In this article, I explore an important aspect of the application of the UAE’s primary insurance legislation, Federal Law No. 48 of 2023 Regulating Insurance Activities (“Insurance Law”). It is known to industry professionals that, pursuant to Article (101) of the Insurance Law, if an insured party wishes to pursue a claim against an insurer, then the following mechanism applies:

• The insured party must file the claim before the Insurance Disputes Committee, which operates under the Banking & Insurance Disputes Unit of the UAE Central Bank. This committee is known by the short name Sanadak;

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• The committee issues a decision on the claim;

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• A party who wishes to challenge the committee’s decision must do so within 30 days of its issuance by way of appeal to the Court of Appeal, failing which the committee’s decision becomes enforceable. 

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Given that the Insurance Law does not define the term “Court of Appeal,” this means that the legislation intended for this to be determined in accordance with the general jurisdictional principles. These are, in turn, embodied within the UAE Civil Procedures Law, which primarily establishes jurisdiction based on:

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• The jurisdiction contractually selected by the parties; 

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• The domicile of the defendant; or 

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• The location where the incident giving rise to the claim took place.

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Therefore, when challenging decisions of the Insurance Disputes Committee, one would normally apply the same assessment as if the claim were being filed directly to the courts in the first instance. An interesting issue arises when you have an insurance policy that includes an arbitration clause. The Insurance Law permits the use of arbitration as a dispute resolution mechanism in insurance disputes; however, it requires such clauses to be included in a separate annexure or schedule to the insurance policy. 

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As such, if an arbitration clause exists and an insured party files a claim before the Insurance Disputes Committee, the latter by default becomes the first body to engage in determining the validity of the arbitration clause if an insurer asserts its right to the arbitration clause. If the committee rules that the arbitration clause is not valid, then an insurer would be able to challenge this decision and seek recognition of the arbitration clause before the competent Court of Appeal. 

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Now assume the insurance policy in question involves:

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• An insured party that is a Dubai International Financial Centre (DIFC) or Abu Dhabi Global Markets (ADGM) entity; or 

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• An arbitration clause that expressly states that the arbitration is seated in the DIFC or ADGM.

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Could the Courts of the DIFC or ADGM then assume jurisdiction for overturning the decision issued by the Insurance Disputes Committee? 

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The answer appears to be a yes on both counts. 

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If the insured party is a DIFC or ADGM entity, then all the applicable federal and local Emirate laws both in Dubai and Abu Dhabi grant exclusive jurisdiction to the courts of each financial freezone over claims filed by or against entities established in each respective freezone. Similarly, if the DIFC or ADGM Courts are the courts of the seat, then this would grant them jurisdiction to hear disputes relating to the validity of the arbitration clause. 

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Whilst, in principle, all of this sounds very straightforward, there are some procedural and practical considerations to bear in mind. 

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The first consideration is that both the DIFC and ADGM Courts operate under a common law procedural regime under which, in most cases, the Courts of Appeal are not engaged directly unless permission for appeal is granted either by the Court of First Instance or a Court of Appeal following a ruling by the latter. Therefore, on the face of the procedural rules, there is no direct mechanism for an insurer to file a challenge directly to the DIFC or ADGM Courts of Appeal to seek to overturn a decision rendered by the Insurance Disputes Committee. There are creative ideas to overcome these procedural/technical obstacles; however, the industry would benefit from having a direct application process for such challenges to be available under the procedural frameworks of the DIFC and ADGM Courts. 

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The second consideration has more of a substantive nature. Both the DIFC and ADGM legal frameworks operate under a strict observance of the principle of Kompetenz-Kompetenz. Under this underpinning principle of the arbitration world, the first bite at determining the validity of an arbitration clause must always rest with the arbitral tribunal. A party seeking to challenge the tribunal’s decision on jurisdiction may do so thereafter by pursuing a challenge before the competent court by reference to the narrow grounds applicable under the relevant arbitration law.

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As such, an insurer seeking to challenge an unfavorable decision by the Insurance Disputes Committee on the validity of an arbitration clause would be caught in a procedural predicament. If the insurer manages to file a direct challenge to the DIFC or ADGM Courts of Appeal, these courts will likely refrain from making a ruling on the validity of an arbitration clause in the absence of a decision by the arbitral tribunal. At the same time, the Insurance Law only allows the overturning of the committee’s decision to be by the “Court of Appeal”. Thus, a favorable preliminary award on jurisdiction by an arbitral tribunal would not suffice, on its own, to overturn a decision rendered by the Insurance Disputes Committee.

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In the short term, if one is faced with this predicament, the quick solution would be somewhere along these measures:

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• Apply to the DIFC or ADGM Courts, as the case may be, within 30 days of receiving the decision of the Insurance Disputes Committee with an express relief sought section seeking to overturn the committee’s decision;

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• File a request for arbitration in accordance with the agreed institutional or ad hoc arbitration clause and seek an urgent preliminary award on jurisdiction;

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• Apply to the DIFC or ADGM Courts to impose a stay on your first application until the arbitral tribunal issues its preliminary award on jurisdiction, together with applying the appropriate interim measures against the insured party to prevent the latter from enforcing the decision of the Insurance Disputes Committee until the DIFC or ADGM Courts rule on the matter.

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In the long run, perhaps judicial or legislative measures would need to be introduced to confirm the interplay between the courts of the financial freezones and the Insurance Law. Alternatively, since Article (2/2) of the Insurance Law expressly provides that it does not apply to insurance companies “operating” within the financial freezones, perhaps a wider interpretation of this provision could be adopted to conclude that, when the beneficiary of an insurance policy is an entity established within one of the financial freezones or where the arbitration is seated therein, the Insurance Law does not apply because the two scenarios constitute operating within the financial freezones. This would mean that in these scenarios the insured party would not be expected to first file its claim before the Insurance Disputes Committee.   

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