10 May 2016

The DIFC’s comity world tour

Dubai International Financial Centre (“DIFC”)

The DIFC is a financial free zone situated in the Emirate of Dubai, United Arab Emirates (the “UAE”). It was established pursuant to an amendment to the UAE Constitution, UAE Federal Decree No. 35 of 2004, UAE Federal Law No. 8 of 2004, Dubai Law No 9 of 2004 and Dubai Law No. 12 of 2004. It has its own legal system based on common law and its own Judicial Authority which runs the DIFC Courts. Under the energetic leadership of Chief Justice Michael Hwang and the DIFC Courts' Registrar and Chief Executive, Mark Beer OBE, the DIFC Courts have set about establishing a unique network of co-operative relationships with courts around the world.

DIFC Courts

The DIFC Courts were established under Dubai Law No. 12 of 2004 (as amended by Dubai Law No. 16 of 2011) and their powers, procedures and functions are set out in DIFC Law No. 10 of 2004.

The DIFC Courts operate a Court of First Instance and a Court of Appeal, and English is the official language.

The DIFC Courts deal exclusively with all cases and claims arising out of the DIFC and its operations, and any other claims in which all parties agree in writing to use the DIFC Courts.

DIFC laws are applicable to all disputes coming before the DIFC Courts, unless the parties choose the laws of another jurisdiction. The jurisdiction of the DIFC Courts extends to the ratification of judgements, issuing orders, and awards. They are also empowered to issue orders and provide directions to third parties in respect of the conduct of any proceedings before the DIFC Courts.

The jurisdiction of the DIFC Courts is limited to civil and commercial matters. Criminal matters cannot be heard by the DIFC Courts, and must be referred to the appropriate authority in the UAE.

Memorandum of Guidance – Enforcement Memorandum

In order to assist investors, businessmen and lawyers, and establish formal links with courts globally, the DIFC Courts have entered into a number of enforcement memorandums – the first being the Memorandum of Guidance, in January 2013, on the procedures for the mutual enforcement of money judgments with the Commercial Court, Queen’s Bench Division, England and Wales. Following which, the DIFC Courts have entered into seven more Memorandums of Guidance (“MoGs”), with: Korea, Kazakhstan, New York State, Singapore, Kenya, New South Wales, Australia and Federal Court of Australia.

The DIFC Courts have further entered into two Memorandums of Understanding (“MoUs”), with Jordan and Singapore.

The MoGs entered into by the DIFC Courts are similar in nature. The key underlying aim is to ensure an understanding between the contracting parties that judgments from one party's courts will be readily enforceable in the courts of the other contracting party.

As stated above, the DIFC Courts are also signatories to two MoUs with Jordan and Singapore. The MoU with Jordan is to promote co-operation and mutual understanding as to fundamental laws and procedures. The MoU with Singapore specifically relates to situations where an issue in dispute before the courts of one party is governed by the laws of the other party. In such cases the parties to the dispute should be directed by the court to have that issue determined by the courts of the party whose governing law it is. Neither of the MoUs discuss enforcement mechanisms.

It is important to note that neither MoGs nor MoUs are legally binding and do not constitute a treaty or legislation. They are purely designed to encourage best practice in the enforcement of judgments between nations.

Similarly, the DIFC Courts have entered into several MoUs with local judicial bodies, such as the UAE Federal Ministry of Justice. These are designed to encourage a mutual recognition of each party’s judicial practices, allowing them to achieve a more efficient and independent judicial system and to assist in the enforcement of DIFC judgments, decisions and orders within the UAE. The DIFC Courts have also agreed various Protocols, which govern particular issues such as jurisdiction and enforcement between the DIFC Courts and the Dubai Courts.

An important feature of each of these memorandums of enforcement is that they have no binding legal effect – then why are the DIFC Courts so proactive and keen to sign them?

First, the purpose of the memorandums is to provide a practical and authoritative guide to enforcement of a judgment.[1] This fits with DIFC Courts’ grand vision and strategy of establishing a user-friendly judicial environment.

Secondly, the memorandums assist in building user confidence and aim to increase usage of the DIFC Courts.

Thirdly, the memorandums provide an international platform for the DIFC Courts to reinforce their presence in other jurisdictions as “a Common Law island in a Civil Law ocean".[2] This is expected to attract more international parties to submit their disputes to the jurisdiction of the DIFC Courts.

It remains to be seen whether the Courts of a foreign jurisdiction with which the UAE has no treaty but with which the DIFC Courts have entered into an MoG, such as Korea, will enforce the judgment, order or decision of the DIFC Courts.

DIFC - China

More recently, the DIFC Courts have been in talks with Shanghai for the purpose of agreeing an MoG. Further, the DIFC has also pledged to support China's “One Belt, One Road” development initiative in realising its growth objectives over the next decade.

Separately, the Academy of Law in the DIFC has entered into an MoU with the East China University of Politics and Law which provides detailed and comprehensive opportunities for cooperation, including staff/student exchanges, joint-seminars and conferences and the sharing of academic resources.

View more articles from the latest edition of Crossing Borders.

[1] This was affirmed in DNB Bank ASA v Gulf Eyadah Corporation and Gulf Navigation Holding PJSC (CA-007-2015).

[2] Address by Michael Hwang, Lawasia Conference, Kuala Lumpa, Malaysia (1 November 2008).

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