Introduction
Governing law in the UAE can be a bit more complicated to address than in other countries.
We have recently helped clients with matters addressing governing law. In one instance a client approached us with a labor dispute making reference to the DIFC Data Protection Law when the Company was registered with the Dubai Economic Department. Would DIFC Data Protection Law or UAE Data Protection Law would be applicable?
Another arbitration client sought to file a case with the UAE Courts when it was noted that the governing law was the DIFC and the statute of limitations was almost about to expire. Complex commercial matters may take a long time-frame to discard amicable solutions and timing in this occasion was of essence.
This publication covers the concept of governing law and answers the question of why the UAE is more complicated than other countries when trying to track the governing law in the absence of parties’ agreement.
What is Governing Law?
Governing law refers to the set of laws and regulations that apply to a particular situation or legal relationship. It determines the rights, obligations, and procedures that govern interactions between parties involved in a transaction, contract, or dispute.
The governing law typically establishes the legal framework within which parties must operate and resolve any disputes that may arise.
In the context of international transactions or relationships, governing law specifies which jurisdiction’s laws will govern the interpretation and enforcement of the relevant legal documents or agreements. This is particularly important when parties involved in a transaction are based in different countries or jurisdictions with distinct legal framework.
For example, in a contract between a company based in the United Arab Emirates and a company based in the United States, the parties may specify that the governing law of the contract is the law of the UAE. This means that if a dispute arises concerning the contract, UAE would apply to resolve the dispute. In commercial contracts Parties tend to also agree whether it will be a national court or an arbitral tribunal that will apply the set of rules fixed by the governing law.
Why is the UAE Different when it comes to Governing Law?
The UAE is not a straightforward country when it comes to knowing the law applicable to a given dispute.
This is because the UAE has over 40 free zones, two of which have their own set of laws including their own Courts. These free zones are the financial centers of Dubai and Abu Dhabi, the Dubai International Financial Centre (also known as the DIFC) and the Abu Dhabi Global Markets (also known as the ADGM).
While the rest of free zones do not have their own courts and full set of laws and regulations, they do have different frameworks that could be applied to the companies that are set up in their jurisdiction, including labor affairs.
This is the reason why disputes arisen in the UAE do require additional food for thought.
Examples:
- Labor dispute between an employee and an employer in the Dubai Multi Commodities Center will require the lodging of a complaint with the DMCC prior to being able to approach the Dubai Courts.
- A contract signed in a coffee shop in the DIFC will make the DIFC law immediately applicable.
One framework is the same in the entire country, this is criminal law with any particularity that the given Emirate gives to it but in principle criminal laws are issued at federal level and as such little variances between the 7 different emirates.
Pursuant to the above it is always highly recommended to obtain expert advice on the applicable steps and recommended actions pursuant to it.
An example of extreme differences is the statutes of limitations. The UAE law has a 15-year time-barre limitation when it comes to breaches of contract. However, the DIFC has only a 6-year gap to raise a breach of contract claim. This difference is significant and can bear importance at the time of exploring actions.
What does a Governing Law clause look like?
Governing law clauses tend to be placed towards the end of agreements and usually include governing law and jurisdiction aspects.
In the event of dispute, this law (ex: UAE law, English law, DIFC law, etc.) shall govern the rights and wrongs in the parties’ relationship (governing law) and these courts or arbitral institution shall be competent to apply such governing law.
A handy example:
Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Arbitration Rules of the Dubai International Arbitration Centre, which Rules are deemed to be incorporated by reference into this clause.
The number of arbitrators shall be three.
The seat of arbitration shall be Dubai.
The language to be used in the arbitration shall be English.
The governing law of the contract shall be the substantive law of the DIFC.
This is an arbitration clause selecting not only the jurisdiction and the governing law but also the language and the number of arbitrators.
Recommended Steps when addressing Governing Law in the UAE
In view of the above, it may be suitable to prepare the following before meeting with expert counsel:
- Contracts signed between the involved Parties. It is very important that you prepare ALL documents that were entered into by the Parties to avoid surprises and conflicting clauses.
- If it is a criminal case location of where the criminal actions too place.
- Summary of the actions that lead you to seek legal advice.
This information should enable competent practitioners to revise the information and draw initial conclusions and next steps.
We hope this publication will help you understand the concept of Governing Law in the UAE and remain available for any questions regarding this post of general application.
For more information published in English you can visit all our publications at this link as well as the videos in English of our Partner Maria Rubert.
*The information on this page is not intended to be legal advice. This article is intended to provide an initial introduction to the concept of governing law in the UAE.