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Thinking smart for small business

Amna Al Owais, DIFC Courts’ Small Claims Tribunal Registrar

The last decade has seen enormous emphasis placed on expanding the SME sector across the Middle East, with massive investment made into creating an enabling environment for entrepreneurs. The UAE has been particularly successful, with SMEs accounting for as many as 95 percent of all businesses, and contributing as much as 60 percent of GDP.

As their numbers have grown, inevitably, so has the incidence of contract disputes. Yet broadly speaking, the systems for dealing with these disputes have not changed, and in particular have not adequately distinguished between the needs of businesses of differing size.

In the first few years of the DIFC Courts, it became clear that smaller disputes might be more effectively dealt with outside of our main Court of First Instance, using a system better suited to the needs, resources and sensibilities of SMEs and individuals.

So in 2007 we established the region’s first Small Claims Tribunal (SCT) to handle lower value cases. Opened with little fanfare, this initiative has been the catalyst for a steady shift in the way the region helps smaller business owners resolve their commercial disputes.

Drawing on best practices from around the world, particularly the UK and Singapore, the SCT deals with cases in a radically different way to normal legal proceedings. Because claims are smaller and less complex, SCT hearings take place without lawyers in a private, informal setting. The first step is a consultation with a certified mediator, rather than a judge, where the emphasis is on finding a solution that works for both parties. If this is not possible, a hearing before a Judge will be scheduled, which while informal in procedure, is akin to a court case.

This process generally leads to faster, cheaper and more amicable resolution of disputes, with on average 90 percent of cases concluded within four weeks. Parties are then free to move on quickly, with the minimum of damage done to their reputations.

Having successfully launched the region’s first SCT, the DIFC Courts have continued to develop and refine the model in the intervening years. In 2011, businesses across the UAE, including those with no ostensible connection to DIFC, were allowed to opt-in to the SCT’s jurisdiction, if both parties agree in writing. This was a particularly important development as it made an English-language dispute resolution mechanism available to the UAE’s many non-Arabic speaking SME owners.

Interesting, while the SCT was originally established to serve the needs of SMEs and individuals, its merits have made it a popular choice with large corporates eager to resolve small, simple disputes quickly, cheaply and discreetly. In part, this was helped by the decision to increase the default jurisdiction to AED500,000 (or AED1 million, if both parties agree), enabling much larger cases to be dealt with by the SCT.

The most recent innovation has been the launch of the region’s first “virtual court,” which enables SMEs to resolve disputes remotely using advanced video technology, which is particularly helpful for owners who travel extensively for business.

Since launching in 2007, the SCT has seen its workload grow exponentially. In 2015, for instance, its workload almost doubled from 116 to 216 cases, while the value of cases continues to rise year-after-year.

The success of the DIFC Courts’ SCT has heralded a new era in the way jurisdictions look to help SMEs resolve their disputes. In 2012, for instance, the Dubai Courts and Department of Economic Development launched the Centre for Amicable Resolution of Disputes, which like the SCT, provides a mediation alternative to the judicial process. Innovations like a fee structure that encourages fast settlement have helped the Centre quickly become popular with the emirate’s SME community.

By thinking smart for small business, specialised dispute resolution systems have transformed the legal landscape for SMEs for the better. As their numbers continue to grow, so too will the importance of the work of the DIFC Courts’ SCT and its growing number of peers across the UAE and wider region.

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