With no reciprocal enforcement treaty with the United Kingdom, or many other international jurisdictions, it has long been the case that enforcing a foreign court judgment in the UAE has been viewed as being a lengthy and potentially prohibitive task.
A recent ruling of the DIFC Court of Appeal, in the case of DNB Bank ASA v. (1) Gulf Eyadah Corporation (2) Gulf Navigation Holdings PJSC (the “DNB Bank Case”) has raised the possibility that foreign judgments may be accepted as enforceable in the UAE, and arguably the wider GCC, via the DIFC Courts.
In the DNB Bank Case the Claimant sought to enforce a judgment of the UK Courts (finding the Defendants liable for USD$ 8.7million due to their default on a loan facility) via the DIFC Courts. In his judgment of the DNB Bank Case (the “Judgment”),Chief Justice Michael Hwang found that once a foreign court judgment had been recognised by the DIFC, it becomes an independent local judgment and can be treated in the same manner as if the judgment had been granted by the local Dubai Courts. In doing so, CJ. Hwang rejected the Defendants’ arguments that, as they were neither registered in the DIFC freezone nor had any assets in the DIFC freezone against which the successful Claimant could enforce, the DIFC Courts lacked jurisdiction to recognise the UK Court’s judgment.
THE ROLE OF THE DIFC COURTS
The DIFC Courts, whilst being constitutionally a part of the Dubai Judicial System, remain anachronistic in the regional context. The DIFC Courts operate in English, draw judges from both the UAE and from international sources and rely on a common law system of judicial precedent. As such it has been widely recognised as the most internationally user friendly jurisdiction of the GCC (and wider Middle East) and has attracted a case load reflective of that reputation.
In 2011 the DIFC Courts entered into an agreement with the Dubai Courts which allowed for the reciprocal enforcement of judgments in both the DIFC freezone and the “onshore” Dubai Courts. Unlike the Dubai Courts however, the DIFC Courts have signed memorandum of guidance agreements with numerous international courts, including those of England and Wales, Singapore and New York, ensuring international collaboration on the reciprocal enforcement of judgments.
As the Dubai Courts are required to recognise the DIFC Courts’ judgments, it seems that the DNB Bank Case has approved the use of the DIFC Courts as a “conduit” jurisdiction for enforcement in the UAE (although CJ. Hwang, in his Judgment, rejected this characterisation linguistically, if not practically).
Additionally, as the DIFC Courts are constitutionally part of the Dubai Judicial System, not only can its judgments be enforced outside of the DIFC area within the UAE with relative ease but these judgments are also subject to, and therefore, at least conceptually, can take advantage of, the treaties between the UAE and other countries for enforcement against judgment debtors outside of the UAE.
IMPLICATIONS FOR GCC WIDE ENFORCEMENT
The most interesting ramification of the Judgment is that, in addition to being able to enforce a foreign court judgment against a liable UAE entity not registered in the DIFC freezone via the DIFC Courts, it may also be possible to register a successful UK / New York / Singaporean judgment at the DIFC Courts and then rely on the stipulations of the UAE’s international treaties to enforce that judgment more easily in another GCC state. As judgments of the DIFC Courts can be enforced through the same channels that are available to judgments of the Dubai Courts, parties could seek to take advantage of (for example) the GCC Convention (1996) and the Riyadh Convention (1983).
The aforementioned conventions provide for the reciprocal recognition of judgments between a number of Arab States in which, historically, it has been difficult to enforce foreign (i.e. non signatory) judgments (such as Saudi Arabia, Kuwait and Qatar). The DIFC’s recentEnforcement Guidelines (dated 03 January 2016) set out the general understanding with regards to the enforcement of its judgments pursuant to these conventions (Section C paragraphs 22-56).
Nowhere in the Judgment is it suggested that the DIFC Courts’ duty to recognise the UK Courts’ judgment was predicated on the judgment debtor being a UAE “onshore” entity and as such the (untested) position must be that, had the UK judgment debtor been, say, a Saudi Arabian entity, the DIFC Court would have come to the same conclusion as to the ambit of its jurisdiction.
As such, and whilst there must be some uncertainty regarding the willingness of other states’ enforcement courts to unconditionally accept the use of the DIFC to ‘authorise’ foreign judgments for enforcement in this manner, this decision raises some interesting possibilities in respect of the wider application of this finding for enforcement across the GCC.
For the time being it would seem reasonable to assume that the recent Judgment may have now paved the way for the DIFC to be used as a host jurisdiction in order for foreign judgments to ‘become’ local judgments and parties to make full use of any treaties available for easier enforcement in other GCC countries. Given the potential ramifications of the Judgment it will be interesting to see how the DIFC Courts, and latterly the enforcement courts of other GCC and/or Arabic countries, will treat any attempts by successful foreign judgment creditors to rely on the precedent set by the Judgment to enforce rulings in their favour in the manner envisaged above.