BACKGROUND
1. DIFC Law No. 3 of 2004, on the Application of Civil and Commercial Laws in the DIFC (“DIFC Application Law”) was enacted with the objectives of – (i) providing certainty as to the rights, liabilities, and obligations of persons in relation to civil and commercial matters in the DIFC; and allowing persons to adopt the laws of another jurisdiction in relation to civil and commercial matters in the DIFC.[1]
2. Article 8(1) of the DIFC Application Law provided that the rights and liabilities between persons in any civil or commercial matter were to be determined according to the laws in force in accordance with Article 8(2) of the DIFC Application Law. Article 8(2) of the DIFC Application Law in turn provided a waterfall of applicable law in the DIFC, as follows:
3. Despite being the last item on the waterfall of applicable law, in practice, parties frequently cited case laws and common law doctrines of England and Wales.
4. Eventually, this practice and the waterfall came to be examined by the DIFC Court of Appeal in The Industrial Group Limited v Abdelazim El Shikh El Fadil Hamid (“Industrial Group”).[2] In the Industrial Group, the defendant sought to argue that it had a cause of action under DIFC law for the torts of malicious prosecution and abuse of process, although those torts were not part of the DIFC Law of Obligations, which codify the torts in the DIFC. The claimant, on the other hand, argued that DIFC law was essentially statutory – while the statutes were capable of interpretation by reference to case law from other jurisdictions, there was no room for judge-made law to import legal doctrines not implemented into law by legislation.
5. The DIFC Court of Appeal accepted the claimant’s submission that a statutory basis for the DIFC Courts’ jurisdiction is inevitable, and reference must therefore be made to that statutory framework to ascertain the scope for proper judicial interpretation and development of DIFC law and to avoid straying into impermissible judicial legislation. Where DIFC (statutory) law identifies principles which come from other jurisdictions, it is legitimate to look to those jurisdictions to determine the content of the principles in question and their appropriate, incremental, development. Beyond that, the DIFC Courts have shown a resistance to making judicial legislation. Having regard to the statutory framework, the DIFC Court of Appeal held that incorporating torts into DIFC law by way of judicial decision would amount to impermissible judicial legislation.
AMENDMENTS TO THE DIFC APPLICATION LAW
6. In May 2024, the Dubai International Financial Centre Authority (“DIFCA”) issued Consultation Paper No. 1 of 2024 on proposed amendments to the Application Law (“Consultation Paper”).[3] The proposed amendments were introduced to clarify the source and content of DIFC law, and provide guidance on the interpretation of DIFC legislation.
7. On 21 November 2024, the DIFC announced the enactment of amendments to the Application Law (“Amended Application Law”). While Article 7 of the Amended Application Law provides an added objective of assisting in the development of the non-statutory law of the DIFC through decisions of the DIFC Courts, the most significant amendments are the changes to Articles 8(2)(e), and the inclusion of Articles 8A and 8B of the Amended Application Law on the content of DIFC law and interpretation of DIFC statutes respectively.
8. The first significant amendment is to the waterfall of applicable law in the DIFC, as set out in Article 8(2) of the Application Law. While Article 8(2)(e) of the Application Law provided for the law of England and Wales to be applied, this has now been replaced by Article 8(2)(e) of the Amended Application Law, which provides that “DIFC Law” shall be applied.
9. The Amended Application Law not only defines “DIFC Law” as the law of the DIFC as established by DIFC Statute and the decisions of the DIFC Courts; but also explains the meaning of DIFC Law in the second significant amendment, i.e., Article 8A of the Amended Application Law, titled “Content of DIFC Law”.
10. Article 8A(2) of the Amended Application Law provides that the content of DIFC Law shall be determined by any applicable DIFC Statute, and any DIFC Court judgments interpreting and applying the applicable DIFC Statute.
11. Interestingly, Article 8A(3) of the Amended Application Law now provides for a “common law for the DIFC”. In so providing, it states that the common law (including the principles and rules of equity) supplements DIFC Statute except to the extent modified by this Law or any other DIFC Law. In determining the common law for the DIFC, the DIFC Courts may have regard to the common law of England and Wales and other common law jurisdictions. Therefore, the Amended Application Law now expressly states that the DIFC Courts may have regard to not only the laws of England and Wales (as provided in Article 8(2)(e) of the DIFC Application Law), but they may also have regard to the common law of other common law jurisdictions. In doing so, the Amended Application Law confirms that the approaches of other leading common law jurisdictions remain relevant to the DIFC.
12. The third significant amendment is the introduction of Article 8B of the Amended Application Law. Article 8B(1) of the Amended Application Law provides that the interpretation of – (i) DIFC Statutes may be guided by jurisprudence from common law jurisdictions regarding the interpretation and application of analogous laws; and (ii) the rules and principles of statutory interpretation from common law jurisdictions.
13. Article 8B(3) of the Amended Application Law further clarifies that if a 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.
14. While Article 8B of the Amended Application Law does not name any common law jurisdictions, the jurisprudence of which would be instructive in interpreting DIFC Statues, the Consultation Paper named established common law jurisdictions such as England and Wales, Australia, and Singapore.
CONCLUSION
15. While parties have routinely cited case laws and common law doctrines of England and Wales, and several landmark judgments of the DIFC Courts rely on case laws from England and Wales, it is worth noting that the DIFC Courts have also often referred to judgments from other common law jurisdictions.
16. For instance, the DIFC Court of Appeal[4] and the DIFC Court of First Instance[5] have frequently referred to Australian authority. Similarly, there are also instances of the DIFC Court of Appeal referring to Canadian authority.[6]
17. Although the Amended Application Law expressly provides that the content of DIFC Law and the interpretation of DIFC Statutes may be guided by jurisprudence from common law jurisdictions (in addition to England and Wales), the DIFC Courts were already following that approach in appropriate circumstnaces.
18. The enacted version of Article 8A of the Amended Application Law has also been modified from the Consultation Paper, which made reference to importing specific common law doctrines, causes of action, defences, and remedies, into DIFC Law. Therefore, this is in consonance with the DIFC Court of Appeal’s finding in Industrial Group that there is no room for judge-made law to import legal doctrines not implemented into law by legislation.
19. These amendments therefore clarify that the DIFC Courts have the power to consider comparative jurisprudence from a variety of leading common law jurisdictions in developing common law rules, but they do not have wider legislative powers.
20. While the amendments reinforce the DIFC’s aim to remain a leading financial centre and a key international common law jurisdiction, their true impact will be interesting to witness.
Authors: Rohit Bhattacharya & Sakshi Solanki
