ARTICLE
20 June 2012

Damages: No Room For Complacency

CC
Clyde & Co

Contributor

Clyde & Co is a leading, sector-focused global law firm with 415 partners, 2200 legal professionals and 3800 staff in over 50 offices and associated offices on six continents. The firm specialises in the sectors that move, build and power our connected world and the insurance that underpins it, namely: transport, infrastructure, energy, trade & commodities and insurance. With a strong focus on developed and emerging markets, the firm is one of the fastest growing law firms in the world with ambitious plans for further growth.
On the morning of 10 February 2004 Kish Air Flight 7170 crashed on its approach to Sharjah International Airport.
United Arab Emirates Litigation, Mediation & Arbitration

On the morning of 10 February 2004 Kish Air Flight 7170 crashed on its approach to Sharjah International Airport. All but three of the plane's passengers were killed.

Among the victims was a wealthy 42-year-old Emirati national who was the sole breadwinner for his wife and eight children. In 2007, following the publication of the General Civil Aviation Authority report which concluded that pilot error was the cause of the accident, his family began legal action against the airline, demanding AED 14 million in compensation for the death (including financial and moral damages). Two years later, the UAE Federal Supreme Court upheld the decision of the Sharjah Court of First Instance to award just AED 864,000 to the aggrieved family.

For those UAE residents who have been badly injured in the workplace or for those families who have suffered the loss of a loved one because of somebody else's negligence, this story will be a familiar one. The UAE courts have always proved far more reluctant to award substantial damages in personal injury claims than in other more established jurisdictions. While it is true to say that there is no barrier under UAE law which prevents litigants pursuing claims in the civil courts for loss of earnings or economic loss in addition to claims for physical injury, significant awards have been few and far between.     

The insurance industry has therefore historically been protected from large payouts as a result of this judicial conservatism. Added to this is the fact that culturally the UAE is significantly less litigious than countries like, for example, the USA. The explanation for this latter trend is multi-faceted.

Financial compensation payable to an injured party in the UAE compromises two separate parts: firstly by way of Diya or Arsh (Diya being the financial remedy following a criminal conviction for wrongful death and Arsh being the mechanism whereby a percentage of Diya is paid to a victim who has suffered a bodily injury as a result of a criminal act) and secondly civil damages.  

Depending on the financial status of the victim, it is common for only Diya and Arsh to be claimed. A litigant with limited means would often decide only to pursue criminal proceedings against the individual or entity that caused them damage (rather than put themselves through what would almost certainly become a lengthy and expensive civil trial) and claim Diya and/or Arsh in the aftermath of the criminal conviction.

The reality is, therefore, that civil claims that could be worth substantial sums of money in other jurisdictions frequently become frustrated in the UAE because of the litigation process, as most litigants simply do not have the resources or the stamina to pursue the matter.

In the long run, however, there is no room for complacency among insurers who write the business likely to be impacted by these sorts of claims. While the legal system in this jurisdiction remains that of a relatively young, developing state, as it matures and evolves with time it is entirely possible that the market will be called upon to respond to larger damages awards.

As judgments are not published in the UAE, it is admittedly difficult to accurately gauge the trends in this regard. Yet recent evidence does indicate that litigation is generally on the rise and we are also aware of a gradual increase in the amounts awarded to claimants in personal injury type cases. For instance, we are now occasionally encountering awards of AED 1-2 million in these sorts of claims, although so far this has been mainly at the Court of First Instance level and such awards have typically been decreased on appeal.

Nevertheless, one only has to look at the how the pendulum has swung in favour of litigants in other formerly developing legal jurisdictions such as Hong Kong to see that the status quo in the UAE is not guaranteed to remain indefinitely. Throughout much of the 1980s and 1990s awards for personal injury claims in Hong Kong were similarly small, only for the efforts of a crusading legal aid department to reverse the trend – a crusade that has resulted in a dramatic increase in the actuarial forecasts for personal injury and death claims in the Asia re/insurance market.

While such a crusade is unlikely to be repeated in the UAE, other factors could reverse the status quo and the market should not assume that the UAE will forever remain a low claims environment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More