This is Part 2 of a two-part blog dealing with the first arbitration-related rulings of the Abu Dhabi Global Market (ADGM) courts. In Part 1, I reported on a ruling of 4 July 2019, which dealt with the enforceability of an agreement to arbitrate in the ADGM (see A3 v B3  ADGMCFI 0004 (4 July 2019)). The ruling discussed here (A4 v B4  ADGMCFI 0007 (8 October 2019)) addresses the enforcement of a foreign LCIA award under the New York Convention.
By way of reminder, the ADGM is a judicial free zone in the heart of the Emirate of Abu Dhabi. It administers its own system of common law courts, the ADGM courts, which are competent to hear arbitration-related actions brought before them in their capacity as curial or enforcement courts under the 2015 ADGM Arbitration Regulations. The ADGM Arbitration Regulations apply as the procedural law to arbitrations seated in the ADGM or to actions for enforcement of arbitral awards, whether domestic or foreign, before the ADGM courts. Being common law courts, the ADGM courts source their judiciary from arbitration-friendly common law jurisdictions, including in particular the UK. For the avoidance of doubt, both the instant ruling as well as the ruling I reported on in Part 1 have been rendered by Justice Sir Andrew Smith.
In A4 v B4, Smith J considered an award rendered under the LCIA Rules in London for recognition and enforcement in the ADGM. Importantly, both the award creditor, A4, and the award debtor, B4, were incorporated in mainland Abu Dhabi, and the award debtor was not known to have any assets in the ADGM. Nor were there any other reported links to the ADGM.
By way of background, the subject arbitral award found in favour of A4, ordering B4 to make outstanding payments to A4 for services provided under a series of service contracts between the two, plus interest. The service contracts were governed by English law and contained a reference to A4’s general terms and conditions, which, in turn, provided for disputes to be resolved by arbitration under the LCIA Rules with seat in London. In its answer to request for arbitration, B4 raised jurisdictional objections, stating a lack of privity between the parties. In further course, B4 essentially fell silent, failing to substantiate its jurisdictional objections.
Following confirmation that in accordance with section 16 of the ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015, the ADGM Court of First Instance (ADGMCFI) had jurisdiction conferred upon it by these Regulations as well as “any other ADGM enactment”, including the 2015 ADGM Arbitration Regulations (ADGMAR) (paragraph 8), Smith J started from the premise that the award before him, having been rendered in the UK (the UK being a member of the New York Convention), qualified as a New York Convention award and, as such, for recognition and enforcement under Part 4 of the ADGMAR (paragraph 9). Article 55(1)(b) of the ADGMAR expressly singles out New York Convention awards for recognition and enforcement under the ADGMAR. Smith J in particular thought it important to emphasise that Article 56(1) ADGMAR was cast in mandatory terms, and required the ADGMCFI to recognise and order the enforcement of an award unless one of the grounds for refusing recognition and enforcement under Article 57 ADGMAR was satisfied (paragraphs 10-12). For the avoidance of doubt, in the terms of Article 56(1)(a), an award under Part 4 ADGMAR, including a New York Convention, “shall be recognised as binding within the [ADGM] on the persons between whom it was made”. Under Article 56(1)(b), such an award “shall be enforced within the [ADGM] as if it were a judgment of the [ADGMCFI] and all of the Court’s powers in respect of the enforcement of judgments shall apply to the enforcement of [such] awards.” Further, by virtue of Article 56(6) ADGMAR, “[a]wards recognised by the [ADGMCFI] may be enforced outside the [ADGM] in accordance with the applicable legislation in force.”
Smith J then considered that under Article 57(1)(a)(ii) ADGMAR, it was not for him to contemplate ex officio the potential invalidity of the underlying arbitration agreement, which formed the basis of B4’s jurisdictional objections. In the terms of that Article, recognition and enforcement of an award may be refused by the ADGMCFI only if “the party making the application furnishes proof” of the invalidity of the arbitration agreement “under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.” This, according to Smith J, “clearly supposes that the person against whom the award was made and against whom recognition or enforcement is (or both are) sought will have made an application that recognition and enforcement be refused”, reflecting the corresponding wording of Article V.1.(a) of the New York Convention (paragraphs 16-17). On this basis, Smith J concluded that given B4’s failure to pursue its contention for the invalidity of the arbitration agreement, let alone to prove or to seek to prove its invalidity, the ADGMCFI was “not entitled to entertain any question about the invalidity of the arbitration agreements invoked by B4.” (Paragraph 18.)
In a second instance, Smith J tested whether the recognition and enforcement of the subject award might be contrary to UAE public policy within the meaning of Article 57(1)(b)(ii) ADGMAR or the corresponding provision of Article V(2)(b) of the New York Convention, either of which invites a competent supervisory court to initiate a public policy investigation ex officio (paragraph 19). In essence, he concluded that there was no sound factual basis that would warrant an investigation into any public policy violation. Nevertheless, Smith J rehearsed a number of public policy scenarios that could come into play.
The potential circumvention of the proper jurisdiction of the onshore Abu Dhabi courts
“… there is no evidence that B4 do not have assets within the ADGM, and still less is there any proper basis to conclude that they will not have assets within the ADGM in the foreseeable future or that A4 have no reason to believe that they will do so. Accordingly, there is no proper reason to suppose that A4 seek recognition and enforcement in these proceedings simply as a device to execute against assets elsewhere in the UAE.” (Paragraph 23.)
The question that this analysis raises more specifically is whether the ADGM courts are able to operate as a conduit jurisdiction for the recognition and enforcement of non-ADGM awards for onward execution against award debtor’s assets onshore. Smith J seems to intimate that if the sole purpose behind the offshore enforcement application is execution outside the ADGM (no assets of the award debtor being present within), the ADGMCFI should not entertain the application. In similar terms, Smith J asks the following rhetorical questions:
“Should this Court be concerned about whether A4 might be seeking recognition and enforcement of the Award not in order to enforce it against assets in the ADGM, but as a device to have an order of this Court (rather than the Award itself) enforced elsewhere in the UAE, and in particular elsewhere in Abu Dhabi, without having other UAE Courts, including those of the Abu Dhabi Judicial Department (“ADJD”), examine for themselves whether the Award should be recognised and enforced within their jurisdictions?” (Paragraph 20.)
That being said, it is worth noting in this context that the Memorandum of Understanding Between Abu Dhabi Judicial Department and ADGM Courts Concerning Reciprocal Enforcement of Judgments (ADJD-ADGM MoU), dated 11 February 2018, provides for the mutual recognition onshore/offshore of ratified arbitral awards. This is irrespective of the location of an award debtor’s assets, and without allowing, let alone requiring, a review on the merits. This evidently reflects the position under Article 7 of the Judicial Authority Law as amended (DIFC Law No. 12 of 2004 as amended by DIFC Law No. 16 of 2011) (JAL), which establishes an area of free movement of judicial instruments, including ratified awards, between the onshore Dubai and offshore DIFC courts. In this sense, both Article 7 JAL and the ADJD-ADGM MoU encourage the operation of the free zone courts as a conduit jurisdiction.
The potential for parallel proceedings between the onshore Abu Dhabi and the offshore ADGM courts
No evidence of any challenge of the award before the onshore courts having surfaced, Smith J found as follows:
“Even if it be supposed that A4 might [commence parallel enforcement proceedings before the onshore Abu Dhabi courts], it would not in itself be objectionable or contrary to the public policy of the UAE to have parallel enforcement proceedings in different jurisdictions of the UAE: see the decision of the Joint Judicial Committee of Dubai in Assas Investments Ltd. v Fius Capital Ltd., Cassation No 6 of 2017.” (Paragraph 24.)
In Assas v Fius, the Joint Judicial Committee between the Dubai and DIFC courts expressly authorised parallel enforcement actions before the onshore Dubai and offshore DIFC courts against assets located onshore/offshore respectively.
The potential unfairness or detriment B4 as the award debtor may suffer by the award being enforced against it by the ADGMCFI rather than any other UAE court
According to Smith J, there was none (paragraph 25). It is worth recalling in this context that enforcement under the New York Convention will afford the same grounds for refusal to enforcement irrespective of the choice of forum for the enforcement, whether onshore or offshore.
In the light of the foregoing, Smith J concluded against any UAE public policy violation (paragraph 26). Ultimately, this ruling introduces the ADGMCFI to a role as a conduit for the recognition and enforcement of non-ADGM awards, for onward execution against assets of the award debtor onshore in reliance on the ADJD-ADGM MoU. For the avoidance of doubt, as correctly found by the DIFC courts in corresponding situations (see DNB Bank v Gulf Eyadah Corporation  DIFC CA 007, at paragraph 125, as per M. Hwang SC), hearing an action for the recognition and enforcement of an award does not require the location of assets of the award debtor in the DIFC. The same considerations apply mutatis mutandis to the ADGM courts’ hearing of enforcement actions of foreign awards for onward execution onshore.