One would not be surprised if a local lawyer in the Middle East region is unfamiliar with the term "class action" or understand what it means. As most may know, a class action is a lawsuit that allows a large number of people with a common interest in a matter (which in most cases are consumer related matters) to sue or be sued as a group.
Such lawsuit is not recognised in most of the Middle East which means that if a number of people wish to bring a lawsuit, then each will need to file their case separately before the Court. This, of course, is not cost effective especially if those involved are, as is the case in most cases, consumers going against big companies. As a result of this, and also the fact that legal costs are not recoverable in this region, one would expect (especially for big companies, which going forward in this article will be referred to as "providers") that the Middle East region is a secured and protected region from the risk of claims by consumers. This is not completely true. In this article we will explore why such companies should not believe that they are protected in this region from consumers' claims by looking at the UAE as an example.
At the Ministry of Economy of the UAE (and each respective Economic Department), a department has been set up to deal with consumer complaints called "the Consumer Protection Department" (the Department). This Department deals with any complaint that a consumer may have relating to a product or service that it bought or received from a provider. There are no fees involved nor does the consumer need to involve a lawyer in the registration of such complaint which, accordingly, encourages the consumer to rely upon the Department to deal with their complaint. In dealing with the complaint, the Department has the powers to investigate and coordinate with the relevant authorities before passing a decision on the complaint pursuant to the UAE Federal Consumer Protection Law No.24 of 2006 as amended by Federal Law No.7 of 2011 and their Executive Regulations.
The parties involved in the complaint have the right to appeal against any decision issued by the Department before the UAE Minister of Economy. If a decision is issued in this appeal, the parties also have the right to object to such decision before the competent Courts in the UAE.
Despite the existence of the Department and the powers vested in it by law, a consumer has the right to refer any complaint directly to the component Courts in the UAE without reverting to the Department and file a case against the provider. This right can be exercised by the consumer when they want to place more pressure on the provider by referring the complaint immediately to the Court which is something the provider would prefer to avoid as the hearings involved are public hearings which can affect the provider's reputation.
The consumer's case before the Court can be brought on the basis of tortious liability or contractual liability and, of course, for breaching the UAE Federal Consumer Protection Laws. Despite the fact that "class action" is not recognised in the UAE, which one would expect may discourage consumers from filing cases separately and incurring costs, such cases are still being filed before the Courts. The reason for this is, when a case is filed, the consumer tends to request the appointment of a technical Court expert to deal with the case, in its claim. When such a request is made, the usual Court fees are not required to be paid but rather a minimal amount needs to be paid (which does not exceed AED1000). Depending on the outcome of the report that the appointed technical Court expert produces, the consumer can decide whether to proceed with the case and pay the full Court's fees or to end the claim.
There is a common misconception that a provider of a product or service to the consumer is limited to the entity or individual who directly dealt with the consumer, which in most cases are the local agents or distributors based in the UAE. The definition of a provider under the UAE Federal Consumer Protection Laws is very broad in that it not only includes the local agents and distributors but also the manufacturer whether based in the UAE or abroad. There is also the likelihood that the definition of provider in the same law also includes any representative office of the manufacturer based in the UAE that is somehow involved in the sale and circulation of the products and services. This means that the consumer can go against all of the aforementioned in their complaint or case and not just the local agents or distributors.
The provider should be aware that their liability will not necessarily be limited to the amount of loss suffered by the consumer, or be protected by certain contractual protections and warranties that they provide to the consumer. When the UAE Federal Consumer Protection Laws are breached, the Department or the Court will immediately apply the remedies and penalties that are set in these laws. A simple example is that if a consumer, after a year of using a car, discovers a defect in his vehicle, then pursuant to Article 5 of the UAE Federal Consumer Protection Laws, the provider should 'refund or exchange' the car with a new one without such compensation being subjected to a depreciation deduction. This will be the case even if the customer breaches the warranty conditions and invalidates the warranty.
The Department and Court are very pro-consumer in protecting their rights. From our experience dealing with matters before the Department and Court, if any of the UAE Federal Consumer Laws are breached, then it is rare to see a ruling in favour of the provider.
In summary, even though a "class action" lawsuit does not exist in the region, there are certain protections available to consumers against the provider in the UAE which encourage the consumer to bring their case against a provider regardless of the costs or any typical ligation risks involved. The consumers' claims should, therefore, never be underestimated and should be dealt with promptly at the outset in order to avoid or minimise the risks associated with such claims including, but not limited to, affecting the reputation of the provider in the market.
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.