UAE legal system doing very well, but it can still do better

The International Association for Court Administration may not sound the most exciting global body, but its presence in Dubai recently was an important sign for the UAE legal system.

The International Association for Court Administration may not sound the most exciting global body, but its presence in Dubai recently was an important sign for the UAE’s legal system.

Some 350 delegates from 50 countries gathered in the Emirates to discuss ways to improve the efficiency of legal court structures worldwide. It was the first time the body has held a meeting in the Middle East, and members of the Dubai legal world regarded it as a mark of approval for progress in developing the legal system here.

That is important. Law, especially commercial law, is regarded as an essential part of the UAE’s “soft infrastructure” that must be of the highest standard if the country is to maintain its status as the leading commercial hub of the region.

Stated bluntly, business people will not do business in countries where they feel unprotected by law, or fear corruption or partiality in the legal system.

The UAE has done well on this score. The recent annual survey by Transparency International, for example, ranks the country 27th out of 174 in the world for lack of corruption in business life, the highest in the Middle East and North Africa.

Part of the reason for this is the ongoing evolution of the local courts system, which has developed out of Sharia principles flavoured (especially in commercial law) by the adaptation of the Napoleonic code that emerged from Egypt.

The other reason for the country’s comparatively high standing in the legal approval tables has been the application of different standards in the free zones that have been responsible for much of the economic growth of the past decade, notably the Dubai International Financial Centre.

Based on English common law, these systems offer international businessmen a high level of assurance that any disputes will be impartially and fairly adjudicated in an environment where they feel comfortable.

All that represents solid progress. But there are some legal experts who believe that the modernisation of the UAE’s legal system has to go further.

One of these is Habib Al Mulla. The founder of one of the leading law firms in the region, Mr Al Mulla recently joined forces with Baker & McKenzie, the biggest in the world. So he knows the business from micro to macro.

Here is what he told me in a recent conversation: “The UAE has led the region in the development of free zones and this has had an undeniably positive impact on economic growth.

“However, the creation of essentially independent legal systems operating within these jurisdictions has limited the debate on national legal reform, which in my opinion needs much more focus.”

Those are the nuanced words of a keen legal mind, but one interpretation of them would go thus: creating specific legal systems in free zones risks bypassing the national legal system, stunting its long-term development; there is a danger this could turn into a vicious cycle, hindering the development of the overarching legal system of the UAE.

The issue is of particular relevance at the moment, as Abu Dhabi lays the groundwork for its own financial free zone in the capital, which according to public statements so far is planning an independent legal system based on common law, like the DIFC.

There are some obvious areas that need to be tackled, says Mr Al Mulla, like bankruptcy and company law, but he also believes that “all commercial laws need improvement. They do not reflect the vibrancy of the economy”.

For the time being, he thinks that it is difficult for “sophisticated and complex financial transactions to be efficiently conducted through the current legal system”, so the free-zone laws will have to remain in place. The DIFC’s success, he says, confirms that there are “deficiencies in the [national] system”.

Other lawyers may well take a different view. But Mr Al Mulla’s opinions are weighty. They should be taken as the opening statement of a debate into the nature of law in the UAE, and its future as a commercial centre.