As I anticipated in Part 1 of this blog, recent case law precedent of the Dubai International Financial Centre (DIFC) Court of First Instance (the CFI) has revived the DIFC Courts’ role as a conduit jurisdiction for the recognition and enforcement of a domestic non-DIFC award for onward execution onshore. By way of reminder, in Isai v Isabelle, the CFI already confirmed the concurrent jurisdiction of the onshore Dubai and the offshore DIFC Courts for recognition and enforcement of a DIFC-LCIA award rendered in onshore Dubai (as the seat of the arbitration) even in the absence of any assets of the award debtor offshore.
Most recently, however, in Chenshan Liu v Dubai Waterfront LLC, the CFI has extended the logic it applied to the determination of its own jurisdiction in Isai v Isabelle to an application for the offshore recognition and enforcement of a DIAC award rendered in a Dubai-seated arbitration for onward execution onshore. In doing so, it held the award debtor, Dubai Waterfront LLC, liable for repayment of a deposit paid for the intended purchase of a plot of land on the Dubai waterfront. The CFI promptly granted an order for recognition and enforcement in the summer of 2016. In response, the award debtor filed an application to set aside before the DIFC Courts and moved for annulment of the award before the onshore Dubai Courts. In both proceedings, the award debtor raised, inter alia, the purported invalidity of the arbitration agreement as a ground for a successful challenge.
Shortly after, in around September 2016, following the establishment of the JT, the award debtor challenged the jurisdiction of the DIFC Courts before the JT, contending that Articles 42 and 43 of the DIFC Arbitration Law did not apply to Dubai International Arbitration Centre (DIAC) awards. The JT found in favour of the onshore Dubai Court’s jurisdiction to annul and enforce the award on the basis of “the general principles of law embodied in the procedural laws” (see Dubai Water Front LLC v Chenshan Liu). A dissenting minority (composed of the DIFC Courts’ members of the JT) found that the Dubai Courts, in their capacity as the curial courts, did have jurisdiction to annul the award, but that the DIFC Courts had “compulsory and exclusive jurisdiction to entertain an application for recognition and enforcement within the DIFC” (as above). In the prevailing circumstances, the DIFC Courts stayed their proceedings.
In 2017, the Dubai Courts rejected the award debtor’s application for annulment. It was then that the award creditor applied to the DIFC Courts to reinstate the original 2016 DIFC Court Order for recognition and enforcement. The CFI, in turn, found that it retained “residual jurisdiction” for the recognition and enforcement of the award on the basis of:
- The original and exclusive jurisdiction accorded to the CFI over any claim or actions over which the courts have jurisdiction in accordance with the DIFC laws.
- Article 24(1) of DIFC Law No. 10 of 2004, which accords jurisdiction to the DIFC Courts to ratify any recognised arbitral award.
On this basis, Sir Justice David Steel of the CFI concluded as follows:
“[t]here is nothing in the Decree [No. (19) of 2016] to suggest that the Joint Judicial Committee [i.e. the JT] has executory power to override the statutory jurisdiction of either [the onshore Dubai or the DIFC] court. It follows that once the Court of Cassation had dismissed the Defendant’s appeal and the administrative stay had been lifted, the Claimant was entitled to reactivate the recognition proceedings. I reject the submission that the DIFC Courts had no residual jurisdiction in the matter.”
He reinstated the original DIFC Court order for recognition and enforcement. In arriving at this conclusion, Sir Justice Steel expressly discounted the proposition that, under Decree No. (19) of 2016, “once the Joint Judicial Committee decides on the appropriate court to have jurisdiction, there is no room for the other court to make any order whatsoever in relation to the global dispute in any of its aspects.” According to Sir Justice Steel:
“[t]his would lead to a black hole where it would be impossible to recognise and enforce an Award upheld by Dubai Courts within the DIFC, since there is no statutory mechanism for Dubai Courts to directly issue an order for enforcement of an Award within the DIFC save through the DIFC Courts.”
“[t]he reliance on the alleged ‘general principles of law’ as supporting the Dubai Court’s competence to entertain the case is difficult to reconcile with the allocation of ‘exclusive jurisdiction’ to the DIFC Courts pursuant to Article 5 of the Judicial Authority Law No. 12 of 2004.”
The CFI’s approach in Chenshan Liu must be saluted without reservation, as it revives the DIFC Courts’ role as a conduit and delimits the proper jurisdiction of the onshore Dubai and the offshore DIFC Courts in relation to the recognition and enforcement of non-DIFC awards rendered in onshore Dubai. Whereas the onshore Dubai court’s jurisdiction to annul the award in its curial capacity is exclusive, both courts have concurrent jurisdiction to recognise and enforce. Where the onshore curial court is seized of an action for annulment, the DIFC court will suspend an action for recognition and enforcement before it. It will only re-activate that action once the onshore action for annulment has failed. In the event that the onshore action for annulment succeeds, the DIFC Courts will be bound by that outcome by virtue of Article 7 of the Judicial Authority Law as amended and will have to discontinue the action for recognition and enforcement pending before it. Importantly, the 30-day moratorium for an award debtor to mount a challenge under Article 54(2) of the new UAE Federal Arbitration Law self-evidently assists this process. Taken in the round, there can be little doubt that, despite initial concerns that the days of the DIFC Courts as a conduit jurisdiction may be counted, the DIFC Courts’ role as a conduit is alive and kicking after all!