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Legal developments

DIFC Courts confirm broad jurisdiction

The DIFC Court of Appeal has recently confirmed the broad scope of the DIFC Courts' jurisdiction in the case of Investment Group Private Ltd (IGPL) v SCB.1

Forum non conveniens doctrine not applicable between UAE courts

IGPL challenged the jurisdiction of the DIFC Courts to determine a claim brought against it by SCB on the grounds of forum non conveniens (which allows a court to decide whether to accept jurisdiction based on whether there is another more appropriate forum).

The DIFC Court of Appeal confirmed that the forum non conveniens doctrine has no application to competing claims to jurisdiction of courts within the UAE.2 The court explained that the Allianz case does not mean "the DIFC Courts can, with abandon, exercise exorbitant jurisdiction" since the UAE Constitution provides for the Union Supreme Court to resolve conflicting judgments on jurisdiction and that the forum non conveniens doctrine still applies in respect of the courts of another state (ie outside the UAE).3

Scope of the DIFC Courts' jurisdiction captures entities with branches in the DIFC

The DIFC Court of Appeal confirmed that the reference to "Licensed DIFC Establishment" in Article 5A(1) of the Judicial Authority Law provides the DIFC Courts with jurisdiction over claims where any party to an action is an entity that has a licensed branch in the DIFC (applying Corinth Pipework v Barclays Bank4) regardless of whether the DIFC branch is involved in the dispute.

Meaning of "courts of Dubai" and "courts of the UAE"

The DIFC Court of Appeal held that the use of these phrases in dispute resolution clauses does not exclude the jurisdiction of the DIFC Courts in circumstances where a gateway to the DIFC Courts' jurisdiction otherwise applies.

Two previous decisions of the DIFC Courts,5 which held that references to "Courts of Dubai" and "Emirate of Dubai" did not include a reference to the DIFC Courts, were distinguished by the DIFC Court of Appeal. The DIFC Court of Appeal held that the decisions in Hardt and Dhir were limited to their specific facts.

Comment

Following this decision, any entity that has a licensed branch in the DIFC, or has satisfied another jurisdictional gateway under the Judicial Authority Law, will need to consider whether to expressly "opt-out" of the jurisdiction of the DIFC Courts if it wishes to refer disputes to courts outside of the DIFC.

Abu Dhabi Global Market update

The Abu Dhabi Global Market (ADGM) was established as a financial free zone pursuant to Abu Dhabi Law No 4 of 2013 and Federal Decree No 15 of 2013.

The ADGM Courts are not yet operational, but they will be composed of the Court of First Instance and Court of Appeal and they will operate independently of the Abu Dhabi Courts and the UAE Federal Courts.

Direct application of English law in the ADGM

A notable recent development in the ADGM is the direct application of English common law and certain English statutes pursuant to the Application of English Law Regulations 2015 (English Law Regulations).

The application of English law within the ADGM is not wholesale since the English Law Regulations make clear that the application of English law is subject to future amendments by Abu Dhabi laws and ADGM enactments. This is a significant qualification and it remains to be seen how it will work in practice.

The direct application of English law in the ADGM is a significant difference to how laws of the DIFC have been developed. Although the laws of the DIFC are largely based on English law and decisions of the English courts are often accepted as persuasive authority by the DIFC Courts, English law has not been applied directly in the DIFC.

Update on draft ADGM laws

The ADGM legal system remains under development. Public consultations on the draft ADGM Courts' Regulations and Arbitration Regulations have recently closed. Key points from these draft regulations are as follows:

  • the jurisdiction of the ADGM Courts is intended to be an elective regime – like the "opt-in" jurisdiction of the DIFC Courts, parties should be able to choose to submit to the jurisdiction of the ADGM Courts irrespective of where they are located or were established;
  • express provisions will cover: (a) the registration and enforcement of foreign court judgments in the ADGM Courts; and (b) the reciprocal recognition and enforcement of judgments between ADGM and foreign jurisdictions; and
  • the draft Arbitration Regulations are based on the UNCITRAL Model Law.

ICSID Convention enters into force in Iraq

Iraq signed the ICSID Convention on 17 November 2015 and this became effective on 17 December 2015.

The immediate impact of this development is limited, at present, since the only Bilateral Investment Treaty (BIT) that Iraq has signed which refers to the ICSID Convention is the Iraq- Japan BIT (which has been in force since 2014). Until Iraq signs further BITs that refer to the ICSID Convention, foreign investors contemplating investments in Iraq (particularly those involving the Iraqi state and Iraqi state entities) should consider whether their investments can be made in a way that benefits from the investment protections available under the Iraq-Japan BIT.

Footnotes

1. (CA 004/2015).
2. The issue was considered previously in Allianz v Al Ain Ahlia (CFI012/2012).
3. Paragraph 195.
4. (CA002/2011).
5. Hardt and Hardt Trading FZE v Damac (DIFC) Co Ltd et al (CFI 36/2009) and Dhir v Waterfront Property Investment Ltd (CFI 011/2009).

 

Legal and Regulatory Risk Note
Middle East