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Lighthouse - March, 2019.

DIFC – Common Law in Civil Law Jurisdiction

The United Arab Emirates is essentially a civil law jurisdiction heavily influenced by French, Roman, Egyptian and Islamic law. Common law principles, such as adopting previous court judgments as legal precedents, are generally not recognized. In 2004, Dubai’s ruler at that time established The Dubai International Financial Center (The DIFC) Courts, providing an independent administration of justice in DIFC, attempting to ensure that Dubai would offer to its players the highest international standards of justice administration, and efficiency, flexibility and certainty that is usually provided by the Common Law.

The DIFC is an independent jurisdiction under the UAE Constitution, with its own civil and commercial laws distinct from those of the UAE. DIFC laws and regulations are written in English and default to English law in the event of an ambiguity. The DIFC also has its own courts, with judges taken from leading common law jurisdictions including England, Singapore and Hong Kong.

The DIFC’s independent jurisdiction extends to a range of areas including corporate, commercial, civil, employment, trusts, and securities law matters. Other laws of the UAE or the Emirate of Dubai, such as criminal law and immigration regulations, continue to apply within the DIFC. The DIFC-LCIA Arbitration Centre is an independent Centre of international arbitration that uses rules modeled on the London Court of International Arbitration. The principal governing body of the DIFC is the DIFC Authority. The financial services regulator is the Dubai Financial Services Authority (DFSA), which regulates the conduct of financial services in and from the DIFC. The DFSA is distinct from the UAE’s federal Securities and Commodities Authority, whose jurisdiction covers the wider UAE outside the boundaries of the DIFC. Since DIFC is one of Dubai’s independent free zones, it offers companies 100% ownership without the need for a local partner and since it is governed by a common-law framework distinct from the UAE legal system, with laws and regulations issued in English. DIFC offers clients a 50-year guarantee of zero taxes on corporate income and profits, complemented by the UAE’s network of double taxation avoidance treaties. Thus, the importance of DIFC courts has been growing in Dubai as a sound alternative. On the one hand, they are the exclusive jurisdiction for companies whether individual or multinationals established in DIFC or for transactions finalized within its territories, further, parties to a contract may come to a written agreement to approach the DIFC courts in the case of dispute.

Nowadays majority of the contracts will establish two mandatory clauses that will decide the future of the contracts in case of the dispute, i.e. the governing law and the jurisdiction clause and while the governing law will be of essence to decide the legal framework that will apply to and govern the contract, the jurisdiction clause will determine the place where the case will be heard, giving the parties with an option to choose between arbitration and courts with exclusive and non-exclusive jurisdiction. Being an independent jurisdiction within the UAE, DIFC is empowered to create its own legal and regulatory framework for all civil and commercial matters, which gives it a unique identity and is favored by the outside entities and individuals who are accustomed to and familiar with common law jurisdiction. Hence it would not be unusual to say that DIFC is indeed a landmark initiative exercising Common Law principals in Civil Law Jurisdiction.

Contributed by : Adv. Joy Thattil

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