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Laurence Black TEP
Standard Chartered Private Bank, Dubai, United Arab Emirates
Doris Matlok
Hadef & Partners, Dubai, United Arab Emirates

1. Introduction

a. History and background

The United Arab Emirates (UAE) is a federation of seven emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain).

The currency is the UAE dirham (AED).

b. Legal system

i. Constitution and other laws

In establishing the Federation, the rulers of the seven emirates agreed on a constitution that provided the legal framework for the Federation and established Islamic Sharia jurisprudence as the main (but not the only) source of legislation for the Federation. The Constitution apportions powers between the federal government (based in Abu Dhabi) and the governments of the constituent emirates. The federal government is entrusted with the task of regulating the principal aspects of the Federation. The governments of each emirate are authorised to regulate local matters not confined to the federal government. Accordingly, federal laws and local laws have been introduced governing most areas of civil and commercial life in the UAE. In practice, most matters are now regulated at federal level (with those relating to real estate being a significant exemption to this), although local interpretations of federal regulations sometimes differ from one emirate to another. In the event of a conflict between federal and local laws, the Constitution provides that the federal law will override the local law of the emirate, to the extent of the inconsistency.

The Civil Code and the Commercial Code are the two principal federal laws that affect day-to-day business life in the UAE, and these are both based on civil law models, as adopted elsewhere in the Gulf (and which have their ultimate originals in the Napoleonic Code), rather than on the common law.

ii. Court system

The Constitution provides for a federal court system, but acknowledges the right of each constituent emirate to maintain an independent legislative body and judicial authority. Currently, all the emirates, with the exception of the emirates of Abu Dhabi, Dubai and Ras Al Khaimah, are part of the federal court system. Federal laws that apply to all seven emirates govern rules of evidence and court procedure.

The federal court system comprises a Court of First Instance in each emirate and a two-tier appeal system. The federal Courts of First Instance are trial courts that are located in each major city. Decisions of one of the Federal Courts of Appeal may be appealed to one of the Courts of Appeal in the emirate in question, and a further appeal on matters of law can then be made to the Court of Cassation in Abu Dhabi. This court also hears any dispute between the individual emirates, as well as disputes between the emirates and the federal government. The Court of Cassation is ultimately responsible for the interpretation of the Constitution and of the constitutionality of all legislation issued at either federal or emirate level. The structure of the Dubai court system largely parallels that of the federal system, except that the highest court in Dubai is the Dubai Court of Cassation.

The types of courts, which make up the legal framework for each emirate, are:

  • the civil courts
  • the Shariah courts, and
  • the criminal courts.

Generally, the civil courts have exclusive jurisdiction over civil, commercial, company, insurance, banking and maritime matters. The Sharia courts have exclusive jurisdiction in connection with all family law matters and those relating to personal status. Both courts have non-exclusive jurisdiction in respect of criminal proceedings, although, in practice, civil courts usually hear most criminal matters. The civil courts are expected to apply, in the following order: first, specific provisions of federal or local law; second, the provisions of usage and custom; and third, the principles of natural justice.

All proceedings are conducted in Arabic. Generally, only UAE national lawyers are permitted rights of audience before the courts. For evidence to be admissible within the UAE courts, all documentation must be in the Arabic language or duly translated, or both. The Arabic translation, if submitted, is deemed to be the definitive and binding version for the purposes of all proceedings before such courts. All translations carried out for the purpose of submittal before the UAE courts must be prepared and certified by a translator suitably licensed by the UAE Ministry of Justice. Overall, litigation is often viewed as onerous and can be unpredictable.

There is no concept of binding judicial precedent or a formal system of court reporting in the UAE, although an informal system of precedent does operate in the Federal Supreme Court and the Dubai Court of Cassation. Therefore, the decisions of a court in one case will have no binding authority in respect of another.

iii. The Dubai International Financial Centre

An amendment to the Constitution has allowed the creation of ‘financial free zones’, within the UAE. The key feature of such zones is that the civil and commercial laws of the UAE are specifically stated not to apply within them.

Since this amendment, the only such zone that has been established is the Dubai International Financial Centre (DIFC). The DIFC has passed a series of its own laws and regulations that are generally based on common-law principles (rather than the civil law system, which applies elsewhere in the UAE). The DIFC has its own court system, which operates in the English language and is currently headed by a retired English Commercial Court judge.

Among its laws, the DIFC has introduced its own trust law, but this is able to apply only in relation to business carried out in or from the DIFC. The DIFC is, however, principally a wholesale banking market, and only high-net-worth individuals (defined as those with in excess of USD1 million-worth of free assets) may become private clients of its licensed institutions. No financial institution in the DIFC may accept deposits or deal in the UAE’s own currency, the dirham.

The DIFC has also established its own independent regulator of financial services within the zone, the Dubai Financial Services Authority (DFSA). Among other things, the DFSA regulates the establishment of trust services providers within the DIFC.



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