i The insurance and reinsurance market
The United Arab Emirates (UAE) insurance market is the largest in the Gulf Cooperation Council (GCC).2 Nevertheless, there are generally low levels of insurance penetration, which presents both challenges and opportunities within the market.
There are effectively three separate insurance jurisdictions in the UAE: the onshore UAE market; the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), of which the latter two are largely wholesale offshore reinsurance centres. The onshore insurance market is largely dependent on reinsurers and significant capacity is now available in the DIFC.3
There is also a growing Islamic insurance market within the UAE. Takaful insurance is an alternative system of cooperative Islamic insurance that is found within the region. Takaful insurance is primarily subject to the same UAE laws as non-Takaful insurance, although there are some differences, for example relating to policy content.4
ii The legal landscape for insurance and reinsurance disputes
The UAE's 'onshore' legal system
The onshore legal system is founded upon civil law principles with a statutory code as the primary source of law. The court system is heavily influenced by shariah law and operates in the UAE's official language of Arabic. The legal framework of the justice system operates via two systems: a federal judiciary presided over by the Federal Supreme Court in Abu Dhabi and local judicial departments at the local government level, such as the Dubai courts. There is no system of binding precedent although the doctrine of jurisprudence constante does apply, meaning that decisions of higher courts can be persuasive on lower courts. In addition, the doctrines of reservation of rights and without prejudice correspondence are not expressly recognised under the law. There is also no general doctrine of privilege (whether legal advice privilege or litigation privilege), although the impact of this is minimised by the absence of any obligation of mandatory disclosure. However, the laws governing lawyers' conduct in the UAE prohibit lawyers from disclosing confidential information provided by their client without the client's consent.
DIFC and ADGM courts
While the onshore courts operate a civil law system, the UAE is home to a series of free zones governed by their own regulations. In the case of the DIFC and the ADGM, these financial free zones have their own civil laws (i.e., non-criminal) and their own common law courts to administer those laws. The DIFC and ADGM court systems are predominantly based on English common law, and substantive civil law and procedure. In relation to binding precedent, which is applicable in the DIFC and ADGM courts, the body of case law continues to grow. In the event that the law is silent, the DIFC and ADGM judiciary has the power to call upon English common law precedent to help determine disputes. In contrast to the UAE onshore court system, the doctrine of privilege and the doctrine of reservation of rights and without prejudice correspondence are recognised concepts in the DIFC and ADGM courts.
i The insurance regulator
The onshore insurance market is regulated by the Insurance Authority (IA), which oversees all insurance business in the country (i.e., insurers, brokers and other insurance service providers). Although the IA was established in 2007,5 and remains in its infancy, there has been a steady increase in regulation, creating a robust framework in which to operate. The scope of IA governance includes insurance and reinsurance companies and licensed insurance intermediaries located or operating in the UAE in order to ensure the protection of customers located or operating in the UAE.
In addition to the IA, there are separate dedicated regulators for the health insurance sector in some of the individual emirates; at present, these are the Dubai Health Authority, the Department of Health of Abu Dhabi and the Sharjah Health Authority.
Further, the Dubai Financial Services Authority and the Financial Services Regulatory Authority, respectively, regulate DIFC- and ADGM-based insurers. Each regulator has its requirements for the authorisation and regulation of companies offering insurance services.
ii Position of non-admitted insurers
The law prohibits non-admitted insurers. Any insurer conducting insurance business in the UAE must be licensed by the IA. This prohibition applies to all types of insurance business and is contained in the UAE Insurance Law.6 The DIFC and ADGM also prohibit non-licensed insurers operating within their jurisdictions.
There are no express legal provisions restricting insurance fronting transactions. Therefore, as long as the insurer is in compliance with applicable prudential limitations in local regulations, there is no provision preventing it from ceding 100 per cent of a given written risk (i.e., fronting the risk), either to a local reinsurer or a foreign reinsurer. In practice, however, reinsurers may impose stricter terms and conditions.
iii Position of brokers
In 2018, the IA passed an Insurance Consultant Resolution,7 which is expected to result in a significant decrease in the number of insurance consultants and brokers in the UAE. Key regulations of the Insurance Consultant Resolution include the prohibition of persons from practising the profession of an insurance consultant or broker unless he or she obtains a licence from the IA.8 A licence is valid for one year and renewable annually.9 Further, a sole insurance consultant or broker whose application is accepted must submit to the IA a professional indemnity insurance policy providing cover of 1.5 million dirhams.10 A corporate insurance consultant or broker must submit to the IA a professional indemnity insurance policy providing cover of 3 million dirhams.11
iv Requirements for authorisation
Insurance and reinsurance activities may be exercised within the UAE by any of the following:12 a public joint-stock company, listed on a UAE stock exchange and with UAE nationals owning at least a 51 per cent stake in the company; a branch of a foreign insurance company; or an insurance agent.
In relation to branches of a foreign insurance company, the parent company of a branch office must be able to meet risk exposures in the UAE.13 Companies that fail to comply with their solvency margins and minimum guarantee fund requirements will be liable to an administrative fine of 150,000 dirhams.14
Insurers based in the DIFC and ADGM are generally prohibited from insuring risks situated in the onshore UAE market; however, this prohibition does not apply to reinsurance providers.
v Regulation of individuals employed by insurers
The IA must approve individuals working in certain roles, including directors, chief executive officers, compliance officers, finance officers and money laundering reporting officers of an insurer or broker. In addition, an insurer regulated by the IA must circulate the Instructions concerning the Code of Conduct and Ethics, which must be observed by insurance companies operating in the UAE,15 to its employees, and develop internal professional codes of conduct for the company and its employees.16
vi Distribution of products
Insurance products can only be distributed in the UAE by insurers and insurance brokers and consultants licensed by the IA,17 or banks licensed in the UAE via bancassurance arrangements between a locally licensed insurer and the bank.18
vii Compulsory insurance
viii Compensation and dispute resolution regimes
The IA mandates that each insurance company must maintain a register of complaints from its clients, and should investigate each complaint within 15 days of the date of its submission. Any decision should be included within the Complaint Register.21 The IA inspectors have access to the Complaint Register to verify the information. Each complainant (whether it is the insured or the beneficiary) may appeal decisions to the IA if the insurance company rejects their complaint. An insurer may be fined 50,000 dirhams if it delays in providing clarifications regarding complaints received by the IA.22
The IA has the mandate to form specialised dispute resolution committees that can settle disputes arising out of insurance contracts.23 The IA has granted extensive powers to the new dispute resolution committees, including the power to compel the production of documentation as necessary, to seek the assistance of experts and witnesses, and to adopt any alternative measures required for the settlement of disputes. Either party may appeal the decision of the IA committee to the individual emirate's court of first instance within 30 days.24 However, once this period has elapsed, the decision of the committee becomes final and binding.25
There is no pre-action protocol or procedure for insurance complaints.26 Insurers are required to handle claims (which must always be in accordance with applicable legislation and the provisions of insurance policies) as follows:
- insurers must issue a decision in relation to all insurance claims;
- if a claim is fully or partially rejected, insurers must provide the insured with reasons for the rejection in writing;
- in the event of a dispute between the insurer and the insured, an insured may submit a written complaint to the IA, which may request further clarification from the insurer; and
- if the insured disputes the clarification provided by the insurer, the insured may refer the matter to a specialised insurance committee.
ix Taxation of premiums
On 1 January 2018, the UAE introduced value added tax (VAT) at the rate of 5 per cent.27 All insurance and reinsurance premiums are subject to VAT with the exception of life insurance. During the implementation of VAT, many issues arose with regard to insurance policies that had been entered into before 1 January 2018, but provided coverage after this date. These issues are still subject to debate.
The Federal Tax Authority (FTA) has confirmed that reinsurance placed with a reinsurer located outside the UAE shall be treated as an imported service and the reinsurance premium payable by the insurance company will be subject to VAT under the reverse charge mechanism. This does not apply to life reinsurance.
x Proposed changes to the regulatory system
There are a number of regulatory reforms being considered by the federal authorities at the time of writing, most notably in relation to life insurance. These potential reforms are considered in more detail in Section V.
III INSURANCE AND REINSURANCE LAW
i Sources of law
Insurance is regarded as a commercial activity and, in theory, is governed by the UAE Commercial Code.28 Under the Commercial Code, the hierarchy of laws is as follows:
- the Commercial Code;
- the agreement of the parties (i.e., the policy);
- rules of commercial customs and practices (with specific or local customs and practices superseding general practices); and
- the Civil Code,29 insofar as it does not contradict the general principles of the commercial activity.
However, the substantive provisions of insurance law are contained in the Civil Code30 and therefore, in practice, the insurance provisions of the Civil Code31 are applied by the courts, despite the above-mentioned hierarchy.
Marine insurance law is set out in the Maritime Code.32 It can be helpful to consider these provisions in the context of non-marine insurance in the event that the Civil Code and the other insurance laws do not address a particular issue.
Many policies written in the UAE still incorporate London market wordings. In the event that UAE law is completely silent on a point, it can be instructive to consider the relevant English law on the basis that it may represent commercial custom, although the extent to which a UAE court will be guided by English law is limited.
Further, the principles of shariah law can also be relevant when considering insurance law. Although there is a presumption that where there is a codified provision of UAE law dealing with an issue, that provision is considered to be compliant with shariah courts may nevertheless look to shariah principles for guidance in interpreting and applying the law.
ii Making the contract
Essential ingredients of an insurance contract
Under the law, insurance is a contract whereby the insured and insurer cooperate in addressing an insured risk or event. The insured pays to the insurer a specified sum or periodical instalments (i.e., the premium) and, in return, if the specified risk materialises, the insurer is bound to make payment.33 The general provisions in relation to formation of contracts under the Civil Code34 will apply to insurance contracts, insofar as they do not contradict those specific provisions in the insurance sections of the Civil Code.
Although not explicitly stated, there must be a fortuity (i.e., there must be an element of risk or uncertainty).
Transfer of risk when the uncertain event occurs
The policy will typically specify that there will be a transfer of risk when the uncertain event occurs. However, as a basic principle, in first-party insurance, the transfer of risk will occur when the risk or the event set out in the contract materialises.35
In the case of liability insurance, the obligations of the insurer only arise when the injured third party makes a claim against the insured.36 This can include a legal judgment awarded against the insured, although it has been held in certain cases that this is not strictly required.37
Requirement of insurable interest
There is no express concept of insurable interest; however, the Maritime Code contains a prohibition on anyone benefiting from a policy of insurance unless they have a 'lawful interest' in the peril not occurring.38 It is likely that this provision would apply equally to non-marine insurance.
Taking out a contract of insurance without an insurable interest, albeit undefined, would be akin to gambling, which is prohibited under shariah law.
Utmost good faith
Parties to an insurance policy are obliged to perform their obligations in a manner consistent with the requirements of good faith.39 There is also an express obligation on an insurance company to carry out its business on the basis of absolute good faith.40
In cases of non-marine insurance, if the insured misrepresents or fails to disclose matters, or fails to carry out an obligation under the policy, and the insurer can prove that the insured did so in bad faith, the insurer is entitled to retain the premium in addition to requiring that the policy be cancelled.41
In cases of marine insurance, the position is the same as in non-marine if the insurer can prove bad faith of the insured. However, even if bad faith cannot be proved (but misrepresentation, for example, can be proved) in relation to a marine insurance policy, an insurer is still entitled to retain half of the premium, as well as requiring that the policy be cancelled.42
To give a degree of protection to insureds, there is an obligation on the insurer to include all of the necessary questions relating to material facts, required by the insurer to assess the risk, within the proposal form. The proposal form must also set out the consequences on coverage of giving incorrect or inaccurate information.43
Recording the contract
A contract of insurance is recorded by way of a written document. Insurance policies are required to be in Arabic although may be accompanied by a translation. In the event of a discrepancy between the translations, the Arabic version will prevail. Failure to issue a policy in Arabic can result in a fine of 50,000 dirhams. The Director General may exempt some insurance policies from being written in Arabic.44
As a result of the enactment of the Electronic Transactions and E-Commerce Law,45 contracts between parties can be executed electronically; for example, contracting by 'click-to-accept' (where an insurer indicates their consent to the insurance contract by ticking a box online). The Electronic Transactions and E-Commerce Law permits such electronic documentation as evidence.
The content of insurance policies is governed by the IA Board Resolution No. 3 of 2010, which sets out a number of requirements, including that the policy must clearly describe the subject matter, the insured sum, the extent of cover and the claim procedure. In addition, the policy must include all terms and conditions governing the contract, be bound in such a way that does not permit removal of pages, and must set out page numbering in the policy and any attachments.46 The Maritime Code also contains certain specific requirements for the content and recording of marine insurance policies, including that the insurer or a representative must sign the policy.47
iii Interpreting the contract
General rules of interpretation
The starting point for interpreting a policy is that clear words will be given their direct meaning with no scope for any other interpretation.48 If the words are clear, they cannot be departed from.49 However, where there is ambiguity or scope for interpretation, enquiries can be made into the intentions of the parties.50 Any doubt arising in cases of ambiguity will be resolved in favour of the obliging party.51 This is caveated in the case of contracts of adhesion (e.g., standard form insurance policies) and it is not permitted to construe ambiguity against the adhering party (i.e., the insured).52
Finally, there is a presumption of contractual interpretation that a specific or special condition, or term, will override or supplement a standard or general clause.
Incorporation of terms
As a general rule, an insurance policy must contain all of the terms and conditions that pertain to it.53 However, there are a number of notable terms that have additional requirements.
For example, clauses in the policy exempting the insurer from liability must be written in bold characters, in a different print colour and initialled by the insured.54 Failure to comply with this requirement can lead to a fine of 50,000 dirhams.55
An arbitration agreement is void unless it is contained within a special agreement, separate from the general printed conditions of the policy.56
The following provisions in an insurance policy are void:
- any provision excluding cover for a breach of the law, other than a felony or deliberate misdemeanour;
- a late notification provision in the event that there is a reasonable excuse for the delay; and
- any arbitrary provision, breach of which was not causative of the occurrence of the incident insured against.57
A party's obligations under the contract (i.e., the policy) can extend beyond what is expressly contained within the contract to include an obligation to also do that which is related to the contract via law, custom or the nature of the transaction.58
Types of terms in insurance and reinsurance contracts
UAE law does not specifically distinguish between types of terms in the same way as may be found under English law (e.g., conditions, terms, innominate terms), nor are conditions precedent or warranties expressly recognised.
The applicability and enforceability of a term under UAE law will depend upon its effect. Any term that purports to permit an insurer to avoid cover (e.g., a condition precedent) will be subject to the formalities for exclusion clauses as referred to above and may be void if it does not comply.
Similarly, any arbitrary term, breach of which would have had no effect on the cause of the incident insured against, will also be void. In that regard, breach of a warranty in a policy will not automatically allow an insurer to avoid cover. The breach of the warranty must have been causative of the loss.
iv Intermediaries and the role of the broker
There is no legal requirement to conduct insurance or reinsurance business through an insurance broker. Where an insurance broker is involved, insurance brokers in the UAE must be authorised by the IA, which prohibits insurance companies from dealing with brokers in respect of UAE insurance business not licensed by them.59 With regard to intermediaries acting in the life insurance business, there are plans to introduce legislation requiring such intermediaries to be licensed by the IA.60
Agency and contracting
A broker is an independent intermediary which mediates insurance or reinsurance contracts between the insured and reinsured, and the insurer and reinsurer, and is paid a commission from the insurer and reinsurer. UAE law does not distinguish between placing brokers and producing brokers. UAE insurance law distinguishes between a broker and an agent. The first acts independently as an intermediary; the latter acts directly and exclusively as intermediary for one insurer or reinsurer. Both categories are separate and a broker cannot act as agent and vice versa.61
How brokers operate in practice
Brokers that are established and authorised in the UAE must comply with the IA Brokers Regulations. A broker is not permitted to act as both insurance broker and reinsurance broker for the same customer and the same transaction.62 Reinsurance brokers are not directly regulated under the law, provided they do not carry on business activities in the UAE (i.e., their business activities are conducted outside the UAE or offshore within the DIFC and ADGM). Therefore, generally, a reinsurance broker's functions and duties will be determined by the contractual arrangements between it and the reinsured, a producing broker or the reinsurer, as the case may be.
The procedure for providing notice of a claim will usually be set out in the insurance policy itself. Article 7(5) of the IA Board Resolution No. 3 of 2010 states that insurers must explain the procedures the insured must follow in the event the insured risk has occurred in order to receive the entitled compensation. The content of the notice will typically require a summary of the claim or circumstance, quantum information sufficient for insurers to assess coverage and any supporting documents. The IA provides that the procedures the insured has to follow upon the occurrence of the risk have to be clearly indicated on the policy.63
There are no specific consequences for late notification in relation to insurance contracts. Instead, the general position regarding a breach of contract will apply. In the event that a policy is breached, the insurer may seek damages or refuse to pay a claim under the policy (depending on the insurance policy itself). However, if the insured has a reasonable excuse for the delay, a term in the insurance policy that provides that late notification means an insured's rights shall lapse under an insurance policy, will be void.64 Further, arbitrary clauses are void (e.g., where a breach did not cause the occurrence of the incident insured against); this could include breach of a notification provision.65
In relation to the handling of claims subsequent to notification, the IA has provided further clarity through Federal Law No. 3 of 2018 on the Amendment of Certain Provisions of Federal Law No. 6 of 2007. For example, if an insured fails to provide all information requested by insurers following notification, this can amount to a reason to deny the claim in circumstances where the information is required to ascertain the incident or the extent of the loss66 and where the insured has no reasonable excuse for the delay.67 Subsequently, the IA has granted extensive powers to the new dispute resolution committees, including the power to compel documentation as necessary.68 Either party may appeal the decision of the IA committee to the individual emirate's court of first instance within 30 days. However, once this period has elapsed, the decision of the committee becomes final and binding (see Section II.viii).
The limitation period for issuing legal proceedings under insurance contracts is three years from the occurrence of the incident, or from the date of the insured having knowledge of that occurrence.69 The limitation period in respect of marine insurance is generally two years from the date of the incident (with specific provisions dealing with claims in relation to vessels and cargo), or where a third party makes a claim against the insured.70 Further, limitation is suspended under marine insurance by 'registered letter or delivery of other documents relating to the claim',71 or a 'legal excuse'.72
Good faith and claims
Parties to contracts (including insurance contracts) governed by UAE law are subject to the obligation to perform the contract in good faith; this includes an obligation on the insurer to exercise good faith in paying claims.73 It follows that it may, theoretically, be possible for the insured to claim damages for breach of this duty of good faith when adjusting and settling claims (i.e., this would be similar to punitive bad faith claims), to claim damages for consequential losses flowing from the insurer's breach, or both.
IV DISPUTE RESOLUTION
i Jurisdiction, choice of law and arbitration clauses
UAE courts have jurisdiction over insurance-related claims brought against UAE nationals and entities or foreign legal entities with a domicile or place of residence in the UAE.74 Any agreement to the contrary is void.75 Articles 31 to 41 of the Civil Procedures Law includes a series of circumstances that will determine which court within the UAE has jurisdiction over, for example, the conclusion of a contract or the performance of a contract. Article 37 relates specifically to insurance where a dispute relates to insurance, jurisdiction is vested in the court or where the beneficiary has its residence or of the location of the property.
In theory, UAE law recognises choice of law clauses. However, the courts will not apply laws that are contrary to shariah or public policy (a concept that is broadly construed). Moreover, there are specific matters where a court will not uphold a foreign choice of law clause, for example real property or contracts entered into or performed in the UAE. In practice, foreign choice of law provisions will likely be ignored by a UAE court.
The parties can also choose arbitration as the method of dispute resolution. In June 2018, Federal Law No. 6 of 2018 on Arbitration (the Arbitration Law) came into force. This repealed and replaced Articles 203 to 218 of the Civil Procedures Law. Article 8 states that if a dispute brought before a court is covered by an arbitration agreement, the court must dismiss the action, unless the court finds that the arbitration agreement is void or unenforceable. In addition, Article 7(6) of the IA Code of Conduct and Ethics states that non-compulsory insurance policies may incorporate an arbitration clause. The arbitration clause must be signed and printed as a separate agreement from the general terms and conditions incorporated in the policy. (See subsection iii.)
With regards to the ADGM, Section 16(2)(e) of the ADGM Courts Regulations state that the ADGM Court of First Instance shall have jurisdiction as is conferred on it by any request, in writing, by the parties.
Under Article 5(A)(2) of Dubai Law No. 16 of 2011, parties situated outside the DIFC can now select exclusive or non-exclusive DIFC courts' jurisdiction to hear disputes. Parties may decide on DIFC jurisdiction either before the conclusion of their contract (i.e., before any potential dispute arises) or after the dispute has arisen by jointly agreeing in writing to refer a dispute to the DIFC courts. If there is any connection between a claim and the DIFC, the DIFC courts are generally amenable to accept jurisdiction, regardless of whether the underlying contract has a DIFC governing law and jurisdiction provision. Parties may opt out of the jurisdiction of the DIFC courts in favour of the local courts under Article 13(1) of DIFC Law No. 10 of 2005. Our experience is that, in practice, any choice of opting out requires careful wording. Disputes as to whether the DIFC courts or onshore Dubai courts have jurisdiction are resolved via the Joint Judicial Committee – a seven-member committee constituted of four judges from the onshore Dubai courts and three from the DIFC courts.76
Litigation is divided into three stages:
- Court of First Instance;
- Court of Appeal; and
- the Federal Supreme Court (colloquially referred to as the Court of Cassation).
Substantive proceedings are commenced in the UAE court by the filing of a statement of claim, along with a power of attorney (POA) issued in favour of a local advocate and the appropriate court fee. Once these are filed, the court will schedule a hearing date and the defendant will be served with the claim.
Separate hearings for the defendant to submit its POA and its defence, and for any further submissions, will be scheduled and held until the court considers that it has enough information either to appoint a court expert or pass judgment.
Either party has an automatic right to appeal judgments of the Court of First Instance to the Court of Appeal.77 Appeals to the Supreme Court from the Court of Appeal can only be made on points of law (in accordance with the specific grounds set out in the Civil Procedure Code).78
A judgment creditor should apply to the Execution Court in order to enforce a judgment against a defendant.
A party is required to present evidence that it relies on in support of its claim or defence and there is no obligation to disclose documents that are relevant or helpful to the other party. The court may be asked to order the specific disclosure of a document.79 Oral witness testimony is possible on application to the court, but is uncommon.
Where causes of action are based on documentary evidence and there is a dispute about the validity of a document, copies of the original documents may be produced.80 Denying documents on the basis that they are copies is no longer acceptable, and the party seeking to deny documents will be required to prove that the documents are 'invalid' or were not in fact authored by the party to whom they are attributed.
All submissions to the court, including documentary evidence, must be filed in Arabic. Any supporting evidence in any other language will need to be translated and certified by a legal translation company registered and certified with the Ministry of Justice. However, if the official language of the defendant is not Arabic, the claimant shall be bound to attach to the notice a certified translation in English, unless there is an earlier agreement between the parties to attach the translation in another language.81
Experts are appointed by the court from a panel of experts according to their particular specialisation82 to provide an opinion required for deciding a case (particularly for technical matters). As litigation in the UAE is characterised by exchanges of written submissions with little advocacy, experts are an essential part of the litigation process. The parties may also agree to use a particular expert from the panel. If appointed, the expert will set a meeting with the parties and allow the parties to submit further documents in addition to those already submitted to the court (including the parties' own expert evidence). Once the expert has filed his or her report, the parties are given the opportunity to comment on it.
While the opinion of the expert is not binding on the court,83 the court will usually follow the recommendations in the expert's report. Significantly, the factual findings of an official document (which are those in which a public official or person employed in public service certifies what has taken place before him or her or what he or she has been informed of by the parties concerned within the limit of his or her authority and jurisdiction, such as a police report) are binding upon the court.84
Only nominal legal costs are recoverable by a successful party (often in the region of 5,000 dirhams) at each stage of proceedings. Court filing fees and expert fees are, however, recoverable as part of the final (successful) judgment awarded by the court.
Format of insurance arbitrations
As mentioned in Section III.iii 'Incorporation of terms', in respect of insurance contracts, the arbitration clause must be set out in a separate agreement signed by both parties.85 Ad hoc arbitration is also recognised.
Arbitration proceedings in the UAE (i.e., onshore) are governed by the Arbitration Law, which is based on the UNCITRAL Model Law. The original arbitration provisions of the Civil Procedure Code were not based on the UNCITRAL Model Law and were underdeveloped in comparison to the DIFC and the ADGM arbitration laws (which are also modelled on the UNCITRAL Model Law). Both international and domestic arbitral awards must be ratified by the UAE courts before they can be enforced.86
Procedure and evidence
There are a number of arbitration centres and institutions, both onshore and offshore. Onshore centres and institutions include the Dubai International Arbitration Centre, the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai. There are also other domestic arbitration centres in Sharjah and Ras Al Khaimah. Examples of offshore institutions include the DIFC-LCIA Arbitration Centre and the ADGM Arbitration Centre. Each institution will have its own procedural rules that will apply insofar as they do not contradict the mandatory rules of the Civil Procedure Code or the offshore law as applicable.
The UAE has been party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) since 2006. While there has been some uncertainty around the enforcement of arbitral awards in the UAE under the Convention, UAE courts have more readily recognised enforcement of foreign arbitral awards in recent years.87 UAE arbitral awards should also be enforceable in other Convention signatory states.
Arbitrators can award costs at their discretion. A party may apply to the courts to vary the tribunal's assessment of costs; however, the usual position is that the unsuccessful party pays the successful party's costs.
Mediation is a voluntary process and, as such, parties can opt to mediate disputes with several centres offering mediation services within the UAE, such as the Abu Dhabi Commercial Conciliation and Arbitration Centre, and the Centre for Amicable Settlement of Disputes in Dubai.
V YEAR IN REVIEW
In 2018 and early 2019, the IA issued new circulars and decisions relating to, among other things, reporting requirements for insurers,88 financial solvency requirements for Takaful insurance companies and branches of foreign insurance companies,89 and bancassurance arrangements.90
Under the new reporting requirements, insurance companies must provide their audited annual financial reports to the IA in Arabic and English in the form specified in the Circular. This provision extends to financial solvency requirements for branches of foreign insurance companies; all branches of foreign insurance companies are now obliged to disclose the value of the net assets of their parent company.
In the health insurance sector, Executive Council Resolution No. 18 of 2018 and Dubai Decree 17/2018 created the Dubai Health Insurance Corporation (DHIC), which will manage and supervise health insurance in the emirate. The DHIC will also manage government health insurance programmes.
The implementation of VAT caused issues for many insurers, particularly those offering consumer-line policies. The transitional provisions of the VAT laws require insurers to account to the FTA for premiums paid for insurance services taking place from 1 January 2018, even if the policy began prior to 1 January 2018.91
ii Life insurance
The UAE has one of the most developed life insurance markets in the region, and it is continuing to grow. In April 2017, the IA introduced draft Circular No. 12 of 2017 regarding Life Insurance and Family Takaful Business in the UAE, with the aim of raising the bar for the regulation of life insurance and family Takaful products. The regulations contained in the Circular were intended to secure market conduct with the various entities that provide and facilitate the provision of life insurance products in the UAE, and place significant focus on regulating the commission structure, disclosure obligations owed to the client and protecting policyholder values. As outlined in Section VI, it is expected that the final version will be published in 2019.
iii Dispute resolution
The powers of the IA are set to increase with the establishment of the IA Disputes Resolution Committee in 2019. This committee will have powers to settle disputes arising out of insurance contracts. The Court of First Instance has also confirmed that insurance-related disputes will not be accepted by the local UAE courts unless they have first been considered by the specialised committee.
As mentioned in Section III.iii and Section IV.i, the Arbitration Law states that if a dispute brought before a court is governed by an arbitration agreement, the court must dismiss the action, unless the court finds that the arbitration agreement is void or unenforceable. In addition, Article 7(6) of the IA Code of Conduct and Ethics states that non-compulsory insurance policies may incorporate an arbitration clause. The arbitration clause must be signed and printed as a separate agreement from the general terms and conditions incorporated in the policy.
VI OUTLOOK AND CONCLUSIONS
It is likely that the IA will continue its proactive approach to the regulation and management of insurance disputes. We expect that the Cabinet will implement the IA's life insurance regulations, which were originally proposed in 2016, during the course of 2019. These regulations will place an upper limit on commission paid to financial advisers selling offshore bonds (a form of lump sum investments) and fixed-term contractual savings plans. The regulations will stipulate that commissions will be paid over the term of the product rather than as an upfront cost. There are also new provisions regarding the transparency of information provided to customers, so that they are aware of fees and commissions. This is intended to give investors more clarity on how their insurance-based investments, savings and life products are structured.
Further, innovation in the insurance industry will be driven by technological development in 2019. This development extends to the supervision of the industry, as the IA is in the process of establishing a sophisticated electronic financial database on the insurance industry that would facilitate its supervision of the sector in accordance with international best practices. Developments in business technology, and the fintech and cybersecurity sectors, will require insurers to offer products and services to keep up to date with the market. We anticipate that the upcoming Board of Directors Resolution concerning electronic insurance regulations (which will include provisions regulating information on websites, transparency and security) will regulate all electronic insurance operations practiced by licensed insurers, brokers, agents and Health Insurance TPA companies in the UAE.
1 Sam Wakerley and John Barlow are partners at HFW.
2 UAE Insurance Authority Annual Report of the Activity of Insurance Sector in the UAE 2017.
3 An analysis of DIFC and the ADGM insurance laws are beyond the scope of this chapter.
4 Insurance Authority Board Resolution No. 4 of 2010.
5 Federal Law No. 6 of 2007 on Establishing the Insurance Authority and the Regulation of its Operations as amended by Federal Law No. (3) of 2018.
6 Article 26 of Federal Law No. 6 of 2007 provides that: 'It is not permissible to carry out insurance with an insurance company outside the state on property in the state, or on the liabilities arising from the same. It is not permissible either to broker for insuring such property or liabilities except with a company registered in accordance with the provisions hereof.' In practice, the Insurance Authority prohibits any insurance products from being provided by foreign insurers irrespective of the type of risk being insured.
7 Resolution of the Insurance Authority Board Chairman No. 12 of 2018 On the Law of Licensing and Registration of Insurance Consultants.
8 id., Article 2.
9 id., Article 9.
10 id., Article 10.1.
11 id., Article 10.2.
12 Article 24 of the Federal Law No. 6 of 2007 on Establishing the Insurance Authority and the Regulation of its Operations as amended by Federal Law No. (3) of 2018.
13 The method for calculating the solvency requirements is included in Article 4 of the Insurance Authority Board of Directors Chairman Resolution No. 14 of 2018 On Applying the Solvency Requirements.
14 No. 3 of Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority.
15 Insurance Authority Board Resolution No. 3 of 2010.
16 Article 3(12) of the Insurance Authority Board Resolution No. 3 of 2010.
17 Insurance Authority Board of Directors Decision No. 12 of 2018 Concerning the Regulation on Licensing and Registration of Insurance Consultants and Organisation of their Operations.
18 Bancassurance arrangements are permitted in the UAE under Insurance Authority Board of Directors Decision No. 13 of 2018.
19 Insurance Authority Board of Directors Decision No. (25) of 2016 Pertinent to Regulation of the Unified Motor Vehicle Insurance Policies.
20 Dubai Health Insurance Law No. 11 of 2013; Abu Dhabi Health Insurance Law No. 23 of 2005.
21 Article 10 of the Insurance Authority Board Resolution No. 3 of 2010.
22 Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority.
23 Article 110(2) of Federal Law No. 6 of 2007 on Establishing the Insurance Authority and the Regulation of its Operations as amended by Federal Law No. (3) of 2018.
24 Article 110(4) of Federal Law No. 6 of 2007 on Establishing the Insurance Authority and the Regulation of its Operations as amended by Federal Law No. (3) of 2018.
26 Article 110(1) of Federal Law No. 3 of 2018 on the Amendment of Certain Provisions of Federal Law No. 6 of 2007.
27 Federal Decree-Law No. 8 of 2017 on Value Added Tax.
28 Federal Law No. 18 of 1993.
29 Federal Law No. 5 of 1985.
30 Articles 1026 to 1055 of the Civil Code.
31 Along with the Insurance Law and the Insurance Authority Board Resolution No. 3 of 2010.
32 Articles 399 to 420 of the Maritime Commercial Code (Federal Law No. 26 of 1981).
33 Article 1026(1) of the Civil Code.
34 id., Articles 125 to 148.
35 id., Article 1026(1).
36 id., Article 1035.
37 Court of Cassation Judgment No. 281 of 1993.
38 Article 368 of the Maritime Code.
39 Article 246(1) of the Civil Code.
40 Article 3 of the Insurance Authority Board Resolution No. 3 of 2010.
41 Article 1033 of the Civil Code.
42 Article 388 of the Maritime Code.
43 Article 6 of the Insurance Authority Board Resolution No. 3 of 2010.
44 No. 3 of Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority.
45 Federal Law No. 1 of 2006.
46 Article 7 of the Insurance Authority Board Resolution No. 3 of 2010.
47 Article 373 of the Maritime Code.
48 Articles 258(2) and 259 of the Civil Code. There is often confusion in this area as the Civil Code also provides that the criterion in construing contracts is intentions and meanings and not words and form (as per Article 258(1) of the Civil Code).
49 Article 265(1) of the Civil Code.
50 id., Article 265(2).
51 id., Article 266(1).
52 id., Article 266(2). See, for example: Dubai Court of Cassation Case No. 125/2009, which held that a Construction All Risk insurance policy was a contract of adhesion under Article 266 of the Civil Code and therefore any ambiguity should be resolved against the insurer; Dubai Court of Cassation Case No. 247/2003 also held, in a life insurance case, that any ambiguity should always be resolved in favour of the insured.
53 Article 7 of the Insurance Authority Board Resolution No. 3 of 2010.
54 Article 28 of the Insurance Law, as amended by Federal Law No. (3) of 2018 on the Amendment of certain Provisions of Federal Law No. (6) of 2007 Concerning the Establishment of the Insurance Authority and Organisation of its Operations.
55 Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority.
56 Article 1028(d) of the Civil Code; Article 7(2) of the Insurance Authority Board Resolution No. 3 of 2010
57 Article 1028 of the Civil Code.
58 id., Article 246(2).
59 Article 26(4) of the Resolution of the Board of Directors of the Insurance Authority No. 15 of 2013 concerning insurance brokers regulation (the Insurance Authority Brokers Regulations).
60 Article 9(1) of draft Circular No. (12) of 2017 regarding Life Insurance and Family Takaful Business in the UAE.
61 Article 3(3) of the Insurance Authority Brokers Regulations.
62 id., Article 3(4).
63 Article 9(1) of the Insurance Authority Board Resolution No. 3 of 2010.
64 Article 1028(b) of the Civil Code.
65 id., Article 1028(e).
66 Article 9(6) of the Insurance Authority Board Resolution No. 3 of 2010.
67 Article 1028(b) of the Civil Code.
68 Article 110(2) of Federal Law No. 3 of 2018.
69 Article 1036 of the Civil Code.
70 Article 399(1) of the Commercial Maritime Code.
71 id., Article 399(3).
72 id., Article 399(1) and (2).
73 Articles 246 and 1034 of the Civil Code, Article 3(2) of the Insurance Authority Directive (Code of Conduct for Insurance Companies issued by the Insurance Authority (Insurance Authority Resolution
No. 3 of 2010)).
74 Article 20 of Federal Law No. 11 of 1992 (the Civil Procedures Law).
75 id., Article 24.
76 Dubai Decree No. 19 of 2016.
77 Article 158 of the Civil Procedure Code.
78 id., Article 173.
79 Article 18(1) of the Law of Evidence in Civil and Commercial Transactions (Federal No. 10 of 1992).
80 Article 20 of Cabinet Decision No. 57 of 2018 on the Regulation of Federal Law No. 11/1992 on the Civil Procedure.
81 Article 5(3) of the Civil Procedure Code.
82 Federal Law No. 7/2012 on the Regulation of Expertise before the Judicial Authorities.
83 Article 90(1) of the Law of Evidence.
84 Articles 7 and 8 of the Law of Evidence.
85 As per Article 1028(1)(d) of the Civil Code.
86 Article 55 of the Arbitration Law.
87 For example, see Case No. 693 of 2015 where the Court of Cassation recognised for enforcement a London-based arbitration award.
88 See Circular No. 51 of 2018 on 2019 Reporting Requirements for All Insurance Companies Operating in the UAE.
89 See Insurance Authority Board of Directors Decision No. 14 of 2018.
90 See Insurance Authority Board of Directors Decision No. 13 of 2018.
91 Article 80 of Federal Decree-Law No. 8 of 2017 and Article 70 Cabinet Decision 52 of 2017.