x Abu Dhabi, UAEFriday 28 July 2017

Dubai mulls extending power of DIFC courts

Government review is under way with effort to allow commercial disputes from outside of the financial centre to be heard.

DUBAI // The Dubai International Financial Centre (DIFC) Courts may have their jurisdiction expanded to include other commercial cases in Dubai under plans being reviewed by the Government, a top judge says. Sir Anthony Evans, the Chief Justice of the DIFC Courts, said efforts were under way to allow the court to handle specific types of commercial cases involving banking, shipping and financial services that took place outside the DIFC zone.

"In the medium term, there is a possibility that the court's jurisdiction might be expanded," Sir Anthony said. "As a specialist court, we may be of use outside the DIFC." The move would be a radical change to the justice system in Dubai, which has been at the centre of the country's economic slowdown in the past year. Many of the disputes that have arisen from this time are playing out in the local courts, while the DIFC Courts have had the number of cases before them rise to 36 last year from nine in 2008.

Sir Anthony said the discussions over expanding the jurisdiction were still preliminary, but they could also include making the DIFC Courts a venue for regional disputes. The DIFC-London Court of International Arbitration can already handle cases from around the world. Any change in jurisdiction would also require a change to the 2004 law issued by Sheikh Maktoum bin Rashid, the late Ruler of Dubai, that established the DIFC Courts to have authority over cases only involving companies that are registered in the DIFC.

The plan could come up against opposition from some local lawyers and judges. Dr Habib al Mulla, a prominent lawyer in Dubai, said an expansion of the DIFC's jurisdiction would be an unnecessary and damaging development for Dubai's justice system. "I believe if that happens, it would be the single largest injustice to the Dubai justice system," Dr al Mulla said. "If you do that, you are admitting that your general judiciary is inadequate to deal with certain types of cases. Rather than improve the judiciary, you are avoiding it."

Dr al Mulla said the UAE needed an overall reform of its laws to better handle commercial cases, rather than case-by-case solutions to legal problems that arise. "We are dealing with legislation on spontaneous occasions, not looking at the whole picture," he said. But an expansion of jurisdiction would improve the confidence of foreign companies and investors, said Kaashif Basit, the managing partner of the law firm JSA's Dubai office.

"If it happens, its going to give confidence to international investors who are here, or intend to come here," Mr Basit said. "It's not like the local system is bad, but with the DIFC Courts there is familiarity. If someone comes from the US, the UK or Singapore, they would understand how the system works." The DIFC Courts, which are funded by the Dubai Government, have emerged in the past year as an increasingly important venue for dealing with commercial disputes.

Its judges have heard a record number of cases involving insolvencies, contract issues, shareholder disputes, property disagreements and employee payment problems in its courtroom connected to The Gate building. The courts are looking now to expand the number of judges and possibly build a new courtroom, Sir Anthony said. The Dubai Government has already begun expanding its use of the DIFC Courts infrastructure.

Sheikh Mohammed bin Rashid, Ruler of Dubai and Vice President of the UAE, issued a decree on December 13 last year to create a special tribunal using judges from the DIFC Courts and a new legal framework to deal with disputes related to the restructuring of Dubai World. Dubai World is negotiating with 97 banks to restructure US$22 billion (Dh80.8bn) of debt. The tribunal is legally separate from the DIFC Courts, but will use the rules of the DIFC courts, the courts' staff and have access to its courtroom.

Sir Anthony, the chairman of the special tribunal, said it had already received dozens of inquiries. "The banks and so on are not coming to us yet, but the lawyers are asking a lot of questions," he said. The decree, No. 57 of 2009, uses a combination of the DIFC insolvency law, which is based on British common law and aspects of US law, to allow for Dubai World to be voluntarily restructured, Sir Anthony said.

"The Americans are well known for a restructuring system, which just operated in the case of General Motors," he said. "The idea is to restructure and continue, which is the opposite of liquidation." The decree says that once Dubai World or any of its subsidiaries files a "voluntary arrangement notice", it has 120 days to negotiate with creditors. The tribunal would deal with disputes during this period.

But the decree had not provided a way to handle disputes until that point, Sir Anthony said. Companies or financial institutions can file claims, but the technical aspects of processing the claims are still being fine-tuned. "We're in a situation where it has got to be decided how we are going to deal with this interim period until this restructuring commences," Sir Anthony said. Dr al Mulla said he was sceptical about the long-term value of creating a special tribunal for Dubai World because itcreated "uncertainty" about the legal system.

"Does this mean that for each new company that has problems we are going to create a special tribunal?" he asked. "It may shake confidence in the system." * with reporting by Gureni Lukwaro @Email:bhope@thenational.ae