ADR in the United Arab Emirates – The Nature of Compromise09 Oct

A country’s laws often provide a clear reflection of a nation’s culture and social values. The Arabian culture is founded on principles of Sharia Law where a promise is frequently treated as absolute. In the UAE you will find it impossible to break a rental or lease contract before the expiry of its natural term and you will go to debtor’s prison if your cheque bounces and payment is dishonoured. Local law requires all contracts to be entered into and performed in good faith. There are no western style insolvency protections and business is inextricably linked to issues of personal honour.

If arbitration is as an exercise in defining what was actually promised is in order to enforce delivery on that promise then mediation must be a process in defining what can be delivered instead of the original promise. How then can mediation work in a culture where the preference is to apply increasingly severe sanctions until the original promise is performed? Compromise will not be acceptable if one party is seen to lose face (or money).

Key to any successful mediation is the ability to accept compromise. In Arabia compromise should be presented as a way of delivering equivalent value to the original promise whether in the form of future opportunities or enhanced value. Faced with the illiquidity of Dubai’s cash strapped local developers international contractors have accepted 25% to 50% reductions in final account on staged payments together with a promise of future work instead of spending US$ 2/3m on an arbitration award they will not easily be able to enforce on any reasonable time horizon. In other cases physical assets have been successfully bartered instead of cash.

In presenting mediated options to those clients steeped in Arabian and Islamic culture care must be exercised in showing that the compromise represents no more than a deal change of equivalent or enhanced value. A client who feels he is being screwed by foreign interests will not settle or if he does he will remember the experience until he is able to re balance the position on his terms at some future date. Despite the absolute nature of contractual promises peoples of the Arabian Gulf come from a strong trading tradition. Deals can be done and final accounts can be settled on the basis of equivalent value. If there is any secret it is in the ability of the mediator to redefine and present a deal both parties see as being equivalent in value to the original promise.