DIFC courts revamp nears end

The Dubai International Financial Centre's court system is putting the final touches on the most comprehensive revamp of its rules since its founding six years ago.

The changes are a response to feedback from lawyers and regulators, and they include clarifications on how the courts deal with employment disputes, insolvencies and other issues. They go into effect on July 1.

"It has been about four years or so since the first rules were enacted, and it's not unusual for a court to be constantly fine-tuning its rules," said Michael Hwang, the chief justice of the Dubai International Financial Centre (DIFC) Courts. The DIFC courts include a small-claims tribunal, an arbitration centre, a trial court and a court of appeal.

Following the financial crisis, a raft of disputes between investors, banks, property owners and employees of companies based in the DIFC led to a spike in activity for the financial free zone's judicial system. A total of 27 new cases were filed last year in the court of first instance, and 81 cases were filed in the small-claims tribunal, up from 66 in 2009.

As they became busier, the courts began to ask for advice on proposed amendments to the rules, which give official guidance on judicial procedures. Among the most significant changes were doubling the limit on claims that can go before the small-claims tribunal to Dh200,000 (US$54,452) and a new set of guidelines for insolvency cases.

The higher limit for the small -claims tribunal and a special set of rules for employment disputes sprang from the courts' early experiences. Many cases involved employees claiming they had not been paid their dues or were not given proper benefits.

"The first thing we learnt was the profile of the cases, what kind of cases came to us, and we realised that the vast majority of cases were personal employment cases," said Mr Hwang, a veteran litigator from Singapore's legal system.

The new rules on insolvencies also stemmed from experience. A flood of liquidations came to the courts after the financial crisis, but while the laws were in place to handle them, there was no specific guidance in the rule book.

"In the early years there was actually only one [insolvency], and we had not completely caught up with the situation at that time," Mr Hwang said. He was appointed to his post a year ago. He said his priorities were to keep the DIFC Courts at the cutting-edge of legal developments and to maintain strong rapport with local courts.

In the long run, the Dubai Government is considering broadening the scope of the DIFC Courts to become a mediator of regional disputes. At present, their mandate extends only to people and companies with links to the DIFC.

Mr Hwang said much territory was left to cover as the DIFC grew, leading to new kinds of legal conflicts. "Obviously, we haven't been tested because the number of cases is nothing like that of a mature system, and that's partly because the DIFC itself is not fully developed," he said.

"A whole bunch of stuff you might expect to happen has not yet happened. Nobody has yet fallen down and broken his leg and sued a hotel," he said. "We've hardly had any tenancy disputes. All these things can and probably will happen when you have enough business activities going on that will lead to that kind of dispute."