On 31 October 2011, Law No. 16 of 2011 came into force to amend certain provisions of Law No 12 of 2004 which specifies the scope of exclusive jurisdiction of the DIFC Courts.
Article 5(A) 1 of Law No. 16 sets out the gateways whereby the DIFC Courts can assert exclusive jurisdiction over a matter:
- civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;
- civil or commercial claims and actions arising out of or relating to a contact or promised contract, whether partly or wholly concluded, finalized or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract;
- civil or commercial claims and actions arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and is related to DIFC activities;
- appeals against decisions or procedures made by the DIFC Bodies where DIFC Laws and DIFC Regulations permit such appeals;
- any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and Regulations.
DIFC Court of Appeal’s judgment in Corinth Pipeworks v. Barklays Bank PLC dated 22 January 2012 stands for the proposition that the gateway provided by paragraph (a) does not require any further “subject-matter qualification”. Therefore, jurisdiction of DIFC Courts would ensue without being required to demonstrate that any activity arose in DIFC.
Where a business division operates within the DIFC but is not separately incorporated in the DIFC, it is a branch office and not a separate legal entity, thus qualifying as a Centre Establishment. Likewise a branch office is legally regarded as part of its parent and does not have a separate legal identity from that of its parent company. “It is a fundamental principle of company law that the only way for a company to create another entity under its control (and yet legally separate from it) is to incorporate a subsidiary.” Therefore, since an unincorporated DIFC branch of a foreign entity cannot be regarded as an independent entity for purposes of qualifying as a “Centre Establishment”, it follows that this term the foreign entity and its various branches, wherever located would fall under the jurisdiction of the DIFC Courts.
Is the judgment an exercise of exorbitant jurisdiction? The judgment addresses this question and answers in the negative. First, the doctrine of forum non conveniens would provide limits on the scope of jurisdiction. Second, a bank or other foreign entities carrying on business in the DIFC can either trade through separate corporate vehicles in the DIFC and the wider emirate. Third, entities may include jurisdiction clauses in their contracts choosing where they allocate jurisdiction when disputes arise. Fourth, the situation would clearly not arise where the Centre Establishment is a company incorporated and carrying on business in the UAE outside the Emirate of Dubai or elsewhere, since the principles of private international law would limit the powers and discretion of the DIFC Courts.
Law No. 16 further opened the doors of the DIFC Courts by allowing parties under Article 5A (2) to opt in to its jurisdiction, provided such agreement is expressed in writing.
Ghada Qaisi Audi & Bahareh Alizadeh