Dubai aims to become region’s legal hub

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Dubai DIFC Gate
Dubai DIFC Gate. Photo-Simon Q

Dubai has thrown its international financial court open to cases from anywhere in the world in the latest effort to make itself a lucrative global legal centre.

The United Arab Emirates is vying with neighbours such as Qatar to woo big multinationals to fight out litigation in well-financed courts with leading judges imported from England and elsewhere.

In a press release issued on the 31st October 2011 by the DIFC Court it was announced that Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, has signed a decree which, once gazetted and incorporated into law, will extend the jurisdiction of the DIFC Court beyond its current limits.

The jurisdiction of the DIFC Court has until now been limited (in broad terms) to civil disputes involving or connected with the DIFC.

Reports suggest Article 5 of the new law rewrites these jurisdictional limitations by allowing parties to agree expressly in writing to have their dispute determined by the DIFC Court so long as no final judgment has been issued by another court.

It is important to note that the new law requires the special and explicit written agreement of the parties to the jurisdiction of the DIFC Court in matters not involving or connected with the DIFC.

This means the Court will only begin to exercise its new jurisdiction once cases arise out of contracts in which the parties have explicitly agreed to its jurisdiction, or, potentially, in the case where disputes have risen before any such agreement was effective in contracts, the parties could now even after a dispute has risen, agree to have the DIFC Court determine that dispute.

However, it is notoriously difficult to get parties in dispute to agree to anything, so the number of such cases may be limited.

However, law analysts foresee that many international/multi-national companies doing business predominantly in the English language will, together with their advisers, give serious consideration to providing for DIFC Court jurisdiction if they wish to have any disputes arising out of a contract determined in the English language and under common law procedures.

This option will now be available, by agreement of the parties, not only to businesses in the UAE but to businesses anywhere in the world. Similar to the way companies agree to the jurisdiction of English Commercial Court, Singapore Court, Hong Kong Court or the Southern District of New York Court (to name a number of popular consensual court jurisdictions), parties now will be free to bring their disputes to the DIFC Court.


Dubai’s move to broaden the jurisdiction of its British common law court gives disputing parties more choice but a Gulf preference for arbitration and concerns about enforcement mean there will be no flood of new cases at the court, lawyers said.

Expanded jurisdiction for the court may be good news for the business community and raise Dubai’s profile as a regional legal hub but the issue of enforceability overseas – and even within the United Arab Emirates – still remains to be resolved.

“The difficulty that international companies would face in enforcement of the judgement abroad may be problematic,” said Adrian Cole, partner at Simmons & Simmons. “Until the law is propagated, one doesn’t know what the details are.”

Previously, companies based outside the free zone had to settle their disputes at civil courts in which proceedings were conducted in Arabic and judges were not trained in common law.

A system based in British common law would allow for more predictability in judgments, based on legal precedence, as well as a choice in venue to air grievances, said Benjamin Newland, partner at King & Spalding.

“Knowing they have a forum right here where a common law judge interprets those agreements will sit better with investors,” he added.


The effort to create rootless international courts that do not require cases to have any connection with the country is seen in the legal world as intriguing, although some observers say there are doubts as to whether it can succeed.

Robert Musgrove, chief executive of the Qatar Financial Centre Civil and Commercial Court, claims the new stateless courts envisaged in the Gulf are another step forward for the development of global capitalism.

This is a new breed of courts that are setting up in theMiddle East: effectively they are marketable commodities, he said.

Graham Lovett, Middle Eastmanaging partner for Clifford Chance, the law firm, says: It’s a great development for commerce in the region, allowing greater freedom of choice for local and international companies and institutions as to where their disputes can be heard.

Dubai is trying to reverse the trend under which companies operating in the Gulf region many of them using contracts written in English agree to go to courts or arbitration overseas to settle their legal disputes.

While enforcement of Dubai legal awards is patchy or untested in many regional states, such as Saudi Arabia and further afield in the Middle East, lawyers argue they are still more likely to be enforceable in a Gulf country than are judgments from London.

Dubai’s move is one of several attempts by states and emirates in the Gulf  such as Bahrain to beef up their legal credibility and capacity as part of wider efforts to establish themselves as truly international business centres.

The Qatar Financial Centre Court began its first arbitration last month, meaning that it now offers a range of legal dispute-resolution options to companies, including classic litigation, mediation and a specialist forum for resolving construction disputes.

The court is headed by Lord Woolf, a former English Lord Chief Justice, and other members include Lord Cullen, the former top judge in Scotland.

Qatar’s advantages include like the UAE  its geographic position as a halfway destination between Europe and Asia and its status as an Islamic country, which could make it more attractive to some Muslim litigants than established legal centres such as London and New York.

Qatar’s Musgrove, a former UK civil servant specialising in legal administration, says: The concept is very, very Arabic: the mediation of the majlis[meeting] but bringing in western skills in dispute resolution.

For all the slickness of the theory, critics say these ideas have been talked about for a long time and still face many obstacles.

One is infrastructural: while the Qatar court has invested in video links to allow people in other countries to follow proceedings or appear as witnesses, it wants more channels and is having to negotiate with the state telecommunications company for extra bandwidth.

In Dubai, some observers argue that the court extension is an opportunistic bid to channel more revenue into the debt-laden DIFC, the investment arm of the emirate which faces a $1.25bn bond repayment next year.

Analysts also question the sustainability of Dubai’s approach of having a twin-track legal system, with the DIFC court operating alongside national courts that work in Arabic, which have come under criticism from some circles over their allegedly opaque procedures.

Other wider doubts over the region’s international courts include whether official commitments to maintain their independence will be honoured if cases crop up that are seen as threatening to the interests of the countries rulers.

Like other Gulf states, the UAE and Qatar are hereditary autocracies ruled by decree, with little tradition of courts taking decisions that undermine executive policy.

Another uncertainty is whether the resources being thrown at the courts including hefty travel costs and daily rates for foreign judges will survive spending cuts in the UAE and elsewhere, as rich Gulf states grapple with the impact of Arab unrest and scale back some of their more extravagant projects.

Dubai created a special tribunal in 2009, operating under common law, to address foreign investor concerns about fair legal practices after Dubai World’s debt crisis.

Claims against its troubled property arm Nakheel, in particular, flooded the tribunal.

Nakheel was absorbed by the Dubai government this year as part of its debt restructuring, prompting lawyers to file a flurry of cases with the tribunal ahead of the handover amid fears that future cases would be before the civil courts in Dubai.

“The (civil courts) system outside isn’t always as easily adaptable to novel structures or to the varied demands of parties,” said King & Spalding’s Newland.

Still, lawyers are skeptical that the DIFC Courts will see a flurry of new cases given a preference for privacy in the Gulf.

Most companies in the region list arbitration – an alternative means of resolving disputes privately through a mediator rather than a court – the preferred method of dispute resolution in their contracts to avoid the publicity surrounding a court battle.

“You could have arbitration and (solve disputes) in a private forum, or you could go to a court system and the details will become public. That will be a major factor when people weigh where they want to go,” said Blanksby.

Foreign companies also prefer arbitration to ensure that both parties are on the same footing if disputes do arise.

“People looking at crossborder transactions don’t want to give either side a home court advantage by selecting the court in their home country. Instead, they say ‘let’s have it decided in arbitration in London or Dubai or Paris,'” said Newland.


The extension of the jurisdiction of the DIFC Court will be welcomed by a significant proportion of business community in the region.

Because of Dubai’s geographical location and connectivity and the provision of first rate court services in line with top international standards, there must also be the prospect, over time, that DIFC Court will be considered as a potential jurisdiction of choice not just within the region but globally.


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