The DIFC Courts' new Technology and Construction Division

The Technology and Construction Division (TCD) of the Dubai International Financial Centre (DIFC) Courts came into operation on 1 October 2017. Mark Raymont, Partner, and Eveline Strecker, Senior Practice Development Lawyer, at Pinsent Masons Dubai look at the recently-published TCD Rules and consider what the TCD means for technology and construction disputes in the UAE.

The DIFC Courts have established the new TCD with a view to expediting and improving the management and resolution of technology and construction related disputes. This follows a one-month public consultation in April this year on the possible introduction of a specialist division.

The Rules governing the TCD have recently been published, and the TCD came into operation on 1 October 2017.

Expanding functions of the DIFC Courts

The DIFC Courts are located within the DIFC, an offshore financial centre or ‘free zone’ in the UAE, which provides a platform for business and financial institutions to enter the markets in the region. The courts administer an English language common law system for the resolution of local and international commercial and civil disputes.

Established in 2004, the DIFC Courts have had a Small Claims Tribunal ('SCT') function since 2007, which the DIFC Courts recently announced to be a faster and more effective way to resolve disputes with 88% of SCT cases resolved in less than four weeks after successful service of the claim. In March this year, the DIFC Courts’ jurisdiction was expanded to deal with labour claims arising out of existing and proposed labour contracts between DIFC companies and their employees, or contracts which are to be performed within the DIFC. This is expected to better facilitate litigation procedures for employees based in the DIFC.

The new TCD is a further step in the DIFC Courts' development of specialist functions with its judges focusing on technology and construction disputes. It is expected that the determination of such claims will benefit from speedy and focused case management in an environment geared up to potentially complex and document-intensive cases.

What kind of claims will the new TCD deal with?

New Rules governing the TCD (Part 56) have been added to the DIFC Courts' Rules. They are modelled on, and similar to, those of the long established and successful English Technology and Construction Court (TCC), although there are some important differences.

They describe a 'TCD Claim' which can be brought in the new division as one which involves 'technically complex' issues or questions. The Rules go on to give the following examples of such claims, although the list is by no means exhaustive and other types of claims may be appropriate for determination in the TCD:

  • building, other construction and engineering disputes
  • claims by/against engineers, architects, surveyors, accountants and other specialised advisers relating to the services they provide
  • claims by/against the DIFC or bodies established by the DIFC (including, for example, the DIFC Authority) relating to their statutory duties concerning land development or construction
  • claims relating to the design, supply and/or installation of computers, software and related network and IT systems and services
  • claims between landlord and tenant for breach of a repairing covenant
  • claims between neighbours, owners and occupiers of land in trespass, nuisance etc
  • claims arising out of fires
  • claims involving taking of accounts where these are complicated
  • challenges to decisions of arbitrators in construction and engineering disputes

Clearly, this wide ranging list of claims, quite aside from the primary criteria that a matter involve 'technically complex' issues, is likely to see a significant number of disputes fall under the management of the TCD. Construction is a substantial industry in the region, often involving complex and high value multi-party disputes which would benefit from efficient and specialist management and determination by judges with the appropriate experience and expertise.

But what about smaller claims? Presumably even a monetary claim of relatively small value could meet the TCD's threshold test, subject to the complexity of the technical issues. It is important that smaller claims are not excluded from the TCD's jurisdiction as they are likely to benefit considerably from the more specialised and streamlined processes that the TCD is likely to offer, as compared to for example arbitral proceedings or local court proceedings.

Having said this, it remains to be seen how the requirement for technical complexity alone will operate in practice and whether the number or nature of the technical issues, the monetary value of the claim, the number of parties or some other factors will be deemed to be relevant in case allocation.

Although the TCD Rules largely mirror the English TCC Rules in terms of the types of claims which are likely to be appropriate to bring before the TCD, some notable exceptions are:

  • claims relating to the quality of goods sold or hired, and work done, materials supplied or services rendered
  • claims relating to the environment, such as pollution cases

It is not clear why claims relating to goods and services have not been included within the TCD jurisdiction, particularly given the fact that disputes regarding performance issues and defective materials/equipment are likely to be very much within the ‘sweet spot’ of a TCD judge. Hopefully the exclusion of this relatively broad category of claims from the TCD does not unduly limit the TCD's jurisdiction.

The exclusion of environmental claims is also a little surprising given that they very often form part of the issues in construction disputes. It may be that there are other courts or governmental bodies which can more appropriately deal with such claims. However, with the relatively undeveloped nature of this area of law in the UAE, it would be advantageous from an environmental protection perspective alone to also permit the TCD to deal with such claims, where possible, in a civil claim context. This may well be an area for future development of the TCD’s jurisdiction (recognising that other bodies will have the relevant jurisdiction to deal with environmental claims from a regulatory or penal perspective).

An application must be made to commence proceedings in the TCD and to transfer existing DIFC Court proceedings into the TCD. The TCD Rules permit any DIFC Court judge to direct that a claim does or does not fall within the TCD's jurisdiction. This is in contrast to the English TCC Rules which require a specialist TCC judge to make such a direction. This is relevant to the question of the experience and familiarity of the TCD judge with TCD matters. It is therefore to be hoped in the interests of consistency, predictability and confidence in the TCD's jurisdiction that any decision or determination as to the TCD's jurisdiction will be made in consultation with the head of the TCD.

Experience and expertise

The TCD Rules provide for a judge to be in charge of the TCD. It has recently been announced that the head of the TCD will be Justice Sir Richard Field QC, who brings 20 years of experience handling complex disputes in the London courts.

The DIFC Courts Chief Justice Michael Hwang has said: 'The TCD has been designed around the particular characteristics of highly complex technology and construction disputes, which can be resolved much more speedily and efficiently with the oversight of specialist judicial experience…'. As matters currently stand, we understand that TCD cases will be heard by the existing DIFC judges, including three UAE judges who have experience in technology and construction cases.

Given the volume of construction and technology disputes in the UAE and the wider region, it may be that future consideration will be given to the appointment of a small panel of specialist TCD Judges. This is likely to aid the effective development and functioning of the TCD as a ‘go to’ construction/technology dispute resolution forum. It will also offer a viable alternative to arbitration where the parties are likely to select arbitrators who specialise in construction/technology disputes and who are familiar with the management and resolution of technology and construction disputes, the nature of the particular issues involved and other related issues, such as the importance of managing and controlling the assistance provided by technical experts in the process.

By way of comparison, the largely successful and efficient operation of the TCC in England has, based on our experience in that jurisdiction, been due in large part to the TCC judges' experience in and knowledge of the technology and construction industries, the nature of claims and issues that arise and the particular case management techniques that have been developed to deal with document and issue intensive disputes. An important distinguishing feature of the English TCC is the fact that, where possible, the judge assigned to the matter oversees it from beginning to end and we would hope that this practice be adopted in the TCD.

Case management in the TCD

As a court division, proceedings in the TCD would lack the confidentiality that comes with arbitral proceedings. However, this potential disadvantage may be off set by the attraction of a potentially more cost effective and streamlined process, especially in the case of large-scale disputes and smaller technical disputes which would benefit from effective case management and the array of procedural and enforcement tools available in the DIFC Courts.

Similar to the English TCC Rules, the TCD Rules require the court to fix a case management conference within 14 days of the issue or transfer of the claim to the TCD. Generally, the TCD's proposed case management conference procedures are comprehensive. The TCD Rules expressly provide for the court to make orders in respect of a court-appointed expert, conducting inspections, obtaining samples, conducting experiments and producing calculations, as well as the production of a Scott Schedule (itemising the claims and the other party's response and counterclaims). If well managed, the express provision for orders in respect of Scott Schedules is a positive addition to the TCD Rules.

Use of experts

Orders in respect of court-appointed experts and inspections are prevalent in UAE local court proceedings and can be useful, cost-saving devices. We are also aware that the use of a single court-appointed expert has proved to be effective in the TCC in England in suitable cases. However, the use of single, court-appointed experts in the local UAE Courts can be a somewhat mixed experience with doubts being raised as to the suitability and expertise of some of the experts appointed. Accordingly, there is a risk, that, unless properly managed (in particular ensuring that the ‘pool’ of experts from which expert appointments are to be made will inspire confidence in the system) such orders may result in 'shadow' experts who simply duplicate the role of the parties' experts.

There are a relatively limited number of suitably qualified and experienced experts available in the region, particularly in the case of very specialist technical issues, and if a party lacks confidence in the court-appointed expert, the party is likely to engage its own expert (as will the other party/ies in turn), resulting in considerable additional costs and time delay. The TCD may find itself weighing up considerably more expert, and potentially conflicting, evidence than would have been the case had the court not appointed an expert. It will be interesting to see how the procedures for use of court-appointed experts develop in practice in the TCD.

Opportunities for settlement

We also note that, at present, the TCD's Case Management Directions Form (Schedule A to the Rules) does not provide an option for a stay, for example of one month, in order for the parties to pursue settlement discussions or alternative dispute resolution options (eg mediation). This option is provided for and has been successfully used in the equivalent English TCC. Although the opportunity for such a stay can be used as a means of delaying a proceeding, the matter is in the court's discretion and both parties must still have included all the necessary case management information in the form, and expended the accompanying time and cost of having assessed the primary claims, issues, witnesses, expert evidence and costs at this stage.

The frank and early exchange of information (including costs) in respect of English TCC construction claims, with a view to entering settlement discussions, is supported by the Pre-Action Protocol for Construction and Engineering Disputes (2nd edition, November 2016) which applies to most construction and engineering disputes, including professional negligence claims, in England and Wales. Its objectives are 'to exchange sufficient information about the proposed proceedings broadly to allow the parties to understand each other’s position and make informed decisions about settlement and how to proceed' and to make attempts to resolve the claims, including through the use of ADR. The Protocol expressly states that it must not be used as a tactical device to secure advantage for one party or to generate unnecessary costs, and that the cost of producing the claims and responses should be modest.

Again, based on the UK experience, this may be something that the TCD may wish to consider for the future. This could be introduced through the TCD's Case Management Directions Form which could be adapted so as to require the provision of such information in order to facilitate settlement between the parties. Some modification would be required to the TCD Rules and the Form, and it may also be appropriate to include a few key questions in the form in respect of costs to help focus the parties on the extent of costs incurred to date and anticipated expenditure.

Trial and pre-trial review

Another effective feature of the English TCC is the early fixing of a trial date (often at the case management conference) and vacating that date in only exceptional circumstances. This is a useful tool in bringing together, as early as possible, what is often a considerable number of witnesses and experts, as well as the parties and their advisors.

The TCD's proposed pre-trial review procedure suggests that it is not compulsory, although it proceeds in a similar way and requires the parties to complete a Pre-Trial Review Questionnaire in a very similar form to that of the English TCC. There may therefore be some scope of this issue to be clarified, as even a brief pre-trial review is beneficial to the management of proceedings and assists both the court and the parties' final preparation for the hearing.

Outlook

Although proceedings in the DIFC Courts’ TCD will lack the confidentiality that generally comes with arbitral proceedings, its establishment is a clear indication of the further development of the DIFC Courts and may well, in time, come to be seen as a viable alternative to the local Dubai courts and arbitration in the UAE. In any event, the TCD now offers potential litigants engaged in the technology and construction sectors a greater choice of dispute resolution forums in the UAE.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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