"Dispute Resolution in Dubai: Choice of Governing Law and Courts" explained by lawyers from Kocher Law Firm

As Japanese investment in Dubai, United Arab Emirates (“UAE”) continue to grow, it is critical to understand the local dispute resolution framework. Commercial contracts in Dubai typically provide for one of three forums: onshore Dubai courts, the Dubai International Financial Centre (“DIFC”) courts, or arbitration. The choice of forum can significantly influence the time and costs in a dispute.

Dubai Onshore Courts

Dubai’s onshore courts follow a civil law system where previous rulings are not binding. Arabic is the language of the proceedings and all filings must be made in Arabic. Onshore courts have exclusive jurisdiction in respect of real estate and employment related matters pertaining to Dubai mainland. Commercial matters are referred to onshore courts when both parties are UAE-based and either there is no contract, or no dispute resolution clause is included therein. The timeframe for resolution of a dispute depends on the complexity of the matter including in particular the requirement of an expert committee in matters requiring subject expertise or detailed evaluation.

DIFC Courts

DIFC Courts apply common law and conduct proceedings in English. Parties can opt into DIFC jurisdiction contractually, regardless of the dispute’s jurisdictional connection. Known for efficient case management and internationally recognized judgments, the DIFC courts system appeals to foreign investors. Dispute resolution is generally quick with simple matters before the Small Claims Tribunal being resolved within 3 to 6 months.

Arbitration

Arbitration offers confidentiality, flexibility and party autonomy. It is particularly suited to cross-border or technical commercial disputes. Parties may choose arbitrators with sector-specific expertise and tailored procedural rules which also provide an option for expedited procedures under the Dubai International Arbitration Centre Rules, 2022.

Another aspect to consider is the requirement of enforcement in a jurisdiction outside UAE. Judgements passed by onshore courts and DIFC courts are enforceable in countries having a reciprocal treaty with UAE. On the other hand, arbitral awards are enforceable under the New York Convention in countries which have ratified the said convention. In other jurisdictions, local enforcement of UAE judgements and/ or awards may involve procedural hurdles depending on the jurisdiction.

Key considerations

When selecting a dispute forum, businesses should consider language, neutrality, enforceability, cost, and the nature of the transaction. The preferred mechanism should be clearly stated in the contract, along with the governing law and language. There is no one-size-fits-all solution. Japanese businesses often find the DIFC Courts or arbitration to be more aligned with their expectations, especially due to language and procedural familiarity. Including a clear and enforceable jurisdiction clause enhances legal certainty and protects commercial interests in the event of a dispute.

Kocher Law Firm handles many cases for Japanese companies in Dubai

Kochhar & Co. Inc.
Address: Suites 1406-1410, Citadel Tower, Burj District, Near Marriott Marquis Hotel, Dubai, United Arab Emirates
Tel: +971-4-277 6075 / Fax: +971-4-277 6071
Email: reception@kochhardubai.com
Website: www.kochhardubai.com