On 28 January 2016, Bocimar International N.V. (“Bocimar”) obtained an injunction freezing the assets of Emirates Trading Agency LLC (“ETA”) from the DIFC’s Court of First Instance (the “CFI”). The order was granted in support of two English court orders enforcing the terms of two London-seated arbitral awards rendered in December 2012 in Bocimar’s favour, and totalling approximately USD 119m (Bocimar International N.V. v Emirates Trading Agency LLC (CFI 008/2015)) (“Bocimar v ETA”).
This case is potentially highly significant because it follows in the wake of DNB Bank ASA v Gulf Eyadah Corporation and another (DIFC CFI 043-2014) (“DNB Bank”), in which the CFI held that, although the DIFC Courts had jurisdiction to recognise and enforce judgments handed down by a foreign court, that power only extended to enforcement within the DIFC itself and such judgments could not be referred to the Dubai Courts for execution under the Protocol of Jurisdiction between the two jurisdictions. This decision appeared to limit the scope of the relationship between the DIFC and Dubai Courts, ring-fencing the DIFC Courts’ position as a conduit jurisdiction, previously espoused in both Banyan Tree Corporate Pte Ltd v Meydan Group LLC (ARB 003/2013) (“Banyan Tree”) and (1) X1, (2) X2 v (1) Y1, (2) Y2 (ARB 002/2013) (“X v Y”), to arbitral awards only.
Notwithstanding that the judgment in DNB Bank is currently under appeal (following the appeal hearing in December 2015, the DIFC Court of Appeal’s judgment is expected imminently), the judgment in Bocimar v ETA appears to criticise CFI’s judgment in DNB Bank and hints at a possible alternative approach. However, it is important to note that Bocimar v ETA is also significant in its own right insomuch as it concerns the DIFC Court entering judgment in relation to overseas arbitral enforcement orders (rather than the direct orders of the English Court as in DNB Bank) and also explores the types of orders that may be referred from the DIFC Courts to the Emirate of Dubai in support of underlying arbitral awards.
The United Arab Emirates is a civil law jurisdiction made up of seven Emirates (of which Abu Dhabi and Dubai are the two largest). Within the Emirate of Dubai (and a number of the other Emirates), the Government has established several free zones, of which the most widely known is the Dubai International Financial Centre (the “DIFC”), established in 2004.
In contrast to the majority of other free zones, the DIFC is an autonomous jurisdiction, applying its own civil and commercial laws based on principles of common law in its own independent judiciary, situated within Dubai. The relationship between the DIFC and Dubai Courts is governed by the 2009 Protocol of Jurisdiction Between Dubai Courts and DIFC Courts (the “Protocol of Jurisdiction”) and DIFC Law No. 12 of 2004 (as amended) (the “Judicial Authority Law”). Under these laws, a judgment handed down in one of either the DIFC or Dubai Courts must be ratified and executed in the other without consideration of its merits.
This arrangement had often led practitioners to consider whether the DIFC may be used as a means through which to obtain judgments in Dubai without recourse to the local Dubai Courts. However, it was not until the DIFC amended its legislation in October 2011 to allow parties to submit to the jurisdiction of the DIFC, irrespective of any nexus to the DIFC, that there was a rapid proliferation of case law, testing the boundaries of the DIFC Court’s jurisdiction and its relationship with the Courts of Dubai.
Two recent cases in particular involving jurisdictional challenges have explored to what extent it is possible to ‘export’ overseas arbitral awards and judgments into Dubai, using the DIFC as a ‘conduit’ or ‘host’ jurisdiction.
In X v Y, the claimant attempted to enforce a London-seated arbitral award against the Dubai-based assets of the defendant. Rather than seeking recognition and enforcement of the arbitral awards under the New York Convention in the local Courts of Dubai, the claimant applied for enforcement in the DIFC, without an obvious connection or practical benefit to enforcement in the DIFC, for example, the presence of attachable assets. In X v Y, the DIFC Court held that Articles 5(A)(1)(e), 7(2) and 7(3) of the Judicial Authority Law and 19(1)(d) and 24(1) of Law No. 10 of 2004 (the “DIFC Court Law”) provided ‘jurisdictional gateways’ through which the DIFC Courts were permitted to recognise and enforce arbitral awards. This decision heralded the DIFC as, in effect, a ‘conduit’ jurisdiction, in which parties could enforce foreign arbitral awards in their favour with the sole intention of attaching those enforcing orders against assets in onshore Dubai.
However, this new status was somewhat restricted by the DIFC Court’s decision in DNB Bank.
In DNB Bank, the claimant sought to rely on the decision in X v Y and make use of the DIFC as a conduit jurisdiction by attempting to enforce orders of the English Commercial Court in its favour within the DIFC. However, the defendant challenged the jurisdiction of the DIFC Courts to hear the enforcement claim on the basis that the jurisdiction gateways established in X v Y did not apply to the facts of the case.
The CFI dismissed the application contesting jurisdiction, describing both party’s submissions as “misconceived”. Notwithstanding this, the CFI effectively found in favour of the defendant, dismissing the claim for enforcement for reasons not pleaded by the defendant. In doing so, the CFI held that the Judicial Authority Law had deliberately drawn a distinction the between “judgments, decisions, orders and ratified Arbitral Awards rendered outside the DIFC”, as covered by Article 7(6) which “shall be executed within the DIFC” and the “judgments, decisions and orders rendered by the [DIFC] Courts and the Arbitral Awards ratified by the [DIFC] Courts”, as detailed in Articles 7(2), 7(4) and 7(5) of the Judicial Authority Law, which could be referred to the Dubai Courts.
Accordingly, the CFI decided that the DIFC Courts were indeed compelled to enforce orders of a foreign court. However, such orders would be confined to enforcement “within the DIFC” and would not be referred to the onshore Dubai Courts. In effect, the DIFC Courts “cannot be said to be a “conduit jurisdiction Court” if the matter before it is related to a Foreign Court Judgment”, therefore distinguishing the case from X v Y. As a consequence of the decision in DNB Bank, although English seated arbitral awards could be enforced through the DIFC Courts under the New York Convention and subsequently referred to Dubai courts for execution, English Court judgments could not. The practical effect is that the conduit character of the DIFC Courts was restricted to arbitral awards exclusively.
It should be noted that the decision in DNB Bank is currently under appeal and, following the appeal hearing in December 2015, the DIFC Court of Appeal’s judgment is expected shortly. However, the reasoning behind the order granting the freezing injunction in Bocimar v ETA contains interesting comments on the decision DNB Bank and may, perhaps, even indicate a potential change in the DIFC Court’s approach.
Bocimar v ETA and connection with DNB Bank
On 17 July 2014, Bocimar obtained two judgments from the English High Court recognising and enforcing two London-seated arbitral awards granted in its favour, pursuant to the summary enforcement procedure set out in the UK’s Arbitration Act 1996 (the “English Orders”). Owing to the fact that a large proportion of ETA’s assets were situated in the Emirate of Dubai and it was common ground between the parties that there were no assets within the DIFC, Bocimar sought to have the English Orders enforced in the offshore DIFC Courts as a means through which to attach to ETA’s assets in onshore Dubai. As the DNB Bank case was running concurrently, the procedure relating to enforcement of overseas arbitral enforcement orders in the DIFC was untested. Nevertheless, the grounds on which Bocimar relied were essentially identical to those submitted in DNB Bank, relying on the jurisdictional gateways in the Judicial Authority Law and the DIFC Court Law, through which, it argued, the DIFC Courts were permitted (and in fact, due to the mandatory language used, obliged) to recognise and enforce foreign court orders.
In addition, as with DNB Bank, in light of the relationship between the two common law English and the DIFC Courts, a judgment handed down by one of those courts represents a judgment debt, and therefore a legal obligation, which can be sued on and enforced in the other by way of a debt claim. This is a general principle applicable to enforcing judgments between all common law jurisdictions, but the precise procedure was clarified in the (albeit non-binding) Memorandum of Guidance as to Enforcement between the DIFC Courts and the Commercial Court, signed by representatives of each Court on 23 January 2013 (the “Memorandum of Guidance”).
In Bocimar v ETA, as in DNB Bank (although prior to issuance of that judgment), the defendant, ETA, sought to challenge the jurisdiction of the DIFC Courts to hear the application to enforce the English Court’s orders. Similar to DNB Bank, ETA argued that any attempt to make use of the DIFC Courts as a conduit to enforcement of foreign court orders in Dubai would represent a cynical attempt to circumvent the ordinary procedure, that is to say, attempting direct enforcement of the English court orders in onshore Dubai where, it was agreed, the relevant assets were located.
At this stage, it is important to note that the procedural background in Bocimar v ETA is different from that in DNB Bank. Although the jurisdictional hearing was listed in September 2015, the CFI’s decision in DNB Bank was issued in 2 July 2015. Seemingly in response to this decision, ETA notified the CFI in January 2016 that it wished to withdraw its application to contest jurisdiction. This withdrawal resulted in the CFI’s order dated 26 January 2016, made by consent of the parties and ordering payment of the sums owed by ETA on the terms of the English Orders. It is on the basis of this order issued by the DIFC Court that Bocimar was able to apply for an order from the DIFC Court freezing ETA’s assets in onshore Dubai, together with an order compelling ETA to provide information about its assets. The critical difference between the two cases is that Bocimar obtained a DIFC Court order in its favour, effectively ‘converting’ the English Orders into an order of the DIFC Courts, and therefore did not have to undergo the full procedure set out in the Memorandum of Guidance or undergo a hearing on the jurisdictional merits.
Nevertheless, the decision in Bocimar v ETA makes several noteworthy comments on the judgment in DNB Bank, even providing implicit criticism of that decision. In Bocimar v ETA, the presiding judge was obliged to consider both whether the DIFC Court had jurisdiction to grant a freezing order, in light of those assets being situated in onshore Dubai, and whether the Dubai Courts would be in a position to enforce the DIFC Court order against ETA’s assets in Dubai. In examining the position regarding the enforceability of a freezing order in onshore Dubai, Justice Sir John Chadwick acknowledged that the decision in DNB Bank was correct insomuch as it confirmed that the DIFC Court does not have the authority to refer foreign court judgments (i.e. those not handed down by the DIFC Courts) to the Dubai courts for execution.
However, Justice Sir John Chadwick in effect criticised the decision in DNB Bank by asserting that, once a DIFC Court order had been obtained under the procedure set out in the Memorandum of Guidance, something that the judgment in DNB Bank stated that the DIFC Courts were compelled to do, that is the relevant order for the purpose of referral to the Dubai courts. Accordingly, H. E. Justice Ali Al Madhani’s analysis in DNB Bank appears to neglect that enforcement of English Court orders would naturally result in a DIFC Court order, which could in fact be referred to the Courts of Dubai.
The similarity of these comments to the arguments put forward by DNB Bank ASA in arguing for permission to appeal in DNB Bank is striking. As summarised by Justice Sir Richard Field in his order granting permission to appeal the CFI decision dated 9 September 2015, DNB Bank ASA, as claimant, contended that the CFI had erred because it had not taken into account that it would not be the orders of the English Court that would be referred to the Dubai Courts, but rather an order of the DIFC Courts. Indeed, DNB Bank ASA argued that the CFI appeared to have misconstrued the common law principles position relating to enforceability of orders between common law jurisdictions. Put simply, the term ‘enforcement’, as used in the arbitration context, is something of a misnomer when applied to enforcing under common law principles. Instead, a would be claimant commences new proceedings by suing upon the debt obligation the foreign judgment represents, with the overseas judgment evidencing the debt owed, and, if successful, obtains a new order.
In paragraph 21 of his order granting permission to appeal, Justice Sir Richard Field neatly summarises the arguments above. Once judgment (or awards) are recognised and enforced by the DIFC Courts, the relevant order for the referral for execution in the Dubai Courts is the DIFC Court order, and not the foreign judgment (or award). In paragraph 22 of his order, he granted leave to appeal on the basis that these submissions are seriously arguable and have a real prospect of success.
In Bocimar v ETA, Justice Sir John Chadwick not only refers to paragraphs 21 and 22 of the order granting leave to appeal in DNB Bank, but even goes as far as to adopt that position as his reasoning. Accordingly, although the DIFC Court of Appeal’s judgment in DNB Bank is still eagerly awaited by the dispute resolution community in Dubai, the decision to grant the freezing order in Bocimar v ETA appears to offer a glimpse into the DIFC Court’s favoured approach.
3. Freezing Injunction
As stated above, the judgment dated 28 January 2016 in Bocimar v ETA is not solely significant because of the comments on the enforceability of foreign court orders. It is also one of the first freezing orders granted in the context of an underlying arbitration. Furthermore, the judgment is important as it appears to endorse the English common law principle, as espoused in Congentra AG v Sixteen Thirteen Marine SA  EWHC 1615 (Comm), that previous conduct, including advancing a case that is clearly unsustainable or taking every step to frustrate and delay the process, may constitute viable grounds for establishing a real risk of dissipation of assets, necessitating the grant of a freezing order.
As well as being a high-value decision against a prominent local defendant, the decision in Bocimar v ETA is potentially very important for the DIFC’s much touted position as a ‘host’ jurisdiction. The comments made in the judgment dated 28 January 2016 may signal the approach the DIFC Court is likely to adopt in the DNB Bank appeal, permitting judgment creditors to export court orders (at least from common law jurisdictions) into Dubai. Such a decision would provide comfort for those claimants who obtain court orders in their favour (including those enforcing arbitral awards) that defendants situated in Dubai cannot retreat to Dubai to escape enforcement.