The United Arab Emirates (UAE) is unique in that two of its seven emirates operate parallel court systems. In Abu Dhabi and Dubai, local civil law courts sit alongside common law courts in the nascent Abu Dhabi Global Market (ADGM) and the better-known Dubai International Finance Centre (DIFC).
The Dubai local civil courts and common law DIFC courts operate under the concept of mutual recognition by which the two court systems recognise and enforce each other’s judgments without re-examining the substantive merits of the underlying dispute.
In recent years the DIFC has modelled itself as a “conduit jurisdiction”, by which parties seeking to avoid the perceived difficulties of enforcing arbitral awards (both domestic and foreign) in the local Dubai courts have turned to the DIFC courts to recognise and enforce arbitral awards (which can then easily be enforced in the local Dubai courts).
Historically, it was thought that for an award to be enforced in the DIFC there had to be some connection with the DIFC. However, in a series of cases, starting in 2013, the DIFC courts have broadened their jurisdiction and held that no such connection is required:
- In X1 and X2 v Y1 and Y2, they held that foreign arbitral awards (in this case an England and Wales seated London Maritime Arbitration Association (LMAA) arbitration) could be enforced in the DIFC even where the award debtor had no geographical nexus to the DIFC.
- In Meydan Group LLC v Banyan Tree Corporation PTE Ltd, the DIFC courts decided that arbitral awards with Dubai as the seat (a domestic award) could be recognised and enforced in the DIFC, regardless of whether there was any connection with the DIFC.
- More recently, in DNB Bank ASA v Gulf Eyahah, the DIFC courts confirmed that it was legitimate for the DIFC courts to recognise and enforce a foreign court judgment (in this case a judgment from the English High Court).
Once recognised and enforced by the DIFC courts, the awards and judgment could be executed in the Dubai courts, thereby side-stepping the scrutiny of the Dubai courts.
In 2016, in an effort to curb the DIFC’s “jurisdiction creep” and bring some control back to the Dubai civil courts, the Ruler of Dubai formed the Judicial Tribunal (JT). If requested by a party, the JT can decide:
- Which court has jurisdiction on a matter, including where the DIFC courts are acting as a conduit jurisdiction (Article 2(1)).
- In cases where the DIFC and Dubai courts have handed down conflicting judgments involving the same parties and subject matter, which of the judgments shall be valid (Article 2(2)).
The first five judgments handed down by the JT seem to indicate that the DIFC’s role as a conduit jurisdiction has been curtailed but is not yet over.
In the JT’s first two cases, Daman Real Capital Partners Company LLC v Oger Dubai LLC and Dubai Waterfront LLC v Chensham Liu, the award creditor had asked the DIFC courts to recognise and enforce a domestic arbitration award (that is, an award from an arbitration with a seat in Dubai). Simultaneously, the award debtor had applied to the Dubai courts to annul the awards.
The JT ruled that the DIFC courts should “cease from entertaining the case”. The UAE legal community has largely interpreted the ruling to mean that the DIFC court proceedings should be stayed until the local Dubai court annulment proceedings have come to an end. Indeed, the DIFC courts themselves appear to have adopted this interpretation. In Oger v Daman (involving the same parties as the JT case) the DIFC has recently held that “any further proceedings in this matter are put on hold until further notice from the DIFC Court.”
Foreign arbitral awards
Interestingly, in the Daman case, the JT indicated that the result would have been different if the case concerned the enforcement of foreign arbitral awards in accordance with the New York Convention.
This distinction was borne out in the JT’s third case; in Marine Logistics LLC and another v Wadi Woraya LLC, the JT was asked to decide whether the DIFC courts had jurisdiction to enforce a foreign arbitral award where the award debtor had no connection with the DIFC. The JT unanimously decided that the DIFC courts had jurisdiction, which means that when recognised in the DIFC courts, it could be executed in Dubai (where the assets of the award debtor are located).
Foreign court judgments
Similarly, in the JT’s fifth case, Gulf Navigation Holding PJSC v DNB Bank ASA (involving the same parties and subject matter of the case which established the DIFC as a conduit jurisdiction for the enforcement of common law judgments (see DMB third bullet point above)), the JT unanimously concluded that the DIFC courts had jurisdiction to enforce foreign court judgments.
So what does it all mean?
In both the Marine Logistics and Gulf Navigation cases, simultaneous proceedings had not been commenced in the local Dubai courts; therefore, there was no real conflict for the JT to resolve. By contrast, in the Daman and Dubai Waterfront cases, proceedings in both court systems were underfoot and presented a real conflict, which the JT resolved in favour of the Dubai courts.
It may be that the only reason the Marine Logistics and Gulf Navigation cases decided that the DIFC courts had jurisdiction is because there was no actual conflict between the two courts. Conversely, if parallel proceedings had been in place in the Dubai courts, perhaps the JT would have come to a difference decision. It will be interesting to see how the JT deals with simultaneous proceedings in the Dubai and DIFC courts relating to a foreign award or judgment.
However, even if the Dubai courts had been engaged in those cases, the JT may still have found that the DIFC courts had jurisdiction because (per the Daman case) the enforcement of foreign arbitral awards is different to the enforcement of domestic awards.
Under the UAE Civil Procedure Code, the supervising courts of domestic arbitrations have the power to scrutinise awards before they are enforced. The same extensive power of review does not apply to foreign arbitral awards. If the DIFC courts are allowed to continue to enforce domestic arbitral awards at the expense of Dubai court proceedings for annulment, the provisions of the UAE Civil Procedure Code would effectively be bypassed.
In this context, the JT’s judgments in Daman and Dubai Waterfronts bring some much needed clarity to the scope of the DIFC courts’ jurisdiction. Whilst the JT has pulled back the DIFC courts’ jurisdiction as a forum for the enforcement of domestic awards, the DIFC looks set, at least for the time being, to continue to act as a conduit jurisdiction for foreign awards and judgments.