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Seeds of Competitive Law in Dubai?

January 16, 2012

The Dubai International Financial Center (DIFC) is a small zone of credibly-administered common law within the UAE’s Sharia law system. Recently, Dubai opened up the courts to a broader client-base. While previously the courts served the institutions housed within the zone, now businesses outside its narrow bounds can bring in their contracts for arbitration.

It appears to have been a smart move:

Dubai’s move to open up its common-law court has sparked a flurry of contract changes among foreign firms to ensure future disputes will be aired at court, the registrar has said.

DIFC Courts, located in the city’s tax-free financial zone, expects to double the amount of cases heard at its small claims tribunal this year and is doubling its staff in anticipation of the surge.

“Without exception I have received calls from every major law firm that has offices in Dubai and the majority of middle-tier international law firms because their clients want to understand how they can use the DIFC Courts,” said registrar Mark Beer.

This is an early step towards allowing better choice in law, and innovating law itself through competition. With parallel legal ‘operating systems’ people can vote with their feet (or, well, their pen) by finding mutually beneficial systems for dispute resolution.

Proving that institutions and credible legal systems matter for markets, the move is openly motivated by a desire for economic growth:

The Dubai government in October widened the court’s jurisdiction to allow companies based outside the tax-free business park to bring their cases before the common law court in a move aimed at attracting more international investment to the emirate.

Under the new rules, companies can opt to resolve their disputes in DIFC Courts if both parties agree to its jurisdiction. Contracts can also include a clause binding both parties to use the court in the event of a disagreement.

“This move will reinforce Dubai’s reputation as the business hub of the region, and attract business to invest in Dubai that may otherwise have established elsewhere,” Michael Hwang, chief justice of the DIFC Courts, told Arabian Business in October.

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