DIFC Consultation Paper on Application of Civil and Commercial Laws in the DIFC

14 June 2024 3 min read

By Dharma Carlin

At a glance

The Dubai International Financial Centre (DIFC) recently announced that it proposes to make amendments to the Law on the Application of Civil and Commercial Laws in the DIFC, DIFC Law No. 3 of 2004 (Law).
The purpose of the amendments is to clarify the source and content of DIFC laws and to provide guidance on their interpretation.
The proposed amendments will be enacted through the DIFC Amendment Law, DIFC Law No. 6 of 2024.

The Dubai International Financial Centre Authority (DIFCA) released a consultation for amendments to the Law and invited public comment on the proposed amendments. The proposed amendments, once in final form, will be enacted through the DIFC Amendment Law, DIFC Law No. 6 of 2024 (Proposed Legislation).

The purpose of the amendments is to clarify and provide statutory certainty as to the source and contents of DIFC law, as well as providing guidance on the interpretation of DIFC statutes.

Source of DIFC Law

The consultation paper explains that since the DIFC was established in 2004, it has been understood that DIFC statutes are supplemented by, or ‘backstopped’, by English common law. However, a DIFC court judgment, The Industrial Group Limited v Abdelazim EL Shikh EL Fadil Hamid [2022] DIFC CA 005/006, created confusion on this topic by setting out that DIFC law is ‘essentially statutory’ and that a common law or equitable doctrine, cause of action, defence or remedy cannot be found to exist in DIFC law unless there is a DIFC statute to that effect.

The Proposed Legislation seeks to clarify the source of law by establishing that in the first instance, the content of DIFC law is to be determined by the applicable DIFC statute(s) (as interpreted / developed by the DIFC courts in a matter consistent with the Proposed Legislation). However, where a doctrine, cause of action, defence or remedy exists under the common law of England and Wales (including in equity), but has not been expressly incorporated into DIFC law by a DIFC statute, the DIFC Court may find that the doctrine, cause of action, defence or remedy exists in DIFC Law, and apply it in the case before them. The finding of the DIFC Court must be appropriate, and is subject to such modification and development as the circumstances require.

It should be noted that where the common law doctrine, cause of action, defence or remedy has been expressly or impliedly excluded by a DIFC statute, then the DIFC Court cannot apply it to the case before it. The Proposed Legislation further notes that the DIFC common law is at all times subject to modification by a DIFC statute (which prevails in the event that there is any inconsistency).

Interpretation of DIFC Law

Currently, it is uncertain as to whether the common law can be used as an interpretative aid in respect of DIFC statutes that do not originate from the common law, such as the DIFC Contract Law and the DIFC Arbitration Law.

The Proposed Legislation seeks to remedy this uncertainty by providing wording to the effect that the interpretation of a DIFC Statute may (but is not required to) be guided by the principles developed in respect of analogous laws in established common law jurisdictions, such as England and Wales, Australia, or Singapore. The approaches of other common law jurisdictions may also be considered (at the discretion of the Court). The consultation paper further notes that this approach to interpretation applies whether or not the DIFC statute is based on international model law or an alternative non-common law source.

The consultation paper provides the example that if the relevant DIFC statute is based on an international model law, its interpretation may also be guided by international jurisprudence interpreting and applying the international model law, as well as interpretative aids and commentary published by international bodies regarding the international model law.

Intended Outcome of Proposed Amendments

The proposed amendments seek to provide clarity on the position of common law, how it is dealt with by the DIFC courts and the interpretation of DIFC statutes while simultaneously providing much needed legal certainty.

The consultation has been posted for a 30-day public consultation period. The deadline for providing comments on the proposals in the paper was 1 June 2024.

If you have any questions on the proposed amendments, please get in touch with your DLA Piper contact.