Test case puts Dubai courts in legal bind

A major test for the fledgling Dubai International Financial Centre (DIFC) Courts will come this week when a judge in the wider Dubai Civil Courts decides whether to recognise a decision made there. The judge in the case, Sir John Chadwick of the DIFC Courts, ruled on September 23 that a Dh236.6 million (US$64.4m) property case filed by Taaleem against Deyaar Development and National Bonds could be heard in the courts.
But National Bonds had earlier filed a claim against Taaleem for payment in the Dubai Civil Courts, which now pits the two courts against each other. A decision is expected to be issued tomorrow. The Dubai Civil Courts uses civil law and is conducted in Arabic, while the DIFC Courts has its own laws based on common law and is conducted in English. Taaleem's lawyers filed an urgent application this week for Justice Chadwick to order National Bonds to stay its proceedings in the Dubai Civil Court.
Justice Chadwick denied the application on Monday evening, saying he expected the Dubai Civil Court would uphold an agreement signed by the two courts in December last year to establish jurisdiction. "It is far too early to reach a conclusion that the Dubai Civil Court will arrive at a conclusion that differs from the conclusion of this court," Justice Chadwick said. If there were a major disagreement between the DIFC Courts and the Dubai Civil Courts, then "steps will need to be taken to solve it". This would be likely to involve additional legislation. The DIFC, and the jurisdiction of its courts, was established in 2004.
Tom Montagu-Smith, a barrister representing Taaleem and instructed by Hogan Lovells, said in the hearing that if the Dubai Civil Court agreed to hear the case then it would set a precedent that could hurt legal affairs within the DIFC. "We could have the rather curious situation whereby the exact same arguments are being run in two different jurisdictions," he said, adding that this could mean "any contract made in the DIFC runs the risk that someone will serve them with proceedings in the Dubai Civil Court and they will have to persuade both courts of the same exact thing".
Justice Chadwick said the situation Mr Smith predicted would not happen if parties used clearer language in contracts that made it certain that cases would be heard in one court or the other. He also ordered Taaleem to pay the expenses of the defendants for the application. A previous ruling from the courts dismissed a claim by an investor in Damac Properties projects - one of which was within the DIFC - because the two sides had specified that any dispute would be heard within the "Dubai Courts".
However, in that case the agreements were signed before the existence of a DIFC property law. [e-mail]