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Dubai extends DIFC Court Jurisdiction

Guiding Principle

This Article introduces the recent changes in the jurisdiction of DIFC Courts. The jurisdiction is now open to agreements of the parties allowing them to benefit from the common law jurisdiction. This brings advantages for the party but creates new problems with local courts.

I. Introduction

On 31 October 2011 his Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, signed a law allowing any businesses to use the DIFC Courts to resolve commercial disputes. The courts are part of the Dubai International Financial Centre (DIFC), which is a Free Zone inDubai. The new law amends Dubai Law No. 12 of 2004, which regulates the jurisdiction of DIFC Courts.

II. Old Regulations

Before, DIFC Courts had only jurisdiction over: 

  • Civil or commercial cases and disputes involving the DIFC or any of the DIFC’s Bodies or any of the DIFC’s Establishments.
  • 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 DIFC or an incident that has occurred in DIFC.
  • Objections filed against decisions made by the DIFC’s Bodies, which are subject to objection in accordance with the DIFC’s Laws and Regulations.
  • Any application over which the Courts have jurisdiction in accordance with the DIFC’s Laws and Regulations;

III.  New Changes

Under the new rules, parties can agree to resolve their disputes now in DIFC courts. This agreement has to be made expressively and in written form. Beside the choice of court the agreement can include the language for the hearing (Arabic or English), the applicable procedure (civil- or common law) and which authority shall hear the case (Court of First Instance, the Small Claims Tribunal, the Court of Appeal). In other words, parties wherever located are free to opt now to choose the jurisdiction of the DIFC Courts and elect them to adjudicate their dispute.

IV. Advantages

The new regulation will allow companies and private persons to let international law firms handle their cases directly and have the cases heard by international experienced judges, some with knowledge in specific fields of law like maritime or real estate law. Furthermore the court can award justified legal cost, including the cost of the lawyer. The DIFC Courts are also one of the most advanced commercial courts in the world, employing new technologies including electronic case management and video-conferencing, which makes procedures faster and more efficient.

V. Problems with the Changes

However the new extension of the jurisdiction of DIFC courts is not without critics and problems.

1. Conflict with local Courts

The new choice of law and especially law procedure deepens a conflict in the otherwise uniform law system of the UAE. The English common law is foreign to the civil law system in the UAE and instead of improving the standard in the local courts, this increases the conflict, as it is expected that more and more companies will chose to avoid local courts. The DIFC court already became the home of the Dubai World Tribunal, a panel established to hear disputes arising from the state-backed conglomerate’s debt restructuring, which local courts were seen unfit to rule over.

2. Problems with Enforcement

It is also unclear to what extend courts and jurisdictions of other emirates and other countries will recognize judgments from DIFC courts. While there is a clear regulation for Dubai courts, there is no regulation on the federal level.

How ever the DIFC Courts remain committed to cooperating with other Courts in the region and beyond. The DIFC Courts signed a number of Memoranda of Understandings with other bodies to work together towards furthering judicial excellence and innovation. There are regular meetings with judicial bodies from across the region, including Qatar and Bahrain, in an effort to work together more closely.

January, 2012 Tobias Speer
  Meyer-Reumann & Partners, Dubai Office
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