01 Sep 2009

CONTRACTS WITH THE GOVERNMENT OF DUBAI

Authored by: Valeriya Lysenko

CONTRACTS WITH THE GOVERNMENT OF DUBAI

When dealing with the Government of Dubai, its establishments, authorities and agencies, and corporations affiliated to or owned by the government and departments (Dubai governmental entities), the negotiating ability of a contractual counterparty (and the enforceability of the counterparty’s preferred contractual provisions) is affected by special legislative acts passed at the Dubai local level, in particular, two 1988 Instructions by HH the Ruler of Dubai and Dubai Law No. 6 of 1997 as amended.

In brief:

  • In Dubai, the ability to negotiate a contract with Dubai governmental departments may be limited.
  • Procurement and other Dubai local legislation affect the choice of law, jurisdiction, dispute resolution and other contractual provisions.
  • It is possible to reduce the impact of the special Dubai local legislation in certain circumstances.

Pursuant to the 1988 Instructions:
 
A contract to which a Dubai governmental entity is a party may not provide for arbitration proceedings outside Dubai, may only provide for the laws and customs prevailing in Dubai as the governing law and dispute process concerning arbitration and procedures relating thereto, and any provision to the contrary will be null and void and will not bind the Dubai governmental entity.
 
Local (we consider these to be Dubai local) laws apply to contracts to which a Dubai governmental entity is a party. Such contracts may not contain a term providing for the application of any foreign law with respect to the subject matter thereof. Nor may it contain any term imposing a FIDIC condition, whether incorporated by reference or forming part of the contract as an attachment thereto (other than in exceptional circumstances and subject to HH the Ruler of Dubai’s prior written approval). Any conflicting contractual provision will be deemed null and void and will not bind the relevant Dubai governmental entity.
 
Dubai Law No. 6 of 1997 as amended has been issued pursuant to, among other legislative acts, the 1988 Instructions and governs the terms of procurement contracts to which Dubai governmental entities are party. Due consideration of this law is required, particularly in the context of the proposed contractual provisions required or requested by contractual counterparties of the Dubai governmental entities, including as may be relevant to the limitation of liability, warranty period, termination of contract, jurisdiction, contractual referral of disputes to arbitration outside of Dubai and application of the laws other than the laws prevailing in the Emirate of Dubai.
 
Application of certain provisions of the Law No. 6 of 1997 as amended to contracts with a governmental entity can be and has in certain instances been exempted by HH the Ruler of Dubai. The most recent amendment to the Law No. 6 of 1997 allows contracts to be concluded with foreign companies operating within or outside the UAE, and companies established in the free zones, where the relevant governmental department is in need of certain supplies or services for which no suitable alternative exists with the “local national” companies.
 
Recently, the Higher Committee for Financial Policies in the Emirate of Dubai has been given the power, among other things, “when necessary,” to exempt such governmental entities from, among other local legislative acts, the 1988 Instructions and certain articles of the Law No. 6 of 1997 as amended.