Legal update

The future of disputes in the Jebel Ali Free Zone

The Jebel Ali Free Zone Authority (Jafza) has signed a memorandum of understanding (MoU) with the Dispute Resolution Authority (DRA) – the umbrella organisation that oversees the administration and functions of the Dubai International Financial Centre (DIFC) Courts – giving its member companies and people living, working and investing in the Jebel Ali Free Zone access to a suite of dispute resolution services, including the Small Claims Tribunal (SCT) of the DIFC Courts.

The MoU states that Jafza and the DRA will cooperate “towards the creation and adoption of bespoke employment law dispute resolution provisions for Jafza and its member companies”.

It is not yet clear how the authorities propose to achieve the aims set out in the MoU. At present, the Jebel Ali Free Zone Rules and Regulations largely reflect the UAE Labour Law. Where disputes exist between employers and employees within the zone and cannot be resolved by Jafza mediation, the matter is referred to the Dubai Courts to apply the Jebel Ali Free Zone Rules and Regulations and the UAE Labour Law.

If the initiative proposed under the MoU is to proceed, it will need to be clarified whether the SCT would resolve employment disputes by reference to the legal framework that applies within the Jebel Ali Free Zone, or whether employers and employees would be given the chance to opt into DIFC law.

This bold and innovative development is likely to provide significant benefits to employers and employees alike, as the SCT offers a fast and efficient means of resolving disputes. If the initiative is successful, it is likely that similar agreements would be put in place with other free zone authorities in due course.

EOSG awarded for periods of employment outside the UAE

Employers in the UAE would be forgiven for thinking they do not have to pay end-of-service gratuity (EOSG) to an employee for a period of employment outside of the UAE – but it’s not always that simple.

In a recent ruling from the Dubai Court of Appeal, an individual who was employed by a UAE branch entity for one year received EOSG for the total period of his employment with the group, which totalled nine years (eight in Europe and one in the UAE).

The employee was initially employed by the ‘parent’ entity, which exercised a great degree of control over the UAE branch (a branch of the same entity) including management, finances and human resources. In fact, the UAE branch was no more than an outpost set up primarily for conducting sales in the country, which were carried out by only a handful of staff. When the employee was asked to relocate to the UAE, all documentation referred to an assignment and preservation of continuity.

The Court of Appeal upheld the Court of First Instance award in favour of the employee by awarding EOSG calculated to include the entire nine years of service. The employer has appealed to the Court of Cassation and final judgment is due in the first half of this year.