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Thu 28 Jul 2016 09:28 AM

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Exclusive: DIFC Courts logs $925m of claims in H1, 48% rise

Number and value of cases brought to Dubai’s commercial courts up as economic uncertainty deepens

Exclusive: DIFC Courts logs $925m of claims in H1, 48% rise

The total value of claims at Dubai’s DIFC Courts rose by nearly 50 percent year-on-year in the first six months of 2016, new figures reveal.

A total of AED3.446 billion ($925.6 million) of claims were filed at DIFC Courts over the period, compared to AED2.339 billion ($634.3 million) in the first half of 2015 – representing a 48 percent increase.

The total number of cases was 152, compared to 142 the previous year.

The figures include Court of First Instance (CFI) cases, arbitration-related cases and counter claims, enforcement cases (where claimants seek to enforce previous judgements and arbitration awards handed down even from courts elsewhere in the world), and Small Claims Tribunal (SCT) cases (claims of up to AED1 million).

The growth was driven by a significant increase in the number of enforcement cases, DIFC Courts said. While the number of CFI and arbitration cases grew by 35 percent during the period from 17 to 23, the total number of enforcement cases grew by 194 percent from 17 to 50.

The average claim value of enforcement cases also grew significantly during the period, from AED6 million ($1.6 million) in the first half of 2015 to AED31 million ($8.4 million) this year, a fourfold increase.

Overall, the average value of claims in the first half of 2016 increased by 38 percent from AED16.5 million ($4.49 million) to AED22.7 million ($6.18 million), the figures showed.

Lawyers noted the rise in cases reflects the “increased confidence” commercial parties have in the DIFC Courts as a forum for resolving disputes and enforcing judgements.

It could also be due to the uncertain economic climate, they said. James Abbott, Dubai-based partner at Clifford Chance, noted: “The fall in the oil price has led, directly or indirectly, to an increasing number of payment defaults.

“Commercial parties are deciding to bring claims now while the economic climate is uncertain for the foreseeable future; they are no longer holding off from commencing formal legal proceedings to recover their debts.”

Graham Lovett, partner at Gibson Dunn, said: “In terms of trends, litigation always tends to be countercyclical to the buoyancy of the economy.

“During the boom times a lot of deals are done, cashflow is good and there is little appetite for the cost or benefit of litigation.

“When things slow down, cash becomes tighter, projects and deals are postponed or cancelled, the repayment of loans or payments to creditors become tighter and litigation is sometimes the only way to recover cash or force a party to negotiate a settlement.”

He added that the overall rise could also be attributable to a recent change in the law permitting non-DIFC entities to use the DIFC Courts.

However, the DIFC Courts figures also revealed that the average claim value of CFI and arbitration-related cases dropped from AED132 million ($35.9 million) to AED82 million ($22.3 million) in the first half of the year.

This suggests the main courts’ workload is “maturing to include a broad mix of both high value and moderate value commercial disputes”, the courts said.

The total number of SCT cases also fell in the first half of 2016, from 108 to 79. However, the total value of SCT claims increased from AED7 million ($1.9 million) to AED9 million ($2.4 million) year-on-year.

Mark Beer, CEO & registrar at DIFC Courts, said the lower volume of SCT cases was due to a “burst of collection cases at the end of last year, which has now passed through the system, testament to the rapid settlement rate of the tribunal.” Ninety percent of cases are settled within four weeks, he said.

Beer added that the latest figures overall, in particular the rise in enforcement claims, show that the courts are “increasing the certainty and reducing the risk” of doing business in the emirate.

“More businesses recognise the DIFC Courts as a time- and cost-effective means to enforce judgements and arbitration awards – for example to collect money from assets held in Dubai, the UAE and elsewhere across the Middle East – even if those judgements were made elsewhere in the world,” he said.

“We are an integral part of the infrastructure that keeps Dubai and the UAE high up on global indices as a secure and innovative jurisdiction for global firms.”

DIFC Courts is situated in Dubai’s financial free zone the Dubai International Financial Centre, and is the emirate’s only common law facility for commercial disputes.

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