Dr Habib Al Mulla's article in Gulf News last Thursday has sparked a lively debate about the mechanics of the DIFC-LCIA Arbitration Centre.

Quite rightly, Dr Al Mulla recognises that "having an arbitration centre applying a world class arbitration law such as the UNCITRAL is a great achievement that the Dubai International Financial Centre (DIFC) should be proud of", but that caution must be adopted before lauding the DIFC for this achievement.

The primary concerns arising from the article appear to be related to the jurisdiction of the DIFC, and the enforcement of DIFC-LCIA Arbitration Centre awards outside the boundaries of the DIFC.

Before addressing these concerns it is necessary to provide a brief background of the DIFC's history. Most readers will be aware that the creation of the DIFC stemmed from a 2003 amendment to Article 121 of the UAE Constitution, which allowed the Federation to enact a Financial Free Zone Law, being Federal Law No 8 of 2004.

It was this law that provided the necessary framework for the creation of financial free zones throughout the UAE. Given that these financial free zones are exempt from UAE civil and commercial laws, it is the domain of each financial free zone to establish its own regulatory and legal systems.

The DIFC's independence in this regard was established by Dubai Law No 9 of 2004, which exempted the DIFC from the rules and regulations otherwise applicable in Dubai.

The DIFC has, accordingly, been established as a separate common law English language jurisdiction whose courts system is largely modelled on the English Commercial Court.

However, the jurisdiction of the DIFC Courts extends only to civil and commercial matters — criminal matters remain firmly in the sphere of the Dubai Courts.

The DIFC Courts were established under two new laws which were enacted by Shaikh Maktoum Bin Rashid Al Maktoum, the former Vice-President and Prime Minister of the UAE and Ruler of Dubai.

Dubai Law No 12 of 2004 established the Judicial Authority, determined the jurisdiction of the DIFC Court and permitted the DIFC to administer justice on an independent basis.

Secondly, DIFC Law No 10 of 2004 set out the powers and procedures of the DIFC Courts. Essentially, the DIFC Courts form a part of the UAE judicial system, but with specific jurisdiction over DIFC matters.

The DIFC laws permit parties operating in the DIFC to choose their own legal jurisdiction and laws by agreement (i.e. other than the DIFC).

However, in the event parties do not select their own jurisdiction the DIFC laws will be applicable by default, thus permitting the parties to file a case in the DIFC Courts.

The connection of the DIFC Courts with the Dubai Courts lies in Article 7(2) of the Judicial Authority Law (Law No. 12 of 2004).

Pursuant to this Article, DIFC judgments and awards are enforceable by the Dubai Courts if the judgment or award is "final and appropriate for enforcement", and if it has been translated into Arabic.

Consistent with the policy of the independence of the DIFC Courts, the Dubai Courts do not have jurisdiction to review the merits of a DIFC judgment or Arbitral Award.

This year, I have seen two important expansions of the DIFC's regulatory framework. Firstly, on 17 February 2008, the Dubai International Financial Centre (DIFC) and the London Court of International Arbitration (LCIA) launched a new regional international arbitration centre — the DIFC-LCIA Arbitration Centre.

The establishment of the DIFC-LCIA Arbitration Centre reflects Dubai's commitment to establishing the UAE as the premier location for international arbitration in the Middle East.

Furthermore, it was designed to attract international business and investment by promoting confidence in the region. It is important to note that the DIFC-LCIA Arbitration Centre is not an authority, or a court — it is an established entity in the DIFC.

Secondly, on 1 September 2008, the DIFC Arbitration Law 2008 (DIFC Arbitration Law) came into force. Based on the UNCITRAL Model Law, the DIFC Arbitration Law removed the requirement that parties to arbitration must have a "nexus" or connection with the DIFC in order to arbitrate in the DIFC.

It is a general principle of international arbitration law that parties are free to have their disputes determined in a jurisdiction of their choice.

Following the introduction of the DIFC Arbitration Law, now anyone, from anywhere, can agree to the DIFC as the seat of their arbitration.

There were several issues raised by Dr Al Mulla in his article which require comment. The article omitted to highlight that the DIFC is licensed to establish financial services (regulated services) and non-financial services (non-regulated services) within the DIFC.

For example, the DIFC Arbitration Centre LLC, which was issued with a Certificate of Registration on 10 February 2008, is a non-regulated entity based in the DIFC, and which offers non-financial services.

In contrast, HSBC Bank Middle East Limited - DIFC Branch is a regulated entity based in the DIFC offering financial services.

It follows from the above that if you have a licence or are established within the territory of the DIFC, it is untrue to say that your services can only be confined to the DIFC.

Such a concept is at odds with the DIFC's model as a financial hub servicing the Middle East and beyond. While it is true that the DIFC Authority can only licence entities within the DIFC, entities, once licenced, can offer their services and engage with businesses outside DIFC territory (subject to any limitations provided by the DIFC).

For example, there is nothing wrong with a restaurant in the DIFC delivering a pizza to Sharjah or for DIFC Caribou to deliver a coffee to Shaikh Zayed road. This does not contravene UAE Federal Law or the DIFC Law.

In regards to the banking sector example, ICICI and Morgan Stanley are two organisations licenced in the DIFC. They are respectively permitted to provide services to Indian nationals and US Nationals outside the DIFC.

Furthermore, the activities that can be carried out in the DIFC are, by definition, financial and ancillary. The definition of ancillary services in the preamble to Federal Law Number 8 of 2004 is particularly wide, and extends to the provision of services to Companies and Establishments within the Free Zone.

In this regard, the DIFC-LCIA Arbitration Centre provides services of an ancillary nature within the free zone, in that the centre and its staff are located within its borders, and further, that the arbitrations themselves will be physically administered within those same borders.

In other words, the offering of dispute resolution services by the DIFC-LCIA Arbitration Centre is a permitted ancillary service under Federal Law No 8 of 2004.

Jurisidictional concerns would be valid if the DIFC had established an arbitration centre in Dubai, as this would have been beyond the jurisdiction of the DIFC and would have been a violation of the territory provided for in the Federal Law.

The DIFC-LCIA Arbitration Centre is within the DIFC and has the support of the DIFC Courts. This again falls within the initial strategy and the business plan of the DIFC in providing services for the financial and business community within the DIFC and beyond.

Further, in terms of the argument that the DIFC Court lacks the requisite jurisdiction to hear claims brought by non-DIFC entities or parties who conduct activities other than those defined in Federal Law No 8 of 2004, the fact that the definitions include all transactions and events which take place in the DIFC must not be overlooked.

This is reflected both in Article 8 of Law No 9 of 2004 and in Law No 12 of 2004. Article 5(A)(1)(b) of Law No 12 of 2004 states that "the Court of First Instance has jurisdiction over civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part in the centre, or an incident that has occurred in the centre."

It is therefore clear that an arbitration which takes place in the DIFC, or which has the DIFC as its seat, is both within these existing definitions and equally, is within the original scope of the DIFC.

Therefore, the DIFC court would have jurisdiction over (i) an ad hoc arbitration, seated in the DIFC under the DIFC Arbitration Law, and (ii) an institutional arbitration under the DIFC-LCIA Rules, with a DIFC seat. Obviously, an institutional arbitration under the DIFC-LCIA Rules with a seat outside the DIFC would be supervised and supported by the courts in that jurisdiction.

In regards to the enforcement of awards issued under the auspices of the DIFC-LCIA Arbitration Centre, Dr Al Mulla is suggesting that parties and practitioners will be met with a "challenging situation" when an award requires enforcement outside of Dubai and the UAE.

The Dubai Courts are not permitted to review the merits of judgments rendered by the DIFC Courts. After all, the DIFC Court was established by the Ruler of Dubai, and is considered a court of Dubai.

As discussed above, I am of the view that any challenge based on jurisdiction (or a lack thereof) would be without merit.

The DIFC Judicial Authority Law and more recently, the DIFC Arbitration Law were carefully drafted to avoid any barriers to enforcement outside the DIFC.

In this regard, by virtue of the DIFC Judicial Authority Law, it is the case that any DIFC-LCIA Arbitration Centre award which has been enforced by the DIFC Courts may thereafter be enforced outside the DIFC.

Furthermore, the great majority of arbitral awards issued under the auspices of leading institutions are adhered to without the need for enforcement proceedings and the DIFC-LCIA Arbitration Centre is unlikely to be an exception.

However, when necessary, a DIFC-LCIA arbitration award, will, once ratified by the DIFC Court, be enforceable within the DIFC pursuant to Article 42(1) of the DIFC Court Law.

Article 42(1) states that judgments, orders and awards issued or ratified by the DIFC Court can be enforced within the DIFC.

There are, of course, grounds for refusing enforcement; however these are limited to the grounds prescribed in the New York Convention, namely procedural issues or public policy concerns.

It will often be the case that a DIFC arbitration award will need to be executed in Dubai (but outside the DIFC). The procedures to enforce the award in such circumstances are firmly in place and entrenched in law.

Following ratification by the DIFC Court, an award may be enforced through an execution judge at the Dubai Courts in the manner prescribed by Article 7 of the Judicial Authority Law.

There are some minor requirements when seeking ratification from the Dubai Courts, including that the award is final and certifiably translated into Arabic.

It should be noted, however, that it is not the case that a DIFC award will require enforcement by the DIFC Court or the Dubai Courts.

This requirement will be dependent on factors such as the nationality of the parties, where the organisation's head office is located and where its assets are located. In some cases, however, foreign jurisdictions do require that an award is enforced by the DIFC Courts.

Once an execution order from the Dubai Courts is obtained, a DIFC arbitration award can be enforced within the borders of the United Arab Emirates pursuant to the UAE Constitution and Federal Law No 11 of 1973, which deals with the organisation of judicial relations between the seven Emirates.

By virtue of Federal Law No 11 of 1973, once an execution order is obtained, DIFC judgments and awards then attract enforceability in the other six Emirates (again, without any further review on the merits).

The DIFC Courts are currently in consultation with other UAE Courts in order to streamline this process.

Furthermore, the award will then be enforceable anywhere in the Gulf Cooperation Council (GCC). The DIFC awards are directly enforceable in any country that has subscribed to the 1958 New York Convention on the Enforcement and Recognition of Foreign Arbitral Awards (New York Convention).

The UAE became a signatory to the New York Convention in November 2006 and the result of this is that awards issued under the auspices of the DIFC-LCIA Arbitration Centre will be subject to the New York Convention for enforcement in New York Convention jurisdictions.

In summary, although at first glance, Dr Al Mulla's concerns appear to have merit, a closer examination of the issues reveals that they are unfounded.

The DIFC-LCIA Arbitration Centre has been properly constituted and we have full confidence that any awards issued under its auspices will be valid and enforceable.

The writer is the Founder and Senior Partner at Al Tamimi
& Company which was involved in drafting the DIFC New Arbitration Law. He is Court Member of the LCIA and the President of the LCIA Arab Users' Council. He is also the President of the UAE Branch of the Chartered Institute of Arbitrators.