15 March 2012 | Patrick Bourke and Adam Vause
Established in 2004, the Dubai International Financial Centre (DIFC) is a financial free zone administered by the government of Dubai.
The objective of the DIFC is to encourage the development of international banking, investment and financial services companies in Dubai by offering: 100 per cent foreign ownership; a 0 per cent tax rate; and no restriction on capital convertibility or profit repatriation.
DIFC Courts are an independent judicial system that operate within the DIFC and were originally designed to uphold the provisions of DIFC regulations. They are based on a common law system and are the only courts in Dubai that conduct legal proceedings in English. They were welcomed as offering greater familiarity for foreigners, coupled with certainty that arises from a precedent-based system.
DIFC Courts have exclusive jurisdiction over all civil and commercial disputes within the geographic area of the DIFC, including bodies and companies registered there. For them to have jurisdiction, the dispute must arise out of a contract performed partially or entirely in the DIFC and one of the parties must be based in the DIFC.
Contracts signed in the DIFC but where neither the parties nor performance was based there would fall under the jurisdiction of Dubai instead. The DIFC jurisdiction has broadened recently reflecting interest in Dubai’s common law system. A new law has been introduced that allows any party to use the English language DIFC Courts to resolve commercial disputes, so long as they agree to do so in writing with a clear and explicit special provision.
Parties conducting business in, or with parties based in, the United Arab Emirates or the wider Gulf Cooperation Council nations can contractually agree to resolve disputes between them in the DIFC Courts without having to establish if it falls within the DIFC’s previously limited jurisdiction.
Parties negotiating contracts should consider inserting clauses agreeing to DIFC Courts’ jurisdiction.
☛ Patrick Bourke is a partner and Adam Vause is of counsel at Norton Rose (Middle East)