An emerging branch of the legal profession, Alternate Dispute Resolution has witnessed significant progress over the past few years. It is being used in almost all kinds of disputes, and has been developed into codified laws in a number of countries, including the UAE. As a centre of commercial growth, ADR in the UAE is not only a want but a need, so that disputes can be resolved in the easiest of ways possible. A common area where ADR is often used is that of contractual disputes. Since they are mostly of civil nature, ADR is the most convenient method to resolve them.

What are contractual disputes?

When there is a contract between two parties, and one of the parties does not abide by the terms or perform its side of obligations, the contract is said to have been breached. In essence, when there is an agreement between two parties and one of them fails to keep it up, it will give rise to a dispute, because the opposite party gets the right to claim damages for the wrong it may have suffered as a result. Consequently, a civil suit may be instituted in the court for breach of contract and compensation for damages thus suffered.

Litigation or ADR: what to choose in case of a contractual dispute?

The traditional method of litigation in terms of contractual disputes may prove detrimental to both the parties because of the time-consuming process that it is. A case may go on for a long time in a court, and the parties will have to incur the heavy costs litigation entails. Moreover, contractual disputes when referred to a court carry the potential to damage the relations, thus reducing the possibility of future agreements.

In order to ensure effective solutions within a reasonable time frame, contractual disputes are now being taken up by authorities involved in alternate dispute resolution. Parties to such disputes themselves want that their issues be resolved without further aggravation and as early as possible, to prevent any additional loss. Often times, parties to a contract also incorporate a dispute resolution clause within the contract, which states that in the event of any dispute, it shall be settled amicably through the methods of ADR.

While litigation means decision in favor of only one party, an arbitrator or mediator assists the parties in arriving at a neutral position, possibly a win-win solution for both, with some compromises. The factor of uncertainty in litigation is cancelled out by ADR, and the focus is directed towards commercial aspects and not legal.

How does Mediation work?

Mediation is one of the primary methods of ADR wherein a neutral third party is appointed, called the mediator, who attempts to negotiate between the parties and allows them to come at a conclusion favorable for both sides. Mediation is a structured yet flexible process with various models from which the parties can choose to go with. The mediator talks to each of the parties and understands their contention, after which he provides recommendations to the parties to reach a settlement. Mediation is a voluntary process, which implies that it is of no avail where the parties are unwilling to settle on mutual terms. Only those disputants who actually want that the disagreement be resolved as soon as possible to restore them to their original positions, can be successful in a mediation.

What are the skills to look out for in a mediator for a contractual dispute?

The role of a mediator is to facilitate between the two parties in such a way that they understand the position of the opposite side and abstain from demanding irrational claims. Even though a mediator cannot impose any recommendation on the parties, a large part of the success of a mediation depends on the negotiation skills that a mediator may display. As a result, the choice of a mediator may determine the outcome of the mediation.

Ordinarily, only one mediator is appointed, who is responsible for conducting the mediation and engaging with the parties. Since a contractual dispute is of commercial nature, a mediator must be well-versed with the commercial as well as civil laws of the jurisdiction in which the dispute took place. Parties can also go by references of certain mediators who have been successful in resolving disputes previously through mediation, or the resumes of mediators that may be available, listing their respective qualifications and experience.

In a dispute relating to a breach of contract, the mediator should stick to retention of the terms of the contract as far as possible. However, the party wronged due to the breach must be indemnified simultaneously. This can be achieved by communicating thoroughly with each party and understanding the cause of the breach as well as the reasons accorded for the same. As a mediator, it is important to remain objective while assessing the situation, and providing the parties with multiple solutions while recommending the most agreeable one for adoption. A mediator with the ability to think creatively will be able to devise outcomes that are fair and rational for each side to the dispute. As parties to the case, if a mediator is not actively listening to your grievances or if he is continuously in support of the opposite party, he may not be a suitable mediator. Instead of asking “who is at fault”, a mediator should be focusing on the remedies available in relation to the given situation.

What are the laws of the UAE regarding Mediation?

As per the new UAE law on Mediation, Federal Law No. 6 of 2021, mediation is of two types: judicial and non-judicial mediation. Judicial mediation is when the parties request the court for mediation in between ongoing proceedings, or the court may itself refer the dispute for mediation at any stage in the proceedings. In non-judicial mediation, parties opt for mediation before a case is instituted in the court, according to Article 22 of this Law. In both the cases, a Mediation Agreement needs to be drafted, which contains details regarding the dispute, the appointment of the mediator, the language of the mediation, and the agreement needs to be in writing. The parties may then get an appointed mediator or choose their own from the lists of mediators established at the Mediation Centre, as per the agreement. As per Article 4 of the Law, the list contains qualified and experienced mediators, who are retired members of the judicial authority, registered lawyers as well as experts in the fields of law and business.

What happens if the parties do not want the appointed mediator?

In case the parties object to a certain mediator, the court can appoint an alternate mediator from the list. A mediator is required to adhere to the principles of neutrality and independence in accordance with Article 7 of this Law, and must prohibit from exercising powers not accorded to him or displaying bias towards a certain party in accordance with Article 8 of the Law.