial contracts (as set out in Federal Law 18 of 1993 (the “Commercial Code”)) is usually 10 years. Therefore, multi-million dollar claims dating back over more than 10 years may now be time-barred.

It is important to note that Article 488 of the Civil Code provides that a defence of time-bar can only be raised by one of the parties and cannot be raised by the judge of his own motion. Therefore, a party who is defending a claim should also be aware of the applicable limitation period so that it can raise the any applicable time-bar defence during the proceedings.

Article 488 also makes it clear that a party can raise a time-bar defence at any stage of the proceedings, unless from the circumstances the person seeking to rely on a time-bar defence has waived it expressly or impliedly.

Certain statutes (for example, Article 481 Civil Code and Article 587 of the Commercial Code) suspend the limitation period if a party can demonstrate a “lawful excuse” for not filing a claim within the relevant time period. What will amount to a “lawful excuse” is not entirely clear. However, one example is the incapacity on the part of the claimant. The UAE Courts have also noted that that the limitation period will be suspended if it appears from the surrounding facts and circumstances of the case that there was an obstacle preventing the claim from being commenced.  

TYPES OF CIVIL CLAIMS

LIMITATION PERIOD

STATUS

Contracts

15 years

Civil Code, Article 473

Commercial Contracts

10 years

Commercial Code, Article 95

Cheques

1-3 years

Commercial Code, Article 638

Insurance

3 years

Civil Code, Article 1036

Tort (causing harm)

3 years

Civil Code, Article 298

Building contracts (defects)

10 years

Civil Code, Article 880

Carriage of goods by sea

1 year

Federal Law No 26 of 1981 (Commercial Maritime Law), Article 287(a)

Sale of Goods

1 year

Civil Code, Article 524.

Right of renewal (rent claims)

5 years

Civil Code, Article 474(1)

Civil Guarantees

6 months

Civil Code, Article 1092

Commercial Guarantees

10 years

Commercial Code, Article 95

Setting aside a domestic arbitral award

30 days

Federal Law No 6 of 2018 (the Arbitration Law), Article 54(2)

Challenging an arbitral tribunal’s jurisdiction before the Courts

15 days

Arbitration Law, Article 19(2).

Employment disputes

1 year

Federal Law 8 of 1980 (the Labour Law), Article 6.

 

TYPES OF CRIMINAL CLAIMS

LIMITATION PERIOD

LAW

Felonies

20 years

Federal Law no 35 of 1992 (the Criminal Procedure law), Article 20.

Misdemeanours (including bounced cheques)

5 years

Criminal Procedure law, Article 20.

Contraventions

1 year

Criminal Procedure law, Article 20.

 

Conclusion

It is important to be aware of the applicable limitation period at the outset of any potential claim or dispute. If a party does not commence proceedings within the relevant period, they may lose the right to pursue your claim (irrespective of how strong their claim is). Therefore, it is necessary to determine from the outset when the limitation period started to run and when it will expire (if it has not expired already).

Notwithstanding the guidance above, limitation periods must be assessed on a case by case basis and consideration must be given to the facts and subject matter of each case. We would recommend that legal advice is obtained in order to ensure that the claim is effectively preserved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

 


[1] These limitation periods are intended as a general guide only. The limitation period which ultimately applies to a particular claim will depend on the facts and may be extended in specific circumstances. It is also important to note that some of the Free Zones in the UAE (such as the DIFC, operating as a common law system), have their own prescriptive periods for a particular types of claims.

[2] Depending on the status of the Claimant.

[3] There are conflicting UAE Court Judgments in relation to whether bank guarantees are commercial or civil.

 
 

This article, including any advice, commentary or recommendation herein, is provided on a complimentary basis without consideration of any specific objectives, circumstances or facts. It reflects the views of the writer which may, in some cases, differ from those of the firm, especially in the developing jurisdiction of the UAE.