In the DIFC Court of Appeal’s recent decision DNB Bank ASA v. Gulf Eyadah [CA-007-2015], the DIFC court has confirmed its availability as a so-called ‘conduit’ jurisdiction. Parties may opt to enforce their foreign money judgment in the DIFC to then have it referred for execution to a judge in the Dubai courts. This decision reverses the lower court’s position, potentially paving the way for enforcement of foreign judgments against assets in Dubai.
Until recently, enforcing a foreign court judgment against assets located in Dubai often proved to be a rocky road. The odds have now improved with the DIFC Court of Appeal decision in DNB Bank ASA v. Gulf Eyadah [CA-007-2015].
In its judgment of 25 February 2016 the DIFC Court of Appeal1 confirmed that:
- It has jurisdiction to enforce a foreign judgment even if no assets are located within the DIFC.
- This judgment may then be referred to the Dubai courts for execution outside the DIFC under Article 7(2) of Dubai’s Judicial Authority Law.
As such, the DIFC court has confirmed its availability as a so-called ‘conduit’ jurisdiction, by which parties opt to enforce their foreign money judgment in the DIFC to then have it referred for execution to a judge in the Dubai courts.
One reason why parties prefer taking this additional step through the DIFC courts rather than the direct route through the Dubai courts is that the prospects of enforcement are significantly higher in the DIFC court than they are in the Dubai courts. At the enforcement stage, the DIFC court merely reviews whether the foreign court had jurisdiction over the initial dispute under common law principles – it does not look into the merits of the judgment.
In referring the judgment for execution to the Dubai courts, the DIFC court confirmed that its judgment enforcing the foreign judgment is an independent domestic judgment which falls within Article 7(2) of the Judicial Authority Law (Dubai Law No. 12 of 2004), thus opening the door for the execution by the Dubai courts – a point which has been rejected in the first instance in the DIFC court proceedings.
This ruling puts foreign court judgments in a similar position to that of domestic and foreign arbitral awards, which may also be recognised and enforced in the DIFC courts and then referred to the Dubai courts for execution. Meydan Group LLC v. Banyan Tree Corporate Pte Ltd [CA-005-2014] as well as (1) X1, (2) X2 v. (1) Y1, (2) Y2 [ARB 002/2013].
Potential for Change
Previously, the DIFC courts were not available as a conduit jurisdiction. The Court of First Instance in DNB Bank had held that the court had no power to refer ‘recognised foreign judgments’ to the Dubai courts for execution. Therefore, a party wanting to execute a foreign court judgment against assets in Dubai would have to seek enforcement and execution before the Dubai courts under the UAE Civil Procedure Law.
As a practical matter, Dubai courts will not enforce a foreign judgment unless there is a treaty in place between the UAE and the foreign jurisdiction for the reciprocal enforcement of judgments.
The UAE Civil Procedure Law provides that foreign judgments shall not be enforced if the UAE courts would have jurisdiction to hear the dispute, which may already be the case if a defendant, or some of the defendant’s assets, are located within the UAE.
The practical effect of this decision will not be felt until the execution stage. Under the Judicial Authority Law, the Dubai Execution Court should treat the DIFC court judgment like any other local judgment and execute it without review of the merits. Until the process is tested, however, there is no certainty as to how the Dubai courts will respond when it comes time to collect against onshore assets.
There is also the risk that the Legislative Council will amend the relevant legislation to plug what some may see as a loophole.
- The Court of Appeal is the highest court in the DIFC and no further appeal will be heard.
Client Alert 2016-069