New forum for resolving UAE contractor rows takes shape

The new court structure within the DIFC will offer an alternative forum to contractors looking to have their disputes resolved — but will everyone in the existing judiciary be happy about the news? Sean Cronin reports on the arrival of a new construction sheriff in town.

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By  Sean Cronin Published  April 22, 2006

The creation of a new court within the Dubai International Financial Center (DIFC) has got the UAE legal fraternity in a state. Or at least it has for those peacemakers of the industry known as arbitrators. For the last two years, the hot topic of the sector has been the likely adoption of the ‘New York Convention’ in the UAE, which would allow for the local enforcement of foreign arbitration decisions. It is a goal that the Dubai International Arbitration Center (DIAC) has been pushing for since its creation in 2004. Now the prospect of the fledgling DIFC emerging as an alternative forum for settling construction industry disputes has taken over as the main topic of discussion in the profession. Although the new court is already up and running, its arbitration powers are still in draft form, and yet to be published fully. But the creation of the new court system at DIFC will introduce an alternative forum for dispute resolution in the UAE. “The word is that a deal has been struck whereby the Dubai courts will automatically enforce DIFC arbitration awards,” said Michael Grose, construction and projects partner at Clyde & Co’s Dubai office and author of ‘Construction Contracts and Disputes in the United Arab Emirates’. He added: “If this means that DIFC awards, unlike other awards, do not have to be ratified by the local courts before being enforced, this will be a big selling point for DIFC arbitration.” Although still in draft form, it is understood that the arbitration law of the DIFC court will mean that a decision made in the new court is enforceable in the wider Dubai court system, according to Dean Ferris, chief legal officer at DIFC. He said: “That has been agreed and it would be enforceable. A DIFC court is a Dubai court, even though it’s designated DIFC so it belongs to the same system of courts for all purposes, and they of course will honour the judgements of their sister courts. The other courts outside of Dubai are also bound to do the same thing under the constitutional law.” It is this requirement that could cause conflict with the established Dubai courts. Like the existing UAE judiciary, the DIAC may also be a little wary of having its role usurped by this potential rival. Dr Hussam Al-Talhuni, director of the DIAC, said the new DIFC court could create tension with the existing UAE court system. He said: “There may be some dissatisfaction among national judges and it may be difficult to get decisions enforced.” However, Ferris believes that such opposition is unlikely: “The judges may have initially been confused as to exactly what the scope of the court was and its jurisdictional basis, but all that has been clarified with the courts law and the various visits they’ve had with the Chief Justice over the last year. “All this has been clarified, so I think it was more of an issue of information and awareness as opposed to resentment or a sense of threat.” According to Dr Al-Talhuni, DIAC was also recently approached by the government with an offer to increase its powers by enforcing arbitral awards directly — an offer which was refused. He said: “The executive office asked DIAC if we wished to enforce arbitral awards directly, but I refused, as this does not match the current international standard.” Managing the interface between DIFC court and its counterparts elsewhere within the emirates, is likely to be the major challenge for the new DIFC legal system as it beds in over the next year. It has also got local lawyers speculating over the crucial issue of ‘jurisdictions’. “One interesting question is whether you could invoke the jurisdiction of the DIFC, for example, by simply signing a contract or holding an execution meeting in a cafe within the DIFC,” said Grose. However such a ‘tenuous’ link may not be enough to satisfy the requirements of the new arbitration code, according to Ferris. He said: “The way the arbitration law is written, any two parties can consensually agree to have their arbitration seated in the DIFC. “But the Chief Justice has made it clear that he feels that the true jurisdiction of the DIFC Court, when it comes to enforcing the award, would have to be based on a real connection to the centre, as opposed to just two parties from anywhere from being here — so typically it would either have to involve a DIFC party or a contract from within the DIFC, or an event that occurred within the DIFC,” he added. The arbitration processes of the new court are being finalised and are due to be published in the next three months.

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