How to get paid if you are a small business?

Lawgical with LYLAW and Tim Elliot

15 September 2020

Tim Elliot:  Hello and welcome to Lawgical, the regular legal podcast from the Dubai-based law firm, HPL Yamalova & Plewka, still the Gulf Region’s first and only legal podcast.  I’m Tim Elliot, back socially distanced at Dubai’s JLT, Jumeirah Lakes Towers District at the firm’s offices with the Managing Partner of the firm, Ludmila Yamalova.  Good to see you.

Ludmila Yamalova:  Great to see you too, Tim.  Thanks for being back in physical form in our office.

Tim Elliot:  You know what, it’s good to be here rather than the remote ways we seem to be working.  Now today on Lawgical, we’re talking dispute resolution, but specifically small claims, and this is really important, what this can do for, not just small businesses, but even medium to larger enterprises.  This is part 1 in a series on the DIFC, the Dubai International Financial Centre Small Claims Tribunal.  Now, we’ll focus today on the initial stages of filing a claim, procedures, and the basic things that you need to know if this is a direction that you want to go in.  Let’s run through this methodically, Ludmila.  I’ll fire off a number of questions at you.  Tell me if I miss anything.  Let’s start with what counts as a small claim and why is this so relevant?

Ludmila Yamalova:  Well, it is relevant, in short, because a) it allows for businesses across the U.A.E. to have their disputes addressed in a rather efficient and business friendly manner that is affordable and quite expeditious.  Because of the name of the DIFC Small Claims Tribunal, perhaps a lot of businesses are not aware that they too can have access to the DIFC Small Claims Tribunal even if they are not based in the DIFC.

This is why it is relevant:  (a) It is relevant for businesses because they can address their commercial claims in a very business-like manner and then (b) just because it is the Small Claims Tribunal that sits in the DIFC does not mean that other businesses that are outside of the DIFC are precluded from it.  In a way, almost every business that has commercial disputes can ultimately avail themselves of this particular tribunal.  However, there are a few conditions as to how you do that.  But that’s why it is relevant.

Now with regard to what is a small claim, as to the DIFC Small Claims Tribunal a small claim is anything up to 500,000 dirhams.  It’s about $150,000, if you will.  However, you can increase this up to a million dirhams.  The parties have to agree ahead of time specifically that any dispute that arise to the value up to a million dirhams they will refer to the Small Claims Tribunal.  That is under this particular jurisdiction, that is what is defined as a small claim, up to 500,000 dirhams, or a million dirhams.

Tim Elliot:  What kind of cases could be heard at the SCT, the Small Claims Tribunal?

Ludmila Yamalova:  In general, it’s mainly commercial cases, commercial and civil cases that are within the threshold, i.e., within either 500,000 dirhams or a million dirham of value.  There are a few cases specifically carved out from the DIFC, for example, employment cases that are outside of the DIFC cannot be brought in or cannot be adjudicated in the DIFC Small Claims Tribunal.  However, if it is related to employment that is based in the DIFC, they will still be subject and will be under the umbrella of the DIFC, but outside of the DIFC those employment cases do not qualify.  Similarly, certain real estate disputes as well, they could be carved out because other forums, for example, the Rent Dispute Committee has exclusive jurisdiction over real estate matters in Dubai.  There are some specialized tribunals that have exclusive jurisdiction of certain matters, so those matters will not be able to be brought into the DIFC Small Claims Tribunal.  But otherwise, any other commercial or civil matter will be included.

One important carve out is criminal, and this is because again, this is a commercial tribunal and it is there to allow businesses or encourage businesses to come in and have their commercial disputes resolved.  Criminal cases are specifically and clearly not included in the SCT and have to be adjudicated in the local courts with the local authorities being either the prosecution or the police and ultimately the local criminal courts, but not the DIFC.

Tim Elliot:  What about the need for a legal professional?  Do I need to involve a lawyer?

Ludmila Yamalova:  In short, no.  That is one of the greatest benefits of the SCT.  The SCT, for our purposes, it is the Small Claims Tribunal so we will refer to it in this discussion as SCT in the interest of time.  But one of the greatest benefits of the SCT is that parties can come and are encouraged to come and have their commercial disputes resolved in a business-friendly manner, and that means that it is basically businesses to businesses, or parties to parties directly without having lawyers battle out their disputes before a more formal authority, or in a formal fashion.  The authority is formal but the fashion in which you argue your case is more business and more informal than what you would expect and would have to do in a different jurisdiction.

In fact, there is a specific rule so that the default rule is that parties have to represent themselves before the tribunal without lawyers.  That is the default rule.  However, there are certain exceptions and certain circumstances where the tribunal may allow for parties to be represented by a lawyer, but the default is that there are no lawyers.  That being said, it is not to say that parties should not consult with lawyers or should not receive legal guidance.  In fact, the parties, I encourage to perhaps retain in more complex matters, is to retain a lawyer to counsel them and guide them through the proceedings, but as far as representation before the courts and the submission of the documents, it is all direct between the parties.

Tim Elliot:  One of the common complaints I get is the length of time the legal proceedings generally tend to take.  Would it be reasonable to say that in a Small Claims Tribunal that proceedings are generally expedited more efficiently?  Is it quicker in the SCT?

Ludmila Yamalova:  Absolutely, and that is the other benefit of the SCT.  In order to resolve matters in a business-like manner, they have to be resolved much faster and much more expeditiously and much more, if you will, casually because otherwise if you start going into legalese and require formal submissions, formal approaches, formal arguments, and such, obviously all that requires not only hiring a lawyer, but also additional time to do things in a formal manner.  Because there is that specific emphasis or focus of the SCT to resolve matters amicably or in a business-like fashion, without lawyers, that is one of the reasons why you don’t have lawyers is to make it less formal, and because of that, it allows the SCT to move the proceedings much faster.  The goal of the SCT in fact is to resolve proceedings within two months from the time of filing until the time of judgment.  That’s the goal and that’s in most cases where there are no complications in terms of, for example, procedural challenges to jurisdiction or certain other requests or application for perhaps joining additional parties or requesting additional time for some other specific reasons.  The goal is and the default is two months from the time the claim is filed until judgment, but it can be extended up to two to three months more.

Tim Elliot:  In terms of the privacy issues, are proceedings and/or results, I guess, private or public in an SCT?

Ludmila Yamalova:  In short, they are private.  It’s an interesting observation because the SCT is part of the DIFC Courts, the DIFC Courts being the Dubai International Financial Centre Courts, which are common law courts.  They are subject to common law.  The DIFC law is based on common law principles.  Part of the common law principles is that all court cases become precedents and become binding on subsequent judges and subsequent judgments.  Part of it is therefore all courts cases are publicly available because if you are using a court case as a precedent, a binding precedent for future decisions, obviously you should have access to that court case.  That is one of the aspects of a common law system is that all court cases and, in fact, even hearings and any other motions and any other orders that are being made along the way during the proceedings are made public and available to the general public, not just the parties.  With that in mind, there is an interesting twist to that as far as the SCT proceedings and judgments are concerned.  The proceedings are private to the parties.  They are not open to the public.  However, the final judgments are made available to the public, yet the names of the parties are changed.  You still have the principles that you need to rely on as part of the common law system, but the names of the parties and the identities of the parties and other kinds of nuances that may reveal the parties actually are changed, so therefore in a way they remain private.  It’s public and private at the same time.

Tim Elliot:  One of the other things about legal proceedings that concerns people is obviously cost.  It’s very much at the forefront.  What are the fees to make a small claim?  Also, can claims, I guess expenses be claimed back?

Ludmila Yamalova:  Great question.  One over aching point to make for the SCT and any other proceedings before the DIFC Courts is that most fees are, in fact, listed in terms of dollars, a dollar figure.  It is in dollars, and therefore, for that purpose I will quote dollars.

Tim Elliot:  Right.

Ludmila Yamalova:  For employment cases, any disputes related to employment entitlements, the filing fee is 2% of the claim value.  For all other claims, any commercial claims, it is 5% of the claim value.  The minimum filing fee is $100.  Those are the court fees.  What is important to highlight as well is that along the process into the court proceedings, if the parties make any applications, in other words, requests of the court, each one of those requests usually also has a dollar figure attached to them.  For example, you want to make a request to join a party, or you want to make a request to challenge jurisdiction, each one of these requests is in legal terms called an application and the application also has a court fee.  So, there is a filing fee and for any of the parties that may consider actually taking cases to the SCT then they need to keep in mind that in addition to these filing fees, there will also be other hearing fees and application fees that they will have to pay.

With regard to whether they can claim them back, yes.  A winning party will be entitled to, if it is truly the win is clear, if they will be entitled to recover all of their court fees that they have paid.  But sometimes, that is why I highlighted that if the win is clear, the decision of the judgment may be such that both parties are winning and losing at the same time, so sometimes the court may make a decision because it’s more or less an evenly split judgment.  While I may be entitled to get a refund of something, but I may not be entitled to get my fees back because as part of that judgment I might have counterclaimed, and I may also have to pay you something.  Therefore, each party in the particular case may be responsible for its own court fees.  But as a general rule, yes, you are entitled to get your court fees.

Tim Elliot:  One of the things during COVID, these coronavirus times that we’ve seen here in the Emirates is remote, I guess, court access.  It’s something you’ve talked about at length in previous podcasts that has been a real boon for people.  Do you need to be physically present in the U.A.E. if you make a small claim?

Ludmila Yamalova:  In short, no.  You don’t need to be here.  That’s a huge evolution in development, if you will, that we have noticed in our practice at the SCT.  Five or so years ago when we would bring proceedings before the SCT, the parties were required to attend all of the hearings in person, and in the event they did not attend them, they were treated, for example, as being absentee and could face default judgment because of ultimately showing contempt of court, i.e., refusing to appear for a mandatory hearing.  That was the protocol.  There was really no other way of attending a hearing.  Now, fast forward five years or so plus, we have COVID-19 and the U.A.E., having embraced the whole idea of e-government and smart government years ago, had actually put in place a lot of technologies early on which at times that we are living in now through COVID-19 obviously paid back because they were able to use these tools and accelerate their implementation and application much more so than, for example, other authorities, including judicial authorities around the world.  As part of that, most of the courts, all of the courts that we now know in the U.A.E., have actually gone online, but the DIFC certainly was one of the first courts that not only went online but was able to navigate that new experience fairly efficiently and smoothly.  The consequence of that particular development is that the system and this new process has been working so well that it looks like there may not necessarily be going back into more of a physical experience.  The hearings are conducted today through a form of Skype, a business Skype account, and they can be either audio or visual, depending on the parties’ preferences.  We have conducted a number of hearings over the last seven months.  We have conducted many hearings.  All of them have been online, very efficiently and smoothly done, and most of the time they have been just audio, though the video option is available, and they are being recorded.  These recordings are made available to the parties.  If there is a video, there will be a video recording.  If it’s an audio, it will just be an audio recording that is easily and readily available to the parties, which makes the process so much more efficient and helpful because if I want to draw back on what was said in a particular hearing, there is no better way to be able to cite what perhaps the other side might have said or the judge might have said than actually quote them straight from the recording.  But because the process has worked so well, and we have had hearings where parties are joining, literally, from five to seven different locations at the same time.  You have a judge, for example, sitting presumably somewhere in Dubai or maybe even in the DIFC, though obviously in the early hearings I’m sure they were sitting at home.  You have the party, the client, if you have one client or multiple clients, sitting in their respective homes, you have the lawyers, perhaps even though they are not appearing on record, but they are sitting in another place, or if the court has allowed for legal counsel to represent, we have had counsel calling in from the UK or from Jordan.  Here you are.  You have this hearing that is happening in real time, that is being recording, where parties are effectively putting on record their submissions and arguments and the judge is not only listening in but ruling and making decisions and orders along the way.  It’s very smooth.  It’s very efficient.  I don’t know why we would ever really go back.  For now, there has been absolutely no indication that this system will be phased out once we’re back into more of a physical experience, if we are ever back into it in the way that we were before.

Tim Elliot:  Whenever I mention the remote access that you enjoy now, I see the smile that crosses your face immediately.  It has made a huge difference.  Two questions now, but they are intrinsically linked, I think.  How is the Small Claims Tribunal different from the local court system?  And, do you need to be, I don’t know, a licensed entity within DIFC, the Dubai International Financial Centre, to be able to utilize the Small Claims Tribunal at DIFC?

Ludmila Yamalova:  There are so many interesting examples or key points that set apart and make the SCT perhaps a more appropriate forum for dispute resolution for many businesses and parties based in the U.A.E. than for example local courts, one of which I mentioned earlier is the common law jurisdiction versus a civil law jurisdiction, which means that the court precedents become binding and as part of that the core precedents are available to the public and are regularly updated which basically means if you want to argue your case, you just go in and look at all these court judgments and you can safely cite these judgments for the purposes of making your arguments.

In the civil law jurisdiction, it works a bit different.  The U.A.E. has adopted a slightly different, perhaps a fusion approach to it, but as a general rule in civil law jurisdictions it is all law driven and not court cases.  That is one difference.

The other difference and a huge one, as I said earlier, it is less formal, and it is just for parties to be representing themselves directly before a judge without lawyers.  Therefore, the formalities that are usually attached to any other court proceedings are not there, which allows parties to communicate in more layman type of language versus legal arguments and citations and legalese and a lot more formalities.  It allows parties to communicate in a language they can understand.  I am talking business language, not legalese.  Because of that, it can move a lot faster.

Also, a huge, huge benefit for any non-Arabic speaker, and particularly for businesses in the U.A.E., is that all the proceedings of the DIFC Courts are in English.  Therefore, all of the proceedings before the SCT are also in English.  English is the formal and the only language of the courts, which for, I would probably argue all of the businesses in the U.A.E. including that are perhaps run by Arabic-speaking investors and owners and managers and such, the business language in the U.A.E. is English, so if you have a dispute between businesses in most cases the documents that are relied on by businesses, even if the parties themselves or their representatives and individuals within these businesses speak Arabic, most of the documents that are created in fact are in English.  Therefore, if you were to argue any of these cases before the local courts, you would have to translate all of those.  In the DIFC Courts and in in the SCT in particular, it is all in English.  Therefore, all of these documents, you don’t need to do legal translations.  All the submissions are in English and all the arguments are in English.  That’s a huge benefit.

Also, because the proceedings are private for a lot of other perhaps businesses who don’t want to publicize their disputes, the privacy of the proceedings is also an important benefit.

All in all, it’s faster, it’s cheaper because you don’t need to bring lawyers either, it’s more direct, and it’s more understandable for most because you don’t have to go through translators or local advocates.  It is more about just commercial business terms versus legalese and other formalities that are usually associated with court proceedings and therefore also with the local courts.

Tim Elliot:  Final question, Ludmila, just the process.  What is the procedure for an SCT case?

Ludmila Yamalova:  Before I answer that question, one important point to highlight is that if you are a business or a party that is not in the DIFC, how do you actually avail yourself of the DIFC jurisdiction?  All of these benefits we just discussed in this podcast are available to any parties who (1) are either based in the DIFC, or at least one of the parties is based in the DIFC, or (2) where part of the transaction or a contract might have executed in the DIFC, and (3) for any other parties who ultimately opt into the DIFC, and this is an important point because any business or any party can in fact opt into the DIFC Courts and the SCT Court jurisdiction in particular by including the language in their contract that allows them to do so.  In other words, you do not need to have any kind of connection with the DIFC.  You don’t need to be based in the DIFC.  You don’t need to even have had any transaction done in the DIFC.  You don’t even have to be based in the U.A.E.  But as long as the parties in the contract agree to have their disputes resolved by the SCT or the DIFC and include the appropriate language that is called an opt-in provision, voila, now they can claim jurisdiction before the DIFC Courts and the SCT in particular for small claims.

Tim Elliot:  Which, Ludmila, strikes me as being a huge bonus, not just for small, medium, large enterprises, but for sole operators such as myself, for example.  I could include an opt-in clause, SCT, DIFC clause in contracts that I would have with people podcasting, for example.  That’s hugely interesting.  Let’s move on though to the process of filing an SCT case, just to finish.

Ludmila Yamalova:  Yes.  The process is in line with the overall emphasis of the U.A.E. moving into the
e-government, the smart government.  The SCT and the DIFC Courts are quite technologically advanced and so everything is done through the online system, through the portal.  You don’t have to go to the court and submit anything physically.  Everything is done electronically which is another huge advantage.  To file the claim, you would go to the DIFC Courts website and there is a special section there for the SCT claims.  It’s a fairly self-explanatory and easy to navigate system.  You just go through the website and fill in the details, the amount of your claim, the names of the parties, and the address in particular of the defendant because ultimately you will have to serve the other side which is to notify them that you have filed a case.  They will have had to receive it and they can receive it and be served either by email or physically.  For example, the details you would put in, the name of the parties, their physical address, and their email address, and then the court will notify them and send an email to them with a form where basically they have to acknowledge service.  They can acknowledge service through electronic means or by email, or if they refuse to acknowledge service you would serve them physically.  In that case, you would have to translate the initial claim into Arabic just for the purposes of service of process.  Let’s say if they don’t respond, then you would move for the default judgment, but after the court has tried to serve the other side a few more times.  We have had a number of those cases.

Ultimately, everything in terms of filing and the experience and the logistics of managing the case, everything is online.  So, once again, it is a huge benefit because not only do you not need to attend the hearings physically, but you can navigate, you can manage your court proceedings from wherever you may be in the world or from the comfort of your own home or your own office, everything from filing to paying for the fees.  You would have to pay for the initial filing, the 5%, for example, for a commercial case, and any schedule that comes up after that, any communications that come up, everything is tracked through the online system.  In fact, all the parties will ultimately have their respective logins and with these logins they can log into the SCT portal and see all the case submissions that have been filed by the respective parties.  There is also a schedule of all the proceedings and the hearings that are scheduled ahead.  This is really one portal, a centralized portal of all the information that is accessible to the parties at all times and any judgments, orders, or decisions that are being made are populated and communicated through this portal.

In addition to that, with the SCT being a business-friendly forum for resolving disputes, the SCT staff also communicates with the parties by email.  The parties always copy each other and so there is a lot of communication.  In addition to the portal, there is a lot of communication that is going on by email.  The SCT representatives are quite helpful in terms of guiding parties on what to do next.  Through the email correspondence, for example, they will either attach a link to the particular provision in the rules that the parties need to familiarize themselves with if they want to make a request, or they would clarify points to them by email.  Again, the idea here is to create the forum for communication for parties so that they don’t feel, because they’re not being represented by lawyers, so they don’t feel that they are in the dark in terms of what they are supposed to do.  In addition to the portal, the SCT staff are quite helpful in guiding the parties in terms of what to do for the proceedings to move forward.

Tim Elliot:  That is another edition of Lawgical, part 1 in a series on the DIFC, Dubai International Financial Centre Small Claims Tribunal, a subject that we will be coming back to in a future podcast.  Ludmila Yamalova is the Managing Partner here at Yamalova & Plewka.  As ever, it’s been a learning experience talking to you.

Ludmila Yamalova:  Always a pleasure chatting with you, Tim.  Thank you.

Tim Elliot:  If you have a legal question you need answered in a future episode of Lawgical, or if you’d like a consultation with a qualified U.A.E. experienced legal professional, all you have to do is click the Contact button at LYLawyers.com.  Plus, you can WhatsApp us as well.  00971 52 525 1611.