Legal deal boosts DIFC courts

Dubai firms will now be able to settle disputes at the specialised English-language courts of the Dubai International Financial Centre.

Dubai companies will be able to settle their disputes at the specialised English-language courts of the Dubai International Financial Centre after a deal was signed yesterday. The new protocol between the Arabic-language Dubai Courts and the DIFC Courts is intended to clarify the issue of DIFC jurisdiction and, according to lawyers, could instil greater confidence among foreign companies.

The agreement comes at a critical stage for Dubai's financial sector and could have a large implication on resolving disputes over financial matters. "If foreign investors and companies are going to be treated as they are treated in their own courts abroad then this will encourage them to come here in a system where they are familiar with," said Dr Mohammed al Roken, a prominent Dubai attorney and professor of law at UAE University.

Dr al Roken said the move would "calm down the fears of investors". The DIFC was set up in 2004 to attract international companies, offering 100 per cent foreign ownership and no tax on income and profit. To enforce the regulations of the financial centre, an independent court system was set up, modelled on London's Commercial Court, which deals with complex cases arising out of business disputes, both national and international.

"If you ask multinational corporations where they want to resolve their disputes, if they can't resolve them at home, the answer is, 'London'," said Mark Beer, the chief registrar at the DIFC Courts. "If [companies] have a dispute in the English language, it might be that they want their disputes to be heard in the language in which they conduct business - It's nothing to do with any court being better or worse than the other, just a matter of what is more accessible and efficient for business," Mr Beer said.

Under the new deal, a checklist will be used to determine where companies can resolve disputes. Previously, there had been confusion over the existence of what was referred to as the "Coffee Shop rule". It led some parties to believe that merely signing a contract within the confines of the DIFC, in the coffee shop, for instance, meant the DIFC Courts would hear any resulting dispute case. That, said Mr Beer, is not the case.

"The protocol clarifies that simply signing a contract at the DIFC is not enough to bring it within our jurisdiction. However, if an element of a contract has been fulfilled in the DIFC, then you are able to choose the DIFC Courts." Such elements could include official DIFC membership by one or more companies involved, or the provision of funds by the DIFC regarding specific contracts. "The [new] protocol clearly sets out the jurisdiction between both courts and defines which court will take which dispute. This further increases the efficiency of Dubai's judicial system by ensuring parties don't have to spend time and money trying to fight a case in the wrong court," Mr Beer said.

In a statement yesterday, Dr Ahmed Saeed bin Hezeem, the director general of Dubai Courts, said: "As pillars of the Dubai legal system, the Dubai Courts and the DIFC Courts are committed to working together to achieve full judicial co-operation, which will have a highly positive impact on the maintenance of a strong judicial system in Dubai." The Dubai Courts will continue to handle all criminal cases. "This co-operation further strengthens the relationship between the Dubai Courts and the DIFC Courts, which was reinforced by the signing of a Memorandum of Understanding for co-operation, as well as a protocol on enforcement, earlier in the year," Dr bin Hezeem said.

While the details of the protocol were not published yesterday, the DIFC stated: "The DIFC Courts also have jurisdiction over any civil or commercial case and dispute arising from, or related to, a contract or financial transaction that has been performed in whole or in part within the DIFC." [e-mail]