On June 9 2016 the ruler of Dubai passed Decree 19/2016 Concerning the Establishment of a Judicial Committee for the Dubai courts and the Dubai International Finance Centre (DIFC) courts. Decree 19/2016 established a Judicial Committee tasked with resolving conflicts of jurisdiction between the Dubai courts and the DIFC courts. Just over six months after the issuance of Decree 19/2016, the Judicial Committee rendered its first decisions.

Background

The issue of conflicts of jurisdiction between the Dubai courts and the DIFC courts has attracted attention in recent years following a string of cases involving the use of the DIFC courts as a 'conduit' jurisdiction for the enforcement of foreign judgments and arbitral awards in the 'onshore' United Arab Emirates (ie, outside the DIFC). Article 7 of the Judicial Authority Law (Dubai Law 12/2004, as amended by Dubai Law 16/2011) requires the Dubai courts to execute court judgments issued and arbitral awards ratified by the DIFC courts.(1) Accordingly, parties seeking to execute foreign judgments and arbitral awards onshore in Dubai have sought to do so by:

  • first, seeking recognition of the award or judgment in the DIFC courts (thereby preventing a review on the merits by the Dubai courts); and
  • second, seeking to execute the award onshore pursuant to the Judicial Authority Law.

The DIFC courts have endorsed this approach to date,(2) which appears to have provided the impetus ? at least in part ? for Decree 19/2016.

Decree 19/2016

Under Decree 19/2016, the Judicial Committee has the power, among other things, to determine:

  • which court has jurisdiction to hear a claim where there is a conflict between the jurisdiction of the Dubai courts and the DIFC courts; and
  • which judgment is to be enforced where conflicting judgments are issued by the Dubai courts and the DIFC courts.(3)

Applications to the Judicial Committee may be made by either party or by the attorney general of Dubai.(4) Once an application is made, the underlying judicial proceedings or execution of the judgments (as applicable) is to be stayed pending the decision of the Judicial Committee,(5) which must be made within 30 days.(6) Notably, Decree 19/2016 does not expressly permit the respondent to file submissions in response to the application (although, in practice, respondents have filed submissions).

The Judicial Committee comprises four members of the Dubai judiciary and three members of the DIFC judiciary.(7) All decisions must be made by majority, but the president of the Dubai Court of Cassation, as chair of the Judicial Committee, has the casting vote.(8)

Judicial Committee's first decisions

Domestic arbitral awards The Judicial Committee has rendered its first decision, granting jurisdiction to the Dubai courts, in Daman Real Capital Partners Company LLC v Oger Dubai LLC (Cassation 1/2016 (JT)).

The case arose out of a Dubai International Arbitration Centre (DIAC) arbitral award rendered on July 19 2015 in favour of Oger Dubai LLC against Daman Real Capital Partners Company LLC. On July 29 2015 Daman applied to the Dubai Court of First Instance for annulment of the award on various grounds. On August 13 2015 Oger applied to the DIFC courts for recognition and enforcement of the arbitral award on the basis that the property which was the subject of the dispute and Daman were both located in the DIFC. On September 26 2015 the DIFC courts granted an ex parte freezing injunction over Daman's assets. Subsequently, the court held that because Daman had made assurances that the Dubai Court of First Instance would render its decision within three months, the correct order from the DIFC courts was to adjourn the application for recognition and enforcement for four months, on the condition that Daman provided security immediately. However, if Daman failed to provide security, the award would be deemed as recognised by the DIFC courts. On January 27 2016 the Dubai Court of First Instance dismissed Daman's annulment application on the basis that it lacked jurisdiction. Daman appealed to the Dubai Court of Appeal.

Meanwhile, after Daman's failure to pay the award amount to Oger notwithstanding various demands, on March 29 2016 Oger applied to the DIFC courts for an order that Daman be wound up. On June 8 2016 the Dubai Court of Appeal dismissed Daman's appeal. Thereafter, on June 16 2016 the DIFC courts ordered that Daman be wound up. In doing so, the courts acknowledged that Daman could still appeal the decision of the Dubai Court of Appeal to the Dubai Court of Cassation, but stated that since both the Dubai Court of First Instance and the Dubai Court of Appeal had dismissed Daman's application for annulment of the award, such application was regarded as no longer having a realistic prospect of success.

It appears that Daman then applied to the Judicial Committee, arguing that a jurisdictional dispute would arise on the basis that it had filed a case for the annulment of the arbitral award in the Dubai Court of Appeal and was intending to appeal to the Dubai Court of Cassation. Oger urged the Judicial Committee to dismiss the application. However, the committee concluded that:

  • there was a conflict of jurisdiction between the Dubai courts and the DIFC courts because Daman was awaiting the decision of the Dubai Court of Cassation;
  • the Dubai courts were competent to decide the case and therefore the case should be remitted to the Dubai courts; and
  • the DIFC courts should cease from entertaining the case.

Notably, the decision was rendered by three members of the Dubai judiciary and three members of the DIFC judiciary, with the three members of the DIFC judiciary dissenting. Therefore, it would appear that the president of the Dubai Court of Cassation, as chair of the Judicial Committee, exercised the casting vote.

The Judicial Committee followed its decision in Daman with a decision in Dubai Waterfront LLC v Chenshan Liu (Cassation 2/2016). This case also arose out of a Dubai-seated arbitration under the DIAC Arbitration Rules. The award was issued against Dubai Waterfront LLC. Chenshan Liu applied to the DIFC courts for recognition and enforcement of the DIAC award, notwithstanding that Dubai Waterfront had no connection with the DIFC. However, the DIFC granted an order for recognition and enforcement of the award.

Subsequently, Dubai Waterfront filed an application before the Dubai courts seeking annulment of the DIAC award and applied to the Judicial Committee for an order that the Dubai courts were competent to determine whether the award should be annulled or enforced.

The Judicial Committee found in favour of Dubai Waterfront. It held that:

  • a conflict of jurisdiction had arisen between the Dubai courts and the DIFC courts;
  • the Dubai courts were competent to decide the case and therefore the case should be remitted to the Dubai courts; and
  • the DIFC courts should cease from entertaining the case.

Again, all three members of the DIFC judiciary dissented.

Foreign judgments and arbitral awards The Judicial Committee has rendered two decisions concerning a foreign arbitral award (Marine Logistics Solutions LLC v Wadi Woraya LLC, Cassation 3/2016) and a foreign court judgment (Gulf Navigation Holding PJSC v DNB Bank ASA, Cassation 5/2016). In both cases, the committee found no conflict of jurisdiction ? not because of the foreign nature of the proceedings, but because no proceedings had been brought before the Dubai courts.

Marine Logistics Solutions LLC v Wadi Woraya LLC arose out of a London-seated arbitration, in which Wadi Woraya LLC had obtained an award in its favour. Wadi then sought to have the award recognised and enforced in the DIFC courts, notwithstanding that Marine Logistics Solutions LLC had no connection with the DIFC. Marine then applied to the Judicial Committee to determine whether the DIFC courts or the Dubai courts had jurisdiction over the enforcement proceedings. The committee found unanimously in favour of Wadi on the basis that there was no case before the Dubai courts and therefore no conflict of jurisdiction.

The same decision was reached in Gulf Navigation Holding PJSC v DNB Bank ASA, which arose out of a September 30 2014 judgment of the English High Court, in which Gulf Eyadah Corporation and Gulf Navigation Holding PJSC were held liable to pay $8.7 million plus costs to DNB Bank ASA under various finance documents. On December 3 2014 DNB sought recognition and enforcement of the High Court judgment before the DIFC Court of First Instance. However, Gulf Eyadah Corporation and Gulf Navigation Holding argued that the DIFC courts did not have jurisdiction under the Judicial Authority Law to recognise and enforce the High Court judgment, since there was no connection between the parties, the contract or the dispute and the DIFC. The defendants also argued that DNB's application to the DIFC courts constituted an abuse of process on the basis that DNB had applied to DIFC courts for recognition and enforcement of the High Court judgment to avoid having to make such an application before the Dubai courts.

In its July 2 2015 judgment, the DIFC Court of First Instance rejected the defendants' arguments and held that the DIFC courts did have jurisdiction under the Judicial Authority Law to recognise and enforce the High Court judgment, notwithstanding that there was no connection to the DIFC. However, it found that the DIFC courts had no power to refer a foreign judgment (as opposed to a foreign arbitral award) to the Dubai courts for execution. On appeal, in its February 25 2016 judgment, the DIFC Court of Appeal held that the DIFC courts did in fact have the power to refer the High Court judgment to the Dubai courts for execution. On July 18 2016 the DIFC Court of First Instance held that the High Court judgment was recognised and enforced in the DIFC. Steps were then taken to execute the High Court judgment, including with the Dubai courts.

Subsequently, Gulf Navigation Holding applied to the Judicial Committee, alleging a conflict of jurisdiction between the DIFC courts and the Dubai courts. The Judicial Committee stayed all enforcement proceedings pending its decision on jurisdiction and ultimately rejected the submission on the basis that there was no conflict of jurisdiction to opine on. The committee recognised that, under Section 4 of Decree 19/2016, the Judicial Committee can intervene to determine which court has jurisdiction if:

  • both the DIFC courts and the Dubai courts have taken jurisdiction; or
  • the DIFC courts and the Dubai courts have issued conflicting judgments.

In these circumstances, the Judicial Committee held that there was no evidence that the Dubai courts had taken jurisdiction and nor was there a conflicting judgment; thus, there was no conflict of jurisdiction to be determined. The six members of the Judicial Committee who were present at the session (three from the Dubai courts and three from the DIFC courts) agreed on this point.

Conflicts of jurisdiction

In Investment Group Private Ltd v Standard Chartered Bank (Cassation 4/2016), the Judicial Committee found in favour of the DIFC courts. The case concerned a claim by Standard Chartered Bank for recovery of capital and interest under two loans provided to Investment Group Private Ltd (IGPL), a Sharjah-based company.

On August 6 2014 Standard Chartered Bank sought to bring its claim before the DIFC courts. However, IGPL argued that:

  • the DIFC courts did not have jurisdiction because Standard Chartered Bank's DIFC branch had not been a party to the loan agreements; and
  • alternatively, the DIFC courts should decline jurisdiction in favour of the Sharjah courts under the doctrine of forum non conveniens (inconvenient forum).

On January 12 2015 IGPL brought its own proceedings before the Sharjah Court of First Instance.

However, before the DIFC Court of First Instance hearing, IGPL conceded that:

  • the DIFC courts had jurisdiction to determine Standard Chartered Bank's claims pursuant to Article 5A(1)(a) of the Judicial Authority Law; and
  • the parties had not agreed to opt out of the DIFC courts' jurisdiction.

On January 15 2015 the DIFC Court of First Instance dismissed IGPL's objection to jurisdiction.

Subsequently, on May 31 2015 the Sharjah Court of First Instance held that it did not have jurisdiction over the matter. IGPL appealed to the Sharjah Court of Appeal and again to the Sharjah Court of Cassation, which rejected its claim.

IGPL also appealed the decision of the DIFC Court of First Instance to the DIFC Court of Appeal and sought to withdraw the concessions that it had made. In its November 18 2015 decision, based on the non-facultative principle, the DIFC Court of Appeal permitted IGPL to withdraw its concession that the DIFC courts had jurisdiction, but not its concession that the parties had not opted out of the DIFC jurisdiction, since the latter was a point of contractual interpretation and not a concession going to the heart of the jurisdictional issue at hand. The DIFC Court of Appeal went on to find that the DIFC courts did have jurisdiction, and that they could not decline to exercise that jurisdiction based on the doctrine of forum non conveniens, since this does not apply if the alternative forum is another court in the United Arab Emirates.

As substantive proceedings began before the DIFC courts, IGPL instituted proceedings before the Amicable Dispute Centre in Dubai. These proceedings were then transferred to the Dubai courts on May 30 2016. On June 6 2016 IGPL applied to the Union Supreme Court, alleging a conflict of jurisdiction. It then applied to the Judicial Committee to determine that same conflict of jurisdiction.

The Judicial Committee dismissed IGPL's application, finding in favour of the DIFC courts and ordering the Dubai courts to cease from entertaining the case. While the committee noted that the DIFC courts had permitted IGPL to withdraw its concession on jurisdiction based on the non-facultative principle, the tribunal reached its own conclusion that IGPL was in fact bound by its concession.

Comment

The Judicial Committee's decisions in Daman and Dubai Waterfront have made it clear that an arbitral award rendered onshore in Dubai cannot be enforced in the DIFC courts where proceedings in respect of the same award have been commenced before the Dubai courts. The wording of the decision in Cassations 1/2016 and 2/2016 is ambiguous in respect of whether the DIFC courts retain jurisdiction to continue enforcement proceedings in the event that the Dubai courts dismiss the applications for annulment, or whether the jurisdiction of the DIFC courts over these cases ceases indefinitely such that Oger and Liu will have to apply to the Dubai courts for recognition and enforcement of the arbitral award.

In contrast, the Judicial Committee's decisions in Marine and Gulf Navigation Holding indicate that the committee will be unwilling to interfere with the DIFC courts' jurisdiction where no proceedings have been commenced in the Dubai courts. However, these decisions provide no guidance as to what the outcome may be where a party seeks to enforce a foreign judgment or arbitral award in the DIFC courts and the recalcitrant party brings proceedings in the Dubai courts. Insofar as foreign arbitral awards are concerned, it could be a violation of the United Arab Emirates' commitments under the New York Convention if the Judicial Committee were to deprive the DIFC courts of jurisdiction to hear applications for recognition and enforcement of foreign arbitral awards.

In yet a further blow to the DIFC's role as a conduit jurisdiction, on February 19 2017 the Dubai Court of First Instance issued a judgment in Case 1619/2016 declaring null three of the DIFC courts' decisions in Banyan Tree Corporate Pte Ltd v Meydan Group LLC. In those decisions, the DIFC courts had held that they had jurisdiction to hear an application for recognition and enforcement of a DIAC arbitral award rendered onshore in Dubai against Meydan Group LLC (notwithstanding that Meydan had no connection to the DIFC), and had proceeded to find that the award must be recognised and enforced. The legal basis for the Dubai Court of First Instance's decision to nullify the DIFC courts' decisions is questionable. It remains to be seen how the decision will fare on appeal.

Lastly, while not a case concerning the DIFC's conduit jurisdiction, the Judicial Committee's decision in the Standard Chartered Bank case is significant ? not least because it appears that at the time of the committee's decision there was no positive decision from the Dubai courts on their jurisdiction to hear the case; therefore, the committee's decision suggests that it may exercise its powers where proceedings before the DIFC courts and the Dubai courts are on foot, irrespective of whether the courts have issued positive, conflicting decisions on jurisdiction.

For further information on this topic please contact Sami Tannous or Samantha Lord Hill at Freshfields Bruckhaus Deringer LLP by telephone (+971 4 5099 100) or email (sami.tannous@freshfields.com or samantha.lord@freshfields.com). The Freshfields Bruckhaus Deringer LLP website can be accessed at www.freshfields.com.

Endnotes

(1) Article 7 of the Judicial Authority Law (Dubai Law 12/2004, as amended by Dubai Law 16/2011).

(2) See, for example, Egan & Eggert v Eava & Efa [2014] ARB 005 and Meydan Group LLC v Banyan Tree Corporate Pte Ltd CA-005-2014.

(3) Article 2 of Decree 19/2016.

(4) Article 4 of Decree 19/2016.

(5) Articles 5 and 6 of Decree 19/2016.

(6) Article 3 of Decree 19/2016.

(7) Article 1 of Decree 19/2016.

(8) Article 3 of Decree 19/2016.

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