United Arab Emirates: Using DIFC courts as a "conduit jurisdiction": Update on enforcing a foreign court judgment in the UAE

This article follows up on a point of law we mentioned in our article dated 9 February 2016, which concerned a July 2015 decision by H.E. Justice Ali Al Madhani in the Dubai International Financial Centre's Court of First Instance case of DNB Bank ASA v. (1) Gulf Eyadah Corporation (2) Gulf Navigation Holding PJSC (case reference CFI 043/2014).  In that decision the learned judge held that foreign judgments which are recognised by the DIFC courts cannot be referred to the other Dubai and UAE courts (that is, non-DIFC courts) for execution.  In his view, the meaning of the relevant part of Article 7 of Dubai's Law No 12 of 2004, The Judicial Authority at the DIFC (Judicial Authority Law) and Article 24 (1) of the DIFC Court Law is that execution of a foreign judgment shall not go beyond the jurisdiction of the DIFC court.  That case concerned the recognition and enforcement of an English High Court judgment of some USD 8.7m.

In his opinion, while the DIFC courts had jurisdiction to enforce and recognise foreign judgments, their powers could not be used to refer "recognised foreign judgments" to the non-DIFC courts for execution. 

That decision therefore meant that a party to litigation outside the UAE was not able to use the DIFC courts as a "conduit jurisdiction" by which a foreign court judgment is first taken to the DIFC courts for recognition, and then for the resultant DIFC court judgment (but not the foreign court judgment itself) to be taken to the UAE courts (that is, those courts outside the DIFC) for enforcement as judgment of the courts of Dubai. 

That conduit jurisdiction process was one considered by a party that was concerned that the non-DIFC courts in the UAE may not be entitled to enforce a foreign court judgment under the applicable UAE legislation, but that the DIFC courts would be able to recognise the foreign court judgment in the DIFC under the legislation applicable to the DIFC (namely the Judicial Authority Law).  This contrasted with the position concerning international arbitration awards where that conduit jurisdiction was possible for non-UAE arbitration awards.

However, and despite its overall success before the DIFC Court of First Instance, DNB Bank ASA (as appellant) appealed to the DIFC Court of Appeal that decision on the grounds that the learned judge had erred in finding that the DIFC Courts had no power to refer a foreign judgment to the non-DIFC courts for execution.  It is not usual for a successful party to appeal, but it was considered necessary in this case due to a particular finding by the learned judge which may have caused the appellant difficulties at a later date.

The appeal from that DIFC Court of First Instance decision came before the Chief Justice Michael Hwang SC, H.E. Justice Omar Al Muhairi, and Sir David Steel (as case reference CA 007/2015); that appeal court, by its judgment dated 25 February 2016, reversed the above DIFC Court of First Instance decision.

While considering the issue of jurisdiction, the DIFC Court of Appeal noted that it was Article 7 (2) of the Judicial Authority Law as being applicable to the execution of judgments, decisions and orders rendered by the DIFC Courts, as opposed to Articles 7(4) and 7(6) which had referred to in the DIFC Court of First Instance decision.  It was also held that the foreign judgment, once it is recognised by the DIFC courts, has the status of an independent local (that is, UAE) judgment.

In reaching its decision, the DIFC Court of Appeal applied common law principles (as it can in the DIFC), and decided that a foreign money judgment could be sued upon by way of a common law action, and as such the English judgment the subject of these proceedings was a foreign money judgment that can be enforced as an independent judgment of the DIFC Courts.  Thus, the judgment issued by the DIFC Court falls perfectly within the scope of Article 7(2) of the JAL.

Further, the Court of Appeal also held that the presence of assets in the DIFC is not a mandatory requirement for the DIFC courts having jurisdiction to enforce a foreign court judgment.

As a consequence of the DIFC Court of Appeal's decision, parties will now be able to use the DIFC courts as a conduit jurisdiction for the purposes of enforcing foreign court judgments.

This judgment thus indicates a further positive shift for the enforcement regime in the UAE for those seeking to enforce foreign judgments.  There is definitely a positive trend, which is being observed in the UAE courts that makes the foreign judgment enforcement process easier. 

However, a small note of caution; it will be sensible to await and see the attitude of the non-DIFC courts in the UAE to the DIFC's approach, as they may look at the matter afresh.

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