COVID-19 & Conflict: Preparing for and managing disputes in Bahrain and UAE
As COVID-19 continues to impact business operations in various ways, a prospective growth in the number and types of disputes is almost certain, inevitably, to arise in both the short and then longer terms.
During these unprecedented times, it is clear that there is much uncertainty as to how businesses and individuals will go about in meeting their contractual obligations in relation to potential COVID-related disputes.
This article will explore the impacts of the current crisis on dispute resolution in Bahrain and the UAE by briefly setting out the judicial systems’ response, and will then consider the force majeure position in the context of contractual disputes, and finally, provide some examples of practical solutions as a way forward.
Impact of the pandemic on dispute resolution
Courts around the world are facing an inevitable spike in claims coupled with the fact that they are either shutting down or operating below capacity due to social distancing measures and other restrictions.
The immediate impact can be seen across various judicial systems as a number of fundamental procedural changes to the way disputes are resolved or managed have been put in place.
Bahrain judicial system response
As a response to COVID-19, the Kingdom of Bahrain’s commercial judicial system has undergone significant reforms, which includes speeding up court procedures, digitizing services by utilizing existing technology, while maintaining court transparency.
Perhaps a key reform is the new mediation law, which was recently passed under the Legislative Decree No. 22 of 2019, issued on the 1st of October 2019, mainly regulating mediation as an alternative dispute resolution method (ADR).
Mediation has been used with great success, as it is a cost effective and time-efficient method in resolving conflicts, which intends to achieve the interest of the parties while avoiding litigation and mainly alleviating the burden on the courts. It is widely adopted in civil, commercial and criminal matters as well as in resolving any COVID-19 driven disputes.
Another major reform was the introduction of a small claims court in March this year, which simplified fast track electronic procedures and short case management schedules (limited to 10-30 days). Similarly, limits on adjournments for commercial cases have been introduced, for instance, the hearing adjournment period was limited to 20 days which expedited the trial period.
Moreover, to enhance transparency, court performance indicators are published on a regular basis, and the outcomes of all commercial cases are published on the Supreme Judicial Council (SJC) online portal. Along with the Ministry of Justice, Islamic Affairs and Awqaf (MOJ), which has also made available dedicated communication channels either by e-mail or telephone, to assist and support lawyers, paralegals and litigants as well as address their queries to allow for the seamless electronic registration of cases and filing of applications and pleadings without the need for their physical attendance.
In addition, the eGovernment Portal has enabled users to utilize a range of e-services relating to civil, Sharia and criminal court cases and publications such as judicial announcements and notifications, licenses and attorney services including powers of attorney requests etc.
These are only a few examples of the notable changes in Bahrain’s judicial processes. In contrast, many foreign jurisdictions have responded differently to the challenges posed by COVID-19, primarily depending on the existence of their technological infrastructure and on the flexibility of their procedural rules to enable or facilitate digital processes.
The impact on UAE Courts
The pandemic has undoubtedly accelerated the use of information and communications technology (ICT) in the UAE as a result of restrictions on movement.
The Dubai and Abu Dhabi courts issued administrative decisions and provided that all court procedures, court hearings and notary public ratifications shall be done through electronic means, including the filling of new cases.
In this regard, Resolution No 30/2020 was issued for the postponement of all court hearings at cassation, appeal and first instance from 22 March 2020 to 16 April 2020.
Arbitration and ADR
The manner in which arbitral proceedings and other forms of ADR have been conducted in the UAE has switched to virtual form.
Pursuant to Article 33 of UAE Federal Law No 6 of 2018 on Arbitration (the ‘UAE Arbitration Law’), which expressly provides that hearings may be held through modern means of communication without the physical presence of the parties at the hearing.
Generally, most arbitrators and counsel remained generally available and most of the arbitral institutions in the UAE remained fully operational during the pandemic.
While there have been no changes to the legislative framework of arbitration in the UAE resulting from the pandemic, many regional and local arbitration institutions such as the Dubai International Arbitration Centre (DIAC) and the DIFC–LCIA Arbitration Centre (DIFC–LCIA), have issued press releases and guidance notes to arbitration users to warrant and safeguard the smooth operation of the conduct of the ongoing proceedings and filing of new cases.
Force majeure related contractual disputes
Many contractual disputes that have arisen as a result of COVID-19, for instance, have been in relation to force majeure type issues, where parties find themselves unable or unwilling to comply with existing contractual obligations and seeking to cease to be bound by those obligations, especially when faced with complications from supply chain disruption, for example, due to lockdowns, reduced raw materials, labor shortages etc.
In many jurisdictions, the concept of force majeure has no fixed legal meaning and is a matter of contractual interpretation, which may leave room for debate and dispute between the parties to a contract as to the meaning and consequences of such legal term.
As a result, whether a particular force majeure clause relieves a party of contractual liability, will depend on the precise wording used in the clause, the allocation of risk between the parties provided for by the contract as a whole, the circumstances in which the parties entered into the contract, and the situation that has arisen.
Therefore, the burden is on the party seeking to rely on the force majeure clause in order to excuse its non-performance or late performance to satisfy a court or other tribunal that this is the effect of the clause.
From a practical perspective, the primary focus should be on achieving an effective and efficient decision that will meet the immediate commercial and legal needs of the parties.
Having a full understanding of the contractual rights and obligations at stake and the consequences of resulting litigation will allow businesses to take a more practical and considered approach to any issues triggering disputes in the short and longer term.
To conclude, the current pandemic has pushed many countries to conduct online court proceedings, remote hearings, electronic filing & document management along with an accelerated use of innovative technology in their judicial processes, all of which will be the norm for the foreseeable future.
Trowers & Hamlins has been proactively working with clients from different sectors in dealing with a variety of commercial disputes and in considering every option for dispute resolution, such as mediation and other ADR as part of a settlement strategy, to help manage the impact of the current situation.
Our experienced commercial disputes teams are more than capable of responding to these challenges posed by COVID-19 as well as handling complex, high value litigation and disputes involving different matters.