Special judicial bodies

There have been three recent legal developments in Dubai which are a reaction to the consequences of the economic downturn and which may mark the beginning of a change to aspects of the existing legal framework.

The first of these developments is the appointment of a judicial committee to consider and to settle all disputes concerning bounced cheques issued by buyers to developers. The second is the setting up of a panel to protect the creditors of Amlak and Tamweel. And the third is the appointment of a tribunal to oversee any disputes arising from the Dubai World restructuring.

There have been a number of articles concerning the legal niceties of these three bodies, and this article considers the broader implications of ring-fencing specific types of disputes by creating special judicial bodies in this way.

Bounced cheques
As is well known in Dubai, the issuer of a bounced cheque is liable to imprisonment. And, when the property bubble burst in Dubai, it left many issuers of cheques with insufficient funds to cover payment of their cheques when they fell due. As a direct result, reportedly, the number of bounced cheque complaints filed with the police and the number of issuers who have been imprisoned has increased significantly. However, the practice of issuing post-dated cheques is well established in Dubai, and is unlikely to change in the foreseeable future. But there have recently been calls to review the existing procedure. In particular, the Dubai police chief has suggested that issuing a bounced cheque should not automatically be considered a criminal offence. 

Against this background, some important things to note about the bounced cheque committee are that it will only consider disputes arising out of cheques issued by a buyer to a developer (or by a tenant or beneficiary of a long term unit); that the primary role of the committee is to act as a conciliation committee; and that the committee has the power to refer the matter to the police to deal with in the normal way. There is no appeal against the decision of the committee, and the committee has the power to cancel the bounced cheque or to require the issuer to issue a replacement cheque. 

Although the committee’s powers are limited to dealing with cheques issued by property buyers to developers, this may be the beginning of a change in the treatment of bounced cheques generally.  Given the prevalence of post dated cheques, a special judicial committee to deal exclusively with bounced cheques issued in any circumstances would be a welcome addition to the existing court system.

The Amlak/Tamweel panel
The Amlak/Tamweel panel is now the only judicial body with the right to review requests and legal claims related to settling the financial issues of Amlak and Tamweel. One of the difficulties in evaluating the panel at this stage is the absence of detail regarding the principles it will apply and the powers of enforcement which it has. However, it may be similar to the bounced cheque committee in that there may be no appeal from a decision of the panel.

The Dubai World tribunal
Finally, the Dubai World tribunal is intended to facilitate the restructuring of the Dubai World group of companies. The appointment of the Dubai World tribunal follows the announcement by the Dubai government that Dubai World was not a government entity and will not therefore necessarily receive financial support from the Dubai government. The decree establishing the tribunal and its jurisdiction is based upon the DIFC Insolvency Law but with some modifications. Again, this could be the first step towards updating the general insolvency law and procedures applicable to all Dubai or UAE legal entities. We continue to closely track developments in Dubai and although the full implications and priorities continue to evolve, key legal themes are emerging which are of importance to entities with interests in Dubai and the UAE. 
 
The establishment of these three judicial bodies is a move towards resolving some immediate problems thrown up by the global economic downturn. Hopefully, there will be further developments to broaden the jurisdiction of these bodies and to integrate them into the existing legal and judicial system. This would be another step forward for Dubai in once again encouraging foreign investment and business confidence.

Authors:

Michael Dark
m.dark@hadefpartners.com

Omar Al Shaikh
o.alshaikh@hadefpartners.com  

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