The Jurisdictional Dispute Between the Dubai Courts and the DIFC Courts.

Practice Area: Jurisdictional Conflicts / Civil & Commercial Litigation

Outcome: The Dubai Court of Cassation affirmed that the DIFC Courts have exclusive jurisdiction; the appellant’s cassation appeal was dismissed for lack of legal merit.

I. Background of the Case

The appellant filed a claim before the Dubai Court of First Instance against the first, second, and fourth respondents, seeking a joint and several judgment compelling them to pay AED 72,744,602 together with legal interest at the rate of 9% per annum from the date of the judicial claim until full settlement.

The claim was based on the fact that, on 3 April 2023, the appellant entered into a supply agreement with the fourth respondent for the delivery of materials to be received and paid for by the first respondent. The appellant duly supplied the agreed materials and issued invoices totaling AED 182,919,602, of which the first respondent paid AED 110,175,000, leaving the claimed balance outstanding.

The fourth respondent sent a letter confirming that the first respondent was responsible for the remaining amount and that all of its subsidiaries guaranteed the debt. Despite repeated demands made to the first respondent and its legal representative (the second respondent), no payment was made, prompting the appellant to initiate proceedings.

The third respondent intervened in the case as an opposing party, seeking the annulment of both the supply agreement and the email dated 21 June 2023, and claiming restitution of AED 110,250,000. It asserted that it was a sister company of the first respondent and had paid the said amount on behalf of the first and fourth respondents. It further alleged that no actual delivery had taken place and that the shipping documents were forged, entitling it to recover the payment.

The appellant subsequently amended its statement of claim to include the third respondent jointly and severally with the other respondents.

Following the appointment of a tripartite expert committee and the submission of both its original and supplementary reports, the Dubai Court of First Instance, on 17 March 2025, ruled that it lacked jurisdiction over the matter.

The appellant appealed this decision, but the Court of Appeal upheld the judgment in chambers. The appellant then filed a cassation appeal seeking to overturn the ruling. Upon review, the Court of Cassation scheduled the matter for judgment.

II. Grounds of Appeal

The appellant raised three main grounds of appeal, summarized as follows:

1.    Error in the application of the law:
The appellant contended that the agreement was concluded solely with the fourth respondent and that the third respondent was not a party thereto, but merely an entity that made payments on behalf of the fourth respondent. Accordingly, the dispute involved companies that do not fall within the jurisdiction of the DIFC Courts.

2.  Agreement on the jurisdiction of the Dubai Courts:
The appellant relied on Clause (25/14) of the agreement, which expressly provides that disputes shall be referred to the Dubai Courts and governed by the laws of the United Arab Emirates.

3.    Implied waiver of DIFC Courts’ jurisdiction:
The appellant further argued that the third respondent did not object to the Dubai Courts’ jurisdiction, which constitutes an implicit acceptance of their authority.

III. Court’s Reasoning and Legal Grounds

The Court of Cassation found the appellant’s arguments to be unfounded and reaffirmed the following legal principles:

The Dubai Courts possess general jurisdiction over all disputes; however, certain cases are exceptionally assigned to the DIFC Courts pursuant to specific legislation namely, Law No. 9 of 2004 and Law No. 5 of 2017 concerning the DIFC Courts.

The DIFC Courts have exclusive jurisdiction over disputes in which one of the parties is an entity registered within the DIFC, or which arise from transactions conducted within the DIFC, or from contracts concluded or performed, wholly or partially, therein. Such jurisdiction cannot be altered or waived by agreement between the parties, as it constitutes a matter of public policy.

The Court further held that since one of the parties the third respondentis a DIFC-registered entity, jurisdiction properly lies with the DIFC Courts, even if the other parties are based outside the Centre.

Moreover, Law No. 2 of 2025, which permits parties to agree to refer disputes to other courts, was not yet in force when pleadings were closed before the Court of First Instance and therefore cannot be applied retroactively to the present case.

Accordingly, both the Court of First Instance and the Court of Appeal correctly ruled that the Dubai Courts lacked jurisdiction and that the case falls within the exclusive jurisdiction of the DIFC Courts, in line with the applicable legislative provisions governing the DIFC.

Conclusion

This judgment reaffirms that the jurisdiction of the DIFC Courts is exclusive and mandatory in all cases where one of the parties is a DIFC-registered entity or where the dispute arises from transactions or contracts executed within the DIFC.

No party may contractually override or waive this jurisdiction, as it constitutes a matter of public order.

Given that the third respondent is a DIFC-registered entity, jurisdiction over this dispute properly lies with the DIFC Courts, notwithstanding the involvement of parties outside the Centre. Furthermore, subsequent legislation allowing referral to other courts has no retroactive effect on pending cases.

Accordingly, the rulings of the Court of First Instance and the Court of Appeal rejecting the jurisdiction of the Dubai Courts and referring the matter to the DIFC Courts are legally sound and consistent with the principles of public order and the exclusive jurisdiction of the DIFC Courts. The appellant’s cassation appeal therefore lacks any legal merit.