Civil Law and UAE: Limits of Formal Systems in Representing Human Disputes

1. Introduction

A formal legal system represents disputes through predefined concepts, rules, procedures, categories, evidence and remedies. This is necessary for consistency and predictability. However, human disputes are often more complicated than the formal categories used to describe them.

For example, a legal system may ask:

Was there a valid contract?

Was there a breach?

Who caused the damage?

What evidence proves the claim?

Which court has jurisdiction?

What compensation is legally recoverable?

But the real dispute may additionally involve trust, commercial expectations, unequal bargaining power, misunderstanding, family relationships, technological complexity, cultural context, incomplete information and rapidly changing circumstances.

UAE civil law therefore illustrates an important tension:

Law requires formal rules for certainty, but justice sometimes requires interpretation, contextual evaluation and judicial discretion.

This issue is particularly significant after Federal Decree-Law No. 25 of 2025 promulgating the new Civil Transactions Law, which entered into force on 1 June 2026 and repealed the 1985 Civil Transactions Law. (UAE Legislation)

2. Meaning of “Formal Systems” in Civil Law

A formal legal system can be understood as a system that converts complicated human relationships into legally recognizable categories.

Examples

Formalization is useful because courts cannot decide millions of disputes solely on subjective impressions.

However, classification is not identical to reality.

3. Why Formal Legal Systems Have Limits

A. Human disputes are factually complex

A legal rule may be simple while the underlying facts are complicated.

For example:

“Party A breached the contract.”

This statement may conceal:

changes in circumstances;

negotiations after the contract;

partial performance;

reliance by the other party;

technical difficulties;

conduct of third parties;

conflicting communications;

informal modifications;

commercial customs.

Therefore, the court must interpret the formal rule in light of the actual relationship.

4. Rules Cannot Completely Capture Human Intent

Contracts are formal documents, but human intention may not always be perfectly expressed in contractual language.

A contract may contain:

ambiguous wording;

incomplete provisions;

inconsistent clauses;

incorporated documents;

technical terminology;

informal side arrangements.

Consequently, courts must frequently determine what the parties objectively agreed to, rather than simply mechanically reading individual words.

This is one reason civil-law systems contain interpretive principles and judicial powers rather than treating every dispute as a mathematical exercise.

5. Formal Categories Can Oversimplify Disputes

A formal system often requires a binary classification:

contract / no contract

breach / no breach

valid / invalid

jurisdiction / no jurisdiction

damage / no damage

But actual disputes may exist on a spectrum.

For example, a party may:

technically comply with one contractual provision;

but substantially undermine the commercial purpose of the transaction.

The legal question then becomes whether formal compliance is sufficient or whether the overall conduct must be considered.

6. UAE Civil Law and Contextual Interpretation

The new UAE Civil Transactions Law is now the principal mainland UAE civil-law framework. Federal Decree-Law No. 25 of 2025 expressly repealed the former 1985 Civil Transactions Law from 1 June 2026. (UAE Legislation)

This demonstrates an important feature of UAE civil law: codification does not eliminate interpretation.

A code provides the framework, but courts still have to:

identify the applicable rule;

determine the relevant facts;

interpret contractual language;

evaluate evidence;

connect facts to legal consequences;

determine the appropriate remedy.

Thus, the formal legal code is a decision framework, not a complete representation of every human circumstance.

7. Limits of Formalism in UAE Civil Disputes

7.1 Limitation of textual formalism

A purely textual approach can fail where the language of a contract does not completely express the parties' actual arrangement.

The court may need to examine:

surrounding circumstances;

contractual structure;

commercial purpose;

subsequent conduct;

communications;

industry practice.

Therefore:

The written text is important, but the legal meaning of the text can require contextual interpretation.

7.2 Limitation of procedural formalism

Procedural rules are essential for fairness, but excessive formalism can sometimes obscure the substantive dispute.

The judicial process must balance:

procedural certainty

against

substantive justice.

The DIFC courts provide useful examples because their judgments repeatedly demonstrate that jurisdiction, procedural requirements and contractual arrangements must be interpreted within their legal context.

8. Case Law

Case 1: Lural v Listran & Lokhan [2021] DIFC CA 003

This is one of the clearest UAE examples of the limits of purely formal classification.

The dispute concerned competing jurisdictional positions involving the DIFC Courts and Abu Dhabi Courts. The DIFC Court considered whether a judgment from another UAE court should automatically be treated as a “final judgment” for the purposes of DIFC jurisdiction.

The Court rejected a simplistic approach. It examined:

the jurisdictional agreement between the parties;

DIFC conflicts principles;

recognition of judgments;

the contractual choice of jurisdiction;

the relationship between different UAE judicial systems.

The Court concluded that a judgment obtained in breach of the exclusive jurisdiction agreement was not automatically a judgment that had to be treated as binding for the relevant DIFC jurisdictional purposes. (DIFC Courts)

Principle

Formal existence of a judgment does not necessarily determine its legal effect.

The court had to examine the circumstances surrounding the judgment and the legal basis on which recognition was sought.

Relevance to formalism

This demonstrates that:

Legal form must sometimes be evaluated through the legal context in which the form was created.

9. Case 2: Oheo Bank v Parker [2025] DIFC CA 006

In Oheo Bank v Parker, the DIFC Court of Appeal considered challenges to portions of an arbitral award.

The Court examined statutory grounds for intervention and ultimately allowed certain grounds of appeal and set aside specified portions of the award. (DIFC Courts)

The case demonstrates that a formal dispute-resolution mechanism—arbitration—does not become immune from judicial scrutiny merely because the parties selected arbitration.

The legal system maintains controls concerning:

procedural fairness;

statutory requirements;

jurisdiction;

proper reasoning;

the boundaries of arbitral authority.

Principle

A dispute cannot be reduced to:

“The parties chose arbitration, therefore the award is automatically beyond review.”

The legal framework must still be applied to the circumstances of the case.

Relevance

This illustrates the limits of procedural formalism: procedural choice is important, but it operates within a larger legal framework.

10. Case 3: Ganesan Muthiah v Abdul Rahman Mohammad [2026] DIFC CA 007

This recent DIFC Court of Appeal decision involved a jurisdictional dispute connected with the Conflict of Jurisdiction Tribunal.

The proceedings demonstrate that jurisdiction cannot always be understood simply by asking which court initially received the claim.

The procedural history involved:

a DIFC Court proceeding;

a Conflict of Jurisdiction Tribunal decision;

an order dismissing the claim;

an application for permission to appeal;

renewed appellate consideration.

The DIFC Court of Appeal heard the appeal in 2026. (DIFC Courts)

Principle

Jurisdiction is a formal legal concept, but its application requires:

consideration of the statutory framework;

procedural history;

interaction between courts;

binding jurisdictional decisions;

appellate supervision.

Relevance

The case shows that:

A formal jurisdictional rule cannot be separated from the institutional structure in which that rule operates.

11. Case 4: Panther Real Estate Development LLC v Modern Executive Systems Contracting LLC [2022] DIFC CA 016

This was a major construction dispute involving a FIDIC-based contract for a Dubai development project.

The contract contained detailed contractual provisions concerning construction obligations, delay and completion. The dispute required the court to interpret the contractual structure and the parties' respective obligations rather than merely identify isolated words in the contract. (DIFC Courts)

The Court of Appeal dealt with contractual interpretation and the relationship between contractual provisions and the parties' obligations.

Principle

Contractual interpretation cannot always be performed by examining a single clause independently.

The contract must be considered as an integrated instrument.

Relevance

The case demonstrates the limitation of clause-by-clause formalism.

A complex commercial relationship may be represented by hundreds of contractual provisions, but the court must understand how those provisions operate together.

12. Case 5: Klesta Eshja & Hair Creators Salon LLC v Salah Masri & Others, CFI 066/2024

This 2026 DIFC decision is particularly important for modern formal systems.

The defendants' amended pleadings had been prepared substantially with assistance from artificial intelligence and contained false references and misleading material. The court ordered the pleadings struck out and imposed substantial costs consequences. (DIFC Courts)

The decision demonstrates that formal legal documents cannot be treated as reliable merely because they possess the appearance of legal form.

An AI-generated document may look like:

a pleading;

a legal submission;

a citation;

an argument.

But the formal appearance does not establish its substantive reliability.

Principle

Legal form does not substitute for human verification.

Importance

This is particularly relevant to the question of formal systems because modern legal technology can produce highly structured material that appears authoritative while containing errors.

Therefore:

Formal appearance ≠ legal truth.

13. Case 6: Arabyads Holding Ltd v Gulrez Alam Marghoob Alam [2025] ADGMCFI 0032

This ADGM case involved problems associated with AI-assisted legal research and legal authorities.

The case illustrates a fundamental limitation of formalized information systems: a computer-generated citation may look like a genuine authority while being incorrect or unreliable.

The responsibility for legal submissions remains with the lawyers and parties who present them.

Principle

Human legal responsibility cannot simply be transferred to a technological system.

Relevance

The case is important because it illustrates a broader principle:

A formal information system can organize information, but it does not automatically establish the truth or legal validity of that information.

This is closely related to the limits of AI-assisted dispute representation.

14. Case 7: Lahela v Lameez [2020] DIFC CA 007

The DIFC Court of Appeal's decision in Lahela v Lameez demonstrates the importance of applying procedural rules within their proper legal context.

Procedural requirements are necessary, but their application cannot be separated from:

the circumstances of the proceedings;

the purpose of the relevant procedural rule;

fairness between the parties;

the overall litigation framework.

Principle

A legal system should not treat every procedural requirement as an isolated technical formula.

Relevance

This demonstrates the difference between:

formal compliance

and

meaningful procedural justice.

15. Case 8: Industrial Group Ltd v Abdelazim El Shikh El Fadil Hamid [2022] DIFC CA 005 & 006

The DIFC Court of Appeal addressed the statutory foundations of DIFC jurisdiction.

The decision is relevant because courts cannot simply create jurisdiction because doing so would appear convenient or produce a particular outcome.

Principle

Judicial discretion operates within legal authority.

This creates an important balance:

Formal rules cannot capture every aspect of human disputes, but judges also cannot disregard formal legal limits whenever they believe a different result would be preferable.

Relevance

This is the opposite side of the formalism problem.

The legal system must avoid both:

excessive formalism, and

uncontrolled discretion.

16. Formalism Versus Judicial Discretion

The central issue can be illustrated as follows:

Neither extreme is sufficient.

Excessive formalism

May produce:

technically correct but factually inappropriate outcomes;

rigid procedural results;

inability to deal with novel technologies;

difficulty addressing unforeseen contractual circumstances.

Excessive discretion

May produce:

unpredictability;

inconsistent decisions;

unequal treatment;

uncertainty for businesses;

judicial overreach.

The proper approach is therefore structured discretion.

17. Formal Systems and Evidence

Evidence is another important area.

A formal system normally requires evidence to be:

relevant;

admissible;

authentic;

sufficiently reliable.

But modern disputes increasingly involve:

emails;

WhatsApp messages;

blockchain records;

cloud records;

AI-generated material;

digital signatures;

metadata;

automated logs;

algorithmic outputs.

The formal label “electronic evidence” does not answer the deeper question:

What does the evidence actually prove?

Therefore, courts must evaluate authenticity, reliability, context and evidentiary weight.

18. Formal Systems and AI

AI creates a particularly difficult version of the problem.

An algorithm can transform a human dispute into:

numerical variables;

probability scores;

classifications;

predictions;

risk assessments;

similarity measurements.

But the dispute itself may involve:

intention;

credibility;

misunderstanding;

emotional context;

commercial expectations;

conflicting testimony;

unusual factual circumstances.

Consequently:

An algorithm can represent information about a dispute without fully representing the dispute itself.

This distinction is crucial.

19. Why Algorithmic Representation Has Limits

Suppose an algorithm evaluates a contractual dispute using:

payment history;

contractual deadlines;

correspondence;

previous cases.

It might predict:

“Party A is likely responsible.”

But the algorithm may not fully understand:

why a deadline changed;

whether the parties orally agreed to a modification;

whether one party induced the other to delay;

whether technical impossibility existed;

whether a third party caused the failure.

Therefore, statistical representation cannot automatically replace legal adjudication.

20. Human Meaning Versus Legal Categories

Human disputes often involve concepts that are difficult to formalize.

Examples

Good faith

Cannot always be reduced to a numerical value.

Reasonableness

Depends upon circumstances.

Fairness

May involve competing legitimate interests.

Reliance

Requires understanding what one party actually did because of another's conduct.

Causation

May involve multiple contributing causes.

Intent

Often requires inference from conduct and surrounding circumstances.

This is why civil-law adjudication necessarily involves interpretation.

21. Limits of Contractual Formalism

A contract is one of the strongest examples of legal formalization.

A contract converts an economic relationship into legal obligations.

However, complex contracts frequently contain:

technical specifications;

schedules;

amendments;

incorporated standards;

correspondence;

variations;

performance instructions;

waiver provisions;

dispute-resolution clauses.

The dispute may therefore concern the relationship among the provisions, rather than one isolated clause.

The Panther case illustrates this problem particularly well in the construction context. (DIFC Courts)

22. Limits of Jurisdictional Formalism

Jurisdiction appears to be a highly formal concept:

Court A has jurisdiction; Court B does not.

But UAE disputes may involve:

mainland courts;

DIFC Courts;

ADGM Courts;

foreign courts;

arbitration tribunals;

contractual jurisdiction clauses;

conflicting proceedings.

Lural v Listran & Lokhan demonstrates how complicated this can become. The DIFC Court had to consider recognition, contractual jurisdiction and the relationship between different judicial systems rather than simply applying a mechanical definition of “judgment.” (DIFC Courts)

23. Limits of Procedural Formalism

Procedural rules exist to protect:

equality;

notice;

opportunity to be heard;

orderly litigation;

finality.

But procedure should serve adjudication rather than completely replace it.

A rigid procedural approach may become problematic where:

a party genuinely misunderstood a requirement;

an unusual technological problem occurred;

evidence became available unexpectedly;

the procedural defect causes no meaningful prejudice.

The courts therefore need to distinguish between technical non-compliance and substantive procedural injustice.

24. Formal Systems and New Civil Transactions Law

The new Civil Transactions Law is particularly relevant to this topic because it represents an attempt to modernize the UAE's private-law framework.

It entered into force on 1 June 2026 and replaced the 1985 legislation. (UAE Legislation)

The modernization reflects a broader reality:

A legal code must continually adapt because human transactions change faster than traditional legal categories.

Modern disputes increasingly involve:

digital assets;

artificial intelligence;

automated contracting;

electronic communications;

platform economies;

complex corporate groups;

cross-border transactions;

algorithmic decision-making.

A formal code therefore needs interpretive mechanisms capable of dealing with new factual situations.

25. The “Representation Gap”

The central theoretical problem can be called the representation gap.

Reality

Human relationship
↓
Complex facts
↓
Conflicting narratives
↓
Economic/social context

Legal formalization

Facts
↓
Evidence
↓
Legal classification
↓
Rule
↓
Judgment

The problem is that something is lost during this transformation.

For example:

Human dispute:
“Company A believed Company B would continue supplying essential components because of their long-standing relationship.”

Formal legal representation:
“Was there a legally enforceable contractual obligation to supply?”

The second question is necessary, but it does not contain the whole human story.

26. The “Category Error” Problem

Formal systems can also make a category error.

For example:

A dispute involving an AI system might be classified simply as:

“Software contract dispute.”

But the actual dispute might involve:

data ownership;

intellectual property;

cybersecurity;

personal data;

negligence;

autonomous decision-making;

consumer protection;

professional responsibility.

One legal category may therefore fail to capture the multidimensional character of the dispute.

27. Why Courts Need Interpretation

Judicial interpretation performs a translation function:

Human facts → legally meaningful facts

The judge determines:

Which facts matter legally?

Which facts have been proved?

Which legal rule applies?

How should the rule be interpreted?

What remedy follows?

This is why judicial reasoning remains essential even in highly codified systems.

28. The Proper Role of Formal Rules

Formal rules should provide:

1. Predictability

People should know the legal consequences of their actions.

2. Equality

Similar cases should ordinarily receive similar treatment.

3. Accountability

Judges and parties should operate within known legal limits.

4. Efficiency

Courts cannot reconsider every issue from first principles.

5. Legal certainty

Businesses require stable rules for commercial planning.

But formal rules should be combined with:

interpretation;

evidence evaluation;

proportionality where legally relevant;

contextual analysis;

judicial reasoning;

appellate review.

29. Formalism and Justice: The Correct Balance

The UAE legal framework demonstrates a middle position.

Pure formalism

“The rule says X, therefore X always applies.”

Pure discretion

“The judge believes Y is fair, therefore Y should apply.”

Structured adjudication

“The legal rule is X; the established facts are Y; the relevant context is Z; therefore the legal consequence is determined through a reasoned application of X to Y and Z.”

The third approach is generally the more useful conceptual model for understanding modern civil adjudication.

30. Case-Law Summary Table

The Lural, Oheo Bank, Ganesan Muthiah and Panther decisions are available from the DIFC Courts' published judgments. (DIFC Courts) The Klesta decision is also an official DIFC Courts decision and specifically records the problems caused by AI-assisted pleadings containing false references. (DIFC Courts)

31. Key Legal Principles

Principle 1 — Law is a representation of reality

Legal categories simplify complex human relationships.

Principle 2 — Simplification is necessary

Without formal rules, legal certainty would suffer.

Principle 3 — Simplification has limits

A legal category cannot always capture every aspect of a human dispute.

Principle 4 — Context matters

Contracts, jurisdiction, evidence and procedure may require contextual interpretation.

Principle 5 — Technology does not eliminate the problem

AI can increase the speed and sophistication of formal representation but can also introduce new errors.

Principle 6 — Human accountability remains essential

The Klesta litigation demonstrates that parties cannot rely blindly on AI-generated legal material. (DIFC Courts)

Principle 7 — Judicial discretion must remain legally bounded

Courts interpret and apply the law but cannot simply disregard statutory jurisdictional limits.

Principle 8 — Reviewability is essential

Appellate mechanisms allow formal decisions to be corrected where legal or procedural errors occur, as illustrated by recent DIFC appellate decisions. (DIFC Courts)

32. Practical Examples in UAE Civil Law

Example 1 — Construction dispute

Contract says:

Completion within 16 months.

But the project was delayed because:

the employer changed specifications;

governmental approvals were delayed;

materials became unavailable;

the contractor failed to coordinate subcontractors.

A purely formal system might ask:

“Was completion late?”

A contextual legal analysis asks:

“Who caused the delay, what contractual mechanisms applied, and what consequences follow?”

Example 2 — Digital contract

A platform automatically accepts an online transaction.

A formal analysis may ask:

“Was there acceptance?”

But the deeper dispute may involve:

whether the user understood the terms;

whether the automated system malfunctioned;

whether the transaction was fraudulent;

whether consent was genuine;

whether consumer protections apply.

Example 3 — AI-generated legal submission

An AI system produces apparently authentic case citations.

Formal appearance:

Proper legal pleading.

Substantive reality:

Some authorities may be false or inaccurately represented.

The Klesta case demonstrates why courts cannot equate formal presentation with substantive reliability. (DIFC Courts)

33. Conclusion

The limits of formal systems in representing human disputes arise because legal systems must simplify reality in order to make it adjudicable.

In UAE civil law, formal rules provide:

certainty;

predictability;

equality;

procedural order;

enforceability.

But human disputes contain dimensions that cannot always be completely represented through predefined legal categories.

The UAE and DIFC case law demonstrates that courts therefore need to combine formal rules with interpretation, factual evaluation, contextual reasoning, procedural fairness and human judgment. Lural demonstrates the importance of context in jurisdiction and recognition; Panther demonstrates the complexity of contractual interpretation; Oheo Bank demonstrates judicial control over dispute-resolution mechanisms; Ganesan Muthiah illustrates the institutional complexity of jurisdiction; and Klesta demonstrates that even highly formal AI-generated legal material cannot substitute for human verification. (DIFC Courts)

In short:

A formal legal system is necessary to represent human disputes, but it can never be assumed to be a complete representation of human reality. The legitimacy of civil adjudication therefore depends on combining legal form with reasoned, context-sensitive and reviewable application of the law.