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The Courts of the Dubai International Finance Centre — A Common Law island in a Civil Law ocean

The Courts of the Dubai International Finance Centre — A Common Law island in a Civil Law ocean

November 1, 2008

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Address by Michael Hwang 2

Lawasia Conference, Kuala Lumpur, Malaysia
1 November 2008

Mr. Michael Hwang, SC, was appointed as Deputy Chief Justice of the DIFC Courts in April 2005. Between 2000 and 2003, he also served as a Commissioner of the United Nations Compensation Commission and currently acts as Vice Chairman of the International Court of Arbitration of the International Chamber of Commerce. In his home country, Singapore, he was formerly a Judicial Commissioner of the Supreme Court and now is a Senior Counsel of the Singapore Court. He also serves as President of the Law Society of Singapore. He currently practices as both Counsel and Arbitrator. (Email address: Michael@mhwang.com)

What is the Dubai International Financial Centre?

The Dubai International Financial Centre (DIFC) was built on an idea. The idea that an inviting oasis of opportunity could spring forth from the desert sands of Dubai, providing global investors and issuers of capital with a regional capital market set in an international environment they could be comfortable with. From this idea, the DIFC was born.

In September 2004, Federal legislation of the United Arab Emirates (UAE) authorised the seven Emirates to create the legal structures necessary for international financial centres to be established and Dubai was ready with a carefully drafted scheme. The late Ruler of Dubai, Sheikh Maktoum Bin Rashid Al Maktoum, enacted Dubai Law No.9 of 2004 (‘Dubai Law No.9‘) and appointed His Highness Sheikh Mohammed Bin Rashid Al Maktoum, who was then the Crown Prince and is now himself the Ruler of Dubai, to be President of the DIFC. The Dubai Law No.9 provides that the Centre has three constituent bodies – the DIFC authority (DIFCA): the Dubai Financial Services Authority (DFSA); and the Judicial Authority. Today, the DIFC Courts are fully operational. They are ready to handle and resolve all cases that lie within their jurisdiction.

The DIFC development project includes more than 40 major buildings. By 2009, the DIFC will house a resident and working population of more than 40,000 and is more than halfway towards completion. Banks, brokers, fund managers, insurance companies, accountants and, of course, lawyers have already moved into offices there, and the amount of commercial business transacted within the Centre is growing accordingly.

The DIFC is an autonomous financial free zone operating on its own unique three-fold legal system consisting of its own legislation, the laws that parties have freely chosen to apply and, when applicable, the commercial laws of England and Wales.

Legal framework establishing the DIFC Courts

The DIFC Courts are part of the sovereign structure of the Emirate of Dubai within the UAE. Laws enacted by the Ruler of Dubai in accordance with UAE law define its jurisdiction. Specifically, Dubai Law No.12 of 2004 (‘Dubai Law No.12‘) is the governing statute which established the DIFC Judicial Authority (including the two DIFC Courts, the Court of First Instance and the Court of Appeal). The geographical jurisdiction of the DIFC courts is limited to the geographical area of the DIFC (which was about 110 acres and has recently been expanded to include additional plots of land and office space in Dubai (see section VI below).) The DIFC Courts have exclusive jurisdiction over most civil and commercial matters occurring within the DIFC 3. This means that, where DIFC Courts have jurisdiction, such jurisdiction will exclude the jurisdiction of the Dubai Courts. Parties are free to agree to submit to the jurisdiction of any other court under Article 5(2) of Dubai Law No 12 of 2004 except for objections filed against decisions made by the Centre’s Bodies, which are subject to objection in accordance with the Centre’s Laws and Regulations (see Section 0 below).

The criminal jurisdiction of the Dubai Courts remains effective throughout the Centre, as it does in the whole of Dubai. The DIFC Courts have no jurisdiction over criminal matters and all criminal matters are referred to the Dubai Police. The DIFC Courts also have no jurisdiction over matrimonial matters.

DIFC Law No.10 of 2004 is the statute enacted by the DIFC itself to implement the provisions of Dubai Law No.12 and provides further detail as to how the DIFC courts are to operate. (‘DIFC Law No.10′).

DIFC Law No.10 provides for the independent administration of justice in the DIFC in accordance with Dubai Laws 9 of 2004 and 12 of 2004. DIFC Law No.10 also allows for the appointment of Judges to the DIFC Courts and vests the management of the administrative affairs of the DIFC Courts with the Chief Justice of the Courts. It provides that the DIFC Courts will receive funding from the Government of Dubai for the management of the DIFC Courts’ administrative affairs. In addition, Law No.10 sets out the practices and procedures that the Court will apply (on issues such as judgments, orders, costs and evidence).

How do the DIFC Courts operate?

The objectives of the DIFC Courts are:

(1) to handle and determine all cases efficiently and fairly;
(2) to establish and maintain a reputation for independence, integrity and impartiality, and;
(3) to confirm the status of the DIFC Judicial Authority as an integral part of the legal systems of Dubai and of the UAE.

DIFC Courts’ Judgments can be enforced as Judgments of the Dubai Courts, both within Dubai and elsewhere in the UAE, and also globally as permitted by international law and under treaties signed by the UAE.

The DIFC is a Common Law and English language jurisdiction within Dubai whose courts system is largely modeled on the English Commercial Court. Anyone familiar with the organisation and procedures of that court, and English civil procedure generally, will quickly understand the workings and governing principles of the DIFC Courts and the philosophy of its Judges. The DIFC Courts’ procedure is outlined in the Rules of the DIFC Courts which came into effect on 8 February 2008.

The Judges of the DIFC Courts are not resident in the DIFC but hail from all around the common law world. This would enable the DIFC Courts to be staffed by judicial talent with international commercial law experience. Currently, eight Judges sit in the DIFC Courts, the Chief Justice Sir Anthony Evans, myself, Sir John Chadwick, Sir Anthony Colman, Tan Sri Dato Seri Siti Norma Yakoob, Mr David Williams QC 4, with two Emirati Judges, H.E. Ali Al Madhani and H.E. Omar Al Muhairi, who also preside over the DIFC Courts’ Small Claims Tribunal.

As from 2009, the DIFC Courts will be sitting monthly, with a Court of First Instance and a Court of Appeal. The decision of the Court of Appeal is final. All proceedings are conducted in English. Urgent hearings can take place by video conference, without the need for the judge to be physically in the DIFC. Other daily procedural and administrative matters are handled by the Registrar who, like the two Emirati Judges, is resident in the DIFC.

In the Court of First Instance, each Judge sits alone and decides civil or commercial cases and disputes:

(a) involving the DIFC, any of its bodies or any of its establishments;
(b) related to a contract that has been executed or a transaction that has been carried out in the DIFC or an incident that has occurred in the DIFC;
(c) objections filed against decisions made by the DIFC’s bodies, which are subject to objection in accordance with the DIFC’s laws and regulations; and
(d) any application over which the Courts have jurisdiction in accordance with the DIFC’s laws and regulations.

The Court of Appeal comprises three Judges, and hears appeals filed against Judgments and Orders made by the Court of First Instance. It can also decide on the interpretation of any article of the DIFC’s laws upon the request of:

(a) the DIFC Courts in a claim that the Courts adjudicate;
(b) any of the DIFC’s bodies; or
(c) any of the DIFC’s Establishments5 provided that the establishment obtains leave of the Chief Justice in this regard.

Such interpretation made by the DIFC Court of Appeal shall have the power of law.

Legal Practitioners in the DIFC

Regulations are in the process of being drawn up to establish a Bar accredited to the DIFC Courts. In the meanwhile, in order to:

(i) conduct litigation in the Court; or
(ii) exercise rights of audience before the Court, it is necessary to apply to the Registrar of the Courts to be entered on the relevant Register. The new Registrar of the DIFC Courts is Mr Mark Beer, who succeeded Ms Sunita Johar in June 2008. The Deputy Registrar is Ms Amna Sultan Al Owais, who is also the Registrar of the Small Claims Tribunal.

Only qualified lawyers possessing the right to conduct litigation and/or a right of audience before the superior courts of the jurisdiction in which they practice civil and commercial law are currently eligible for accreditation. Every applicant must possess sufficient command of the English language in order to conduct proceedings before the Court. So even though the DIFC laws are based on common law, civil law lawyers are welcome to appear in DIFC Courts. As of August 2008, the Register of Practitioners lists 225 lawyers and 21 law firms.

Developments in the DIFC Courts

Small Claims Tribunal

The Courts have established a Small Claims Tribunal in October 2007 to deal with all claims under AED 100,000. The Small Claims Tribunal is similar to the one in Singapore, where parties cannot be represented by legal representatives and proceedings are conducted under simplified rules to enable claims to be resolved expeditiously. This ensures a feasible right of recourse for individuals and small businesses when it is uneconomic for them to proceed under the normal court procedure having regard to the quantum of the dispute. The Small Claims Tribunal has heard a total of 59 cases from inception to September 18, 2008 (30 in 2007 and the remainder in 2008) and all cases were successfully resolved by agreement between parties after what was essentially a mediation procedure before the Small Claims Tribunal Judge. The Small Claims Tribunal is a landmark, being the only operating small claims tribunal in the region.

Joint Committee between the DIFC and Dubai Courts

A Joint Committee is being established between the DIFC Courts and the Dubai Courts. This Joint Committee will meet regularly to promote good relations between the two Courts and to foster co-operation between them.

The Joint Committee will consist of the two Executive Judges of the DlFC Courts (H.E. Omar Al Muhairi and H.E. Ali Al Madhani) together with the DIFC Courts’ Registrar and Deputy Registrar and two Dubai Courts’ Judges with two other representatives of the Dubai Courts to be appointed by the Director General of the Dubai Courts. The Joint Committee’s proceedings will take place and will be recorded in Arabic and English. The Joint Committee will report to the Director General of the Dubai Courts and to the Chief Justice of the DIFC Courts, Sir Anthony Evans

Jurisdiction

The Courts of the DIFC is intended to have exclusive jurisdiction relative to the Dubai Courts. Exclusive jurisdiction is established under Article 5 of the Law of the Judicial Authority of the DIFC, Dubai Law No 12 of 2004

“Article 5
The Jurisdiction of the Courts
(A) The Court of First Instance:

(1) Without prejudice to paragraph 2 of this Article, the Court of First Instance shall have the exclusive jurisdiction over:

(a) civil or commercial cases and disputes involving the Centre or any of the Centre’s Bodies or any of the Centre’s Establishments.
(b) civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre.
(c) objections filed against decisions made by the Centre’s Bodies, which are subject to objection in accordance with the Centre’s Laws and Regulations.
(d) any application over which the Courts have jurisdiction in accordance with the Centre’s Laws and Regulations;
(2) Parties may agree to submit to the jurisdiction of any other court in respect of the matters listed under paragraphs (a), (b) and (d) of this Article.”

Article 23 of Dubai Law No. 3 of 1992 establishing the Courts in the Emirates of Dubai reconciles the role of the Dubai Courts with the exclusive jurisdiction ‘carved out’ for the DIFC Courts above:

“The Court of First Instance is a Civil or Sharia Court with jurisdiction over all actions and matters except where this or any other law has granted exclusive jurisdiction to a special Tribunal or Judicial Committee.

Article 5 of Dubai Law No.12 of 2004 serves the purpose of both circumscribing subject matter jurisdiction, personal and territorial jurisdiction. It is likely to be the determinative clause where the jurisdiction of the Court is concerned. The Court cannot have personal jurisdiction over any defendant not falling under its subject matter jurisdiction.

Very recently on 16 June 2008, the Prime Minister of the United Arab Emirates has actually extended the geographical jurisdiction of the DIFC, with the result that it is now slightly larger than its original 110 acres. More significantly, Decision No.3 of 2008 issued by the Prime Minister on the variation of the location and area of the Dubai International Financial Centre states:

“The plots of land specified in Regulation No. 1 and the sites of the companies and establishments specified in Regulation No. 2 shall be annexed to the administrative jurisdiction and geographic locations of the Centre.”

Regulation No.2 contained the office addresses of 210 DIFC companies and the area of office space they occupied. All of these companies had their offices and PO Boxes outside of the DIFC in various parts of Dubai such as the Emirates Towers and Dubai World Trade Centre.

To avoid jurisdictional disputes, lawyers advising parties who wish the DIFC Courts to have jurisdiction should pay special attention to the drafting of contracts and the execution of their transactions to ensure that any dispute will fall within the jurisdiction of the DIFC Courts. This can be done by making sure that:

(1) the contracting party is a Centre’s Establishment under Article 5(A) (1)(a);
(2) the contract is executed within the geographical confines of the DIFC (this requirement seems to be now made easier with the recent expansion of DIFC jurisdiction); or
(3) a part of the transaction was “concluded” within the DIFC (despite the lack of clarity as to what ‘concluded’, ‘part’ or ‘executed’ means)

Currently, there have also been suggestions that parties should be able to voluntarily submit to the jurisdiction of the DIFC Courts even when Article 5(A) is not satisfied, preserving the spirit of Article 13 of the DIFC Law Relating the Application of DIFC Laws (DIFC Law No. 0 of 2005) which states:

“Effectiveness of express submission to jurisdiction or arbitration

(1) A submission to the courts of a jurisdiction in a contract shall be effective” 6
However, it is likely Article 5 of Dubai Law No.12 of 2004 will still remain the operative provision as jurisdiction is conferred upon the DIFC Courts by Dubai law. If so, the DIFC Courts will not be able to extend their own jurisdiction relying only on the DIFC Law. It is hoped that the position will be clarified by amending legislation, which would be preferable to case law which may otherwise be necessary.

There have also been questions raised as to how the DIFC Courts will deal with any conflict of jurisdiction issue between itself, the Dubai Courts and any other emirate Court. Given that the DIFC Courts’ jurisdiction is expressed to be exclusive under Article 5 of Dubai Law No.12 of 2004, it remains to be seen if other Courts in the region would stay any proceedings brought before it while awaiting the DIFC Courts’ decision on the jurisdiction issue, or if the DIFC Courts would voluntarily stay their exclusive jurisdiction in favour of another Court.

In any jurisdiction, there are bound to be contracts or transactions within the physical jurisdiction that do not have anything else to do with that jurisdiction and conversely, contracts or transactions outside that jurisdiction which may have everything to do with that jurisdiction. Such facts would often cause parties to argue that two different Courts have competence over the subject matter. Ultimately, which Court eventually hears the case on the merits might depend on the scope of their jurisdiction, doctrine of forum non conveniens (or any equivalent doctrine), as well as the particular facts of each case.

Applicable law

Parties must note Article 8 of the Law on the Application of Civil and Commercial Laws in the DIFC (‘DIFC Law No.3 of 2004’), which provides for a certain Order in which the Court or an Arbitrator will determine the law applicable.

Article 8 states:

“8. Application

(1) Since by virtue of Article 3 of Federal Law No.8 of 2004, DIFC Law is able to apply in the DIFC notwithstanding any Federal Law on civil or commercial matters, the rights and liabilities between persons in any civil or commercial matter are to be determined according to the laws for the time being in force in the Jurisdiction chosen in accordance with paragraph (2).

(2) The relevant jurisdiction is to be the one first ascertained under the following paragraphs:

(a) so far as there is a regulatory content, the DIFC Law or any other law in force in the DIFC; failing which,
(b) the law of any Jurisdiction other than that of the DIFC expressly chosen by any DIFC Law; failing which,
(c) the laws of a Jurisdiction as agreed between all the relevant persons concerned in the matter; failing which,
(d) the laws of any Jurisdiction which appears to the Court or Arbitrator to be the one most closely related to the facts of and the persons concerned in the matter; failing which,
(e) the laws of England and Wales.”

Specific conflict of law rules such as rules to determine the applicable law of contracts, submission to jurisdiction in contracts and applicable laws to property are set out in the Law Relating to the Application of DIFC Laws (Amended and Restated) DIFC Law No.10 of 2005. (‘DIFC Law No.10 of 2005’). DIFC Law No.10 of 2005 makes special provision for the determination of governing law for securities (law of issuer’s jurisdiction), investment entitlements (law of investment intermediary) and security certificates (law of jurisdiction in which a security certificate is located at the time of delivery). Trusts are also expressly recognised under Article 17 of the DIFC Law No.10 of 2005.

Article 8(2)(e) of DIFC Law No.3 of 2004 provides the DIFC Courts with a ready body of persuasive authority, which supplements the DIFC law. For example, at an earlier stage of the DIFC’s development in late 2006, I had referred to English Company law on shareholder meetings when I was sitting as a Judge of First Instance in Dutch Equity Partners Limited v Daman Real Estate Capital Partners Limited CFI 1/2006. (‘Dutch Equity‘) At paragraph 86-88 of the judgment7 in that case, I had stated:

“86. The 2004 Companies Law was the applicable law in the DIFC until the 2006 Companies Law came into force on 30 April 2006.

87. As the statutory Companies Law in the DIFC is clearly based on common law principles, the common law jurisprudence of England and other Commonwealth countries is persuasive authority on principles of company law and the interpretation of similar statutory provisions. Further, there is express reference to the application of the laws of England and Wales under Article 8(2)(e) of the Law on the Application of Civil and Commercial Laws in the DIFC (DIFC Law No. 3 of 2004) (“DIFC Law No.3″).

88. Article 8(2) of DIFC Law No. 3 provides a framework for ascertaining the applicable laws in each case. Since neither the 2004 nor the 2006 Companies Laws of the DIFC provide an exhaustive code of company law, the default position under Article 8(2)(e) of DIFC Law No. 3 is that the laws of England and Wales (particularly the common law) will apply to supplement the provisions of the DIFC Statutes.”

Dutch Equity was an appropriate case where the court could rely on Article 8(2)(e) to take advantage of the already developed body of company law cases in various common law jurisdictions because the DIFC Companies Law is based on common law principles.

However, Article 8(2)(e) may not supplement DIFC law in all cases. The case of Forsyth Partners Group Holdings Limited and in the matter of DIFC Insolvency Law No. 7 of 2004 (‘Forsyth’) highlights the question of applicable law in an insolvency context. In that case, the Liquidators of certain DIFC Companies had applied on 20 November 2007 to the DIFC Courts seeking directions as to which debts of the companies should be treated as preferential debts for the purposes of Article 67 of the DIFC Insolvency Law No.7 of 2004 (‘DIFC Insolvency Law’). At that time, there had not yet been any pronouncement from the DIFCA as to what types of debts are preferential. Parties then submitted that UAE or English law should apply in default. However, I held that the legislature of the DIFC intended to have its own law regarding preferential debts and it would not be appropriate to apply either UAE law (which had Islamic law considerations) or English law on preferential debts as there are factors in the latter jurisdiction that are influenced by the priorities and social conditions in England and Wales that do not necessarily apply in the DIFC. As a result, in the absence of any promulgated list of preferential debts by the DIFCA, there are presently no preferential debts in any insolvencies carried on under the DIFC Insolvency Law in the DIFC. 8

There is no doubt that, as the DIFC matures as a jurisdiction, there would be less problems resulting from a lack of legislation. However, Forsyth demonstrates that, even if there is a ‘default’ applicable law of England and Wales, this would not necessarily be applied in all situations where there is an absence of other applicable laws.

Arbitration

Alternative dispute resolution is very much encouraged in the DIFC and a new revised DIFC Arbitration Law has replaced the DIFC Law No.8 of 2004. The DIFC-LCIA Arbitration Centre, which will provide mediation and arbitration services, has also been launched recently.

By a Federal decree dated 13 June 2006 it was announced that the UAE would be acceding to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. Upon the Convention coming into force, the DIFC Court of First Instance will be bound to recognise and enforce a foreign arbitral award upon the terms set out in the Convention. In the meantime, the DIFC Court Law (DIFC Law No.10 of 2004) gives the Court of First Instance discretion to ratify and enforce foreign arbitral awards within the DIFC.

The new DIFC Arbitration Law (Law No.1 of 2008) (‘DIFC Arbitration Law’) applies where parties choose the DIFC as a Seat. (Article 7 of the DIFC Arbitration Law)

Article 7 reads:

“(1) Parts 1 to 4 and the Schedule of this Law shall all apply where the Seat of the Arbitration is the DIFC.
(2) Articles 14, 15, Part 4 and the Schedule of this Law shall all apply where the Seat is one other than the DIFC”

Article 27(1) which is located in Part 3 of the DIFC Arbitration Law states:

“(1) The parties are free to agree on the Seat of the Arbitration. In the absence of such agreement, where any dispute is governed by DIFC law, the Seat of the Arbitration shall be the DIFC.”

Accordingly, parties are free to opt into the DIFC arbitration regime by specifying the DIFC as the seat. The advantages of having an arbitration in the DIFC would include:

(1) having the DIFC Courts as the curial Court. The DIFC Courts has wide powers to assist and facilitate arbitration, e.g. powers to grant interim measures, to assist in taking of evidence upon request etc.
(2) having the DIFC Arbitration Law, which is based on the UNCITRAL Model Law, apply to the arbitration
(3) for international arbitrations, having an award issued within the DIFC, a jurisdiction within the UAE, will mean that parties can take advantage of the New York Convention in enforcing the award
(4) having a option to choose the DIFC-LCIA Arbitration Centre, which would be well-placed to handle arbitrations under the DIFC arbitration regime.

There will also be certain sections (Articles 14, 15, Part 4 and the Schedule of the DIFC Arbitration Law) dealing with confidentiality of arbitration, interim measures in aid of arbitration, recognition and enforcement of awards are proposed to apply where the seat is not the DIFC.

Rules of Court regarding arbitration proceedings are currently being developed and practitioners should look out for them in due course.

Overview of various DIFC laws

In any case brought before the DIFC Courts or for arbitration in the DIFC, one must take note of the Law Relating to the Application of DIFC Laws DIFC Law No.10 of 2005 (Amended and Restated)

The various DIFC statutes draw inspiration from the laws of other jurisdictions, both civil and commercial. To that extent, as a new jurisdiction, the DIFC has the benefit of adopting tried-and-tested systems from other jurisdictions. DIFC statutes are drafted in simple, plain English. Common law lawyers will find that certain DIFC statutes such as the Companies Law (DIFC Law No.3 of 2006) (‘DIFC Companies Law’) and DIFC Insolvency Law are shorter than the common law counterparts from which they drew inspiration. In that respect, there will be considerable room for interpretation by the Judges of the DIFC Courts and the relevant authorities who issue regulations under the statute.

1. Corporate vehicles and laws

There are a number of corporate vehicles available in the DIFC, including:

(1) Companies (governed by the DIFC Companies Law);
(2) Limited Partnerships (governed by (DIFC Limited Partnership Law (‘DIFC Limited Law No.4 of 2006 (‘DIFC Partnership Law’));
(3) General Partnership (governed by DIFC General Partnership Law, Law No.11 of 2004) (‘DIFC General Partnership Law’)
(4) Limited Liability Partnership (governed by DIFC Limited Liability Partnership Law, Law No.5 of 2004)

The DIFC Companies Law is based loosely on the 1985 English Companies Act and common law lawyers in this region would find it familiar. The DIFC Insolvency Law is also based on the English Insolvency Act.

2. Law of Obligations (DIFC Law No. 5 of 2005) (‘Law of Obligations’)

Statutes such as the Law of Obligations cover a wide range of obligations. Obligations covered include negligence, occupiers’ liability, misrepresentation, deceit, economic torts, wrongful interference with property, trespass to land, nuisance, obligations relating to insurance, obligations relating to bailment, negotiable instruments, obligations relating to banking, fiduciary duties, etc.

The Law of Obligations is an example of a fusion between the civil law and the common law. It is drafted like a civil law code in the sense that it sets out certain statements that state the general principles with respect to the various types of obligations and does not purport to be exhaustive. However, the Law of Obligations constructs a framework that greatly resembles the modern day position in common law jurisdictions (taking into account both statute and case law) without the baggage of the distinction between common law and equity. Looking at the Act, one would observe that each general class of obligation listed in the paragraph above is dealt with in the Act in a manner that reads like a summary of the law in that particular area.

For example, with regard to misrepresentation, Article 29(1)(a) of The Law of Obligations provides that a misrepresentation must be a representation of fact. A statement of opinion can only be a misrepresentation if it is accompanied by a further incorrect express or implied representation such that the representee has reasonable grounds for believing that it is true. This is close to the English common law position on misrepresentation. However, unlike the English Misrepresentation Act and common law, there is no difference in the remedies available for various degrees of misrepresentation.

3. DIFC Contract Law (DIFC Law No. 6 of 2004) (‘DIFC Contract Law)

The DIFC Contract Law expressly provides for the rights of third parties and establishes rules for offer, acceptance, performance, assignment, agency and damages as well as for interpretation of contract. It expressly deals with common practical contractual issues such as battle of forms, conflict between standard and non-standard terms, substituted contract, when interest on damages will accrue and currency in which to assess damages. The DIFC Contract Law must be read together with The Implied Terms in Contracts and Unfair Terms Law (DIFC Law No. 6 of 2005), which exists as a separate statute and is akin to an amalgamation of the English Sale of Goods Act and the Unfair Contract Terms Act.

The DIFC Contract Law reads like a codification of the key concepts in the various areas of law, many of which would be familiar to the common lawyer. However, one should not be lulled into a sense of complacency as the DIFC Contract Law does not simply codify the English common law position.

5A. Example on the Law of Assignment
One example is the law on assignment (Part 9 of the DIFC Contract Law). The drafters of the Contract Law ostensibly having the benefit of the evolution of English case law on assignments, Part 9 of the DIFC Contract Law provides for a distinction between how rights and obligations can be assigned and delegated respectively, but is free of the distinction between equitable and statutory assignments present in English law.

Under Article 94 of the DIFC Contract Law, contractual obligations can be delegated, unless delegation is precluded by contract or the obligee has a substantial interest in having the obligor perform or control the acts promised. This is a much simpler approach compared to the ‘conditional benefit’ doctrine in English common law (i.e. that a duty cannot be assigned but a conditional benefit can be assigned) Article 96 goes a step further to articulate the consequence of such a doctrine, stating:

“Interpretation of words of assignment; effect of acceptance of assignment

(1) Unless the language or the circumstances indicate the contrary, as in an assignment for security, an assignment of a contract or of all rights under a contract or an assignment in similar general terms includes a delegation of the unperformed duties of the assignor under the contract.
(2) Unless the language or the circumstances indicate the contrary, the acceptance by an assignee of such an assignment operates as a promise to the assignor to perform the assignor’s unperformed obligations, and the obligor of the assigned rights is an intended beneficiary of the promise.”

The provision of such a default position providing for a direct promise from the assignee to assignor, with the obligor as a third party beneficiary, would provide a simple contractual mechanism by which the obligations of the assignee can be enforced by both the obligor and assignor. This is arguably a cleaner concept than having to fall back on the law of restitution and unjust enrichment in order for an obligor to recover any benefits paid to a non-performing assignee.

The prohibition in English common law against the assignment for future property or rights is adopted under Article 93 and Article 97 expressly states that a contract to make a future assignment of a right is not an assignment.

From the above provisions, it is clear that the legislators have diligently applied their mind to crafting the law on assignment and have not blindly copied the English common law position. In a sense, this is true of many of the DIFC statutes, where many provisions are codifications of the English common law position but others are actually improvements upon the existing doctrines. Unlike many Commonwealth jurisdictions which have inherited wholesale from the colonial period both the wisdom and the complications of English common law, the DIFC is able to both reap both the benefits of common law experience and the benefit of a jurisdiction that is starting from a ‘clean slate’, escaping much of the baggage of history.

4. Law of Damages and Remedies (DIFC Law No. 7 of 2005) (‘Law of Damages and Remedies)

Interestingly, there is a Law of Damages and Remedies dealing with damages in general as well as under the Law of Contract and the Law of Obligations. A right to restitution would also be available where the remedy is expressly provided for in the DIFC Contract Law or where there has been unjust enrichment and no change in position which would render the restitution unjust. Damages in lieu of restitution are also available. The Law of Damages and Remedies also provides for the DIFC Courts’ power to grant interim remedies, declarations, injunctions, damages as an additional remedy, specific performance and accounts. Enforcement powers of the Court include attachment of future assets, execution, charging orders, appointment of a receiver and examination of a judgment debtor.

5. Laws dealing with property

Real property is governed by the Real Property Law (DIFC Law No. 4 of 2007) (‘Real Property Law’) and the Strata Title Law (DIFC Law No 5 of 2007). The Real Property Law establishes a land title registration system similar to the Torrens system and adverse possession is not recognised. The common law concept of joint tenancy and tenants in common is adopted. Leases longer than one year must be registered.

The Strata Title Law provides for sites like condominiums and office buildings to be managed by a ‘body corporate’ similar to a Management Corporation in Singapore or a Body Corporate in Australia. It also provides for the regulation of staged development schemes where variation of the scheme has to be approved by the owners and prospective owners. The DIFC Authority will have power to dispense with the consent of a particular owner under certain circumstances. There is also a collective sale regime for such sites, similar to the en bloc regime in Singapore, where the sale must be approved by at least 90% of the members present and entitled to vote at the meeting.

The Personal Property Law (DIFC Law No. 9 of 2005) spells out rules regarding the transfer of property. Specific performance is expressly available as a remedy for the breach of an obligation to deliver property. Befitting its status as a financial centre, there is a section dealing entirely with investment transactions, transfer of certificated and uncertificated investments and investment entitlements. There is also a Law of Security (DIFC Law No.8 of 2005) which spells out the nature of security interests and enforcement of security agreements. The Law of Security provides for details such as perfection of security interests, priorities among conflicting security interests and the establishment of a Security Registry, with which registration of security interests is necessary in order to perfect a security interest.

6. Data Protection Law (DIFC Law No. 1 of 2007) (‘Data Protection Law’)

Lawyers in this region would find the DIFC Data Protection Law interesting. The Data Protection Law governs the processing of personal data, defined as any information relating to an Identifiable Natural Person. There is a prohibition against the processing of Sensitive Personal Data (except when there is consent or when such data falls within a list of limited exceptions in favour of necessity or public interest). Sensitive Personal Data is defined to be personal data revealing directly or indirectly racial or ethnic origin, communal origin, political affiliations or opinions, religious or philosophical beliefs, criminal record, trade-union membership and health or sex life.

7. Employment Law (DIFC Law No. 4 of 2005) (‘Employment Law’)

In relation to employment, the DIFC Employment Law is tailored to the needs of a workforce in an Islamic country, with provisions for reduced hours during Ramadan (no more than 6 hours a day), special leave to perform the Haj for one time during employment. There is a prohibition on receiving payment from the employee for hiring him/her or providing information about employment.

Conclusion

The DIFC Courts are still in its early days. From January 2008 to 31 August 2008, the Court of First Instance has issued 29 Orders and has handled 26 Applications. The Court of Appeal has heard at least one interlocutory appeal. As the development of the DIFC approaches completion and the level of commercial activity increases, the workload of the Courts will also increase.

The structure of the DIFC and the DIFC Courts means that parties, counsel and Judges may all come from different jurisdictions and that, by itself, lends an international character to many proceedings before the DIFC Courts. Against this diversity of backgrounds, will be the uniformity of the common law. We will look to the experience of the other common law countries, with the benefit of our multinational bench of Judges, and will arrive at solutions which we believe are best for DIFC.

Michael Hwang SC
Deputy Chief Justice