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Expansion of Jurisdiction of the DIFC Court

Expansion of Jurisdiction of the DIFC Court

Property Magazine

30 November 2011

By: Ludmila Yamalova, Managing Partner, HPL Yamalova & Plewka DMCC

Expansion of Jurisdiction of the DIFC Court

Parties can choose to have their civil and commercial disputes heard by the Dubai International Financial (DIFC) Courts instead of the local courts.  This includes disputes that have no relationship to the DIFC, such as real estate and breach of contract cases.  To foreign investors and businesses, the DIFC Courts present a multitude of advantages over those of the local courts, offering a more neutral, familiar and economical forum.

To begin with, the DIFC Courts are English-language courts.  This means that all submissions and hearings are in English.  There is no requirement to translate everything into Arabic, as is the case with local courts.  Because business in the U.A.E. is primarily conducted in English, with corresponding documents also in English, not having to translate everything into Arabic results in significant time and cost savings.

Also, under the DIFC laws, different parties can bring one claim jointly, as could be the case with a group of real estate investors against the same developer.  Similarly, there is no requirement of filing separate cases for each contract, as is the practice in local courts.

The DIFC Courts, being courts of common law jurisdiction, allow for more predictability in judgments and transparency.  Unlike the local civil law courts, the DIFC Courts are based on binding and publicly available precedents.  The DIFC judges are prominent and highly experienced international judges, offering a more neutral and flexible forum for adjudicating novel and diverse issues.

Significantly, parties in the DIFC Courts have a wider choice of advocates, as they are not restricted to local advocates, a requirement of local courts.  Both Emirati and foreign-qualified lawyers have the right of representation in the DIFC Courts.

Parties’ freedom to use the DIFC Courts is a result of the law introduced in October 2011, broadening the jurisdiction of the DIFC Courts.  In relevant parts, the new Dubai Law No. 16 of 2011 allows parties to choose the DIFC Courts to resolve their disputes even if there is no relationship to the DIFC.  To qualify, parties must include in their agreements a clear and explicit special provision to that effect.

The new law is a significant departure from its original form and application.  From the inception of the DIFC Courts in 2004, the general understanding was that only financial cases and cases involving DIFC parties were subject to the DIFC Courts’ jurisdiction.  Over the last two years, the Courts’ jurisdiction was extended to commercial cases with a nexus to the DIFC.  This included real estate cases for properties located in the DIFC.  It also covered contractual disputes, where a part of a contract took place in the DIFC.  Under this line of reasoning, contracts, which otherwise had no relationship to the DIFC, but were physically signed in the DIFC, for example at one of the DIFC’s coffee shops, qualified – giving rise to what became known as the Coffee Shop Rule.  In 2009, the Courts’ jurisdiction was also extended to include all Dubai World’s cases, including its subsidiaries such as Nakheel, through a Dubai decree setting up a specialized Dubai World Tribunal in the DIFC Courts.

The latest extension of the DIFC Courts jurisdiction will allow a broad range of investors and businesses to avail themselves of the benefit of the DIFC Courts even without the DIFC connection.  Parties entering into new contracts now have the option of choosing the DIFC Courts as their preferred forum.

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