Abu Dhabi Court of Cassation, Commercial Appeal No. 1367 of 2021, judgment of 18 January 2022
Under Article 5(2) of Dubai Law No. 12 of 2004, as amended by Law No. 16 of 2011, the DIFC Court of First Instance may hear any civil or commercial claim that the parties agree in writing, before or after the dispute, to bring before it, provided the agreement is a specific, clear and express provision. Such an agreement gives the DIFC Courts jurisdiction to the exclusion of the ordinary courts, which may not hear the dispute; the word 'may' in Article 5(2) means only that the DIFC Courts' jurisdiction becomes valid and binding once the conditions are met.
Two partners had formed a limited liability company in Abu Dhabi. In November 2018 one sold his 70% stake to the other for AED 6.03 million, payable in sixty instalments, and agreed to the company's conversion into a sole-owner company. Clause 17 of the sale agreement provided that it was governed by DIFC law and that any dispute arising out of or in connection with it, if not settled amicably, would be referred to the DIFC for final settlement. The seller sued the buyer in the Abu Dhabi commercial court for about AED 6.14 million in unpaid instalments. The buyer objected on the basis of the clause, which the parties and the courts below called an arbitration clause. The first-instance court declared the claim inadmissible; the Court of Appeal reversed and sent the case back for a hearing on the merits.
The Court of Cassation allowed the buyer's appeal. Although the ordinary courts have general jurisdiction, jurisdiction may be assigned elsewhere by law. Article 8 of Dubai Law No. 9 of 2004 and Article 3 of Dubai Law No. 12 of 2004 establish the DIFC Courts as independent courts, and Article 5(2) of Law No. 12 of 2004, as amended by Law No. 16 of 2011, allows the DIFC Court of First Instance to hear civil or commercial claims that the parties agree in writing, before or after the dispute, to bring there, provided the agreement is specific, clear and express. Such an agreement removes the dispute from the ordinary courts, and the DIFC Courts' jurisdiction cannot then be taken away and given to another body. Clause 17 was such an agreement. The Court quashed the appeal judgment, decided the appeal itself and confirmed the first-instance ruling that the claim was inadmissible because of the clause.
Commercial parties anywhere in the UAE, including onshore Abu Dhabi companies, can choose the DIFC Courts in writing, and the Abu Dhabi courts will decline to hear a claim brought in breach of a clear DIFC Courts clause. The decision was given under the DIFC court legislation in force in 2022, since replaced by Dubai Law No. 2 of 2025.
| Articles 3 and 5(2) of Dubai Law No. 12 of 2004 on the Judicial Authority at the DIFC, as amended by Dubai Law No. 16 of 2011 — text of articles 3, 5 Decided under this law; it has been replaced by DIFC Courts Law 2025. |
| Article 8 of Dubai Law No. 9 of 2004 establishing the Dubai International Financial Centre |
“بما لا يجوز معه نزع اختصاص محاكم مركز دبي المالي العالمي واسناد مهمة الفصل فيما حدده المشرع من منازعات الى غيرها من الجهات الأخرى”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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