Enforcement of foreign judgments in Dubai - the DIFC Courts as a conduit jurisdiction

United Kingdom

A recent decision of the DIFC Court of Appeal, overturning the decision at first instance which we reported on here, has opened the door to a simplified method of enforcing a judgment of a foreign court in Dubai. The court’s decision confirms that the DIFC Courts can enforce a foreign judgment and, once enforced, it will be treated as an independent local judgment for the purposes of referring the judgment to the Dubai Courts for execution. The decision could potentially have a significant impact on the number of applications to the DIFC Courts for recognition and enforcement of foreign judgments.

 

DNB Bank ASA v (1) Gulf Eyadah Corporation (2) Gulf Navigation Holdings PJSC

Background
We previously reported on the decision at first instance here.

In short, the Appellant, DNB Bank, had successfully brought a claim in the Commercial Court of England and Wales for moneys due by the First Respondent (and the Second Respondent as guarantor) under a series of financial agreements.

Following its success in the English courts, the Appellant then filed a claim with the DIFC Courts for the recognition and enforcement of the English Court’s order. The Respondents argued that the DIFC Courts lacked jurisdiction to hear the claim as none of the “jurisdictional gateways” provided by the Judicial Authority Law (Dubai Law No. 12 of 2004, as amended by Dubai Law No. 2011)) applied. The Respondents also argued that the claim was an abuse of process as it was accepted that they held no assets in the DIFC and, in their view, the Appellant was using the DIFC as a “conduit jurisdiction” and not for any purpose relating to the DIFC itself.

First Instance Decision

At first instance, the judge held that the English Court’s order was a “foreign court order” and, as such, the DIFC Courts had jurisdiction to hear the claim and could accept the order for recognition and enforcement within the DIFC. Importantly, however, the judge also held that the DIFC courts had no power to refer “recognised foreign judgments” to the Dubai courts for execution under the reciprocal enforcement provisions of the Judicial Authority Law, thus confirming that judgment creditors were unable to circumvent the lengthy Dubai Court processes for ratifying foreign judgments by using the DIFC as a “conduit jurisdiction”.

In doing so, the lower court distinguished between arbitral awards and foreign court judgments or orders. Key to the reasoning behind this decision was the wording of Article 7(2) of the Judicial Authority Law on enforcement in Dubai, which expressly provides for the ability to refer “arbitral awards” ratified by the DIFC Courts to the Dubai Courts, but does not mention “recognised foreign judgments”.

DNB Bank appealed the judge’s finding that the DIFC courts could not refer foreign judgments to the Dubai courts for execution. Essentially, the issue before the DIFC Court of Appeal was “whether the enforcement of a foreign judgment by the DIFC Courts will result in a local judgment of the DIFC Courts which can then be executed in accordance with Article 7 of the [Judicial Authority Law].”

The Court of Appeal Decision

The Chief Justice, relying on the judgment of Lord Bridge in Owens Bank v Bracco [1992] 2 A.C. 443, took the view that an enforced foreign judgment becomes an “independent judgment” of the enforcing court. On this basis, the Chief Justice reversed the decision of the lower court and confirmed 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…” As such, the judgment “can therefore be executed under Article 7 of the [Judicial Authority Law]”.

Accordingly, the Appellant’s judgment from the English Court was, once granted recognition in the DIFC Courts, enforceable against the Respondents in Dubai (where their assets were located) as a judgment of the DIFC Courts (in accordance with the mechanism for the enforcement of DIFC Courts judgments onshore).

Conclusion and implications

In overturning the lower court’s judgment, this decision provides judgment creditors with an alternative, and greatly simplified, potential route for the enforcement of foreign judgments in Dubai. Judgment creditors seeking to enforce a foreign money judgment in Dubai can now look to the DIFC Courts for enforcement regardless of whether the debtor has any assets in the DIFC and then, relying on the reciprocal enforcement provisions of the Judicial Authority Law, seek to have that judgment executed by the Dubai Courts.

The decision emphasises the growing importance of the DIFC Courts as a “conduit jurisdiction” for, not only the enforcement of arbitral awards, but also foreign court judgments and court orders in circumstances where the debtor has assets in onshore Dubai (i.e. outside the DIFC financial free zone) or the wider UAE.

However, the Chief Justice sounded a note of caution to parties choosing to rely on this process, observing that “[t]he DIFC Courts are not concerned with what happens in the Dubai Courts in which the Claimant seeks to enforce its judgment as it does not have the jurisdiction to dictate what they should do. However, the holder of a DIFC Courts judgment recognising a foreign judgment will seek enforcement of the DIFC Courts judgment at its own risk…”

It remains to be seen how the Dubai Courts will deal with judgments of this nature.
Reference: DNB Bank ASA v (1) Gulf Eyadah Corporation (2) Gulf Navigation Holdings Pjsc [CA 007/2015] (25 February 2016)