Limits to the enforcement of foreign judgments in onshore Dubai through the conduit of the DIFC Courts
PUBLISHED ON: 10/15/2015
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According to a recent decision of the DIFC Court of First Instance, the possibility for the DIFC to act as a conduit jurisdiction for the enforcement of arbitral awards in onshore Dubai does not extend to the enforcement of foreign judgments.
Reminder of the relevant Legal Framework
In 2009, the DIFC Courts and the (onshore) Dubai Courts signed a Protocol on the mutual recognition and enforcement of decisions between the two jurisdictions1.
Law No. 12 of 2004 as amended by Law No. 16 of 2011 (the "Judicial Authority Law") provides, in Article 7(2), that judgments handed down by the DIFC Courts and arbitral awards ratified by the DIFC Courts can be enforced outside the DIFC by the Courts with which the DIFC Courts have signed a protocol2 - which therefore applies to the Dubai Courts.
The DIFC, a conduit jurisdiction for the enforcement of foreign (and domestic) awards in onshore Dubai
In recent years, a number of parties successfully went before the DIFC Courts to obtain the recognition of foreign arbitral awards rendered in their favour, to then take the DIFC Courts' ratification to the Dubai Courts and enforce against the award debtor in onshore Dubai.
In (1) X1, (2) X2 v (1) Y1, (2) Y2 (DIFC Court of First Instance, 2014 (undated) [ARB 002/2013]), the DIFC Courts confirmed their status as a conduit jurisdiction for the enforcement of foreign arbitral awards outside their jurisdiction (see para. 41 of the judgment3).
In Banyan Tree Corporate PTE Ltd v Meydan Group LLC (DIFC Court of First Instance, 27 May 2014 (decision on jurisdiction) and 2 April 2015 (judgment on merits) [ARB 003/2013]), the DIFC Courts confirmed the same with regard to domestic arbitration awards.
In other words, the DIFC Courts allowed creditors of international and/or domestic arbitration awards to enforce those awards against assets of award debtors in onshore Dubai through the DIFC Courts, even in the absence of any connection with the DIFC.
The DIFC, not a conduit jurisdiction for the enforcement of foreign judgments in onshore Dubai
In contrast to the above, the DIFC Court of First Instance held in a recent decision that the DIFC legal framework does not allow a foreign judgment, recognised by the DIFC Courts, to be referred to the Dubai Courts for enforcement against assets located in onshore Dubai.
In DNB Bank ASA v Gulf Eyadah Corporation and others, the claimant lodged a claim with the DIFC Courts seeking the recognition and enforcement of a judgment issued by the English High Court ordering the defendants to pay US$ 8.7 million plus costs under various finance documents. Being based in onshore Dubai, the defendants (like the claimant) had no assets located in the DIFC.
The defendants argued that the DIFC Courts did not have jurisdiction to recognise and enforce the English judgment, and that the claimant's attempt to do so was an abuse of process.
HE Justice Ali Al Madhani dismissed the argument and found that he was compelled to recognise the English judgment and make it enforceable within the DIFC, irrespective of the fact that the defendants had no assets in the DIFC (see paras 26 -34 of the judgment).
However, he also found that "this Court has no power to refer Recognised Foreign Judgments to Dubai Courts for execution" (see para. 52 of the judgment). This is because, he explained, Article 7(2) of the Judicial Authority Law only refers to judgments rendered by the DIFC Courts on the one hand, and arbitral awards ratified by the DIFC Courts on the other hand. No reference is made to judgments made by foreign courts.
It remains to be seen whether the decision of the DIFC Court of First Instance will be upheld on appeal4: should it be the case, the claimant will have no other choice than to start enforcement proceedings in the Dubai Courts, which might prove a lengthy and uneasy process.
In the meantime, parties looking to benefit from the DIFC Courts as a conduit jurisdiction for enforcement purposes might be well advised to rely on arbitration as their dispute resolution mechanism.
1 Protocol of enforcement between Dubai Courts and DIFC Courts, 23 April 2009, available at: http://difccourts.ae/wp-content/uploads/2015/08/Protocol-of-Enforcement-betwen-the-DIFC-Courts-and-Dubai-Courts-23-April-2009.pdf
2 Article 7(2) of the Judicial Authority Law No. 12 of 2004 as amended provides: "Where the subject matter of execution is situated outside the DIFC, the judgments, decisions and orders rendered by the Courts and the Arbitral Awards ratified by the Courts shall be executed by the competent entity having jurisdiction outside DIFC in accordance with the procedure and rules adopted by such entities in this regard, as well as with any agreements or memoranda of understanding between the Courts and these entities"
3 Sir John Chadwick, Deputy Chief Justice of the DIFC Courts, ruled as follows: "I reject the submission - advanced under paragraph 56 of the Defendants/Applicants' skeleton argument - that it cannot have been the intention of the Dubai legislator in promulgating the Judicial Authority Law to allow the DIFC Courts to be used as a conduit jurisdiction for enforcement of an arbitration award against assets in Dubai (outside the DIFC) in circumstances where the owner of those assets has a legitimate expectation that such enforcement action can only be properly brought in the Dubai Courts. It seems to me plain, from the provisions in Article 7 of the Judicial Authority Law, that the legislator did contemplate that there could be circumstances in which recognition of a foreign arbitral award by the DIFC Court could trigger enforcement proceedings, through the Dubai Courts, against assets in the Emirate of Dubai (but outside the DIFC) without the need for separate recognition of the award by the Courts of Dubai; and vice versa"
4 A permission to appeal the 2 July 2015 judgment was granted by Order of Justice Sir Richard Field on 9 September 2015