Address by Chief Justice Sir Anthony Evans
IBA Mediation Committee, Dubai, United Arab Emirates
16 February 2009
1. First, let me thank the IBA, the organisers of the Conference, for inviting me to address this IBA Mediation Committee breakfast and all of you for attending. I’m delighted that you would like to hear about the DIFC Courts, but I was interested to read the announcement – “Guests will enjoy a continental breakfast, during which a keynote address will be made …nothing about enjoying the address and I can only hope that I shall not prevent you from enjoying the breakfast as you are enjoined to do.
2. In fact, I’m glad to have this chance to speak, not just about the Courts, but about the whole scope of the dispute resolution service offered by, to give it its proper title, the Judicial Authority of the DIFC. The subject is, as you will hear and maybe know already, highly topical, possibly even controversial in some respects, so let me begin with a basic description.
3. The dispute resolution service is comprehensive. It embraces the three major forms of commercial dispute resolution – that is, litigation, arbitration and mediation. These, of course, are distinct legal processes and they are all now available within the DIFC. Personally, I would like to emphasise a fourth method which I would call the simplest and the best, namely, a compromise settlement agreement reached after negotiation between the parties without the need for outside assistance of a mediator, an arbitrator or a Judge. But that is another story and I shall not trouble you with it today.
4. The DIFC is a statutory body, created and regulated by Dubai Law and the Judicial Authority is one of three bodies which constitute it under the Law. The others are the DIFC Authority (DIFCA) which you could describe as the development authority or, in constitutional terms, the executive body and the DFSA, the independent regulatory body without which no international trading market would have any credibility, these days.
5. The Judicial Authority is equally independent and I like to say that its independence is guaranteed in all least three ways. First, by the express terms of the founding Laws. Second, by an express provision that it is funded by the Government of Dubai, not by the DIFC itself or any other body, and thirdly, by the fact that its Judges are neither career, nor financially dependent on their status as such.
6. The DIFC, the Financial Centre, is a stunning physical development as you all can see. A measure of its success is that five years ago, in February 2004, when I saw it for the first time, the 110-acre site was completely bare, except for scaffolding on the first few floors of the Gate and it was literally ring-fenced. Now, the Gate is the imposing entrance building and the development is not far from its target of more than forty high-rise buildings, offices, shops, restaurants and hotels, with a working and resident population in excess of forty thousand.
7. No less significant is the fact that the Centre has its own legal system which, I believe, is unique. The site being an enclave, a defined area within the Emirate of Dubai, the Law provides that within that area the normal civil and commercial laws of Dubai are displaced in favour of the Centre’s own Laws. So, within the area and subject to the jurisdiction limits specified by Dubai Laws, DIFC law is the law of Dubai, for civil and commercial disputes but not criminal or family matters and the DIFC Courts are required to apply, subject to the parties’ express choice if they have made one, first, the DIFC’s published Laws and, secondly, the laws of the appropriate jurisdiction or, in default, the laws of England & Wales, meaning, of course, the common law as applied by the Commercial Court in London.
8. How is the Courts’ jurisdiction defined? This involves a whistle-stop tour of the relevant Federal and Emirate legislation. On 14 March 2004 His Highness the President of the UAE promulgated Federal Law No. (8) of 2004 Concerning Financial Free Zones. Pursuant to this Law, on 27 June 2004 His Highness enacted Federal Law No.35 of 2004 establishing the Financial Free Zone in the Emirate of Dubai, described as the “Dubai International Financial Centre”. Then, on 13 September 2004 His Highness the Ruler of Dubai enacted Law No. (9) In respect of the Dubai International Financial Centre, followed by Law No.12 of 2004 In respect of the Judicial Authority of the Centre.
9. Law No.9 of 2004, the founding Dubai Law, defined the DIFC Courts’ jurisdiction as follows:
“Unless otherwise provided … the Centre’s Courts shall have exclusive jurisdiction to hear and determine any claims in which the Centre, the Centre Establishments or any of the Centre’s Bodies is party to, and also to hear and determine any dispute arising out of many transaction carried out in the Centre or an incident which took place therein …” (Article 8(2)).
10. Law No.12 of 2004, concerned with the Judicial Authority only, established the DIFC Courts by Articles 2 and 3(1) – strictly, two Courts, the Court of First Instance and the Court of Appeal, but this need not concern us at present; the same Law provided that the Ruler of Dubai should appoint a Chief Justice and other judges, by decree (Article 3(4)); and it defined the Courts’ jurisdiction. This is a working translation.
(A) Court of First Instance
(1) Without prejudice to paragraph 2 of this Article, the Court of First Instance shall have the exclusive jurisdiction over:
(a) civil or commercial cases and disputes involving the Centre or any of the Centre’s Bodies or any of the Centre’s Establishments.
(b) civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre.
(c) objections filed against decisions made by the Centre’s Bodies, which are subject to objection in accordance with the Centre’s Laws and Regulations.
(d) any application over which the Courts have jurisdiction in accordance with the Centre’s Laws and Regulations.
(2) Parties may agree to submit to the jurisdiction of any other Court in respect of the matters listed under paragraphs (a), (b) and (d) of this Article …”
11. A word about the background, although I was not personally involved at that time. These Laws, as you will appreciate, were not drafted overnight, not even in the three-month gap between Federal Law No.35 and the Dubai Laws. When the Federal go-ahead was given, the Dubai authorities were already prepared with a carefully drafted scheme for the new Centre in all respects including its legal status and arrangements for its Courts and for the laws the Courts would apply. This scheme was rapidly brought into effect and, in addition to the Dubai Laws I have referred to, several DIFC Laws were promulgated soon afterwards. These included the Law on the Application of Civil and Commercial Laws in the DIFC (DIFC Law No. 3 of 2004); the Law relating to the Application of DIFC Laws (DIFC Law No.4 of 2004) and the DIFC Court Law (DIFC Law No.10 of 2004).
12. The last-named is most relevant for present purposes because it contains further references to the jurisdiction of the Courts. These are in Article 19, and I need quote only paragraph (1)(c):
“(c) civil and commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre”.
13. You will be relieved to hear that I shall not say any more about the details of these provisions. I would not want to attempt any sort of legal definition, in any event. It is sufficient to say, as I have suggested many times to different audiences over the past four years, that the general picture is clear. Some cases clearly are within the Courts’ jurisdiction. These are civil and commercial cases which arise within the Centre or to which a Centre Establishment is a party – defined in Law No.12, by the way, as “any entity or business duly established or carrying on business in the Centre, including any Licensed Centre Establishments” (Article 2) – and where the references to contracts, transactions and incidents are clearly satisfied. Equally clearly, a case where neither of the parties nor their contract has anything to do with the Centre is outside the Courts’ jurisdiction, so defined. Between these two extremes, inevitably there will be borderline cases where issues as to the Courts’ jurisdiction could be raised and which, if necessary, would have to be decided by the Courts. I can only express the hope that when such problems do occur they will be solved by the good sense of the parties and their counsel. Jurisdiction should be exercised with the consent of the parties, whenever that is possible.
14. I turn now to other aspects of the dispute resolution service which is available at the Centre. In February 2008 the DIFC/LCIA Arbitration Centre was announced and on 1 September 2008 a revised Arbitration Law was enacted (DIFC Law No.1 of 2008, replacing the original DIFC Law No.8 of 2004). The Rules of the new Centre envisage that a Registrar will be appointed (the DIFC/LCIA Registrar) and I hope that an appointment will soon be made. This is a new venture which will benefit from the growing importance of the DIFC and from the established skills and experience of the LCIA. Four aspects are particularly relevant for us today:
(i) the new Centre administers mediation as well as arbitration and it offers the first-class facilities of the DIFC Conference Centre for conferences and hearings as they may be required. In connection with mediation, which may be your primary interest, I should perhaps add this. Questions have already arisen in the DIFC Courts, as they have elsewhere, as to the Courts’ attitude towards mediation, when that is sought or proposed by one or both parties in pending litigation. As I have already indicated, I regard an agreed settlement as the preferred outcome in almost every case and, if a mediation procedure was likely to be helpful in bringing that about, the proposal would have my full support. But I also prefer not to blur the distinction between mediators and Judges and it seemed wrong to me that the DIFC Judge hearing a case should change roles and become a mediator, as was suggested once last year. When it becomes necessary to identify an independent person to appoint as a mediator, the Courts will be able to assist the parties by encouraging the DIFC/LCIA Registrar, when appointed, to maintain a Register of Mediators to which they can refer and we shall do this.
(ii) There is no territorial or other limit on the subject matter of arbitrations and mediations which can administered by the DIFC/LCIA Centre. In other words, and in legal terms, its jurisdiction is not limited, as the DIFC Courts’ jurisdiction is, to what may loosely be called DIFC-related disputes. It is worldwide and the Rules provide that the seat of the arbitration shall be the DIFC, unless the parties agree, or the DIFC Court rules otherwise (Rule 16.1
(iii) The DIFC Courts exercise supervisory or curial powers over LCIA/DIFC Arbitrations, both under the express terms of certain of the Rules and in accordance with general principles of law when the arbitration has its seat, or the hearing takes place, within the territory of the DIFC. These powers will be exercised pursuant to the new DIFC Arbitration Law (No.1 of 2008) and the Courts’ own Rules (Rules of the Dubai Courts (“RDC”) to which Part 43 is being added). It may be relevant in this context that English is the official language of the DIFC Courts (DIFC Court Law, No.10 of 2004, Article 60).
(iv) You will see from the attached list of the DIFC Courts’ Judges that there is a considerable amount of arbitration expertise amongst us. I hope this will mean that the Courts’ supervision of DIFC/LCIA Arbitration will be based on a mature understanding of arbitration and mediation procedures and will always conform to best international practice and I can announce today that Justice David Williams will be in charge of an Arbitration List within the Courts when Part 43 of the RDC comes into force.
15. So far I have not said a word about enforcement and ratification of judgments and arbitration awards. This is a subject of major importance for all practitioners and it is covered in some detail in the legislation to which I have referred, specifically in Dubai Law No.12 of 2004 regarding judgments, also the DIFC Courts Law No.10 of 2004 and in the DIFC Arbitration Law No.1 of 2008 regarding Awards. All I shall do today is suggest an outline and then deal finally with a particular issue which has already been raised in the press.
16. First, the outline. I find it helpful to classify enforcement matters under two main heading with four subdivisions of each heading. The main headings are “inward” and “outward”. The sub-headings are territorial: the DIFC, the Emirate of Dubai outside the DIFC, other Emirates within the UAE and outside the UAE.
17. So far as inwards enforcement is concerned, there is express provision in Laws for enforcement within the territory of the DIFC of judgments and awards from outside the Centre, wherever they were made.
18. Outwards enforcement of DIFC judgments and awards begins with the provisions of Dubai Law No.12 of 2004, the Judicial Authority Law. These require the Executive Judge at the Dubai Courts to enforce “judgments, awards and orders” issued and ratified by the DIFC Courts, provided it is “final and is appropriate for enforcement”, it has been translated into Arabic (Article 7(2)), and they expressly provide that the Executive Judge has no jurisdiction to review the merits of the judgment, award or order in question (Article 7(3)).
19. For the purposes of enforcement outside Dubai, therefore, the judgment etc will have the same status as an order of the Dubai Courts. Enforcement outside the UAE will depend on the local law of the foreign state in question bearing in mind that the UAE, since November 2006, has been party to the New York Convention for the enforcement of foreign arbitral awards.
20. Finally, I come to the specific issue to which I have already referred. The suggestion has been made, and quite widely publicised, that parties should be advised to be cautious about using DIFC/LCIA Arbitration because of a fundamental objection which might be raised as an obstacle to enforcing a DIFC/LCIA Award anywhere outside the DIFC. That is to say, in the Dubai Courts and maybe in the UAE Federal Courts also.
21. The suggestion essentially is that DIFC/LCIA Arbitration cannot be extended to include references where neither of the parties nor the subject matter of their dispute has any connection with the DIFC. It is contended that this goes outside the scope of the whole concept of the DIFC, as permitted by UAE Federal Law, and that it does so in two ways. First, because the DIFC concept is limited to activities within the Centre, a geographical zone, and secondly, because the only activities permitted by Federal Law even within the zone are the financial and ancillary activities defined in Federal Law No.8 of 2004.
22. These points were raised in the press and they have been answered in print. It would not be right for me to express any view on the legal issues involved, even in my personal capacity, and I do not propose to do so. However, because the DIFC Courts and the question of their jurisdiction have been brought into the argument, I am entitled to raise some further facts which may also be relevant.
23. The jurisdiction of the DIFC Courts is defined by Dubai Law, as I have summarised above. It encompasses civil and commercial disputes. It has not been suggested elsewhere, so far as I have heard, that the Dubai Laws have extended the definitions contained in the Federal Law. Presumably, if they have done so, they are unconstitutional; a dramatic result.
(1) The Federal Law definitions in fact are wide ones; they are found in Article 1 of Federal Law No.8 of 2004 and I need not set them out here.
(2) DIFC/LCIA Arbitration itself carries on business within the DIFC.
(3) There is no requirement, so far as I am aware, that companies and bodies which carry on business within the DIFC can only do so with other parties themselves situated within the area.
(4) By definition, any parties who have agreed DIFC/LCIA Arbitration bring their dispute to the Centre in order to take advantage of the arbitration service offered by it.
(5) Unless the parties agree otherwise, any DIFC/LCIA Arbitration has the DIFC as its seat, and the arbitration hearing may take place there. The DIFC Courts exercise the curial or supervisory role. At least in these cases, there will be a substantial and significant connection between the reference and the DIFC.
24. In conclusion, I cannot ignore the fact that the validity of DIFC/LCIA Arbitration in non-DIFC cases may have been challenged or at least questioned because it exists alongside another Dubai arbitration institute, the Dubai International Arbitration Centre, or DIAC for short. As its name indicates that, too, administers international as well as local arbitrations and, as a general rule, because it is situated in Dubai but outside the DIFC, its arbitrations are subject to the curial or supervisory jurisdiction of the Dubai (local) Courts.
25. The reason why there are two such institutions in Dubai, of course, is a matter of history and of the development of the DIFC as an international financial centre, which I have outlined to you. It is hardly surprising that they should find themselves existing alongside each other, even competing with each other. Who knows, they may both find that their interests, and the interests of their customers, the arbitration parties, will be best served by the maximum of cooperation between them.
Sir Anthony Evans
Chief Justice of the DIFC Courts
16 February 2009