Many employers and employees are often wary of embarking on settlement discussions in fear that statements indicating a willingness to strike a deal will later be held against them on the basis that being a civil jurisdiction, the UAE does not recognise ‘without prejudice’ principle whereby parties to a potential dispute could agree (under specific circumstances) to enter into discussions which will be ‘off the record.’ 

However, a recent judgment by the Dubai Court of Cassation has provided important clarity on the treatment of settlement discussions in litigation before the UAE courts. The Court confirmed that communications exchanged for the purpose of amicable settlement, when made on a “without prejudice” basis, are inadmissible as evidence of liability if negotiations ultimately fail. This principle is highly relevant for businesses and individuals navigating disputes in the UAE, particularly given the growing use of digital platforms for negotiations.

Parties involved in litigation in the UAE have often been cautious about putting settlement discussions in writing. In the absence of explicit statutory provisions guaranteeing the confidentiality of such communications, many have been concerned that statements or offers made during negotiations could later be introduced as evidence to establish liability if disputes proceed to trial. To avoid this risk, settlement negotiations have frequently taken place verbally, or written communications have been carefully limited to avoid language that could be construed as an admission of liability. This practice has reflected uncertainty about how consistently UAE courts would uphold the “without prejudice” principle, often creating obstacles to open and transparent negotiations.

In the recent case, a dispute arose concerning a cryptocurrency transaction, where the claimant sought to rely on WhatsApp messages exchanged during settlement discussions as evidence of the defendant’s liability. Both the Dubai Court of Appeal and the Court of Cassation rejected this attempt, confirming that statements made during settlement negotiations are protected by the “without prejudice” principle and cannot be used to establish liability if the negotiations do not succeed. The Court’s decision underscores that parties must be able to negotiate candidly, without fear that their words will later be used against them should settlement efforts break down.

This ruling signals that parties in the UAE can engage more openly in written settlement discussions, including through modern communication channels such as email and messaging apps, without the automatic risk that such exchanges will be used as evidence in court. Nonetheless, caution remains essential. Communications marked “without prejudice” should avoid language that might be interpreted as binding admissions unless the parties genuinely intend to finalise a settlement. Courts may still examine settlement communications in exceptional circumstances, such as allegations of fraud, misrepresentation, or duress.

The Dubai Court of Cassation’s ruling brings welcome certainty and helps promote more constructive and transparent settlement negotiations.

At Clyde & Co, our employment team advises clients on managing employment disputes and settlement negotiations before the UAE onshore courts. If you have questions about this ruling or require guidance on employment litigation in the UAE, we would be pleased to assist. Please feel free to reach out to us for further support.