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Enforcing arbitration awards and foreign court judgments in Dubai

The status of the Dubai International Financial Centre (DIFC) Courts as a “conduit jurisdiction” for the enforcement of onshore Dubai-seated arbitral awards appears to be under threat, following the recent decisions of the Judicial Tribunal for the Dubai Courts and DIFC Courts (the JT) in Daman Real Estate Capital Partners Company LLC v Oger Dubai LLC and Dubai Waterfront LLC v Chenshan Liu;1 as well as the onshore Dubai Court of First Instance’s decision in Banyan Tree Corporate Pte Ltd v Meydan Group LLC.2

It appears (for now at least) that it remains possible to use the DIFC Courts as a conduit jurisdiction for the enforcement of foreign arbitral awards and foreign court judgments in onshore Dubai.

Background

The DIFC Courts have shown a willingness to act as a conduit jurisdiction for the enforcement of arbitral awards and foreign court judgments in onshore Dubai, offering potential benefits to award/judgment creditors by providing an enforcement route into onshore Dubai which avoids the often time-consuming and unpredictable processes of onshore Dubai Court proceedings.3

However, as a result, there have been concerns over an increase in conflicts of jurisdiction and/or judgments between the two Courts. 

The JT was established in June 2016 to resolve conflicts in jurisdiction and judgments between the DIFC Courts and the onshore Dubai Courts.

Decisions

Daman and Dubai Waterfront both concerned the status of DIFC Court proceedings to enforce onshore Dubai-seated arbitral awards in the DIFC Courts, while parallel proceedings to annul the awards in the onshore Dubai Courts were ongoing. In Dubai Waterfront, the award creditor expressed an intention to take the resulting DIFC Court judgment onshore to enforce in Dubai (ie to use the DIFC Courts as a conduit jurisdiction). The award debtors applied to the JT contending that jurisdictional conflicts arose between the DIFC and onshore Dubai Courts. In both cases, the JT held that there was a conflict of jurisdiction, that only one court should be involved in determining the issues, and that the relevant court should be the onshore Dubai Court.

In Banyan Tree, the onshore Dubai Court of First Instance ruled that the DIFC Courts had exceeded their “exceptional” jurisdiction when they recognised and enforced an onshore Dubai-seated arbitral award against a Dubai-based entity and, accordingly, that the DIFC Court decision was a “nullity”.4  The basis of the onshore Dubai Court decision was, in essence, that the onshore Dubai Courts were the courts of natural or default jurisdiction in that case, as the case had no other connection with the DIFC.

Comment

The JT’s decisions in Daman and Dubai Waterfront indicate that the onshore Dubai Courts will retain substantive jurisdiction to resolve any challenges to an onshore Dubai-seated arbitral award, before the award can be enforced within the DIFC (or before the DIFC Courts can be used as a conduit jurisdiction to enforce the award in onshore Dubai). This is likely to prevent creditors of onshore Dubai-seated awards from carrying out such enforcement until after the full onshore appellate/ratification process has been concluded.

The JT's decisions, and the onshore Dubai Court of First Instance’s decision in Banyan Tree, reflect a conservative approach by the onshore Dubai Courts to issues of jurisdiction when dealing with onshore Dubai-seated arbitral awards, and one which contradicts legislative provisions dealing with the jurisdiction of the DIFC Courts. 

For the moment, the DIFC Courts’ status as a conduit jurisdiction for the enforcement of foreign arbitral awards and foreign court judgments in onshore Dubai appears to remain intact:

  • In Daman, the JT stated that “[t]here is no similarity between this case and the case when it’s sought to enforce or annul a foreign arbitral award in several jurisdictions pursuant to the New York Convention 1958”, indicating that the JT’s approach may differ when considering the enforcement of arbitral awards not rendered in onshore Dubai.
  • The JT has, in subsequent decisions, dismissed applications by award/judgment debtors challenging enforcement of London-seated arbitral awards and English Court judgments within the DIFC.5 These applications appear to have been dismissed by the JT given the absence of parallel proceedings in the onshore Dubai Courts, rather than as a positive affirmation of the DIFC Courts’ jurisdiction, or on its use as a conduit jurisdiction. However, these decisions indicate that it should remain possible to use the DIFC Courts as a conduit jurisdiction for the enforcement of foreign arbitral awards and foreign court judgments in onshore Dubai.

In any event, the decisions of the JT and Dubai Court of First Instance do not affect the enforcement route between the DIFC Courts and the onshore Dubai Courts for the enforcement of DIFC-seated arbitral awards and DIFC Court judgments. This means the DIFC remains attractive as an arbitral seat or court jurisdiction where enforcement is likely to be focussed in onshore Dubai.

Footnotes

1. Cassation No. 1/2016 (JT), and Cassation No. 2/2016 (JT).
2. 
Case No.1619 of 2016.
3. As previously reported in the May 2016 edition of the Legal & Regulatory Risk Note.
4. The DIFC Court decisions in Banyan Tree were previously reported in the October 2015 edition of the Legal & Regulatory Risk Note.
5. Marine Logistics Solutions LLC and other v Wadi Woraya LLC and others (Cassation No. 3/2016 (JT)); IGPL v Standard Chartered Bank, (Cassation No. 4/2016 (JT)); and Gulf Navigation Holding PJSC v DNB Bank ASA, (Cassation No. 5/2016 (JT)).

Legal and Regulatory Risk Note
Middle East