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.