Clarifying the DIFC's Legal Framework: The Role of English Common Law

Introduction

The Dubai International Financial Centre Authority (DIFCA) has initiated a consultation for proposed changes to the Law on the Application of Civil and Commercial Laws in the DIFC, amending DIFC Law No. 3 of 2004 (the “Application Law”). These amendments, if enacted as DIFC Law No. 6 of 2024 (the “Proposed Amendment Law”), aim to clarify the source and interpretation of DIFC law following feedback due on June 1, 2024. This article explores the motivations behind these changes and their potential impact on the DIFC's legal landscape.

Historical Context

Since its establishment, the DIFC has operated under a framework wherein English common law supplemented its statutes. This practice provided a fallback mechanism, allowing parties to resort to English common law when DIFC laws lacked specific provisions. However, the DIFC Court of Appeal's decision in The Industrial Group Limited v Abdelazim EL Sheikh EL Fadil Hamid [2022]DIFC CA 005/006 (“Industrial Group”) challenged this assumption by emphasizing the statutory nature of DIFC law, leading to uncertainty among legal practitioners.

Implications of the Industrial Group Case

The Industrial Group decision marked a pivotal moment by rejecting the assumption that English common law automatically applied in the DIFC. The Court of Appeal ruled that DIFC law must be interpreted strictly within its statutory boundaries, resulting in the failure of claims for malicious prosecution and abuse of process. This decision highlighted the need for legislative clarification to provide certainty on the applicability of common law principles within the DIFC.

Addressing the Source of Law

In response to the confusion following the Industrial Group ruling, the Proposed Amendment Law introduces new provisions to address the source and interpretation of DIFC law. New Article 8A stipulates that DIFC law is primarily determined by its statutes and relevant court judgments. It permits the application of English common law principles only when appropriate and not expressly excluded by DIFC statutes. This ensures that English common law can fill gaps in DIFC law, provided it aligns with the circumstances of the case and statutory provisions.

Interpretation Guidelines

The Proposed Amendment Law also introduces Article 8B, which guides the interpretation of DIFC statutes. This article acknowledges that DIFC law is influenced by a variety of legal traditions, including the UNIDROIT Principles and the UNCITRAL Model Law. Consequently, the interpretation of DIFC statutes may draw on principles from both common law and non-common law jurisdictions. This approach allows for a more nuanced and context-sensitive application of legal principles, fostering a dynamic legal environment in the DIFC.

Conclusion

The proposed legislative amendments reflect the DIFC's commitment to providing a clear and robust legal framework. By potentially incorporating English common law as a supplementary source, the DIFC aims to enhance legal certainty and maintain its status as a leading financial center in the MEASA region. The changes seek to resolve ambiguities arising from the Industrial Group decision and offer a structured approach for the application and interpretation of DIFC law.

These developments signify a progressive step towards a more comprehensive legal system, reaffirming the DIFC's dedication to high standards of legal practice. The DIFC's readiness to adapt and clarify its legal framework ensures it remains an attractive jurisdiction for international commercial disputes.

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