The Dubai International Financial Centre as a conduit jurisdiction

In DNB Bank ASA v. Gulf Eyadah Corporation and Gulf Navigation Holdings PJSC CA 007/2015, the DIFC Court of Appeal has delivered a landmark judgment which expands the jurisdiction of the DIFC Courts and allows it to be used as "conduit" jurisdiction.

Previously a party wishing to obtain the recognition and enforcement of a foreign judgment against a party domiciled in "onshore" Dubai (in distinction to the "offshore" DIFC) was required to seek the recognition and enforcement of that judgment in the domestic courts of Dubai. These proceedings take place in Arabic, are often slow and produce inconsistent results.

This regime was, in essence, unaltered by the first instance judgment in DNB.

In that judgment Justice Ali Al Madhani found that, whilst the DIFC Courts were required to recognise and enforce a foreign judgment, such judgment, once recognised by the DIFC Courts, could not be referred to the domestic Courts of Dubai for the enforcement by them against assets in "onshore" Dubai, under the reciprocal enforcement arrangements in place between the Dubai Courts and the DIFC Courts (as would normally be the case for a judgment of the DIFC Courts).

The practical effect of Justice Ali Al Madhani's ruling was that a foreign judgment that had been recognised by the DIFC Courts could only be enforced against assets in the DIFC. This meant that if a judgment creditor was looking to enforce that judgment against a party domiciled in onshore Dubai (and whose only assets were located in onshore Dubai) then it was still required to seek the recognition and enforcement of that judgment in the domestic Courts of Dubai.

However, the DIFC Court of Appeal's judgment in DNB has altered this regime.

In allowing the judgment creditor’s appeal, the DIFC Court of Appeal found unanimously that the DIFC can be a conduit jurisdiction for the recognition of foreign judgments so as to become independent local judgments capable of being "automatically" enforced by the Dubai Courts under the relevant mechanisms for the reciprocal enforcement of judgments.

In his judgment the Chief Justice, Michael Hwang SC, stated: “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.” He also held 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)”.

On a strict legal analysis, the Court of Appeal in DNB avoided making any direct finding on what the Dubai Courts should do in dealing with a DIFC Court judgment enforcing a foreign court order.

However, this issue would appear to have been settled in Bocimar International NV v. Emirates Trading Agency LLC CFI 008/2015. In that case the issue of whether the Dubai Courts would be required to enforce did arise directly and Justice Sir John Chadwick confirmed that foreign judgments recognised by the DIFC Courts became DIFC judgments ordinarily entitled to enforcement in the onshore Dubai Courts.

The combined effect of DNB and Bocimar would appear to clear the way for the DIFC to be used as a conduit jurisdiction for the enforcement of foreign judgments against judgment debtors (and their assets) based in onshore Dubai.

Using the DIFC Courts will allow parties to benefit from the greater speed and certainty offered by the DIFC Courts (and with proceedings in English, if desired) and, for parties seeking to enforce an English Court judgment, the expedited procedure offered by the Memorandum of Understanding between the English Courts and the DIFC Courts can be used. This is a great advantage.

The DIFC Courts being willing to accept jurisdiction in these circumstances should also allow a judgment creditor to use the procedural mechanisms offered by the DIFC Courts to bring further pressure to bear on a judgment debtor. For example, in Bocimar, the judgment creditor (Bocimar) was able to obtain a Worldwide Freezing Order from the DIFC Courts, once the DIFC Courts had recognised Bocimar's judgment under the regime described above. Matthew Showler, a partner in our Dubai office, acted for Bocimar on that landmark case, which is a good example of how the procedural mechanisms offered by the DIFC Courts can be used.