By Roma Patel, Associate
The Dubai local onshore courts recently recognised and upheld the “without prejudice” principle, a principle previously not recognised. This marks a significant development to the approach taken to confidential settlement discussions in the UAE.
“Without prejudice” privilege is recognised in several common law jurisdictions. The “without prejudice” principle offers protection against certain communications made during the course of negotiations or discussions concerning settlement. It prevents these statements from being used as evidence in court or other legal proceedings, specifically against the party who made the “without prejudice” statement. The purpose of this principle is to encourage open, honest and unreserved discussions between parties in an attempt to resolve and settle disputes without the fear that communications will later be held against parties later on in the proceedings.
The UAE local onshore courts have not previously recognised the “without prejudice” principle. In fact, the courts have admitted and considered documents marked “without prejudice” or statements used in the course of settlement discussions as evidence. Consequently, this approach has often hampered settlement discussions between parties.
A recent landmark decision on Case No. 31/2024, issued on 22 October 2024 by the Dubai Court of Cassation, significantly departed from the traditional approach taken by the local onshore courts. The judgment held that communications made in the course of settlement were inadmissible as evidence.
The dispute arose out of an agreement to purchase cryptocurrency. The Claimant filed a claim seeking to recover funds plus interest from the Defendant. The Claimant claimed that it had transferred a specific amount of funds to the Defendant to purchase the equivalent amount of cryptocurrency. However, the Claimant alleged that the Defendant failed to transfer the equivalent amount of cryptocurrency which the Claimant claimed had been agreed between the parties. Following the analysis of a court-appointed expert committee, the Court of First Instance awarded a lower amount than claimed by the Claimant.
The Claimant appealed, arguing that the Court of First Instance had not analysed the evidence properly, including WhatsApp communications exchanged between the parties during settlement negotiations. In these negotiations, the Defendant allegedly admitted to owing a higher amount than what was awarded by the Court of First Instance.
On 3 April 2024, the Court of Appeal issued its judgment in Case No. 31/2024. The Court of Appeal upheld the Court of First Instance’s judgment. In its consideration of the evidence, the Court of Appeal applied the “without prejudice” principle. It held that settlement communications were inadmissible as evidence. Whilst it is unclear and unlikely that the WhatsApp communications were marked as “without prejudice”, it was clear the communications were intended to facilitate settlement between the parties. The Claimant filed a further appeal to the Court of Cassation.
On 22 October 2024, in Case No. 486/2024, the Court of Cassation upheld the Court of Appeal’s judgment. In its analysis, it made clear that statements made during the course of failed amicable settlement discussions were not to be taken as evidence or admission against the individual who made them, on the basis that these statements are made “without prejudice” to their rights. The Court stated that such statements enjoyed the right to immunity. The Court made clear that, even if the settlement discussion were unsuccessful, communications during settlement discussions were still not to be considered as evidence in proceedings.
The judgment displays a significant departure from the previous approach taken by the local onshore courts. Whilst the UAE courts do not have a system of binding judicial precedent, meaning that the UAE courts are not bound to abide by the Court of Cassation’s findings in this matter, the judgment provides scope for the “without prejudice” principle to be applied by the UAE courts in the future. The judgment parties the opportunity to refer to the Court of Cassation’s judgment when trying to convince the relevant courts to exclude settlement communications from evidence. Time will tell whether the opportunity for “without prejudice” protections will be formalised in legislation.
Further, it can be inferred from this judgment that the courts do not necessarily require communications to be marked “without prejudice” during the course of negotiations. If the communications were exchanged with the intent of settlement efforts, this may be enough to apply the “without prejudice” principle. However, until the principle is routinely applied in the UAE and/or codified by law, parties should continue to mark settlement communications clearly as “without prejudice” to avoid any uncertainty as to the intent behind the communications. Indeed, to avoid any uncertainty around the status of such communications, it would be best practice to ensure they are marked “without prejudice”.
To conclude, the judgment has brought UAE local onshore courts one step closer to the approach adopted by common law jurisdictions with respect to settlement discussions. This positive change may invite parties in the UAE to engage in more settlement discussions without the fear that their statements may later be used against them in evidence.
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