Government-owned companies (GOCs) play a pivotal role in the UAE’s economy, significantly influencing sectors such as construction, infrastructure, energy, oil and gas, and utilities. They invest heavily in various sectors, promoting growth in architecture, technology, and sustainability.

In recent years, and in view of the constructional expansion in the UAE, GOCs have been directly responsible for the major and biggest construction projects throughout the UAE. For the implementation of those large projects, GOCs, acting as employers (or clients), rely on contractors from the private sector, whether local, international, or a mix of both (normally through joint ventures). On occasions, disputes arise between the parties, prompting jurisdictional questions when such disputes are subject to local UAE Courts (as opposed to arbitration) as explained below. Any mistake in filing the case could result in dismissal of the case, or a referral from one division of the court to another, depending on the scenario, resulting in significant financial losses to the contractors and delays in recovering their dues. 

Before determining the court of competent jurisdiction within the UAE to whom the dispute should be referred, it is necessary to understand the nature of the judicial system in the UAE. Up until recently, three out of seven Emirates had their own judicial systems coexisting with the federal judiciary body – Abu Dhabi, Dubai, and Ras Al Khaimah. These Emirates were joined last October by Sharjah, who has also established its own judiciary.

Hence, if a dispute arises between a GOC and another party in one of the four Emirates mentioned above, the question of which judicial system (federal or Emirate level) is competent to preside over the dispute would arise.

In disputes between GOCs and third parties, which court has jurisdiction to hear the dispute, when the parties have agreed on the jurisdiction of local courts?

Triumph & Co. is involved in a construction dispute pertaining to a large construction project, representing the contractor in a one billion dirhams claim. The GOC is indirectly owned by the government of an Emirate in the UAE, only operating and carrying out its business and affairs in that Emirate. Before filing the case to the courts, a question as to the correct forum (Emirate courts or federal courts) arose. 

Regarding a government-owned company or a company established by federal decree of law, that is in dispute with a private-sector company, federal courts may have jurisdiction under specific conditions under the UAE Constitution and the UAE Code of Civil Procedures. 

According to a number of important judicial precedents, the following are established:

• Cross-Emirate Cases: If the dispute with a GOC spans two or more emirates, a federal court may assume jurisdiction if it involves parties or matters across emirate borders. 
• Federal Nature of the corporation: If the company is established by federal legislation or is considered part of a federal authority such as a central bank, ministries, and so on, and its activities span multiple Emirates, a federal court may assume jurisdiction.
• GOCs are owned by the government of a specific Emirate and are licensed within that Emirate (with potential licenses in other Emirates should such GOCs have operations in other Emirates requiring them to get licensed).

Thus, the scope of the jurisdiction of the federal courts is limited, and the rule for local jurisdiction applies when a GOC is operating only within a specific Emirate. This is largely because certain Emirates prefer to maintain autonomy over legal matters involving their GOCs to control outcomes that may affect their economic and public interests. Moreover, Local courts may have specialized knowledge or tailored processes for handling cases involving GOCs, as these disputes are often specific to the economic activities and regulatory framework of the Emirate.

Furthermore, another question that arises when dealing with a GOC when the proper jurisdiction of the Emirate level courts has been established is whether the dispute should be referred to the commercial court of first instance or the administrative division of the same court.

Therefore, filing the lawsuit before a court, if lacking jurisdiction, has significant consequences. 

First, if the lawsuit is brought before the federal court when in fact it lacks jurisdiction, the lawsuit will get dismissed, and the claimant shall file another completely new lawsuit before the local courts, resulting in significant financial losses (including loss of court fees) and delays. 

Filing cases before the federal courts when the local Emirate level courts have jurisdiction will result in dismissal of the case for lack of jurisdiction.

Second, if the lawsuit was filed before the first instance courts of a specific division (for example commercial), when the jurisdiction is for the administrative courts, this would entail internal referral of the case between courts of one division to courts of the other division that actually have jurisdiction, without loss of court fees.

Filing cases before the competent courts but wrong division (commercial instead of administrative for example) would result in internal transfer of the case from one division to another.

In instances where the GOCs is being sued (or suing) in connection with a matter unrelated to the work and operations of said GOCs, the courts have established that the jurisdiction would belong to the commercial courts (or other divisions depending on the nature of the matter), as opposed to administrative courts who only have jurisdiction over matters involving the GOCs operations and core nature, not when they’re dealing with third parties for the supply of services such as construction, which is unrelated to the core operations of the GOCs and the nature of its operations.

The UAE’s legal system is a blend of federal and local jurisdictions, with the federal judiciary overseeing matters of national importance and local courts handling issues specific to their emirate. In cases involving a specific emirate owned corporation, this principle often leads to the local judiciary’s jurisdiction taking precedence.

Only under exceptional circumstances such as cross-emirate disputes or cases of federal nature-can the federal courts become involved.

This article has been prepared by:

Mariam Alshamsi–Partner-Dubai

Georges Abou Zogheib– Partner, Dubai

Issam Bader-Partner, Dubai

Ahmad Rima– Associate, Dubai/Beirut