Dubai widens jurisdiction of DIFC Courts

Businesses in Dubai can now opt to take their disputes to the Dubai International Financial Centre (DIFC) Courts, following an overhaul of the Gulf emirate’s commercial legal system.

The Dubai Government on Monday widened the court’s jurisdiction to allow companies based outside the tax-free business park to bring their cases before the common law court.

Under the new rules, companies can opt to resolve their disputes in DIFC courts if both parties agree to its jurisdiction. Contracts can also include a clause binding both parties to use the English-language court in the event of a disagreement.  

“[The decision] provides businesses with more choice; choice to have their cases heard in Arabic or English, using civil or common law procedures,” Michael Hwang, Chief Justice of the DIFC Courts, told Arabian Business.

Companies outside the free zone were previously tied to bringing cases before the Arabic-language Dubai Courts in the event of a dispute.

“This move will further reinforce Dubai’s reputation as the business hub of the region, and attract business to invest in Dubai that may otherwise have established elsewhere.”

Cases can be brought before the Court of First Instance, the Small Claims Tribunal, and the Court of Appeal.

Plans to extend DIFC Courts jurisdiction beyond the free zone have been mooted for several years. The court’s Chief Justice, Sir Anthony Evans, last year said efforts were underway to allow it to handle specific types of commercial cases for companies operating outside of DIFC.

The courts are also the home of the Dubai World Tribunal, a panel established to hear disputes arising from the state-backed conglomerate’s debt restructuring. The panel’s ability to rule on cases linked to Nakheel has been questioned in recent months, after the indebted developer was carved out parent company Dubai World in June.

The move to extend DIFC Courts’ jurisdiction could mean companies with legal claims against Nakheel are able to bring their case before the English-language courts, said Jonathon Davidson of Davidson & Co Legal Consultants.

“If the creditors or the investors and Nakheel agree that their dispute can be bought in the DIFC Courts then my understanding of the amendment of rule 12 is that DIFC Courts will accept that,” he said. “Needless to say those are issues which are personal to the parties.”

Nakheel, one of the biggest causalities of Dubai’s property crash, has faced a slew of cases from unpaid trade creditors and buyers since the tribunal was created in December 2009.

The state-owned developer is engaged in at least 12 legal cases relating to The World, including one lawsuit against Kleindienst Properties which demands almost $200m in unpaid installments and delay fees.