In this article, we look at the recent decision of the UAE's Financial Markets Tribunal (the FMT) in the Al Masah case¹ and, in particular, the FMT's unprecedented and rather troubling decision to make costs orders against the firms and individuals who appealed the DFSA's enforcement decisions. This is likely to have a significant chilling effect on future appeals to the FMT.


In September 2019, the DFSA issued Decision Notices against two firms and three individuals in relation to their involvement in unauthorised activities in the Dubai International Financial Centre (DIFC) and misleading and deceptive statements made to investors. The Decision Notices contained various findings of misconduct, and imposed sanctions on each recipient.

Al Masah Capital Limited (in liquidation) (Al Masah Cayman) was fined USD 3m, and Al Masah Capital Management Limited (in liquidation) (Al Masah DIFC) was fined USD 1.5m. In addition, the senior executive officer of Al Masah DIFC was prohibited from working in any DFSA authorised entity and fined USD 225,000. Al Masah DIFC's chief financial officer and an executive director of Al Masah Cayman were each prohibited and fined USD 150,000.

All five Decision Notices were referred to the FMT by their recipients (the Applicants), but the appeals were ultimately unsuccessful. In its judgment dated 27 October 2020, the FMT upheld the sanctions imposed by the DFSA, except for the fine against the chief financial officer, which the FMT increased by USD 25,000. The FMT broadly agreed with the DFSA's findings with respect to the Applicants' misconduct. Interestingly, the FMT also decided to make an award to the DFSA for its costs, by making costs orders against each of the Applicants.

The costs orders

The FMT's decision to uphold the DFSA's decisions is not wholly surprising in light of the facts of the case. However, the FMT's decision to make costs orders against the firms and individuals who appealed against the DFSA's decisions is unprecedented and will send a chill down the spine of every current and future recipient of a DFSA Decision Notice.

The FMT ordered that the Applicants should pay all of the DFSA's costs in the FMT proceedings (other than the costs related to the preliminary issues on whether the DFSA's Decision Notices should be published before the FMT had issued its judgment and whether the hearing in the FMT should be private). While the precise nature of the costs that have been awarded to the DFSA are not set out in the judgment, they are likely to run into the hundreds of thousands of dollars assuming that they include the DFSA's costs of instructing leading and junior counsel from the UK, as well as the costs of its employees who worked on the FMT proceedings.

The FMT did not provide detailed reasons for its decision to order costs against the Applicants. However, its decision on costs appears to have been based on two key principles. First, it cited a DIFC Court of Appeal judgment in a commercial case which found that the DIFC Court has discretion to award costs. This hardly seems apposite in the context of regulatory proceedings brought by parties who are subject to enforcement proceedings by a public body, but the FMT felt that this was relevant to the question of the tribunal's discretion to order costs. Second, the FMT also made the following observation:

"The Applicants knew or should have known from the outset that if and when the truth emerged the applications were bound to fail whichever view of the law prevailed. The fact that one aspect of the case raised complex legal issues is thus of limited relevance. That is a particular reason why the Applicants should pay the costs and we will order them to do so."

The FMT apportioned the DFSA's costs as follows:

  1. 40% of the DFSA's costs to be paid by Al Masah DIFC and Al Masah Cayman (20% each).
  2. 60% of the DFSA's costs to be paid by the individuals, with the senior executive officer and chief financial officer of Al Masah DIFC paying 26% each, and the director of Al Masah Cayman paying 12%.

Implications of the FMT's decision

The implications of the FMT's decision to make the costs orders against the Applicants are grave.

There are a number of important issues that should be borne in mind when considering the implications of the FMT's decision about costs:

  • Recipients of a Decision Notice from the DFSA have a statutory right under the Regulatory Law to refer disciplinary decisions to the FMT.
  • While the FMT is part of the DFSA, it is operationally independent, and it is generally accepted that the FMT is the first real opportunity that recipients of a Decision Notice have to appeal the DFSA's decision to an independent tribunal.
  • The regulatory proceedings in the Al Masah matter are not commercial litigation proceedings between two private parties. Rather, the proceedings were appeals against the disciplinary decisions of a public body. Arguably, in these circumstances, costs orders should only be imposed against either of the parties in exceptional circumstances such as when a party acts in bad faith or unreasonably.

The FMT's decision on costs in the Al Masah matter is a stark contrast to the approach taken by tribunals in other jurisdictions, most notably the UK, where costs awards against those appealing a regulator's decision are virtually unheard of. In the UK, the Upper Tribunal (the approximate equivalent to the FMT) has never made a costs award against a firm or individual who has referred a Decision Notice from the UK's Financial Conduct Authority (the FCA). There are very good public policy reasons behind this approach, including that the fear of a significant costs order should act as a deterrent to legitimate appeals (even if ultimately unsuccessful) against the decisions of a public body. Even appeals that fail on substance can raise important points of policy, resolve significant legal issues, and may inform future proceedings on key issues.

It is notable that until the Al Masah decision, the FMT has never awarded costs against an individual or firm who appealed a DFSA Decision Notice to the FMT. It has also never, to date, made a costs order against the DFSA.

The FMT's decision on costs in the Al Masah matter suggests a significant shift in the FMT's approach and attitude toward those who seek to appeal DFSA decisions. The message is clear: appeal the DFSA's enforcement decisions to the FMT and risk having to pay not only your own legal costs and any financial penalty imposed, but also the DFSA's legal costs. It is very likely that this risk will prove too great a threat for many, with the consequence that many meritorious challenges to the DFSA's use of its enforcement powers will no longer be brought. The broader implications are that:

  1. A material barrier to access to justice has been created.
  2. Only those persons with significant financial resources will be able to tolerate the risk of an appeal to the FMT – even those persons with modest means could be deterred by the risk losing their life savings.
  3. The checks and balances designed to ensure that the DFSA is held accountable for its enforcement decisions has been eroded.
  4. The DFSA may feel empowered to be more aggressive in its enforcement approach, knowing that the risks of an appeal by the subject of an enforcement action are significantly reduced.
  5. Without meaningful challenge, the quality of the DFSA's decision making, at least with respect to the exercise of its significant statutory enforcement powers, could be diminished.

It's too soon to measure the impact that the consequences of the FMT's decision in the Al Masah case will have on current and future DFSA enforcement actions and on financial regulatory business in the DIFC. However, we expect that the decision will create a chill wind that reduces the number of appeals to the FMT, and will result in many more settled enforcement actions.