With many of Dubai's property investors still suffering the
effects of the global economic crisis, December 2009 saw the filing
of an ambitious claim in the DIFC Courts by Dr. Lothar Ludwig Hardt
and Hardt Trading F.Z.E against DAMAC (DIFC) Company Limited and
others. The claim was ambitious not because of the sum claimed
(circa US$10,000,000) but due to the fact that it sought to expand
the jurisdiction of the DIFC Courts arguably beyond that enshrined
in DIFC Law.
In this case, Dr Hardt and Hardt Trading (the
"Claimants") made a series of investments between 2007
and 2009 with various companies within the DAMAC Group. These
investments related to the purchase of residential apartments and
retail units in four separate property developments by DAMAC. The
developments concerned were: Park Towers, Water's Edge,
Wildflower and Ocean Heights. Of these four developments, only Park
Towers was situated in the Dubai International Financial Centre
("DIFC"). The Claimants' claim was based upon various
causes of action including breach of contract.
The jurisdiction of the DIFC Courts is set out in DIFC Court Law
No. 10 of 2004 and DIFC Law No. 12 of 2004 in respect of The
Judicial Authority at Dubai International Financial Centre. On 7th
December 2009, the DIFC Courts and the Dubai Courts also signed a
Protocol of Jurisdiction to clarify certain issues relating to the
determination of jurisdiction of the DIFC Courts and to identify
the legal procedures for transferring cases between the Dubai
Courts and the DIFC Courts, where appropriate.
Specifically, Article 5(A) (1) of Law No. 12 of 2004 provides that
the DIFC Courts will have jurisdiction in the following
circumstances:
- Civil or commercial cases and disputes involving the Centre or any of the Centre's Bodies or any of the Centre's Establishments
- 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.
- Objections filed against decisions made by the Centre's Bodies, which are subject to objection in accordance with the Centre's Laws and Regulations.
- Any application over which the courts have jurisdiction in accordance with the Centre's Laws and Regulations.
Relevantly, Article 5(A) (2) provides that parties may contract
out of the jurisdiction of the DIFC Courts in certain
circumstances.
The First Defendant in the DIFC Court proceeding, DAMAC (DIFC)
Company Ltd, made an application for an order that the DIFC Courts
give immediate judgment and/or strike-out the Claimants' claim,
on the basis that, amongst other things, the DIFC Courts did not
have jurisdiction to hear the Claimants' claim.
By way of a robust judgment, Justice Sir Anthony Colman granted the
First Defendant's application to strike out the DIFC Court
Proceedings against it for the following reasons:
- The First Defendant, although incorporated in the DIFC was not a contracting party and the Claimants had failed to make any allegations of breach of contract or duty specifically against the First Defendant;
- None of the contracts were entered into in the DIFC;
- There was in any event no jurisdiction under Article 5(A)(1) of DIFC Law No. 12 of 2004; and
- If there was such jurisdiction, the parties had contracted out of it.
The contracts which had been entered into by the Claimants
contained the following Governing Law and Jurisdiction
clause:
"This Agreement is made in the English language and the rights
of the Parties hereunder shall be governed by the Laws of the
United Arab Emirates and the Laws of Dubai and the Parties agree
that any legal action or proceedings with respect to this Agreement
shall be subject to the exclusive jurisdiction of the Courts of
Dubai, United Arab Emirates."
In examining this clause in conjunction with Article 5(A)(2) which
enables parties to contract out of the jurisdiction, Justice Sir
Anthony Colman applied the natural meaning of the "Laws of
Dubai" and the "Courts of Dubai" to specifically
exclude the jurisdiction of the DIFC Courts. The case therefore
reinforces the limits of the jurisdiction of the DIFC Courts.
This case serves as an important example to property investors who
may have thought that they could avail themselves of relief
provided by the DIFC Courts. Before any such claims are commenced,
potential Claimants should carefully consider the facts of the
dispute and the relevant contracts they have with developers in
order to assess whether their dispute comes within the relevant
jurisdiction provisions of Law no.12 of 2004 which prescribes the
DIFC Courts' jurisdiction. It is a common misconception that
parties are able to opt in to the jurisdiction of the DIFC Courts.
This is not the case. If the property concerned is located within
the jurisdiction of the DIFC Courts, property investors may be able
to bring a claim in the DIFC Courts if the parties have not
contracted out of the jurisdiction of the DIFC Courts.
Property investors with civil claims should also ensure that their
claim is commenced against the correct entity by carefully
examining the contracts and facts which gives rise to the dispute.
This can sometimes be difficult to establish when an entity has
several subsidiaries.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.