As the UAE economy expands and diversifies, commercial transactions become more sophisticated in nature and voluminous in numbers. Consequently, there is a greater need and urgency to manage business transactions, both in financial as well as legal terms.
On the accounting side, fortunately, there are numerous and respectable accounting firms in the UAE now. The legal side, however, is lagging behind, simply because it is much more difficult to expand this field as compared to accounting. Legal systems usually correspond to the country's historical legal needs and other aspects of the society.
Commercial transactions in the UAE during 1990s were fairly restricted to a few number of business fields, and were limited in volume; so, the commercial disputes then were both simple in nature and small in numbers. Over the past five years the economy here has grown at a very rapid pace, and commercial transactions are rapidly increasing. This trend, however, will continue.
Commercial transactions in general are complicated, and the bigger the stakes the more sophisticated the contracts that bind the parties.
This requires qualified, experienced and a very competent legal system to ensure that such transactions are carried out in accordance with the established rules and regulations governing such business agreements and contracts.
Investors demand security and legal protections as a prerequisite for their investment, be it a small businessman or a large corporation. And, as the UAE attracts more foreign investments, the demand for a protective legal system becomes obligatory and crucial.
The property market in the UAE has a significant share of the economy now and in the foreseeable future. Moreover, since the makeup of the industry is both extensive and multilevel, it furthers complicates the layers of responsibilities and in turn creates a chain reaction in a given commercial dispute.
On the top we have the end-users and/or investors who are the ultimate owners of the properties, with a direct link with the property developers immediately at one level lower. The property developers in turn have a direct link with the main contractors and the master planners, at even lower levels. This hierarchy goes on all the way to the smallest suppliers at the bottom level, and necessitates complex layers of responsibilities and commitments that must be precisely spelled out in numerous back-to-back legal contracts and cover all elements from top to bottom.
Any disputes initiated by any level will definitely have ramifications on the rest of the hierarchy and reverberates throughout this complex legal system, and, therefore, requires a well-versed and able judiciary to resolve the commercial disputes on a timely basis.
Furthermore, what compounds the problems and makes matters more critical are the sheer volume and the size of property projects.
Adding to this predicament is the lack and/or absence of numerous and absolutely necessary legal procedures and issues, that have yet to be finalised, which makes the urgency of the requirement vividly clear.
As the UAE property market matures it demands a more stringent and comprehensive judiciary for its commercial disputes, because those elements that make amicable settlements more logical and rational today (such as high property appreciation rates for property buyers, attractive business margins for property developers and contractors/suppliers) may no longer exist later on to offset the lack of a comprehensive and all inclusive judiciary system. This is true as the supply side lags behind the demand side, and the delays in units' deliveries become more acute. This element and its consequences will inevitably force the market to behave differently than today, and to take a more aggressive approach towards commercial disputes.
The UAE needs to urgently address this very important element of its economy. Recent steps taken by the government, such as DIFC legal procedures and arbitration system, are welcome news and will help the business communities. But a more robust, well-organised legal system that covers large portions of UAE's commercial transactions should be planned for the near future; to insure that all business and economic objectives are carried out smoothly and without any hindrance.
- The author is Chairman of Saba Properties