The Dubai International Financial Centre Court of Appeal recently held, in the case of DNB Bank ASA v Gulf Eyadah [CA-007-2015] (25 February 2016) that ‘a foreign judgment, when granted recognition in the DIFC Courts becomes a local judgment of the DIFC Courts and should therefore be treated as such by the Dubai Courts’.
This represents an important and landmark decision in relation to the jurisdiction of the DIFC courts and is a positive step in recognising the international nature of the DIFC courts.
After obtaining judgment by the English Commercial Court requiring Gulf Eyadah Corporation & Gulf Navigation Holding PJSC (Defendants/Respondents) to pay USD 8.7 million plus costs under various contracts, the Claimant/Appellant (DNB Bank ASA) sought the enforcement of the said judgment in the DIFC courts.
The Defendants contested the jurisdiction of the DIFC courts, inter alia, on the grounds that:
- the Claimant’s claim to seek recognition and enforcement of the English order constituted an abuse for execution within the DIFC to the Dubai courts for execution onshore in Dubai.
The Court of First Instance decision
In the Court of First Instance decision dated 2 July 2015, H.E. Justice Ali AI Madhani dismissed the Defendant’s complaints.
The Judge held that the Judicial Authority Law (JAL) conferred jurisdiction on the DIFC courts to ratify foreign judgments and orders and that this was independent of the existence of any assets within the DIFC.
The Judge went on to find that the abuse of process complaint was without merit as the DIFC courts have no power to refer ‘recognised foreign judgments’ to the Dubai courts for execution.
The Judge relied on Article 7(2) of the JAL which provides for the enforcement in the Dubai courts of ‘judgments, decisions and orders rendered by the [DIFC] Courts and the Arbitral Awards ratified by the· [DIFC] Courts’. The Judge held that there was no reference, at all, in the said article to foreign judgments recognised by the DIFC courts.
The Court of Appeal decision
While the Judge had ruled in favour of DNB’s claims, the Bank filed an Appeal Notice claiming that the Judge erred in law in finding that the JAL did not confer on the DIFC courts the jurisdiction to refer a foreign court’s judgment or order to the Dubai courts for execution. In essence, the judge could have gone further in his judgment.
It was argued on behalf of the Bank that the enforcement of a foreign judgment by the DIFC courts will result in a local judgment of the DIFC courts, instead of a foreign judgment, which could then be executed in accordance with Article 7 of the JAL.
The Respondents also filed an Appeal Notice to cross-appeal the Judge’s finding on costs jurisdiction and abuse of process. In their Supplementary Skeleton Argument, the Respondents abandoned the jurisdiction and abuse of process cross-appeals and instead sought to uphold the Judge’s decision that the DIFC Court could not be used as a conduit jurisdiction.
The matters to be resolved by the Court of Appeal were the following:
- whether the enforcement of a foreign judgment by the DIFC Courts will result in a local judgment of the DIFC courts, which can then be executed in accordance with Article 7 of the JAL (para 99-124), and
- whether the presence of assets is a condition to the enforcement of foreign court judgments (para.125).
The court confirmed Judge Madhani’s finding on this first issue and held that the DIFC courts have jurisdiction to enforce foreign judgments. The court relied on Articles 7(4) to 7(6) of the amended JAL which provide for:
‘the enforcement within the DIFC of judgments, decisions and orders and ratified Arbitral Awards rendered by Dubai Courts or any court other than the Dubai Courts’ (para.96).
Whether the enforcement of a foreign judgment by the DIFC courts will result in a local judgment of the DIFC courts, which can then be executed in accordance with Article 7 of the JAL
On this central issue, the court took as a starting point the Memorandum of Guidance (MOG) signed between the English Commercial Court and the DIFC Courts in 2013 emphasising that the MOG only applies to money judgments as provided in its paragraph 1.
The Court held that a foreign judgment is not enforceable as such, but that the Court would allow a claim despite as set out in paragraph 18 of the MOG.
The Court reversed Judge Madhani’s decision regarding this second issue.
Using Lord Bridge’s line of reasoning in Owens Bank v Bracco (1992) 2 A.C. 443, the court found that:
‘a foreign judgment when granted recognition in the DIFC Courts, becomes a local judgment of the DIFC Courts and should therefore be treated as such by the Dubai Courts (amongst others)’ (para.104).
The Court further held that:
‘when seeking execution, the judgment creditor will be seeking enforcement of the DIFC Courts’ judgment not the English judgment’ (para.106).
Therefore, the Court concluded that:
‘when the DIFC Courts recognise and enforce a foreign judgment the product is itself a judgment of the DIFC Courts which can therefore be executed under Article 7of the JAL’ (para.107).
Whether the presence of assets is a pre-condition to the enforcement of foreign court judgments
On the third issue, the Court of Appeal upheld Judge’s Madhani’s findings and found that the presence of assets in the DIFC jurisdiction is not a pre-condition to the enforcement of foreign court judgments by the DIFC courts. The Court of Appeal referred to the case of Meydan Group LLC v Banyan Tree Corporate Pte Ltd [CA-005-2014] wherein it was held that whilst the absence of assets may be a point for consideration by the court in granting execution of an award, it is not a bar to enforcement. The Court of Appeal concluded that this principle similarly applies to the enforcement of a foreign judgment.
It is clear from the above that the enforcement of a foreign judgment by the DIFC courts will result in a local judgment of the DIFC courts which can then at least in principle be executed in accordance with Article 7 of the JAL.
The DIFC courts could be used as a conduit jurisdiction; in paragraph 129 of its decision, the Court of Appeal held 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 reciprocal mechanisms to execute against assets in another jurisdiction’.
We wait to see what will happen in practice when a local judgment of the DIFC Court (as converted from a foreign judgment) makes its way onshore for execution.