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DIFC Court Jurisdiction: Then and Now

  • Middle East

    23-12-2011

    

    Prior to the Government passing the Law, the DIFC courts’ jurisdiction was established through Dubai Law No. 12 of 2004 in respect of the Judicial Authority at the Dubai International Financial Centre ("Law No. 12 of 2004”), as well as a 2009 Protocol of Enforcement set up between the DIFC courts and the Dubai courts (the “Protocol”).

    By Article 2 of Law No. 12 of 2004, the DIFC Court of First Instance was given exclusive jurisdiction over “civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre”.  The DIFC Court of First Instance was also provided jurisdiction over claims against any DIFC body under Law No. 12 of 2004. In effect, a party opting for the DIFC courts must have some connection to the DIFC. This connection may be: 1) a contract executed with a DIFC entity; 2) a dispute relating to a contract performed fully or partially in the DIFC; or 3) a dispute resulting from an incident occurring within the DIFC.

    In both jurisprudence and in practice, parties have interpreted the language “concluded, in whole or in part, in the Centre” to mean that they could opt into the jurisdiction of the DIFC courts by executing or negotiating a contract within the DIFC, such as in one of its many coffee shops.  This notion of “coffee shop” jurisdiction was later rejected within the Protocol. In the Protocol, it was established that the dispute or the transaction itself had to be connected with or involve the DIFC or a DIFC entity and that concluding the contract within the DIFC was insufficient for the purpose of falling under the jurisdiction of the DIFC courts. 

    This ruling was effectively nullified by the implementation of the Law, which expands the jurisdiction of the DIFC courts to cover transactions and disputes that are not connected to the DIFC or a DIFC entity. Under Article 5(2) of the Law, the DIFC Court of First Instance may consider and rule in civil and commercial cases and claims if the parties agree to submit their dispute to the DIFC courts either before or after the existence of the dispute.  This means that the parties no longer need a connection to the DIFC, but can contractually elect to have the DIFC courts adjudicate any disputes that may arise.

    By permitting parties with no connection to the DIFC to litigate through its courts, parties opting for the jurisdiction of the DIFC courts have now become exposed to a number of other changes that were previously unavailable.  These changes include:

    •  Official language of the DIFC courts is English: Therefore, hearings are now held in English as opposed to Arabic.  In many cases, this reduces the cost and time of having the relevant documentation translated to Arabic as well as the need for a translator during the court proceedings.
    •  The DIFC courts are modeled on the English common law system: Parties can have their dispute resolved by a common law-based court system as opposed to the civil law system in place in the UAE. In addition to a court modeled on English civil procedure rules, the DIFC courts’ system of case precedence will likely increase the predictability of the outcome of a dispute referred to the DIFC courts.
    •  Recovery of Legal Fees: The successful party is permitted to claim legal fees from the other party. While the UAE Civil Procedures Law permits a judge to award legal fees to the successful party, in practice this is rarely done.  In many cases, this acts as a deterrent to initiating a dispute resolution process through the UAE courts.
    •  Internationally recognized judges: The judges in the DIFC courts hail from a number of jurisdictions, including the UAE. These judges have significant experience in adjudicating UAE matters, but also experience resolving complex international commercial disputes.

    Most notably, the Law effectively allows parties to avoid the UAE court system altogether by opting for the jurisdiction of the DIFC courts.  In theory, the implementation of the Law should decrease the timeline to resolve disputes, as well as provide greater comfort and familiarity with the adjudication process to the parties involved.

     

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