Firms use jurisdiction as DIFC Court defence

The multi-million lawsuits of Amwal Alkhaleej versus Damas, Ludwig Hardt against Damac and 31 investors versus Union Properties have two things in common – the cases were lodged in the DIFC Courts and all the defendants have contested the court's jurisdiction.

But not all of them have met the same fate – Damac won, while Damas failed in its application to get the case thrown out. The Union Properties case is still pending.

According to Sapna Jhangiani, Senior Associate at Clyde & Company, the defendants would usually remove themselves from the proceedings and argue that the court has no jurisdiction.

"It's a good way of extricating yourself. If you are in the defence, you would usually use technical tactics to get yourself out, and contesting jurisdiction – if you've got an arguable case – is one way of doing that," she said.

Jhangiani represented Amwal AlKhaleej in the $22 million (Dh80.8m) non-payment case against Damas. The Saudi private equity firm is asking the court to direct Damas to send back the $22m worth of shares it sold to Damas two years ago – shares for which Damas never paid – or direct the Abdullah brothers, who used to be the directors and shareholders of Damas, to pay the full sum of $22,042,696, plus interest at the rate of 12 per cent and damages. Damas has contested the jurisdiction on grounds that neither Damas Investment nor the Saudi-based firm is incorporated in DIFC. But DIFC Courts ruled on April 21 that it does have jurisdiction because the dispute rose from a contract relating to the DIFC.

A similar ruling was expected by claimants in the $140m case of German investor Dr Lothar Ludwig Hardt versus Damac, which alleged the non-delivery of five properties Hardt has invested in. Although only one is located in DIFC, the claimant said Damac used investments from the other four projects to fund the DIFC-based property.

Lawyers of the German investor have used the same premise used by the claimants in the Amwal-Damas case – that the DIFC Court of First Instance shall have exclusive jurisdiction over civil or commercial cases and disputes "arising or related" to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the DIFC. However, the court rejected Hardt's suit on grounds that none of the property contracts was entered in the area of DIFC and none was required to be executed in DIFC. In addition, when the contracts were signed, there was no land law in DIFC other than the Dubai Law. The rejection has been a blow to what would have been a first of its kind lawsuit in the DIFC Courts.

Union Properties is also contending that the DIFC is not the correct venue for case hearings.

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