A DIFC Courts clause does not oust RAK courts over a RAK free-zone company not registered in the DIFC

The principle

The DIFC Courts' jurisdiction depends on the conditions in the DIFC judicial authority law. A company that is not registered in the DIFC is not one of its bodies or establishments; if its management is in Ras Al Khaimah and it belongs to the RAK Free Zone, the RAK courts have local jurisdiction over its employees' claims, and a clause in the employment contract choosing the DIFC Courts does not change that when the statutory conditions are not met. Whether someone is an employee or a partner depends on subordination to the employer's direction.

The case and the decision

The respondent had worked for the appellant company as a manager from 1 July 2007 until 31 August 2016. He sued in the Ras Al Khaimah labour court for his end-of-service entitlements, claimed in US dollars with an AED equivalent of AED 1,104,183.56, plus interest. The company objected that the courts lacked jurisdiction because clause 22 of the employment contract gave jurisdiction to the courts of the Dubai International Financial Centre, and argued that he was a partner rather than an employee. The Court of Cassation examined Article 8 of Law No. 9 of 2004 establishing the DIFC and Article 5 of Law No. 12 of 2004 on the DIFC judicial authority, as amended by Law No. 5 of 2017, which set out when the DIFC Courts have jurisdiction, including where parties agree to it. It held that the company was not registered in the DIFC and so was not one of the Centre's bodies or establishments; its management was in Ras Al Khaimah and it belonged to the RAK Free Zone; and the dispute was a labour claim. The RAK courts therefore had local jurisdiction, and the contractual choice of the DIFC Courts could not be relied on because the conditions of Article 5 were not met. On the second issue, the Court restated that an employment contract is distinguished from other contracts by subordination, meaning the worker's submission to the employer's supervision and direction under Article 1 of the Labour Relations Law, shown by the employer setting the work and paying a wage, and that an employee differs from a partner in this respect. Whether an employment relationship exists is for the trial court, whose finding was reasonable. The gratuity for nine years and two months had been correctly calculated under Article 132 of the Labour Law. The appeal was dismissed.

Laws applied

In the court’s words

“الاختصاص النوعي". عقد "عقد العمل". عمال. محاكم مركز دبي المالي العالمي.”

Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.

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