The UAE Court of Cassation has awarded a compensation of $1 million to Power Horse Energy GmbH, a prominent Austrian drinks brand headquartered in Dubai.
The compensation is intended to redress the damage inflicted upon Power Horse’s reputation and brand in a significant contractual dispute with Anorka Food Industries LLC, a fully owned subsidiary of Al Hamei Group, one of the Middle East’s largest importers of coffee beans from Brazil.
Power Horse’s legal battle for compensation
This legal battle came from a Moral Damages Claim initiated by Power Horse, following a partnership agreement with Anorka to launch and market a coffee-based energy drink.
Power Horse invested substantial resources in preparing for the product launch, but Anorka abruptly withdrew from the agreement, opting to introduce its own coffee-based drink in Middle East markets.
This sudden turn of events had severe financial and reputational consequences for Power Horse.
The case, which was originally filed in Dubai in August 2020, ultimately reached the Court of Cassation, where the judges ruled in favor of Power Horse, awarding them $1 million in damages.
Anorka’s refusal to pay led to enforcement proceedings and the seizure of their assets and commercial license. Despite various attempts by Anorka to evade payment, the Court consistently upheld Power Horse’s claims.
This landmark judgment represents a significant development in UAE corporate law, as it recognises the importance of protecting corporate reputation and dignity in commercial disputes.
It marks the first time UAE courts have granted moral damages in a commercial claim and provided compensation for non-monetary losses incurred by a company.
The decision aligns with recent changes in UAE Companies law, which have strengthened corporate governance standards and empowered stakeholders to take legal action against company managers for misconduct.
“The Federal Decree-Law 32/2021 enhances corporate governance mechanisms within UAE companies. This case highlights the importance of adhering to these enhanced corporate governance standards and emphasises the directors’ responsibility to ensure the ethical and legal conduct of the company,” Fareya Azfar, partner at Fareya Azfar Araoui LLP said.
“It extends the sphere of influence for stakeholders, encompassing employees and others by providing them with the possibility to seek legal remedies against company’s directors. This grants stakeholders the capacity to safeguard their legal rights and interests in accordance with established legal principles.”