OUR KNOWLEDGE / PUBLICATIONS / DIFC COURT – JURISDICTION UPDATE
The law which defines jurisdiction of the Courts of the Dubai International Financial Centre (DIFC Court) was amended on 31 October 2011 according to the Court's press release. Full wording has now been released and a full summary can be found below.
On 31 October 2011 the Ruler of Dubai signed amendments to Law No. 12 of 2004 effective to expand the jurisdiction of the DIFC Court by granting a freedom to commercial parties to provide for DIFC Court jurisdiction in their contracts.
Previously it was only possible to involve the jurisdiction of the DIFC Court pursuant to Article 5 of the Judicial Authority Law, being:
- civil or commercial cases and disputes involving the DIFC or any DIFC body or establishment
- 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 DIFC or an incident that has occurred in the DIFC
- objections filed against decisions made by any DIFC body
- any application over which the DIFC Court has jurisdiction in accordance with DIFC laws and regulations.
The Judicial Authority Law allowed the parties to opt out of (but not into) DIFC Court jurisdiction. The advance of the new law is that parties will now be able to opt into the jurisdiction of the DIFC Court by providing for it in writing in their contracts.
In the early days of the DIFC Court the reference in Article 5(A)(1)(b) to “a contract that has been executed or a transaction that has been concluded” in the DIFC generated some confusion as to whether parties could effectively opt into the jurisdiction of the DIFC Court by signing their contract on the DIFC's premises, for example in one of the DIFC's many coffee houses. This was the so called “coffee shop” jurisdiction of the DIFC Court. The position was clarified in the Protocol of Jurisdiction between the Dubai Court and the DIFC Court signed on 7 December 2009 (“the Jurisdiction Protocol”). This provided that for DIFC Court jurisdiction to arise it was not sufficient for a transaction merely to take place in the DIFC, it also had to relate to DIFC matters. Since then, it has been generally accepted that DIFC Court jurisdiction was limited to DIFC related matters only. This has now changed.
The expansion of DIFC Court jurisdiction represents an important policy shift which changes the role of the DIFC Court from being a specialist court servicing the Dubai International Financial Centre, and therefore of only limited application, to becoming an international judicial institution open to everyone. There are a number of factors which may make the DIFC Court attractive to the business community at large:
- The Court is staffed with internationally recognised judges from a number of common law jurisdictions such as England, Singapore, New Zealand, Malaysia as well as from the UAE, which is a civil law jurisdiction. The judges have considerable experience of handling a variety of international commercial disputes
- The official language of the Court is English, which means that all proceedings are conducted in English and there is no need to translate English language documents into Arabic
- The Rules of the DIFC Court are essentially modelled on English Civil Procedure Rules and will be therefore familiar to anyone who has ever litigated in the High Court in London. The Rules of the DIFC Court have been revised and updated as recently as in September 2011
- The winning party is entitled to claim their costs from the losing party, in a manner similar to English proceedings
- Appeal is possible, but permission to appeal is not granted automatically and there is only one appeal stage, from the Court of First Instance to the Court of Appeal
- A Small Claims Tribunal exists which has a simplified procedure for cases with a claim amount under AED 100,000 (about USD 27,000) or, if the parties agree, up to AED 500,000 (about USD 136,000)
- Dubai is a convenient location with advanced infrastructure and international transport connections.
It is also possible to specify the body of law that the DIFC Court is to apply. Care should always be taken to ensure that the choice of jurisdiction is practical and suitable for the particular transaction. However, by way of example, a contract could now provide, say, for DIFC Court jurisdiction and English law. In the absence of a choice of law clause in the contract the default position will be that DIFC law and regulations will apply.
It will also now be possible for parties to an existing dispute to agree to submit it to the DIFC Court.
The DIFC is a free zone within Dubai. Previously, it has not always been clear if the Dubai Court will recognise the jurisdiction of the DIFC Court and the Jurisdiction Protocol was signed to address this. Now, following the expansion of DIFC Court jurisdiction, if a claim which parties have agreed to submit to the exclusive jurisdiction of the DIFC Court is filed with the Dubai Court, the Dubai Court should refuse to take jurisdiction and direct the claimant to the DIFC Court instead. An early determination of this is to be hoped for to bring about certainty.
An important factor is the enforceability of any DIFC Court judgment. The DIFC Court has a number of tools at its disposal to enforce its own judgments within the DIFC. If assets are located in Dubai outside the DIFC, the claimant should be able to rely on the Enforcement Protocol agreed between the Dubai Court and the DIFC Court, which should lead to near automatic enforcement in Dubai of a DIFC Court judgment. The envisaged procedure is that the DIFC Court judgment is “converted” into a judgment of the Dubai Court and can then be enforced under any enforcement treaties to which the UAE is a party.
Ince & Co Middle East LLP are registered legal practitioners with the DIFC Court authorised to issue and conduct proceedings.
For more information please contact Graham Crane or Anna Fomina
Graham Crane
Managing Partner
Ince & Co Middle East LLP (Dubai Branch)
+971 (0)4 359 8982