ABU DHABI // A judge has thrown out a highly publicised case brought by a German investor against Damac Properties because the Dubai International Financial Centre (DIFC) Courts does not have jurisdiction over the claims. The judgement, issued yesterday, could deter property investors thinking of using the court as an alternative to the Dubai property tribunal, lawyers said.
Lothar Hardt, one of Damac's "VIP investors", alleged in the original filing that Damac and four individuals had broken their contractual agreements and several laws by failing to deliver the property projects on time, mismanaging escrow accounts relating to some of the projects, and not registering the transactions with the Dubai Land Department. Mr Hardt had paid US$9.7 million (Dh35.6m) as downpayments for the purchase of 37 properties in five developments: Park Towers, Water's Edge, Lotus Residences, Wildflower and Ocean Heights. He sought the return of his investment, as well as damages and lost profits, court documents show.
Hannah de Figueiredo, the lawyer for Damac, argued that the DIFC Courts did not have jurisdiction over the case. Justice Sir Anthony Colman ruled yesterday in favour of Damac's argument. The contracts Mr Hardt signed with Damac included a provision that they would be "governed by the Laws of the United Arab Emirates and the Laws of Dubai", and that "the Parties agree that any legal action or proceedings with respect to this agreement shall be subject to the exclusive jurisdiction of the Courts of Dubai, United Arab Emirates", legal documents show.
Justice Colman also pointed to the fact that some of Mr Hardt's transactions preceded the DIFC Real Property Law, which was passed in June 2007, as evidence that the two sides did not intend for the DIFC to be the jurisdiction for disputes. Until the DIFC Real Property Law was passed, the Dubai courts officially had jurisdiction over property in the DIFC. The parties had "contracted out of the jurisdiction of the DIFC courts under each of the many contracts entered into, including the Park Towers contracts, and the DIFC Courts have no jurisdiction", Justice Colman wrote.
Ludmila Yamalova, the lawyer for Mr Hardt, said in an interview yesterday that she disagreed with the judge's interpretation of the contracts and was considering filing an appeal. "We disagree with the interpretation of the terms," Ms Yamalova said. "Dubai Courts also means DIFC Courts and Dubai laws also mean DIFC laws." The ruling would deter other investors from using the DIFC Courts, she said.
"This was a big chance for the court to set some new precedents," Ms Yamalova said. "This will be disappointing to a large number of investors that were hoping that the DIFC Courts would extend jurisdiction ? Many people view the DIFC Courts like the courts in their home countries." A spokesman for Damac Properties declined to comment. The DIFC Courts have only recently been used as a venue for disputes arising from the property downturn in Dubai.
In addition to Mr Hardt's case, 31 investors have filed a case against Union Properties alleging that the company failed to deliver contracts to buyers and did not finish construction on time. Union Properties is also contending that the DIFC is not the correct venue for the case, according to the DIFC Courts registry. Michael Lunjevich, the head of the property practice at Hadef and Partners, said the initial decisions of the DIFC Courts showed the jurisdiction needed to be clearly spelt out in contracts and was likely to dissuade some buyers from filing cases.
But Mr Lunjevich said the DIFC Courts was a preferred venue for disputes because its laws provided for a discovery process that allowed each side to get more information to argue its case. "The stakes are higher, the costs are higher, but when you get down to arguing the real facts, I think the DIFC Courts help," he said. @Email:firstname.lastname@example.org