Summary of the case
The case before the Courts concerned a dispute in respect of a transaction for cryptocurrency, whereby the respondent agreed to transfer to the claimant cryptocurrency in exchange for cash. A dispute arose over the amount of cryptocurrency transferred by the respondent and its value. Amongst the evidence presented, the claimant relied on the settlement negotiations that took place between the parties, during which the respondent – in the claimant's opinion – acknowledged the debt. The claimant argued in the appeal proceedings that the court of first instance did not give proper consideration to this evidence.
Conclusions of the Courts and their practical effect
The Court of Appeal rejected the appeal by the claimant, disagreeing with the claimant's argument that the court of first instance had not given proper consideration to the evidence of acknowledgement of debt. The Court rejected this argument on the basis that statements made during amicable settlement negotiations, if such negotiations do not lead to settlement, are not admissible as evidence, as they were made without prejudice and enjoy immunity from being considered as evidence before the courts. The Dubai Court of Cassation upheld the conclusion and rejected the claimant's cassation appeal.
The Court for the first time formulated the concept of negotiations "without prejudice" in UAE law. The concept is well-developed in common law legal systems and recognized in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM). However, onshore Dubai courts have been reluctant to apply it, which theoretically allowed parties to rely on statements made during settlement negotiations if such negotiations did not lead to a settlement of a dispute. This made parties in the region overly cautious during such negotiations, bearing in mind the possibility that statements made may harm their positions if the case was referred to onshore courts. This had a negative effect on practical settlement outcomes.
The development is welcome, as it may provide parties with more comfort during settlement negotiations and lead to more open discussions, which in the end is likely to promote settlement of disputes, reducing time and cost of dispute resolution.
The onshore UAE legal system is not based on precedents. Accordingly, it remains to be seen whether Dubai courts and other onshore UAE courts will follow this approach. It is also not yet clear which requirements the courts will impose for communications to be granted protection from admissibility, such as communication being marked "without prejudice", and which standard the courts will apply.
Therefore, it is recommended to err on the side of caution before a clearer concept and standard of "without prejudice" negotiations is developed. This may include: (i) clearly marking communications as both "without prejudice" and not representing acknowledgement of any claims, defenses or facts, and (ii) exercising caution in formulating the statements made.
