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Dubai-based Fichte & Co, the first law firm in the UAE to enforce a foreign arbitration award under the New York Convention, claims it has achieved another notable legal breakthrough.
According to the company, a UAE court deciding on an arrest application will generally require the arresting party to provide an undertaking, agreeing to indemnify a shipowner against wrongful arrest. However, the company points out it is common knowledge that claims for wrongful arrest rarely succeed and so such actions are hardly ever brought.
Managing partner Jasamin Fichte says, “The heavy burden of proof resting on the shipowner, coupled with extremely low chances of success, mean that wrongful arrest claims are significantly dis-incentivised. In the rare instance that a court orders against a wrongful arrest undertaking, it will be completely at the discretion of the court as to what amount will be payable as compensation.”
Until now, it is understood that no court in the Gulf region has actually awarded compensation for wrongful arrest, but this has now changed following a case that started in February 2013, when a ship financing company made an arrest application against a vessel owned by Fichte & Co.’s client as a result of a contractual dispute.
As is standard practice, the Dubai Court required the claimant to provide an undertaking to indemnify the shipowner for any loss or damage and to pay compensation to the shipowner, if a final court judgment determined that there was a wrongful arrest. Fichte & Co was instructed by the owner and pleaded that the ship had been unlawfully arrested on the grounds that the claimant arrested the vessel in a claim wholly unconnected to the dispute with the defendant and had made a series of procedural errors in bringing their arrest application.
As a result of the wrongful arrest, the shipowner suffered significant losses and it was decided that a strong message, that vessels could not be arrested with impunity, had to be sent. Late last year, the Dubai Court of First Instance made an order in favour of the shipowner for AED 10 million in compensation for wrongful arrest. The judge ruled that the claimant had been unlawful in arresting the shipowner’s vessel to secure his claim against the defendant.
Fichte & Co subsequently filed a civil arrest order under Article 252 of UAE Federal Law no. 11 of 1992 – the Civil Procedure Code – against the claimant’s bank accounts, cars and other assets to secure the claim. On 18 March this year, the Dubai Court awarded the arrest order to giving ‘teeth’ to enforce the judgment order.
Jasamin Fichte adds, “I am particularly proud of this victory because we had the courage, ingenuity and quality to achieve what was thought to be previously unachievable, and ultimately to facilitate justice being done for our client in what was obviously an unjust situation. This judgment endorses the view that despite some entrenched practices and customs in the UAE Courts, even the most challenging of claims can be won with employment of intelligent strategy and quality of argument.”
Fichte & Co says it has no plans to stop the action at this point. Indeed it is now appealing for the full compensation sum of approximately AED 38 million.
