Arbitration Spotlight: Technology Disputes in the UAE - Choosing the Right Forum

Technology disputes are becoming increasingly common in the UAE, as digital transformation and investment reaches an all-time high. However, technology disputes are not all the same and throw up a variety of issues. A failed software implementation may involve contract interpretation, technical performance assessment, delay and expert evidence. A cybersecurity incident may raise issues of data protection, confidentiality, criminal and urgent injunctive relief. A digital assets dispute may require expert consideration of blockchain infrastructure, tracing, proprietary claims and cross border enforcement.

For parties operating in the UAE, the forum selected to resolve these disputes can be just as important as the governing law to the remedies available, and the quality, cost and speed of the outcome. The UAE offers a range of options, including arbitration, the UAE onshore Courts, the ADGM Courts, and the DIFC Courts which include two separate specialist divisions targeting technology disputes: the Technology and Construction Division and the Digital Economy Court. The right forum will depend on the nature of the dispute, the relief sought, the location of the parties and assets, and the degree of technical complexity involved. 

Dispute resolution clauses are often treated as standard wording, but in technology contracts they require closer consideration. Technology disputes may require urgent relief to preserve assets, protect data or prevent misuse of confidential information. They may also involve expert evidence on software functionality, cybersecurity, cloud infrastructure, source code or digital assets. 

The key question is therefore not simply whether to choose court or arbitration, but which forum is best equipped to deal with the dispute in practice.

Arbitration

Arbitration remains a popular choice for high value and cross border technology disputes, particularly where confidentiality is important.  

Arbitration also gives parties flexibility over procedure and the appointment of arbitrators with relevant technical, sectoral or legal experience. However, it can be costly and may not always be faster than court proceedings. It also offers limited rights of challenge or appeal. Unlike court judgments, arbitral awards generally cannot be appealed on the merits and may only be challenged on narrow procedural, jurisdictional or public policy grounds. This may be attractive where parties value finality, but less so where the dispute raises novel or complex legal issues.

Common law courts: DIFC and ADGM

The DIFC and ADGM Courts provide English language, common law court systems within the UAE and are often attractive for complex commercial and technology disputes. Unlike arbitration, they offer a more structured and prescriptive procedural framework, publicly available judgments, broader appeal mechanisms and potentially more direct access to enforceable interim remedies such as injunctions and disclosure orders than may be available in arbitration. 

In technology disputes, interim relief can be particularly important. Parties may require urgent orders to preserve evidence, protect confidential information, prevent misuse of data, secure access to critical systems or restrain the dissipation of digital assets. At the same time, parties should be aware that court proceedings are generally public, which may be less suitable for disputes involving highly sensitive technical, proprietary or commercial information. 

Within the DIFC Courts, the Technology and Construction Division (TCD) is intended for technically complex disputes as well as construction disputes, including claims arising from IT infrastructure projects, software implementation failures, technology outsourcing arrangements, systems integration disputes and cybersecurity related issues. 

The Digital Economy Court (DEC) is focused more specifically on disputes arising from emerging technologies and digital assets, including blockchain, distributed ledger technology, smart contracts, fintech, artificial intelligence, cloud services and data driven business models. The DEC may therefore be particularly attractive where the dispute raises novel issues connected to digital assets or rapidly evolving technologies. It includes a greater degree of procedural options and flexibility for the judiciary than the mainstream DIFC Courts. 

UAE onshore courts

The UAE onshore courts remain important, particularly where the counterparty is based ‘onshore’ (i.e. in the UAE excluding the DIFC and ADGM financial freezones), the relevant assets are located onshore, performance took place onshore or there is no arbitration, DIFC Courts or ADGM Courts jurisdiction clause. 

They may be the natural forum for local commercial disputes and claims involving UAE incorporated entities. However, proceedings are generally conducted in Arabic and documents relied upon before the court will generally need to be translated into Arabic by an approved legal translator, which can be costly and time-consuming in a document heavy technical case and also risks highly technical documents being misconstrued. There is also typically no oral evidence or cross examination of witnesses which can make it much more challenging to prove a case based on oral misrepresentations, for example. Expert evidence is also more constrained, with the courts generally not permitting evidence from party-appointed experts, but instead appointing their own expert (or panel of experts) who do not usually have deep technical skills. This makes it very challenging for parties to convey their case to judges who are also not likely to be specialists in determining cases with a highly technical subject matter, so parties risk not receiving an optimal outcome. 

On the other hand, the onshore courts may be faster and less costly than other forums.

Mediation and negotiation

Parties may also wish to consider including a tiered dispute resolution clause, which provides for a mandatory negotiation or mediation stage before court or arbitration proceedings can be commenced. That may be particularly helpful in long term contracts, such as outsourcing agreements or joint ventures. It is important to ensure that they contain clear steps with time limits before progressing to the next stage to avoid satellite disputes about whether and when a party can proceed to formal proceedings if an amicable resolution is not achieved in a defined timeframe.

Which forum is best?

There is no single best forum for all technology disputes. Arbitration may be preferable where confidentiality and cross border enforcement are key. The DIFC and ADGM Courts may be more suitable where parties prefer English language common law proceedings and access to interim relief within the UAE. Within the DIFC Courts, the TCD may be well-suited to technically complex project disputes, while the DEC is likely to become an increasingly important forum for disputes involving digital assets, AI, blockchain, fintech and other emerging technologies. The UAE onshore courts may remain the most appropriate option where the dispute has a strong mainland UAE connection or enforcement against onshore assets is central and in more simple and less technical cases. A tiered dispute resolution clause may also be desirable in certain types of technology contracts, particularly those involving long term relationships. 

Ultimately, dispute resolution clauses in technology contracts should be treated as a strategic consideration rather than standard boilerplate wording. 

Clyde & Co advises clients on dispute resolution strategy across complex technology and digital economy disputes, including litigation, arbitration, interim relief and enforcement.

For further information or to discuss the most appropriate forum for a technology dispute, reach out to Alexandra Lester or Ban Lahham.