Arguments are raised in first hearings DIFC Courts session hits a stumbling block as lawyers question the setting of arbitration Asa Fitch The Dubai World tribunal hit a roadblock on its first hearings yesterday as lawyers argued over the jurisdiction of the court. The tribunal was set up within the Dubai International Financial Centre (DIFC) to decide cases involving the conglomerate and its subsidiaries. The DIFC Courts are separate from the tribunal but the tribunal has adopted the same set of rules for adjudicating cases.
Ludmila Yamalova, a partner at Al Sayyah Advocates and Legal Consultants in Dubai, said that while the courts and the tribunal were in their infancy, too much time was still spent weighing minor legal issues. Ms Yamalova, who is representing a wealthy German investor in a case against the property developer Damac, said those proceedings had been held up for months while deciding where the case should be heard.
"It really is frustrating because we have a real case but instead we're arguing jurisdiction," she said. Arguments at yesterday's tribunal hearings focused on whether the judicial body should be guided by laws that prevail in Dubai's local courts or those in the financial free zone, which has its own set of laws and courts. In the case, Vinod Kumar Dang, an investor in Nakheel's Jumeirah Islands project, is asking the tribunal to enforce an arbitration award of Dh2.5 million (US$680,680) plus legal costs.
The Dubai International Arbitration Centre made the award to Mr Dang in early May after he asserted that his villa was structurally unsound because of what he said was shoddy construction by Nakheel, a subsidiary of Dubai World. Kaashif Basit, a lawyer for Mr Dang, argued that the tribunal had to apply the law of the "seat of arbitration" in weighing whether to enforce the award. After the establishment of the tribunal, he said, that seat shifted from local courts to the DIFC.
Dalmook Mohammed Dalmook, a lawyer for Jumeirah Islands, countered that local Dubai law still applied to the arbitration enforcement claim even though the forum had shifted to the DIFC. The Dubai World tribunal was set up in December as a forum for investors and businesses to sue as Dubai World underwent a major reorganisation and restructured $24.9 billion of debt. The conglomerate recently received approval from 99 per cent of its bank creditors on the debt restructuring.
The tribunal's decision on Mr Dang's case could set a precedent for a raft of expected arbitration enforcement actions. Many disputes between Dubai World and its business partners are being thrashed out in arbitration in accordance with typical contract clauses. Lawyers say the case will help set the boundaries of laws applicable to tribunal proceedings and settle issues of whether the tribunal is the proper forum for all cases involving Dubai World.
"I think this is going to be a truly landmark judgment in that sense," said Imran Shafiq, a senior associate at Bin Shibib and Associates in Dubai. But other lawyers say the delays in DIFC Courts cases are costing their clients money as they wait for the courts to clarify jurisdiction. Most of the justices in the courts do not reside in Dubai, lawyers point out, which has compounded logistical delays.
More clarity on jurisdiction, however, may be on the way. A judge ruled last week that a disputed contract that was to be judged in "Dubai Courts" could be heard in the DIFC Courts, potentially laying the groundwork for more cases to come to the DIFC. New DIFC court cases grew to 36 last year from just nine the year before, a sign, observers say, of increased confidence in the courts and of a growing number of financial disputes after the financial crisis.
"No doubt some of the increase has been the result of the global financial crisis but it is impossible to say how much," Sir Anthony Evans, the DIFC Courts chief justice, said in an annual review for last year.