The Courts in the Dubai International Financial Centre (DIFC) are an attractive forum for international businesses to resolve their disputes in the Middle East. The DIFC is an independent jurisdiction inside the UAE. However, its jurisdiction is narrow: not all disputes may be heard by these courts.

Recent case law casts light on jurisdiction for non-DIFC entities

In the National Bonds case, a property located in the DIFC was subject to a dispute by three UAE companies established outside the DIFC, Taleem, National Bonds and Deyaar. The contracts entered into between the parties were stated to be governed by Dubai law and to be subject to the jurisdiction of the "courts of Dubai". Taleem brought an action in the DIFC Courts, and National Bonds challenged jurisdiction.

The DIFC Court judge refused to strike out the claim, concluding that the wording "courts of Dubai" in the contracts meant both the DIFC Courts and the courts of the Emirate of Dubai (outside of the DIFC).

On the basis of the Dubai Law No. 12 of 2004 in respect of the judicial authority in the DIFC (the Judicial Authority Law), the DIFC Courts had jurisdiction because the claim is a commercial case and dispute "arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the [DIFC]…".

The decision in the National Bonds case is a different outcome to a previous DIFC Court case, Hardt v Damac, in which a series of agreements relating to different properties were stated to be subject to the exclusive jurisdiction of the "Courts of Dubai". In this case, one of several properties was inside the DIFC, and the judge in Hardt decided that the courts of the Emirate of Dubai had jurisdiction.

The judge in the National Bonds case distinguished this decision in two ways: firstly, no argument that the words "courts of Dubai" included the DIFC Courts were put to the judge in the Hardt case and, secondly, on the facts it was unlikely that the parties intended DIFC Courts to have jurisdiction as none of the agreements was entered into in the DIFC and they were entered into before the DIFC law on land in the DIFC came into effect.

These contradictory cases currently leave the position on DIFC jurisdiction unclear. If the National Bonds decision is followed in the future, the use of the words "courts of Dubai", which are contained in many contracts to indicate the courts of the Emirate of Dubai, is not in itself sufficient to ensure a case is heard in Dubai courts outside of the DIFC.

Barclays case considers the scope of jurisdiction for DIFC entities

In a very recent development, Corinth Pipeworks commenced proceedings against Barclays Bank for (amongst other things) deceit and negligence under the laws of tort in the DIFC. The actions of the Barclays Bank employee on which the claim was based took place outside of the DIFC, at the Jebel Ali branch. However, Corinth Pipeworks claimed that the DIFC Courts had jurisdiction because Barclays Bank was counted as a "Centre's Establishment".

Under the Judicial Authority Law, any dispute involving any entity or business established or carrying on activity in the DIFC falls within the jurisdiction of the DIFC Courts.

In the Barclays Bank case, the entity which was established in the DIFC was a branch of the London listed parent company. A branch is not a separate legal entity and, therefore, it was the London listed parent company itself which was duly licensed to operate in the DIFC, through its branch establishment. Corinth Pipeworks contended that it is the entire corporation which is the relevant establishment falling within DIFC Courts jurisdiction and, consequently, the activities of any other branch of that company may also form the basis of a dispute within DIFC Courts jurisdiction, even if those activities are wholly outside of the DIFC.

The DIFC Court upheld an application by Barclays Bank for the claim to be struck out on the basis that the DIFC Courts had no jurisdiction. In the judgment, Sir Anthony Coleman made clear that, in order for the DIFC Courts to have jurisdiction on the basis that one of the parties is established in the DIFC, the conduct or activities of the DIFC registered business must be the basis on which the cause of action arises. The fact that the licensed entity is an international corporation does not mean that all businesses and branches of that parent company are automatically included in the DIFC Courts jurisdiction.

Summary on DIFC Court jurisdiction

The position as to whether the DIFC Courts have jurisdiction is set out in a combination of Dubai Laws (in particular the Judicial Authority Law), case law (particularly the 2009 case of Shihad Khalil v Shuaa Capital) and a 2009 Protocol between the DIFC Courts and the Dubai Courts.

In summary, the DIFC Courts, as opposed to the courts of the Emirate of Dubai, have jurisdiction in the following situations:

  • civil disputes involving the DIFC, its authorities and entities registered therein;
  • civil disputes arising from or related to a contract that has all or part performance within the DIFC;
  • civil disputes arising from or related to a financial or associated transaction that has taken place, in whole or in part, in the DIFC;
  • civil disputes arising from or related to an incident that has occurred in the DIFC (excluding criminal proceedings, for which DIFC is not a separate jurisdiction).

The key to being able to bring a claim within the DIFC Courts is whether there is a connection between the cause of the action itself, or the entity in relation to its licensed activities, and the DIFC. The nationality of the parties to the dispute is not necessarily relevant.

It is also irrelevant whether the parties have selected DIFC Law as the governing law of their contract. It is possible for a contractual claim to be heard by the courts of the Emirate of Dubai, but under DIFC Law. However, the position as to whether a contract which is signed inside the DIFC free zone (such as in a DIFC coffee shop for example), but which otherwise has no connection with the DIFC, can fall within the DIFC jurisdiction is not conclusively determined.

The Judicial Authority Law states that the parties may provide for another court to have jurisdiction. This may therefore be the courts of the Emirate of Dubai or the courts of a foreign jurisdiction.

The future of DIFC Court Jurisdiction

Many international companies see the advantages of having their disputes heard in the DIFC because it uses the English language and is based on a familiar legal structure. Although their remains uncertainty on some aspects of DIFC court jurisdiction, more cases are to be expected.