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Pride and Without Prejudice: Protection of confidential settlement discussions under UAE law27 February 2025

The Dubai Courts recently reconsidered the confidential nature of settlement discussions and the concept of “without prejudice” that is widely adopted in common law jurisdictions. The case marks a significant development in the position under UAE law with the judgments of the Court of Appeal and Court of Cassation upholding the concept of “without prejudice”, which has historically not been recognised by the Dubai onshore courts.

Factual Background

The case concerns an agreement for the sale and purchase of cryptocurrency. The purchaser of the cryptocurrency (the “Claimant”) alleged that it had made the agreed payment, but the seller (the “Respondent”) had failed to transfer the agreed amount of cryptocurrency in return. The Claimant commenced proceedings pursuant to the agreement against the Respondent in the onshore Dubai Courts.

"WhatsApp communications in question were sent during amicable settlement negotiations between the parties."

The Dubai Court of First Instance appointed a committee of experts to assist with their investigations and prepare a report of their findings. The court ordered the Respondent to pay the Claimant AED 136,283, plus legal interest at a rate of 5% annually (Case No. 2100 of 2023). Crucially, this sum equated to only a small part of the total amount sought by the Claimant and the court rejected all requests for recovery of additional sums based on the experts’ report.

The Claimant appealed the judgment on a number of grounds including that the Dubai Court of First Instance had failed to consider WhatsApp communications between the parties in which the Respondent allegedly admitted to owing the higher sum claimed by the Claimant. Notably, the WhatsApp communications in question were sent during amicable settlement negotiations between the parties.

The Dubai Court of Appeal subsequently issued a judgment (Case No.31 of 2024) rejecting the Claimant’s appeal and upholding the findings of the Court of First Instance that statements made during amicable settlement discussions were inadmissible as evidence in Court proceedings. The judgment recognised that statements made during amicable settlement discussions are made by a party “without prejudice” and should therefore be immune from consideration as evidence before the court.

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"statements made during amicable settlement discussions are made by a party “without prejudice” and should therefore be immune from consideration as evidence before the court"

The Claimant further appealed the Court of Appeal’s judgment to the Dubai Court of Cassation. The Court of Cassation issued a judgment, dismissing the appeal and upholding the decision of the Court of Appeal (Case No.486 of 2024). The Court of Cassation held that the Court of Appeal had acted within the limits of its discretionary authority in assessing the evidence and finding communications made in the course of failed settlement discussions to be inadmissible as evidence against the party who made them. They therefore concluded that there was no legitimate basis for the appeal.

Discussion

In common law jurisdictions, statements made in a genuine attempt to settle an existing dispute, either orally or in writing, are protected by the “without prejudice” principle from being produced in legal proceedings as evidence of an admission against the party making the statement. This principle has not previously been recognised by the UAE Courts who have historically been open to considering statements made during parties’ settlement discussions as evidence when determining a dispute. The Court of Appeal and Court of Cassation judgments in this case therefore mark a significant shift in the approach historically adopted by the onshore Dubai Courts in relation to the concept of “without prejudice”.

Insofar as these judgments indicate that the Dubai Courts may be more inclined to protect the confidential nature of settlement discussions, this is undoubtedly a welcome development for commercial parties who become engaged in disputes before the onshore courts in the UAE. The judgments will hopefully encourage parties to seek to resolve disputes amicably without fear of such settlement discussions later being used against them in evidence.

"there is no system of binding judicial precedent under UAE law and judges in the UAE are not legally obliged to adhere to this decision"

Whilst the recent judgments are clearly a positive development and could potentially have a significant persuasive effect on future judgments in the onshore UAE Courts, it is important to note that there is no system of binding judicial precedent under UAE law and judges in the UAE are not legally obliged to adhere to this decision. The treatment of ‘without prejudice’ communications in the onshore courts will therefore ultimately remain at the discretion of the judge on any particular case and the extent to which the UAE Courts will follow the abovementioned judgments and adopt the ‘without prejudice’ concept is not yet clear.

In the absence of the UAE enacting an explicit rule to define the “without prejudice” concept in the context of UAE law and/or clarifying the position, parties and their legal representatives will likely remain cautious of relying on the “without prejudice” principle to protect statements made in the course of settlement discussions from disclosure in onshore Dubai Court proceedings because ultimately the treatment of such communications will fall to the discretion of the judge hearing the proceedings.

It is not evident from the Court of Appeal judgment whether the correspondence in question was marked “without prejudice” or not. It is not therefore clear whether the Dubai Court required that the settlement communications be marked “without prejudice” to be excluded from documentation put before the Court, or whether it is sufficient that the correspondence is made during discussions to settle the dispute. In any event, based on this decision, parties will have a stronger argument that correspondence is not disclosable to the court where it is marked “without prejudice”.

"parties will have a stronger argument that correspondence is not disclosable to the court where it is marked “without prejudice”"

Key Takeaways

  • The Court of Appeal and Court of Cassation judgments in this case indicate a significant shift in the UAE legal framework by upholding the concept of “without prejudice”, which Dubai onshore courts have historically not recognised, and protecting the confidential nature of settlement discussions.
  • The judgments bring the onshore Dubai Courts a step closer to aligning with the approach to settlement discussions widely adopted in common law jurisdictions. This will undoubtedly be seen by many as a welcome development which will encourage commercial parties to engage in open settlement discussions without fear of any statements made in such discussions later being considered as evidence before the court.
  • Crucially, there is no system of binding judicial precedent under UAE law and the courts in the UAE are not legally obliged to follow these judgments. The extent to which the onshore Dubai courts will follow these judgments and adopt the “without prejudice” concept is therefore not yet clear and until further legal clarification is provided, it likely that parties may remain cautious of relying on the “without prejudice” principle to protect statements made during amicable settlement discussions.

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