This article was originally published on www.gulfbusiness.com in March 2016.
Established in 2004, the Dubai International Financial Centre (DIFC) Courts operates in the English language, unlike the rest of the UAE’s Arabic-speaking courts. While originally intended to only settle civil and commercial disputes which are connected to the DIFC Free Zone, Dubai Law No. 16 of 2011 now enables any party around the world, regardless of connection to the free zone, to choose the DIFC Courts as their governing jurisdiction.
A COMMON LAW COURT IN A CIVIL LAW JURISDICTION
With judges appointed from the UAE and from common law jurisdictions such as the UK, Singapore, Malaysia, and Australia, the DIFC Courts is considered to be part of the Dubai’s legal system despite being common-law based. In contrast, the rest of the UAE legal system is civil law-based, influenced by French, Roman, Egyptian and Sharia law principles, which, unlike the common law system, does not rely on precedents (previous court decisions).
Built upon careful selection of international best practices, the DIFC Courts is comprised of a Court of First Instance and a Court of Appeal. In addition, a Small Claims Tribunal (SCT) was established to resolve claims of less than AED 500,000 (for employment-related issues) and up to AED 1 million for other matters where the parties have specifically chosen to have their case resolved at the SCT.
Having an international judiciary with significant experience, the DIFC Courts is the leading English dispute resolution centre in the Middle East. It is advantageous to other courts in the region because its common law principles are familiar to many international parties, it has expedient and efficient resolution of disputes, and especially since it permits the successful party to recover most of its litigation costs.
ENFORCING FOREIGN JUDGMENTS
On February 25th, the DIFC Court of Appeal issued a landmark judgment making it easier for foreign judgments to be enforced here.
Generally, a court decision can only be applied in the jurisdiction or state in which it has been rendered. This means that a judgment by a Thai court ordering the defendant to pay the winning plaintiff a certain amount of money can only be enforced in Thailand, which may not help the plaintiff if a Canadian-based defendant does not have any assets in Thailand.
However, if there are treaties in place between jurisdictions, e.g. if both Canada and Thailand have reciprocal agreements to recognise and enforce each other’s court decisions, then the plaintiff can seek to have a Canadian court mandate the defendant pay the winning plaintiff from its assets in Canada.
As the UAE has very few such treaties with countries outside the GCC or MENA, it has been challenging to enforce foreign judgments from outside the region.
With the goal of facilitating international judicial collaboration, the DIFC Courts have signed ‘Memoranda of Guidance’ about reciprocal enforcement of judgments with several international courts such as those in England and Wales, the state of New York which covers State and Federal Courts in New York, Singapore, Kazakhstan, Kenya, and Australia.
While not mandatory or legally binding, these memoranda set out a cooperative relationship in which the courts may enforce the final judgments of the other court.
THE DNB BANK CASE
In the ground-breaking DNB Bank ASA v Gulf Eyadah last month, DNB Bank won its case at the DIFC Court of Appeal against the defendants Gulf Eyadah and Gulf Navigation Holdings, a Dubai-based shipping company and its affiliate.
A noteworthy point is that the parties had agreed in their loan agreement to be governed by English law and an English court did make a finding in favour of the plaintiff bank. In 2014, the Commercial Court of England and Wales had required the defendants to pay DNB Bank USD 8.7 million plus costs for their default of bank loans, a judgment that DNB sought to apply here in Dubai.
As the UAE itself does not have a reciprocal enforcement treaty with the UK, this would have previously been incredibly difficult to achieve. However, with the memorandum signed by the DIFC Courts and the Commercial Court of England and Wales, DNB was now able to apply to the DIFC Courts to have its judgment recognised in Dubai.
Chief Justice Michael Hwang, writing on behalf of the Court of Appeal, clearly stated that “a foreign judgment, when granted recognition in the DIFC Courts, therefore becomes a local judgment of the DIFC Courts and should therefore be treated as such by the Dubai Courts”.
The Court also confirmed that the DIFC has jurisdiction to enforce foreign judgments even where the defendants do not have assets in the DIFC since the DIFC Courts can be used as “a conduit jurisdiction to enforce a foreign judgment”.
IMPLICATIONS OF LANDMARK RULING
What this effectively means is that this DIFC judgment can then be executed and enforced by Dubai courts outside of the DIFC. By having the DIFC judgment recognised by Dubai courts means that it will also be recognised by the other emirates in the UAE.
However, the implications of the DNB case do not end there. Rather, by extension, the judgment can now be enforced in countries with which the UAE has a treaty, such as the GCC (Saudi Arabia, Bahrain, Kuwait, Oman, and Qatar) pursuant to the GCC Convention, the League of Arab States (comprising Egypt, Iraq, Jordan, Lebanon, Saudi Arabia and Syria) pursuant to the Riyadh Convention, China, and France.
The DNB Bank case is such a critical decision because it had always been near impossible to enforce a foreign judgment in Dubai due to the lack of bilateral treaties between UAE and international jurisdictions.
However, with the growing list of signatories to DIFC Courts’ Memoranda of Guidance of Enforcement, commercial parties both from and outside of the UAE can be assured that their winning judgments from foreign courts and international arbitration awards can now be enforced in the UAE.
The DIFC Courts’ had also released a Practice Direction last year enabling its arbitration judgments to be upheld in the 150 signatory countries to the New York Convention, further increasing the utility and mobility of the Courts’ judgments.
It is the business-friendly, practical decisions such as these that have undoubtedly contributed to the DIFC Courts’ rapidly growing number of cases, with their case values reaching USD 1.2 billion last year.