x Abu Dhabi, UAESunday 23 July 2017

DIFC expansion speeds justice for small businesses and employees

Seeking justice in the Emirates has become a lot easier for small business owners and individuals since the Dubai International Financial Centre widened its jurisdiction.

Mark Beer, the chief registrar of the DIFC Courts, says that the economies in countries with good judiciaries grow at a faster rate. Sarah Dea/ The National
Mark Beer, the chief registrar of the DIFC Courts, says that the economies in countries with good judiciaries grow at a faster rate. Sarah Dea/ The National

Nicola Berlen loved his job as an outlet manager for an Italian restaurant in the Dubai International Financial Centre (DIFC). So when he was fired in January, almost three years after taking on the role because of a "change in management style", he was extremely upset.

Unhappy at the Dh28,000 settlement he was offered - almost Dh30,000 short of the Dh55,000 to Dh59,000 he was expecting - he decided to take his former employer to court.

And with the restaurant falling under the jurisdiction of the DIFC Courts, an international law court that handles financial cases, he filed a claim with the Small Claims Tribunal (SCT) in early February.

Three weeks later, he sat opposite his former boss in a small meeting room with only a court registrar present.

Over the next 30 minutes, each party had an opportunity to present their side of the story. The registrar then left them alone to discuss the matter further before she returned and an agreement was signed awarding Mr Berlen Dh38,000 - Dh10,000 more than the original offer.

"It was a higher offer. Maybe the company felt bad, but the good thing was that it was so quick; it was resolved immediately," Mr Berlen, an Italian, says.

Mr Berlen's speedy resolution is one of the reasons the independent, common law court - comprised of the Court of First Instance (CFI), which handles bigger claims averaging between Dh30 million to Dh35m, the SCT and the Court of Appeal - was first set up in 2007.

To begin with, only companies based in the DIFC or those that had an issue related to the free zone could settle their disputes there. Then, in October last year, Sheikh Mohammed bin Rashid, the Vice President of the UAE and Ruler of Dubai, issued a decree extending the jurisdiction to the wider business community, which has had huge implications for individual employees and the small-to-medium-enterprise (SME) sector.

With employment disputes of up to Dh200,000 and civil or commercial claims of up to Dh100,000 heard in the SCT, it's a cost-effective option for those with little capital or legal back-up to get financial issues resolved quickly.

"An economy with a good judiciary grows at about 2 per cent faster than those without," says Mark Beer, the chief registrar at the DIFC Courts. "The cost of credit is lower because contracts can be enforced and people will lend more freely because they know they can get their money back and enforce their loans.

"And the impact of the judiciary on an economy is significant, none more so than in the SME sector because SMEs cannot flourish unless they can have an employment regime that is clear and they can enforce their contracts and get paid. You need to keep cash moving through the small-business sector, otherwise it's starved."

The attraction for businesses and individuals to use the SCT is the fact that 90 per cent of its cases are resolved in less than three weeks and, with no lawyers present during the hearing, both parties have a chance to air their points of view without interference.

"It is very swift, the rules are simple and it doesn't cost any money to open a case," says Amna Sultan Al Owais, the deputy registrar and SCT registrant at the DIFC Courts.

"We wanted to keep the essence of the SCT simple and friendly and with lawyers, it might be more complicated. We have a consultation stage where parties are encouraged to reach a settlement rather than have it litigated over a long period of time. Some people settle the matter before coming to the courts and they still come to officialise their agreement."

Ms Al Owais says the DIFC Courts received numerous enquiries about the reach of its jurisdiction outside the free zone even before the rule change, illustrating the business community's demand for a system that operates in English rather than Arabic, which is traditionally used in local courts.

"For a lot of people, particularly expats, it's perceived to be quicker and perhaps more transparent," says Scott Hutton, a senior associate at Kilpatrick Townsend, a US law firm based in Dubai that specialises in construction and real estate cases. "Dubai Courts are definitely working on that, but at the moment, according to DIFC Courts, their turnaround is quicker and there is only the one appeal process as opposed to the two in Dubai Courts.

"The DIFC Courts and Dubai Courts are working very closely now and are moving in the same direction, so what I hope is that this perception and good feeling towards DIFC then permeates through to Dubai Courts as well."

Having a choice as to where and in what language your case is heard is key in a nation that is home to so many nationalities.

"If someone is running a business in Jebel Ali, operating internationally, but using Dubai as a hub and doing everything in English, to go to a court system with a different language has two issues," says Mr Beer. "The first is the cost of translating everything and then the fight you will then have over the accuracy of that translation.

"The second is unfamiliarity with the process. The process might be world class, but if it operates in a language that you don't speak, you might feel at a disadvantage because you don't know what's going on.

"It's not that one court is better than the other, it's just that the leadership has given people a choice and people can look at which they think is going to be best for their particular problem."

As well as encouraging more people to take their cases to the DIFC Courts - the SCT has already handled 83 cases this year; two more than all of 2011 - the new ruling has encouraged many to redraft contracts to recognise the DIFC as a jurisdiction for disputes before a problem even arises.

While there may not be a massive jump in business for the DIFC Courts or for the lawyers representing clients just yet, it will come.

"The signs are promising because we're getting a lot more enquiries now on DIFC jurisdiction," says Mr Hutton. "A lot of people are looking at having DIFC jurisdiction in their contract; it is way down the line in that respect, so people are looking at it."

Although the court fees are relatively low at 2 per cent of the settlement amount in the SCT and 4 per cent in the CFI, with senior lawyers charging between Dh1,600 to Dh2,200 an hour, the cost of actually taking a case to court may seem insurmountable. This is where the DIFC Courts' pro bono scheme comes into play.

Litigates can apply for pro bono representation through the courts, which have 23 lawyers on their books and have already seen two cases taken on and won.

Who gets the help is entirely up to the law firms themselves, which carry out the screening for applicants.

"Taking on a case on behalf of an individual who cannot afford to pay legal fees is pretty common among law firms. It does what it says on the tin - it's pro bono, it's for good and it almost can be considered akin to a charitable contribution. Throughout the US, we're all encouraged to be in pro bono schemes as well as our chargeable work," says Mr Hutton, whose firm takes on about seven cases a year, working on one at a time.

Now the DIFC Courts' programme has been taken a step further with the introduction of a pro bono clinic - designed to help those with basic legal questions about issues such as gratuity payments, employment contracts or property issues.

"People often just want answers to simple questions, so we thought it would be a useful way to solve problems at that stage instead of going to a proper case," Ms Al Owais says.

Six clinics are planned a year and the first was held in February. Mr Hutton was one of two lawyers representing two law firms who handled 13 enquiries.

"Each person had 30 minutes to discuss their issue and we had property, employment and banking issues. There is an element of people not knowing the law and which set of court rules are going to apply to them."

While Mr Hutton agrees that legal fees are not cheap for those on smaller budgets, he says it is not uncommon for lawyers to offer free advice in an initial consultation before proceeding with a case - something Mr Berlen could have benefited from before he approached the SCT.

Although Mr Berlen, a father of three children aged five, six and 17, was pleased with the speed his case was resolved, he says he felt lost during the process and would have preferred to have a lawyer's support.

"I don't have a perfect understanding of the law. The company charged me for missing cigarettes, a tie and for a party that was never paid for. I ended up losing Dh20,000 and while I wanted to take the company to a higher court, I didn't have time and was running out of money, which is hard with a family to support. It would have cost me more to go to a higher court with a lawyer, but I believe I would have got more money."

Mr Hutton says it may be advisable for people to consult a lawyer before going through the SCT process.

"There is a case for legally knowing what you're entitled to and what to expect," he says. "It can be quite daunting for someone, even in the SCT, who does not have court experience to be in front of a judge."

Mr Berlen is now very happy in his role as the area manager for Baker and Spice, but he still struggles to move on from the dispute with his previous employer.

"When I came on board, the restaurant was in a bad condition and I saved it. Then it became very famous. We were doing crazily well. I'm the best manager in Dubai and I still don't understand how I could not be doing my job when I was the only one there with no assistant, nothing."

arayer@thenational.ae

 

Claim Steps

1 Small Claims Tribunal (SCT) cases can be filed in person to the courts at the Dubai International Financial Centre between 10am and 5pm from Sunday to Thursday, or by fax to 04 427 3330

2 Companies or individuals outside the DIFC free zone must have the agreement of the other party to have their claim heard at the courts

3 The SCT will hear claims of less than Dh200,000 for employment cases and less than Dh100,000 for any civil or commercial claims. To have claims that exceed those amounts in the SCT, both parties have to agree in writing

4 The SCT registrar will fix a time for the parties to attend a consultation before a judge – normally within seven days. Each party must attend the consultation in person and should not be represented by a lawyer

5 Once the claim is settled, fees of 2 per cent of the value of the claim must be paid to the court

6 If the small claim is not settled at the consultation, the case will either go to a second hearing with another SCT judge or be referred for trial at the Court of First Instance

For more information, go to www.difccourts.ae