08 Mar 2016

HADEF IN THE COURTS - DIFC Court of Appeal decision paves the way for the enforcement of foreign judgments in Dubai

Authored by: Zarghona Fazal and Kerie Receveur

HADEF IN THE COURTS - DIFC Court of Appeal decision paves the way for the enforcement of foreign judgments in Dubai

In brief

The DIFC Court of Appeal has handed down its seminal decision in DNB Bank ASA v (1) Gulf Eyadah Corporation (2) Gulf Navigation Holdings PJSC (CA 007/2015). 

  • The decision confirmed the DIFC Court’s view that parties holding a money judgment or order from a foreign Court could use the DIFC Court as a conduit to recognise the foreign judgment, and then enforce the DIFC’s judgment against assets held in Dubai. 
  • In his leading judgment, Chief Justice Hwang confirmed that “it is not wrong to use the DIFC Courts as a conduit jurisdiction to enforce a foreign judgment and then use reciprocal mechanisms to execute against assets in another jurisdiction.” 

The Court’s judgment is considered in further detail below. 

 

Implications

The implications of the DIFC Court of Appeal’s decision are that a creditor who has a favourable foreign court money judgment can apply to the DIFC Court to recognise the foreign Court’s judgment, regardless of whether the debtor has assets in the DIFC. It is a significant change to the long-standing position in the UAE, which has made it difficult (and in fact, often impossible) to enforce foreign judgments in this jurisdiction.

If the judgment debtor has assets in Dubai, the judgment creditor can now apply to the DIFC Court for referral of the DIFC Court judgment to the Dubai Courts for enforcement, through the enforcement section of the Dubai Courts (the Execution Court).   

In theory, the Execution Court should enforce all DIFC judgments in the same way that it would enforce other Dubai Court judgments, without revisiting the merits of the case. However, it remains to be seen whether the Execution Court will in fact take such an approach, particularly in circumstances where it is clear that the DIFC Courts have merely been used as a means or conduit to avoid recognition of the judgment through the Dubai Courts.   

As a consequence of the DIFC Court’s decision in DNB Bank ASA v (1) Gulf Eyadah Corporation (2) Gulf Navigation Holdings PJSC, we have been approached by several clients enquiring about enforcing money judgments obtained from foreign Courts through the DIFC Courts, in situations where the judgment debtor does not have assets within the DIFC but does have assets on mainland Dubai. 

Last month we filed what we believe to be one of the first claims for enforcement of a DIFC Court order recognising an English Court order for default judgment with the Execution Court. The Execution Court has registered the claim and is currently in the process of serving the judgment debtor. However, it remains to be seen how the Execution Court will treat the DIFC judgment if the judgment debtor raises an argument that the DIFC Court has been used as a conduit to enforce a foreign judgment in Dubai without having had to go through the Dubai Courts.

 

Should assets be located in Abu Dhabi or another Emirate, it may be possible to obtain a DIFC Court judgment and then go on to ask the Dubai Execution Court to rely upon the reciprocal arrangements for enforcement between the Dubai Courts and the Courts in the other Emirates. At this time, it is not clear how the Courts of the other Emirates will treat DIFC Court judgments.

 

Facts of the case

DNB Bank (the Bank) obtained a judgment against the Defendants in the English Commercial Court in the sum of USD8.7m. The Bank then brought proceedings for the recognition and enforcement of the judgment in the DIFC Courts, seeking, among other things, judgment in the amount of the English judgment sum.

The Defendants filed an application disputing the jurisdiction of the DIFC Courts, arguing that there were no assets in the DIFC against which the judgment could be enforced, and there was no other connection with the DIFC which could justify the proceedings.

The Defendants also argued that the proceedings were an abuse of process. According to them, the Bank’s aim was to enforce the judgment in the DIFC and then take it for execution in the Dubai Courts, relying on the reciprocal enforcement mechanisms available under Article 7 of the Judicial Authority Law (these provide for the mutual enforcement of judgments between the DIFC Courts and the Dubai Courts). The Defendants argued this was abusive as it sought to avoid engagement with the Dubai Courts, and so avoid the more restrictive test for enforcement of foreign judgments in Dubai.

 

Court of First Instance

The Judge in the Court of First Instance dismissed the Defendants’ application and found in favour of the Bank. 

He found that the DIFC Courts had jurisdiction to recognise and/or execute foreign court judgments within the DIFC. However, he held that the execution should not go beyond the DIFC jurisdiction, as Article 7(2) of the Judicial Authority Law only allowed judgments, decisions and orders rendered by the DIFC Courts to be referred for execution. The jurisdiction of the DIFC Courts did not allow the DIFC Courts to refer “recognised foreign judgments” to the Dubai Court for execution, and vice versa.           

Article 7(2) of the Judicial Authority Law provides for the enforcement outside the DIFC of “judgments, decisions and orders rendered by the [DIFC] Courts and the Arbitral Awards ratified by the [DIFC] Courts”. The Judge noted that since there was no reference to any foreign judgment recognised by the DIFC Courts, Article 7(2) excluded “recognised foreign judgments”. 

The Bank appealed.

 

Court of Appeal 

On appeal, all three judges of the Court of Appeal upheld the Bank’s appeal, and held that the DIFC Courts had the power to refer foreign judgments to the Dubai Courts for execution. 

Chief Justice Hwang held (with Justice Omar Al Muhairi agreeing) that the DIFC Court has jurisdiction to hear claims for the recognition and enforcement of foreign judgments. The Chief Justice also agreed with the finding in the Court of First Instance that the presence of assets within the DIFC was not a pre-condition to the enforcement of foreign court judgments within the DIFC. 

In relation to execution, the Chief Justice used decisions from several Commonwealth Courts to decide that “a foreign judgment when granted recognition in the DIFC Courts therefore becomes a local judgment of the DIFC courts and should therefore be treated as such by the Dubai Courts (amongst others)”. He noted that in this case, it was “clear that the judgment sought to be enforced is a foreign money judgment, which is enforceable by this Court. Once it is enforced, it becomes an independent local judgment of this Court.” 

Consequently, the Chief Justice held that a foreign judgment enforced by the DIFC Court would fall within the scope of “judgments, decisions and orders rendered by the [DIFC] Courts” as set out in Article 7(2) of the Judicial Authority Law, which could then be enforced in the Dubai Courts under Article 7 of that Law. It is unnecessary for Article 7 to provide for enforcement of “recognised foreign judgments”. In his short judgment, Justice Steel also agreed that a judgment issued by the DIFC Courts on recognition and enforcement of a foreign judgment “is in fact a domestic judgment and accordingly falls within the scope of Article 7(2) of the Judicial Authority Law.”

Finally Chief Justice Hwang noted that “From the perspective of the DIFC Courts, it is not wrong to use the DIFC Courts as a conduit jurisdiction to enforce a foreign judgment and then use the reciprocal mechanisms to execute against assets in another jurisdiction.”  However he did note that the DIFC Courts were not concerned with what would happen in the Dubai Courts in which the Bank would seek to enforce its judgment and that “the holder of a DIFC Courts judgment recognising a foreign judgment will seek enforcement of the DIFC Courts judgment [in another jurisdiction] at its own risk”. 

 
 

This article, including any advice, commentary or recommendation herein, is provided on a complimentary basis without consideration of any specific objectives, circumstances or facts. It reflects the views of the writer which may, in some cases, differ from those of the firm, especially in the developing jurisdiction of the UAE.