REUTERS | Amir Cohen

The DIFC as a conduit: resurrected from the dead?

A recent order of the Dubai International Financial Centre (DIFC) Court of First Instance (see Isai v Isabelle) gives hope that the DIFC Courts’ status as a conduit jurisdiction has been resurrected from the dead and been granted a new lease of life. Readers of this blog will recall previous reporting to the effect that the Dubai-DIFC Joint Judicial Tribunal (the JT) (see Cassation No. 1/2017 – Gulf Navigation Holding PJSC v Jinhai Heavy Industry Co Ltd; and Cassation No. 3/2017 – Ramadan Mousa Mishmish v Sweet Homes Real Estate) and the Dubai Court of First Instance (see Commercial Case No. 1619/2016, ruling of the Dubai Court of First Instance of 15 February 2017) had, in one sense or another, pronounced a death sentence over the DIFC Courts’ competence to hear actions for recognition and enforcement of domestic awards for onward execution against assets of an award creditor in onshore Dubai.

By way of reminder, the JT was originally established by the Ruler of Dubai to deal with conflicts of jurisdiction between the onshore Dubai and offshore DIFC Courts (see Decree No. (19) of 2016 establishing the Dubai-DIFC Judicial Tribunal). Such conflicts typically arise in situations where an award debtor initiates a challenge before the onshore courts pending an action for recognition and enforcement offshore. Pursuant to the JT’s case law precedent, it is a prerequisite for the JT’s proper jurisdiction for court proceedings before the Dubai and DIFC Courts to be pending in parallel between the same parties, in relation to the same or a related subject-matter.

In the presently prevailing circumstances, the award creditor had failed to bring an action for challenge before the onshore Dubai courts. There was hence no competence for the involvement of the JT. That said, on a more recent occasion (see Cassation No. 6/2017 (JT) – Assas Investments Limited v Fius Capital Limited), the JT has conceded that, on the basis of the proper operation of Article 7 of the Judicial Authority Law as amended (see Dubai Law No. (12) of 2004 as amended), both the onshore Dubai and offshore DIFC Courts enjoy concurrent jurisdiction over recognition, enforcement and execution of a domestic DIFC-London Court of International Arbitration (LCIA) award, provided the presence of assets both on and offshore. The regular reader is reminded in this context that Article 7 is the bedrock of the area of free movement in respect of judicial instruments issued by the onshore Dubai and the offshore DIFC Courts, including judgments, orders and ratified awards.

In Isai v Isabelle, H.E. Justice Al Muhairi did not hesitate to confirm 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. In doing so, Al Muhairi dismissed the award debtor’s application for dismissal of the award creditor’s application for recognition and enforcement before the DIFC Courts. Al Muhairi had no doubt that the DIFC Courts had proper jurisdiction to recognise and enforce the subject DIFC-LCIA award by virtue of Article 42(1) of the DIFC Arbitration Law, which empowers the DIFC Courts to recognise as binding any arbitral award “irrespective of the State or jurisdiction in which it was made”.

The judge correctly identified Article 5(A)(1)(e) of the Judicial Authority Law, which confers exclusive jurisdiction on the DIFC Courts to hear and determine any action over which the courts have jurisdiction in accordance with DIFC laws and regulations, read together with Article 8(2) of Dubai Law No. 9 of 2004 (as amended by Dubai Law No. 7 of 2011), which requires the DIFC Courts’ jurisdiction to be determined by reference to DIFC laws, as a “gateway” for the Courts’ jurisdiction (paragraphs 13-16). Pursuant to Al Muhairi, neither the Judicial Authority Law nor the DIFC Arbitration Law contained any requirement for a connection with the DIFC as a prerequisite for the DIFC Courts’ competence to hear an action for recognition and enforcement (paragraph 16). Instead, he relied upon Article 7 of the Judicial Authority Law to emphasise the concurrent jurisdiction of both the onshore and offshore courts, terming the two courts’ jurisdictions “complementary”:

“In enacting Article 7 of the Dubai Judicial Authority Law, the legislators contemplated that both the DIFC Courts and the Dubai Courts would have power (in appropriate cases) to ratify (or recognise) arbitral awards. There is no conflict between the jurisdiction of the two courts, as is reflected in the complementary relationship highlighted by Article 7 of the Judicial Authority Law.” (Paragraph 20.)

Further, considerations of setting aside of the subject award or adjournment of the DIFC Courts’ decision under Article 44 of the DIFC Arbitration Law did not weigh in, in circumstances where no application for nullification had (as yet) been filed before the onshore Dubai Court in its capacity as the curial court of the arbitration (paragraph 21).

Importantly, Al Muhairi was clear that the onshore Dubai and offshore DIFC Courts have “concurrent but separate jurisdiction” (paragraph 22) to hear applications for recognition and enforcement onshore and respectively offshore. This, no doubt, was intended to serve as a timely reminder that the onshore and offshore courts form part of the same family of UAE courts, ordained by the Ruler of Dubai. There is no judicial hierarchy between the onshore Dubai and offshore DIFC Courts; each is properly competent to determine the limits of its own jurisdiction. Article 7 of the Judicial Authority Law, in turn, establishes the mutual bond of trust that holds the on and offshore limbs of the Dubai judicial system together to form part of an integrated whole.

H.E. Justice Al Muhairi’s Order in Isai v Isabelle has to be saluted for its attempt to redress the proper balance of the judicial relationship between the onshore Dubai and offshore DIFC Courts, with a measure of encouraging sobriety and to breathe life back into the DIFC Courts’ status as a conduit jurisdiction. Essentially, absent a pending challenge before the Dubai courts, an onshore DIFC-LCIA award may be properly subject to an application for recognition and enforcement before the DIFC Courts (irrespective of the absence of assets of the award debtor from the DIFC). For the avoidance of doubt, the seating of the arbitration onshore does not prevent recognition and enforcement offshore. That said, had the award creditor applied for a challenge onshore pending the application for recognition and enforcement offshore, Justice Al Muhairi may have considered adjournment of the application by virtue of Article 44(2) of the DIFC Arbitration Law, or a refusal to enforce the subject award under Article 44(1)(a)(v) of the DIFC Arbitration Law in the event that the award had been nullified before the onshore courts. This, no doubt, would have been a natural consequence of the operation of the principle of mutual recognition under Article 7 of the Judicial Authority Law.

Long live the DIFC Courts’ jurisdiction as a conduit!

DWF LLP Dr Gordon Blanke

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