Choosing the applicable law for a Construction Contract – the case for ‘the law of the DIFC’
When it comes to agreeing the substantive law that is to be applied to a construction contract, the parties literally have a world of choice.
For projects carried out in Dubai, the most common choice of law is the “laws of the United Arab Emirates, as applicable in the emirate of Dubai”. Due to the location of the project, this is totally understandable. The very fact that the parties are carrying out the project in Dubai suggests that they are aware of, and comfortable with the law that applies within the jurisdiction. It is perhaps also a term of the contract that they have used time and time again.
The focus of this article is to point out that within Dubai itself, there is an alternative option that may in some instances be a more suitable option. This is ‘the laws of the DIFC’.
DIFC Law is currently made up of 29 statutes all of which are:
- drafted for application in a modern commercial context;
- drafted for application in Dubai, and so are culturally palatable within the GCC;
- written and published entirely in English; and
- supported and enhanced by the common law of the DIFC Courts.
Language
Dubai is a global city. As such, it attracts contractors, consultants and designers from all over the globe.
For any project in Dubai, you may have a designer from Spain, engineer from England, subcontractor from Italy, main contractor from China, and the employer from the UAE. Whilst occasionally a construction contract will be drafted in dual language (Arabic and English) it is commonly the case that contracts used in such projects are drafted in English, administered in English and contain an arbitration agreement whereby the parties have agreed for the dispute resolution proceedings to be conducted in English.
It therefore makes practical sense for the parties to adopt a law that is written in English and can be read and applied in its natural form. The laws of the DIFC are well written, being modern, clear, succinct, and reflecting best international practice. By way of example, the DIFC Contract Law is substantially based on the UNIDROIT Principles of International Commercial Contracts.
Whilst some may suggest that this issue is simply overcome by obtaining an English translation of the UAE Civil Code, you only have to compare the various translations that have been published to see substantial differences between them. This creates confusion and subsequently leaves more matters that are open to debate.
Cultural Aspects of the Law
Further to the literal translation of the UAE Civil Code, there is deep cultural context to the law.
At times it can be curious how such context will be applied when such terms are being interpreted by foreign arbitrators, based on arguments put forward by foreign lawyers. This is particularly the case when such context and cultural ties are totally foreign to the cultures of such parties.
There are aspects of the onshore law of Dubai that in some commercial situations create significant challenges in its application. One example of this can be seen with Article 102(2)(iv) of the UAE Civil Code, which prescribes that the enforcement of a provision of a contract will be unlawful if such exercise is “contrary to the provisions of Islamic Shari’ah, public policy or morals”.
Whilst the DIFC Law does not have an article that is directly equivalent to Article 102(2)(iv) of the Civil Code, this is not to say that it is out of line with local principles and policy. For example, the Contract Law of the DIFC includes an implied duty of good faith (section 57(c)), a legal concept that is common to the civil codes of the Gulf nations.
As such, whilst the DIFC Law is perhaps modelled primarily on common law jurisdictions, it has incorporated provisions that are core to business in the GCC.
Certainty of Law
A key feature of common law systems is that over time, precedents provide guidance and create greater level of certainty as to the interpretation and application of the law.
A feature of the DIFC Law is that it is supplemented by judgments of the DIFC Court.
As a public judicial forum, the DIFC Courts are presided over by some of the most respected legal minds in the common-law world. Over time, one can expect an excellent body of case law to be created by the Court itself.
Conclusion
It remains exceedingly rare to see the “law of the DIFC” adopted as the parties’ choice of law in a construction contract. My hope is that this article opens the door to parties considering this as an option for future construction contracts they may enter into in Dubai and throughout the region.
