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Draft of the Law Relating to Application of DIFC Laws

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Part 1: General

1. Title

The Law may be cited as "the Law Relating to Application of DIFC Laws No. I of 2003".

2. Legislative authority

The Law is made by the Chairman in accordance with the authority given to him by Dubai Law No. 3 of 2002.

3. Application of the Law

The Law applies in the jurisdiction created under Dubai Law No. 3 of 2002.

4. Date of enactment

The Law is made on [insert date of enactment].

5. Commencement

The Law comes into force on the date that the Law is enacted.

6. Interpretation

Schedule I contains:

(a) interpretative provisions which apply to the Law; and
(b) a list of defined terms used in the Law.

Part 2: Scope

7. Limitation on scope

(1) The Law shall not apply to:
(a) rights and obligations under negotiable Instruments to the extent such rights and obligations arise out of their negotiable character;
(b) any question of capacity or authority of natural persons, Bodies Corporate or other organisations;
(c) any question of capacity or authority of an agent not appointed under a contract; or
(d) any rights or obligations arising from the creation or winding up of a Body Corporate or other organisation.
(2) In relation to any matter which under this Law is governed by the law of another jurisdiction, any rule of the law of that jurisdiction applying the law of another jurisdiction in relation to that matter shall be disregarded.

Part 3: Applicable Law Of Contracts

8. Governing law

The existence, validity, effect, interpretation and performance of a contract, or any term thereof, including any requirements as to formality, shall be determined by the law which governs it.

9. Effectiveness of express choice of governing law

An express choice of a governing law in a contract shall be effective against all persons affected thereby.

10. Absence of express governing law

If the parties do not specify the governing law of a contract, the contract shall be governed by the law of the DIFC if any party to the contract is a licensee acting in its capacity as such.

11. Agency

(1) Where an agent is appointed under a contract, the capacity and authority of the agent shall be determined by the law which governs the contract.
(2) Where an agent contracts on behalf of a principal, the rights and liabilities of the principal as regards third parties shall be governed by the law which governs the contract between the agent and the third party.

12. Governing law of right of subrogation

Where a Person (the "creditor") has a contractual claim upon another (the "debtor"), and a third party has a duty to satisfy the creditor, or has in fact satisfied the creditor in discharge of that duty, the law which governs the contractual claim shall determine what extent to which the third Person is entitled to exercise against the debtor the rights which the creditor had against the debtor under the law governing the contractual claim.

Part 4: Submission To Jurisdiction In Contracts

13. Effectiveness of express submission to jurisdiction or arbitration

(1) A submission to the courts of a jurisdiction in a contract shall be effective.
(2) A submission to arbitration in a contract shall be effective.

Part 5: Property

14. Law governing rights in property

Subject to Article 16, the law of the jurisdiction where Property is located governs:

(a) the classification of the Property as real Property or personal property; and
(b) the validity and extent of interests in the Property.

15. Law governing validity of transfer of property

(1) Subject to Article 16, the law of the jurisdiction where Property is located governs:
(a) the validity of transfer of the property;
(b) the effect on the proprietary rights of the parties thereto and of those claiming under them in respect thereof.
(2) Where Property is in transit or its location is not known, the validity of a transfer is governed by the law governing that transfer.

16. Securities

(1) The law of an issuer's jurisdiction governs:
(a) the validity of a security;
(b) the rights and duties of the Issuer with respect to registration of transfer;
(c) the effectiveness of registration of transfer by the issuer; and
(d) the validity and extent of any third party Property interest in a Security.
(2) The law of a Securities intermediary's jurisdiction governs:
(a) acquisition of a Security entitlement from the Securities intermediary;
(b) the rights and duties of the Securities intermediary and entitlement holder arising out of a Security entitlement; and
(c) the validity and extent of any third party Property interest in a Security entitlement.
(3) The law of the jurisdiction in which a Security Certificate is located at the time of delivery governs the validity and extent of any third party Property interest against a Person to whom the Security Certificate is delivered.
(4) For the purpose of this Article an "issuer's jurisdiction" is the jurisdiction under which the Issuer of the Security is organised or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified by the Issuer.
(5) For the purposes of this Article a "securities intermediary's jurisdiction" is:
(a) the jurisdiction in which the Securities account is expressed to be maintained in the agreement governing, if any;
(b) if paragraph (a) does not apply, the jurisdiction in which the office identified in an account statement as the office serving the entitlement holder's, account is situated; failing which
(c) the jurisdiction in which head office of the Securities intermediary is situated.

Part 6: Trusts

17. Recognition of trusts

(1) A trust which is:
(a) expressly constituted under the law of another jurisdiction; or
(b) created by the law of another jurisdiction.
shall be recognised as a trust.
(2) The existence, validity and interpretation of a trust constituted in accordance with Article 17(1)(a) shall be determined by the law under which the trust is constituted.
(3) For the purpose of this Article, the law under which the trust is constituted shall be:
(a) in the case of a trust recognised under Article 17(1)(a) the law set out in the Instrument constituting the trust; and
(b) in the case of a trust recognised under Article 17(1)(b) the law of the jurisdiction by whose law the trust is created.