By: Ludmila Yamalova, Managing Partner, HPL Yamalova & Plewka DMCC
A recent decision by the Dubai International Financial Centre (DIFC) Courts against Damac, once the largest private real estate developer, might have given hope to some of the U.A.E. investors regarding resolution of their real estate disputes. In that case, the DIFC Courts ordered Damac to refund an Irish couple AED 1.7 million for failure to timely deliver their unit in Damac’s Park Towers, located in the DIFC free zone.
Judgment was rendered just a few months after filing. It was filed in English, as the DIFC Courts proceedings are in English and decided based on DIFC’s own laws, modeled on British laws. It was also a judgment by default, meaning, Damac failed to appear in court and, as such, the Court did not decide the case on the merits. Damac was ordered to pay the judgment in full within two weeks or be subject to further penalties. The couple may also claim reimbursement of its attorney fees, under the DIFC Court’s rules, a remedy not available in local courts. Finally, because the DIFC Courts are common law jurisdiction, the judgment is a binding precedent for future cases.
A very encouraging outcome indeed, especially given the few actual victories awarded to real estate investors by local courts. The speed and decisiveness with which it was rendered are also sharply contrasted with thousands of lawsuits, often marked by conflicting and confusing interim judgments, pending for almost three years in local courts.
Yet, the impact of the DIFC Court’s judgment against Damac must not be overestimated. Its application is rather limited, as very few cases can actually be brought in the DIFC Courts. This is because the DIFC Courts have limited jurisdiction and can only hear cases arising from or related to, in one way or another, the DIFC itself.
While the scope of the DIFC Courts’ jurisdiction is a complicated issue, one thing is clear. There must be a nexus to the DIFC. Real property located in the DIFC, such as Damac’s Park Towers, is one such example. If one of the parties is either registered or authorized to conduct business in the DIFC, that too can create a nexus for jurisdiction. If part of the cause of action took place in the DIFC, such as where parties signed agreements in the DIFC, that too may give rise to the Court’s jurisdiction. Also, jurisdiction can be established by a decree, as is the case of the decree establishing a specialized tribunal in the DIFC to deal with Dubai World, including its Nakheel entity.
Therefore, as far as real estate disputes are concerned, very few cases are subject to the DIFC Court’s jurisdiction. They must either relate to the property located in the DIFC or involve a party who is either a DIFC entity or is subject to special decree, such as Nakheel.