Courting the Chinese legal system a priority for DIFC

The deepening trade ties between China and the UAE has also meant that the “soft infrastructure” supporting these should also be strengthened, according to the DIFC Courts chief executive Mark Beer.

Speaking at the DIFC Courts/Dentons Trading Securely event on February 28, Mr Beer said growing trade ties were why “we made it a priority of the DIFC Courts to reach out and connect with the courts in China, and particularly with the sister city of Dubai, Shanghai”.

DIFC Courts signed an agreement on judicial cooperation with the Shanghai High People’s Court last year in a bid to allow a decision reached in one jurisdiction to be enforced in the other.

“The collaboration we’ve built with the Chinese courts make us the first commercial court in the world to have connected with a court in the People’s Republic of China,” Mr Beer said.

He said Dubai was now home to 4,500 Chinese businesses and four of its biggest banks. Hongbin Cong, the vice-president of international relations at Falcon & Associates, said despite the fact that these four banks had only been operating in Dubai for about five years, in the past year they accounted for 25 per cent of total DIFC assets.

Yet even with a robust legal framework in place, Chinese contractors looking to expand in the region need to be wary of pitfalls.

Sadique Mohammed, who is the general counsel of China State Construction Engineering Corporation Middle East, says a common challenge for lawyers is that the local law can be ambiguous in certain circumstances, and that “local courts appear to be very active trying to see and view your behaviour” on how you enforce any contract terms you have negotiated as much as the terms themselves.

Another challenge for Mr Mohammed has been the language issue, with local laws written in Arabic and his head office requiring documents in Chinese.

“I’m ably informed by my team that there are some words in Arabic that are not present in Mandarin, and vice versa. Can you imagine having to translate legal and technical terms on a big value dispute and feeling unable to be able to convey the right message to head office?,” he says.

Hill International’s Benjamin Highfield, who has represented a number of major Chinese contractors, adds that there are sometimes cultural issues that need to be addressed. Whereas many Chinese contracting firms cut their international teeth working in Africa, in the Middle East contract scopes are more tightly defined and controlled.

Often, he argues, there has been a cultural element of faith given by Chinese contractors that is not always repaid.

“For me, the perception in Asian culture is that if we work hard, do a good job and entertain all of the employers’ ideas then at the end of the day we will be treated fairly.

“Whereas if you look at European or American contractors they are far more litigious. A solution will not be agreed until such time as a commercial remedy is agreed,” Mr Highfield says.

“That element of good faith isn’t returned to many clients who believe that a fair compensation will be put in place.”

Follow The National's Business section on Twitter