Questions & Answers
Can I hold the delivery of goods to a buyer outside the UAE if he defaulted on payment?
I, as a UAE-based Seller, entered a sales agreement with a KSA-based Buyer. The Buyer defaulted on the LC payment, breaching the contract.
The goods are stuck at the port as they need original documents, which I am holding to recover the outstanding balance.
They later made a partial payment but now threaten to cash the PBG (UAE bank) I provided if don't release the document.
The contract mandates DIAC arbitration but lacks a governing law clause. I need advice on:
1. Which law applies to this dispute?
2. Where can I seek an injunction to prevent PBG encashment, given the Buyer’s bad faith and breach? Or should I send a letter to their bank with the brief above?
Kindly advise.
Dear questioner
The tribunal will likely seek to determine the law of the jurisdiction most closely connected to the contract.
Also, there are mechanisms for getting interim measures or appointment of an emergency arbitrator to issue urgent interim measures, including injunctions through the DIFC.
If you need further assistance, kindly share your Whatsapp number.
Hello!
Since the contract involves both UAE and KSA parties and is governed by DIAC arbitration, UAE law would likely apply, as the arbitration is within the UAE jurisdiction.
However, it could also be influenced by any specific provisions in the LC or the PBG (The documents need to be thoroughly scrutinized for any overriding clause).
To prevent the encashment of the PBG, you should seek an injunction from the UAE courts, which have jurisdiction over the bank.
An injunction can be granted if you can prove the Buyer is acting in bad faith or is in breach of the contract.
Kindly reach out to us by phone or leave a contact number to understand the specifics of your issue and guide you accordingly.
Thanks!
Badr Legal Consultants.
Dear M. F.,
Thank you for your inquiry.
Below is my legal advice regarding your situation with the KSA-based buyer and the threat of PBG encashment:
1. Applicable Law for the Dispute:
As the contract lacks a governing law clause but mandates DIAC arbitration, the applicable law will likely be UAE law, given that the arbitration is in Dubai and you are based in the UAE.
The arbitrators may also reference international trade law principles, such as the UN Convention on Contracts for the International Sale of Goods (CISG).
2. Injunction to Prevent PBG Encashment:
You have the following options to prevent the encashment of the PBG:
Urgent Injunction from UAE Courts: Apply for an urgent injunction in the UAE courts to prevent the bank from honoring the encashment request. You will need to prove bad faith, breach of contract, and potentially irreparable harm.
Letter to Buyer’s Bank: While you can send a formal letter to the bank requesting a delay, it is unlikely to be legally binding.
Interim Relief in Arbitration: You can request provisional measures from the DIAC tribunal to prevent the encashment of the PBG during arbitration.
Recommendation:
- Seek an urgent injunction from the UAE courts.
- Initiate arbitration proceedings under DIAC if not already done.
- Send a letter to the bank as a supplementary action.
Let me know how you would like to proceed, and I can assist with the next steps.
Best regards,
Mohammed Salah
Legal Consultant
Greetings,
In your case, the applicable law will likely depend on factors such as the place of contract execution, performance, and relevant UAE and KSA laws.
Since DIAC arbitration is mandated, UAE arbitration law may govern procedural aspects, but substantive law remains uncertain without a governing law clause.
Key Considerations:
Applicable Law: If the dispute proceeds under DIAC, the tribunal may apply UAE law unless parties agree otherwise or rely on conflict-of-law principles.
Preventing PBG Encashment: You may seek an injunction in UAE courts to stop the Buyer from cashing the Performance Bank Guarantee (PBG), arguing bad faith and contract breach.
A well-drafted legal notice to their bank may also be an option.
Given the urgency and financial risk, we strongly recommend booking a consultation with Future Vision for Advocacy and Legal Consultancy to take the appropriate legal action swiftly.
Would you like assistance in filing the injunction or drafting a formal legal notice?
We are happy at Future Vision Law Advocates and Legal Consultancy to assist you and provide the best legal services that meet your needs.
To contact us, you can call or WhatsApp us.
The absence of a governing law clause in your contract creates a challenge. In DIAC arbitration, the tribunal will determine the applicable law based on conflict-of-law principles.
Given the involvement of both UAE and KSA parties and the location of the goods, both UAE and KSA commercial law could potentially be considered.
You can seek an injunction from the UAE courts to prevent the encashment of the Performance Bank Guarantee (PBG).
In your DIAC arbitration, you'll need to argue for the application of laws that favor your position.
If you need further clarification we will discuss the possibilities in detail.
Kindly share your WhatsApp number to discuss further.
The applicable law will depend on various factors including place of performance and connections between jurisdictions; consulting legal counsel experienced in international trade law is crucial.
To prevent encashment of the PBG effectively, pursue an injunction through DIAC arbitration while considering notifying their bank as supplementary action.
Please contact us on the phone or via email.
In your case, since the contract stipulates arbitration at the Dubai International Arbitration Centre (DIAC), the applicable law will typically be UAE law, given that arbitration in Dubai is subject to local arbitration laws.
Since arbitration is the dispute resolution mechanism agreed upon in the contract, this dispute will be heard by the DIAC Arbitration Tribunal in accordance with the applicable laws and procedures there.
Regarding the procedure for blocking the payment of a personal guarantee bond, if you wish to prevent the buyer from cashing the bond based on bad faith and breach of contract, you can request an interim injunction from the Dubai Court.
You can file a lawsuit or request an interim order to protect your rights, halting the payment of the bond until the dispute is resolved.
The injunction may be granted if you provide strong evidence of the buyer's breach of contract and bad faith in attempting to cash the bond.
Another option is to contact the bank that issued the bond. You can send a letter to the bank with the legal brief, including documents related to the dispute, explaining that the bond must remain suspended until the dispute is resolved through arbitration or a court ruling.
Arbitration in this type of case may be a faster and more efficient option than filing a lawsuit, so it's important to take advantage of the arbitration agreement entered into your contract.
If arbitration fails, you can always resort to a local court in the UAE if necessary.
For assistance, please contact us by phone or WhatsApp.
