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No rush seen to expanded DIFC Courts

Dubai, November 3, 2011

Dubai's move to broaden the jurisdiction of its British common law court gives disputing parties more choice but a Gulf preference for arbitration and concerns about enforcement mean there will be no flood of new cases at the court, lawyers said.

The emirate's ruler this week allowed regional and foreign firms to file disputes with the English-language Dubai International Financial Centre (DIFC) Courts, rather than the Arabic-language civil courts.

DIFC Courts' oversight had been over civil and commercial disputes related to companies in the tax-free business park.

Expanded jurisdiction for the court may be good news for the business community and raise Dubai's profile as a regional legal hub but the issue of enforceability overseas -- and even within the United Arab Emirates -- still remains. 

"The difficulty that international companies would face in enforcement of the judgement (abroad) may be problematic," said Adrian Cole, partner at Simmons & Simmons. "Until the law is propagated, one doesn't know what the details are."     

Previously, companies based outside the free zone had to settle their disputes at civil courts in which proceedings were conducted in Arabic and judges were not trained in common law.

A system based in British common law would allow for more predictability in judgments, based on legal precedence, as well as a choice in venue to air grievances, said Benjamin Newland, partner at King & Spalding.

"Knowing they have a forum right here where a common law judge interprets those agreements will sit better with investors," he added.

It also gives Dubai a chance to position itself as a regional hub for legal activities and fend off a challenge from neighbours such as Qatar where the Qatar Financing Centre Civil and Commercial Court also uses British common law. Doha has become a key market, drawing top global law firms, such as Clifford Chance and Allen & Overy.

Dubai created a special tribunal in 2009, operating under common law, to address foreign investor concerns about fair legal practices after Dubai World's debt crisis. Claims against its troubled property arm Nakheel, in particular, flooded into the tribunal.      
Nakheel was absorbed by the Dubai government this year as part of its $10.9 billion debt restructuring, prompting lawyers to file a flurry of cases with the tribunal ahead of the handover amid fears that future cases would be before the civil courts in Dubai.

""The (civil courts) system outside isn't always as easily adaptable to novel structures or to the varied demands of parties," said King & Spalding's Newland.

Still, lawyers are skeptical that the DIFC Courts will see a flurry of new cases given a preference for privacy in the Gulf. Most companies in the region list arbitration -- an alternative means of resolving disputes privately through a mediator rather than a court -- as the preferred method of dispute resolution in their contracts to avoid the publicity surrounding a court battle.

"You could have arbitration and (solve disputes) in a private forum, or you could go to a court system and the details will become public. That will be a major factor when people weigh where they want to go," said Blanksby.

Foreign companies also prefer arbitration to ensure that both parties are on the same footing if disputes do arise. "People looking at crossborder transactions don't want to give either side a home court advantage by selecting the court in their home country. Instead, they say 'lets have it decided in arbitration in London or Dubai or Paris,'" said Newland. - Reuters




Tags: Dubai | DIFC Courts | civil courts | new rule |

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