Dubai Court of Cassation Delivers First Landmark Ruling on Treatment of Without Prejudice Evidence

Executive Summary

The Dubai Court of Cassation recently affirmed the existence and application of the "without prejudice" principle under Dubai law in Case No. 486/2024, confirming the earlier ruling of the Dubai Court of Appeal in Case No. 31/2024. This is a landmark decision that introduces a significant change in the UAE legal landscape. Although the Dubai onshore Courts do not follow the doctrine of legal precedent, this decision could influence future judgments across the UAE. Parties engaging in settlement negotiations on a without prejudice basis will now be emboldened to argue that their without prejudice communications are not admissible as evidence in court. This decision also reflects a move towards harmonising UAE commercial and legal practices with international standards, particularly those of common law jurisdictions.

However, the full scope and implications of this decision are not yet clear. It remains uncertain whether other UAE courts will adopt a similar approach to interpreting the without prejudice principle. Parties should therefore continue to exercise caution and vigilance when entering into settlement discussions on a without prejudice basis.

Factual Background and Case Summary

The dispute concerned a contested cryptocurrency exchange transaction in Dubai. The buyer (Claimant) accused the seller (Respondent) of not transferring the agreed amount of cryptocurrency in exchange for the agreed cash payment. Consequently, the Claimant sought monetary damages from the Respondent in the onshore courts of Dubai for failing to transfer the full amount in accordance with their agreement.

The Dubai Court of First Instance ruled that the Respondent pay an amount substantially less than what was claimed by the Claimant. Dissatisfied with this outcome, the Claimant appealed the decision, arguing, among other points, that the Court had failed to consider WhatsApp messages between the parties.

On 3 April 2024, the Court of Appeal upheld the decision of the Court of First Instance. The Court of Appeal determined that the WhatsApp communications relied upon by the Claimant were exchanged during a period of amicable settlement discussions and negotiations. As such, the Court deemed these communications inadmissible, citing that statements made without prejudice during settlement negotiations are protected and inadmissible as evidence in court proceedings.

On 22 October 2024, the Court of Cassation upheld the decision of the Court of Appeal. Similarly, it reiterated that statements made during amicable settlement negotiations, which did not result in a contractual settlement agreement, are inadmissible as evidence on the basis such statements are made without prejudice and are immune from being used as evidence.

Concept of Without Prejudice

Conceptually, the recognition of without prejudice communications varies between common law and civil law jurisdictions. In common law systems such as the UK, it is a well-established legal principle. Without prejudice communications and documents provided during settlement negotiations are prevented from being admissible evidence in court. This principle aims to promote open dialogue and productive commercial settlement between parties, without the risk of disclosure in court should negotiations fail.

In contrast, the GCC's civil law jurisdictions have not traditionally acknowledged this concept. However, some jurisdictions, such as the UAE's "offshore jurisdictions" – the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) – have adopted the principle, following the common law model.

The decision of the Court of Cassation demonstrates a shift in the onshore UAE courts towards potentially offering increased protections for without prejudice communications. However, due to the lack of legal precedent and the uncertain future impact of this decision it may be unwise for parties to overtly disclose their commercial position during without prejudice discussions in the UAE. Nevertheless, should such evidence be adversely relied upon in court, it may now be possible to argue against its inclusion and admissibility before the onshore UAE courts.

Potential Commercial Impact of the Decision

The recognition of without prejudice communications has potentially far-reaching implications for business and legal relations across the UAE:

1. Encouragement of Open Discussions: parties may now be emboldened to engage in more open and frank discussions during negotiations, potentially leading to increased rates of settlement and therefore reducing long-term associated dispute costs.
2. Facilitation of Cross-Border Dispute Resolution: the alignment of UAE case law with common law practices may streamline cross-border dispute resolution. Parties from different legal backgrounds will now have a shared understanding of the implications of "without prejudice" communications during settlement negotiations.
3. UAE and GCC Judicial Treatment: it remains to be seen whether other GCC civil law jurisdictions will take this decision into account in future cases involving the disclosure of evidence obtained during without prejudice amicable settlement negotiations. It will be interesting to see future noteworthy regional developments in this space across the GCC.

Conclusion

The Dubai Court of Cassation's recognition of the without prejudice principle represents a significant development in UAE law. However, the full implications and consistent application of this principle remain to be seen. As such, parties to disputes should approach this development with cautious optimism. Taking advantage of the potential benefits, yet remaining mindful of the current limitations and uncertainties. As the UAE continues to evolve its legal framework, this ruling may mark the beginning of a new era in dispute resolution practices, enhancing the country's position as a hub for international business and legal services.

Authors: Cameron Cuffe, Partner; Hannah Archer, Associate; Cynthia Abi-Chahine, Junior Associate