In another first in the DIFC Courts, Fichte &  Co recently represented the Defendant in the case of DNB Bank ASA v. (1) Gulf Eyadah Corporation (2) Gulf Navigation Holding PJSC, (CFI 043/2014 of 2nd July 2015), which resulted in the first judgment concerning the enforcement of a Foreign judgment within the DIFC.

In a ruling by H.E. Justice Al Madhani, a resident UAE Judge of the Court of First Instance (CFI, the DIFC CIF has held that:

“Unlike the situation in cases where an Arbitral Award is brought for recognition and then for enforcement, Recognised Foreign Judgments or Orders by the DIFC Courts cannot be said to be referred to the Dubai Courts for execution beyond the DIFC jurisdiction”

And, importantly, that the DIFC Court:

“cannot be said to be a conduit jurisdiction Court if the matter before it is related to a Foreign Court Judgment.”

The practical effect of the Judgment is that a Claimant cannot use the DIFC Court as a “conduit jurisdiction” to execute against a Defendant’s assets in Dubai (onshore), but must, instead commence separate and independent original proceedings in the onshore Courts of Dubai before a Foreign Judgment can be recognized, enforced, or executed there. In short, the ruling means that whilst there can be recognition of foreign judgments, there can be no referral to the Dubai courts for enforcement.

Background

The Claimants had sought enforcement of a foreign judgment obtained in the High Court of London which required the Defendant, the judgment debtor, to pay the judgment creditor US$ 8.7 million plus costs.

The Claimant’s core contention was that following the decisions of the DIFC Court of Appeal and CFI in Banyan Tree Corporate PTE Ltd v Meydan Group LLC (CA 005/2014) and X1 & X2 v Y1 & Y2 (ARB 002/2013), the DIFC Court could be used as a “conduit jurisdiction” to obtain execution against the Defendant’ assets in Dubai (onshore).

The Defendants had challenged the Court’s jurisdiction in this matter, essentially on the basis that in the absence of any assets in the DIFC, a foreign judgment could not be enforced against it through the DIFC Courts. The Defendants challenged the jurisdiction of the DIFC Court under Rules 12.1(1) and/or (2) of the Rules of the DIFC Court on the basis that none of the gateways set out in Article 5 of the Judicial Authority Law applied and that the claim was an abuse of process in that it had been brought in the DIFC Court for the sole purpose of executing against assets in Dubai (onshore) without having to make an application to the onshore Courts of Dubai. The Defendants argued that the Claimant should be prevented from using the DIFC Court as a “conduit jurisdiction” to execute against assets outside the DIFC.

The main issue, therefore, for the courts, was whether the DIFC Courts could act as a “conduit” jurisdiction on the basis that the Claimants were at all times aware in their application that the Defendants held no assets within the jurisdiction of the DIFC.

The Judgment

Based on an analysis of Articles 5 and 7 of the Judicial Authority Law and Article 24 of the DIFC Court Law, H.E.Justice Al Madhani found that whilst the DIFC Court did have jurisdiction to recognize and enforce a foreign court judgment, however, that no such order for recognition or enforcement could be referred to the onshore Dubai Courts or could be said to be binding on such courts.

In particular, the Court decided, among other things, that:

44. […]45. Article 7(2) of the Judicial Authority Law […] provides that:

‘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[,] [s]uch execution shall be subject to the following conditions.’

46. In this Article there is reference to judgments, decisions and orders rendered by the DIFC Courts and the Arbitral Awards ratified by the DIFC Courts to be referred for execution but no reference at all to any foreign judgment recognised by the DIFC Courts. The Article has excluded Recognised Foreign Judgments from that rule. This is not by mistake, because Articles 7(4) and 7(5) of the said law stated that Dubai Court decisions and Arbitral Awards ratified by the Dubai Courts could be brought for execution in the DIFC but not Foreign Courts Judgments recognised by Dubai Courts.
47. Recognised Foreign Judgments were only mentioned in Article 7(6) […]
‘The judgments, decisions, orders and ratified Arbitral Awards rendered outside DIFC by any court other than Dubai Courts shall be executed within DIFC in accordance with the procedure prescribed in the Rules of the Courts.’
48. In my view, the meaning of Article 7 of the Judicial Authority Law […] along with Article 24(1) of the Court Law in regards to Foreign Court Judgments is that although this Court may execute judgments, decisions and orders rendered by any Recognised Court other than Dubai Courts, that execution shall not go beyond the jurisdiction of this Court which requires this Court not to refer Recognised Foreign Judgments to the Dubai Court for execution and vice versa.
49. This would surely lead me to say that this Court cannot be said to be a ‘conduit jurisdiction Court’ if the matter before it is related to a Foreign Court Judgment. There shall be no contradiction between my finding and the finding in the Banyan Tree case and XX v YY, since these cases involved Ratified Arbitration Awards that were said to be able to be sent for execution between the DIFC Courts and Dubai Courts according to Article 7(3)(4) and (5). For these reasons one cannot imagine that the DIFC Courts are obliged to enforce foreign court judgments in the same way they are obliged to enforce Foreign Arbitral Awards (XX v YY) or even domestic arbitral awards (Banyan Tree).
50. One might argue that Foreign Judgments or Orders recognised by the DIFC Courts come under the meaning of ‘the judgments, decisions and orders rendered by the Courts’ in Article 7(2) and therefore can be referred to the Dubai Courts for execution. In my view it does not, and if that were the correct approach there would be no need to particularly mention or add ‘Arbitral Awards ratified by the Courts’ in separate words to that provision. The acknowledgment of the ‘Arbitral Awards ratified by the Courts’ means that a distinction must be drawn to what this Court issues or renders (judgments, decisions and orders) by itself and between what is rendered or issued by another court or institution and then brought for recognition or ratification.
51. My interpretation of Article 7 is that a Recognised Foreign Court Judgment or Ratified Arbitral Award cannot be said to be within the meaning of ‘the judgments, decisions and orders rendered by the Courts’.
52. In conclusion, although this Court has jurisdiction to recognise and enforce Foreign Judgments and that power shall be within the DIFC and cannot extend beyond the DIFC, this Court has no power to refer Recognised Foreign Judgments to Dubai Courts for execution. […]” (italics in the original
The matter is currently awaiting permission to appeal by both parties. However, in the meantime the situation remains at present, pending the outcome of the appeals, that whilst the DIFC courts have accepted jurisdiction and enforcement of foreign arbitral awards, the ruling of H.E. Justice Al Madhani means that the DIFC Courts can only serve as a conduit jurisdiction in the enforcement of foreign arbitral awards and not in regards to the enforcement of foreign judgments.

The Gulf Widens on Enforcement of Foreign Judgment’s was last modified: April 8th, 2019 by Fichte Legal