Q. What is the Dubai International Financial Centre?
A. The Dubai International Financial Centre (DIFC) is a Federal financial free zone attached to the Government of Dubai, which was established in accordance with UAE Federal Law and Dubai Law. The President of DIFC is His Highness Sheikh Mohammed bin Rashid Al Maktoum, the Vice President and Prime Minister of the UAE and Ruler of Dubai.
As a financial free zone, DIFC has been granted authority to self-legislate and has been specifically designed to provide a world-class regulatory regime for the creation and operation of a global financial centre. DIFC offers financial institutions, and other companies operating within it, a number of important benefits. There are, for example, no taxes on income or profit, no customs duties, 100 % foreign ownership is permitted, there are no restrictions on foreign exchange and a transparent operating environment subject to world-class regulation and standards.
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Q. How was DIFC created?
A. An amendment was made to the UAE Constitution in 2004, enabling the Federation to enact a Financial Free Zone Law (Federal Law No 8 of 2004) providing the basis for the establishment of financial free zones throughout the UAE. Financial free zones are exempt from UAE civil and commercial laws and, accordingly, each financial free zone can create its own legal and regulatory framework to deal with civil and commercial matters.
In 2004, Federal Decree No 35 was issued, establishing DIFC as a financial free zone in the Emirate of Dubai. Later that year, Dubai Law No 9 of 2004 was enacted, recognising the financial and administrative independence of DIFC and providing exemption for the DIFC from the rules and regulations otherwise applicable in Dubai. DIFC has, accordingly, established its own legal and regulatory framework for civil and commercial matters.
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Q. What is the LCIA?
A. The London Court of International Arbitration (LCIA) is one of the world’s longest-established and most prestigious arbitral institutions. Originally known as the City of London Chamber of Arbitration, which was established in 1892, the LCIA is a truly international institution, providing efficient, flexible and impartial administration of arbitration and other alternative dispute resolution proceedings in any location and under any system of law. The LCIA promulgates its own rules and procedures and also administers proceedings under ad hoc procedures, such as the UNCITRAL arbitration rules.
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Q. How is the LCIA run?
A. The LCIA operates under at three-tier structure, comprising the Company, the Arbitration Court and the Secretariat. The LCIA Secretariat is based at the International Dispute Resolution Centre in London, and is responsible for the day-to-day administration of all disputes referred to the institution.
The Company is a not-for profit company, limited by guarantee. The LCIA Board of Directors (which is made up largely of prominent London-based arbitration practitioners) does not have an active role in the administration of dispute resolution procedures, being concerned primarily with the operation and development of the LCIA's business and with its compliance with applicable company law.
The LCIA Court is the final authority for the proper application of the LCIA Rules. Its key functions are appointing tribunals, determining challenges to arbitrators, and controlling costs. The Court is made up of up to thirty five members, who are selected from among leading commercial arbitration practitioners from around the world.
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Q. What services will be offered by the DIFC-LCIA Arbitration Centre?
A. The DIFC-LCIA Arbitration Centre, which is located within the DIFC, will promote and administer the effective resolution of international business disputes through arbitration and mediation, offering all the services that are offered by the LCIA casework secretariat in London.
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Q. What types of case will be arbitrated by the DIFC-LCIA Arbitration Centre?
A. Under DIFC Arbitration Law No. 1 of 2008 (see further, at Q11, below) any contracting party, both foreign and domestic, and whether or not connected to DIFC, may choose to arbitrate disputes under the auspices of the DIFC-LCIA Arbitration Centre.
The Centre will, therefore, arbitrate cases arising from the widest range of contractual relationships, provided only that the parties have an agreement in writing to submit their dispute to DIFC-LCIA arbitration.
Parties who choose the DIFC as the seat/place of arbitration are still free to arbitrate under the arbitration rules of other arbitral institutions than the DIFC-LCIA Arbitration Centre.
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Q. What rules will apply to DIFC-LCIA arbitrations?
A. The DIFC-LCIA Arbitration Centre has its own arbitration and mediation rules, which are closely modelled on the LCIA rules. The DIFC-LCIA rules are universally applicable and are compatible with both civil and common law systems, offering the international business community, international lawyers and arbitrators, a comprehensive and modern set of rules and procedures. As with the rules of other international centres, the DIFC-LCIA rules may also be adopted by parties in arbitrations to be conducted outside DIFC.
Under the DIFC-LCIA Rules, the LCIA Court plays exactly the same supervisory role as it does under the LCIA’s own rules in connection with such matters as the selection and appointment of Tribunals, determining challenges against arbitrators, and controlling costs.
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Q. What Court system operates in DIFC?
A. The DIFC Judicial Authority and the DIFC Court System were established by Dubai Law No 12 of 2004. DIFC Law No 10 of 2004 sets out the powers, procedures, functions and administration of the DIFC Courts.
There is a Court of First Instance and a Court of Appeal, with one judge presiding over the Court of First Instance and three over an appeal. DIFC judges are appointed by Decree of the Ruler of Dubai and the DIFC Courts are fully equipped to conduct proceedings, with their own court rooms, rules of court and court facilities. The Courts have the power to make any orders (including interim or interlocutory orders) and to issue, or to direct the issue of, any writs they consider appropriate. Orders may, for example, be made in relation to restitution, disgorgement, compensation, or damages.
In exercising its powers and functions, the DIFC Courts apply the Judicial Authority Law, the DIFC law or any legislation made under it, or such law as may have been agreed by the parties and the Rules of the Court. In the absence of such provisions, the Court will apply the law of England and Wales. Proceedings are in English and are open to the public.
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Q. Who presides over the DIFC Court?
A. The judges in the DIFC Courts are experienced in international commercial arbitration and are considered to be supportive of arbitration. The DIFC Courts are led by Chief Justice Sir Anthony Evans and Michael Hwang SC, as Deputy Chief Justice, both of whom were appointed in April 2005.
Both judges are senior and respected common law jurists, who have held high judicial office in their respective jurisdictions. Prior to his appointment as Chief Justice, Sir Anthony practised in England as a barrister specialising in commercial cases. He was made Queens Counsel in 1971 and a Recorder of the Crown Court in 1972. Sir Anthony was appointed as a High Court Judge in 1984 and as Lord Justice of Appeal at the Court of Appeal, in 1992. In recent years he has worked as an arbitrator, specialising in international commercial arbitration.
Michael Hwang was formerly a partner at Allen & Gledhill in Singapore, where he served as Head of litigation and arbitration for ten years. In 1991, he was appointed a Judicial Commissioner of the Supreme Court of Singapore, before returning to private practice as an independent barrister and arbitrator in 1993. Mr Hwang was appointed as a Senior Counsel (SC) of the Supreme Court of Singapore in 1997 and served as a Commissioner of the United Nations Compensation Commission (UNCC) between 2000 and 2003.
A further six judges from prestigious legal backgrounds were appointed to the DIFC Court in January 2008, so there are now eight commercial judges at DIFC, in total. The newly appointed judges are David A R Williams QC (New Zealand); Sir Anthony Colman (UK); Tan Seri Dato Siti Norma Yaakob (Malaysia); Sir John Chadwick (UK); Omar Juma Mohamed Saif Al Fajeer Al Muhairi (UAE); and Ali Shamis Mohamed Shamis Al Madhani (UAE). Under DIFC law, judges are appointed for a term of three years.
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Q. What is the current scope of the Court’s jurisdiction?
A. DIFC is a Common Law jurisdiction, whose independent judicial system is predominantly modelled on the English Commercial Court. The DIFC Courts have jurisdiction over all civil and commercial cases relating to disputes arising out of or in connection with DIFC. However, under DIFC Court laws, institutions operating within DIFC have the option to select a different legal jurisdiction when entering into contracts. There is no obligation for them to be governed by DIFC laws, but, in the absence of any agreement to the contrary, DIFC laws will govern the agreement, by default. Pursuant to Article 11 of the Arbitration Law 2008, the DIFC Court has authority to assist and supervise arbitrations conducted within the jurisdiction of DIFC.
It is important to note that Dubai laws (with the exception of criminal laws) do not apply in DIFC, nor do Dubai Courts have jurisdiction over DIFC or entities set up in DIFC. UAE criminal laws do apply within DIFC and criminal matters are referred to the appropriate external authority.
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Q. What law applies to arbitrations held in DIFC?
A. On 1 September 2008, the DIFC Arbitration Law No.1 of 2008 (Arbitration Law 2008) came into force, repealing the previous arbitration legislation (DIFC Law No.8 of 2004).
The new law is based on the UNCITRAL Model Law (recognised worldwide as the accepted international legislative standard for modern arbitration law), and covers all stages of the arbitral process, from the form and content of arbitration agreements to the recognition and enforcement of arbitral awards.
The key change to the arbitration framework is the removal of restrictions on the jurisdiction of DIFC, allowing parties without a connection to DIFC, both foreign and domestic, to arbitrate disputes in DIFC. The new law also makes it clear that the DIFC Courts are bound by the New York Convention and confirms that awards made within the jurisdiction of DIFC are to be enforced by the Dubai Courts without further review of the tribunal’s decision.
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Q. What is the relationship between the local Courts and the DIFC-LCIA Arbitration Centre?
A. There has been extensive discussion and co-operation between DIFC and the local courts, and it is expected that local court judges will be concerned primarily with the formalities of an award and that, subject to these being in order, the local Courts will enforce an award issued under the auspices of the DIFC-LCIA Arbitration Centre, without considering it necessary to investigate the merits of the case. Indeed the Arbitration Law 2008 includes a provision which ensures that arbitral awards made within the DIFC are enforced by the local Courts without further review of the merits. Article 42(4) of the Arbitration Law 2008 provides “awards recognised by the DIFC Court may be enforced outside the DIFC in accordance with the Judicial Authority Law and recognition under this Law includes ratification for the purposed of Article 7 of the Judicial Authority Law”. Article 7 of the Judicial Authority Law provides that arbitration awards ratified by the DIFC Court shall be enforced by the execution judge at the Centre, and furthermore, that the execution judge at the Dubai Courts has no jurisdiction to review the merits of the judgment, award or order of the DIFC Courts.
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Q. How will a party enforce a DIFC-LCIA award?
A. The great majority of arbitral awards issued under the auspices of leading institutions are complied with without the need for enforcement proceedings. However, where necessary, an award issued by a tribunal appointed under the auspices of the DIFC-LCIA Arbitration Centre will, once ratified by the DIFC Court, be enforceable within DIFC, pursuant to Article 42(1) of the DIFC Court Law. Article 42(1) states that judgments, orders and awards issued or ratified by the DIFC Court can be enforced within DIFC in the manner prescribed by the Rules of the Court. Recognition or enforcement of an arbitral award, irrespective of the State or jurisdiction in which it was made, may only be refused by the DIFC on limited grounds which are outlined in Article 44 of the Arbitration Law 2008.
If the award is to be executed in Dubai, but outside the jurisdiction of the DIFC, the award must first be ratified by the DIFC Court, and then, if enforcement proceedings are necessary, it may be enforced through an execution judge at the Dubai Courts. Article 42(2) of the DIFC Court Law states that judgments, orders and awards issued or ratified by the DIFC Court may be enforced outside the DIFC in accordance with the Judicial Authority Law, Article 7 of which states that judgments, awards and orders issued by the Courts, and arbitral awards ratified by the Courts, shall be enforced by an execution judge of the Dubai Courts provided that the judgment, award or order is final and appropriate for enforcement, and provided that it has been translated into Arabic.
As outlined above, it is important to note that, pursuant to Article 7(3) of the Judicial Authority Law, the executive judge of the Dubai Courts has no jurisdiction to review the merits of any judgment, award or order of the DIFC Courts.
Once an execution order of the Dubai Court is obtained, the award will be enforceable anywhere in the UAE, under UAE Constitutional Law, and enforceable anywhere in the Gulf Cooperation Council (GCC), under the GCC Convention for the Enforcement of Judgments and Judicial Notices and Delegations (GCC Convention) which was ratified by the UAE in June 1996. Under the GCC Convention, judgments issued in any of the six member counties of the GCC (UAE, Bahrain, Qatar, Kuwait, the Kingdom of Saudi Arabia and the Sultanate of Oman) are enforceable in any other GCC country.
Finally, an award issued under the auspices of the DIFC-LCIA Arbitration Centre will be subject to the 1958 Convention on the Enforcement and Recognition of Foreign Arbitral Awards (the New York Convention) for the purposes of enforcement in other New York Convention jurisdictions. Article IV.1 of the New York Convention states that, at the time of its application, the party applying for enforcement must provide the duly authenticated original award, or a duly certified copy thereof, and the original arbitration agreement or a duly certified copy thereof. If these conditions are met, the courts of any other Convention state must enforce the award without amendment, subject always to Article V which sets out the circumstances in which the recognition and enforcement of an award may be refused.
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Q. How are foreign awards enforced in Dubai?
A. Pursuant to Article 24 of the DIFC Court Law, the DIFC Court of First Instance is obliged to comply with the terms of any applicable treaty for the mutual enforcement of judgments, order or awards which have been ratified by the UAE. Therefore, the DIFC Courts are bound by the terms of several international treaties signed by the UAE, including the New York Convention.
The UAE formally acceded to the New York Convention on 19 November 2006, and the terms of the Convention became law throughout the UAE. The New York Convention lays down the conditions for the recognition and enforcement of foreign arbitral awards in the territories of other New York Convention states. Thus, an arbitration award issued in the UAE is directly enforceable in another Convention state. Furthermore, unlike a number of other states that are bound by the New York Convention, the UAE has agreed to enforce foreign arbitral awards, regardless of whether or not they were made in another state bound by the Convention.
Therefore, as with the Dubai Courts themselves, the DIFC Court of First Instance is bound to recognise and enforce a foreign arbitral award on the terms set out in the New York Convention, under which enforcement can only be refused on very narrow grounds. Namely, where (i) the arbitration agreement was invalid (ii) a party was not given an opportunity to present its case (iii) the tribunal was incorrectly formed or acted beyond its competence (iv) the award is not final in the state in which it was made (v) under UAE law the subject matter of the dispute cannot be decided by arbitration and (vi) enforcement of the award would be against the public policy of the UAE.
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Q. How will a party appeal a DIFC-LCIA award?
A. A party wishing to appeal an award issued under the auspices of the DIFC-LCIA Arbitration Centre must apply to the DIFC Court, which, by Article 26(2) of the Court Law, has the power to:
- make or give any order that could have been made or given by the Court of First Instance, or by the Tribunal whose award is being appealed;
- attach terms or conditions to an order it makes;
- annul or set aside a decision;
- require, or prohibit the taking of, a specific action or an action of a specific class;
- make a declaration of facts;or
- make any other order that the Court of Appeal considers appropriate or just.
Pursuant to Article 41 of the Arbitration Law 2008 recourse to a Court against an arbitral award made in the Seat of the DIFC may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of Article 41. Paragraphs (2) and (3) provide that an arbitral award may be set aside by the DIFC Court only if the party making the application furnishes proof that a party was under some incapacity, the agreement was invalid, the party making the application was not given proper notice, the award deals with a dispute not contemplated by or not falling within the terms of the submission to Arbitration, the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties, the subject matter of the dispute is not capable of settlement by arbitration under DIFC law, or the award conflicts with public policy in the UAE.
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