Power Horse Energy drink brand wins moral damages in a business dispute.
Compensation for non-financial losses in a business dispute, for the first time in the UAE Courts.
A major advancement in UAE corporate law, acknowledging the significance of safeguarding a company’s reputation and honour.
Moral Damage to Energy Drinks
In a significant ruling, the UAE Court of Cassation has awarded a compensation of $1 million as ‘moral damages’ to the energy drink brand Power Horse Energy GmbH, a prominent Austrian drink brand headquartered in Dubai. This compensation aims to make up for the harm caused to Power Horse’s reputation and brand in a significant contractual dispute with Anorka Food Industries LLC. This ruling is a milestone as it grants compensation for non-financial losses in a business dispute for the first time by the UAE Courts, creating a new precedent for similar cases in the future.
This means that companies in the UAE must be extra cautious about their contractual obligations. If they breach a contract, they could be required to pay ‘moral damages’ which can be substantial. ‘Moral damages’ refers to losses related to reputation, feelings, privacy, or belief. While these damages are usually awarded to individuals, the Dubai court has now applied them to a business in a breach of contract dispute.
In the UAE, ‘moral damages’ are allowed by the law to compensate for non-financial losses caused by a breach of contract. These losses can include damage to a company’s reputation, emotional distress, and a decrease in morale. To determine the financial compensation for these losses, the court assesses the brand value of the company.
The different types of losses and compensation are as follows:
Expectation loss: This represents what Power Horse could have earned if the contract had not been breached. However, this type of loss is not covered by the UAE civil code.
Reliance loss: This covers the money spent based on the contract and is the only loss compensated by UAE courts to restore parties to their pre-contractual position.
Moral loss: This encompasses the loss of reputation, emotional distress, and decreased morale.
The Power Horse case is important because it goes beyond just compensating for financial losses resulting from a contract breach. It sets a new standard for including compensation for moral damages in commercial disputes. This significant ruling marks a major advancement in UAE corporate law, acknowledging the significance of safeguarding a company’s reputation and honour in commercial conflicts.
We are awaiting to see the judgment for further details. We shall publish an update when the judgment becomes available.
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Amy is a legal consultant at ATB Legal, with a unique blend of skills for corporate, commercial and litigation matters. She is a law graduate and certified in Intellectual Property from the World Intellectual Property Organization.
