There have been three recent legal developments in Dubai and the DIFC on the enforcement of court judgments and arbitral awards.
New DIFC Court judgment on choice of arbitration and DIFC Court jurisdiction
An important decision has been handed down in the DIFC Courts on the validity of arbitration clauses and the jurisdiction of the DIFC Courts in the judgment in Injazat Capital Limited and Injazat Technology Fund BSC v Denton Wilde Sapte & Co.
Injazat and Denton Wilde Sapte (DWS) entered into a contract which allowed for disputes to be referred to LCIA arbitration in London. Injazat sued DWS in the DIFC Courts and DWS applied to dismiss or stay the court action on the grounds that the claim was to be heard in arbitration. The DIFC Court refused to do so. In doing so, the court held that where the DIFC Courts had the jurisdiction to hear a case, they had no power to dismiss it, or to stay it for arbitration, unless the arbitration had its seat in the DIFC. If the parties had agreed to arbitration elsewhere (such as London), the court case should continue.
The DIFC Court also gave a view on the validity of the arbitration clause. The court said that, even if it was wrong and it could stay a court action for a non-DIFC arbitration, it would not do so in this case because, to be valid under UAE law, an arbitration clause needs to be signed by the parties. In this case, it had been set out in one party's standard terms and conditions.
Finally, the DIFC Court held that a reference in the documents to "Dubai courts" should be construed as including the DIFC Courts, which will have jurisdiction if the protocol on jurisdiction between the Dubai courts and DIFC Courts applies (and Dubai Law No. 16 of 2011 on DIFC Court jurisdiction). In this, the DIFC Court of First Instance followed its previous decision in the National Bonds case (see Middle East exchange for March 2011).
The following practice points should be taken from this decision:
- if the DIFC Courts may have jurisdiction in relation to a future dispute, the parties should strongly consider arbitration with a DIFC seat because any other choice may not lead to the DIFC Court staying parallel proceedings. Recent DIFC Court decisions (such as the Corinth Pipeworks Court of Appeal judgment) have greatly expanded the circumstances in which the DIFC Courts have jurisdiction. Our Middle East exchange for February 2012 covers the expanding jurisdiction of the DIFC Courts. When coupled with this decision, a DIFC arbitral seat will be increasingly compelling for alternative dispute resolution to avoid the cost and expense of competing claims;
- if you want to expressly choose the courts of the emirate of Dubai (not the DIFC), the wording needs to be very clear on this such as "the courts of Dubai (outside of the DIFC)";
- consider asking counterparties to acknowledge and agree to an arbitration provision in bespoke terms, even if there is a cross reference to standard terms and conditions governed by UAE law.
Dubai Court of Appeal upholds enforcement decision in Dubai under New York Convention
The Dubai Court of Appeal has rejected an appeal against a decision of a Dubai court of first instance to issue an execution order to enforce two LCIA arbitration awards with an English seat. The Court of Appeal emphasised that, under the New York Convention, the courts may not reject the approval and execution of awards unless it is proven that:
- the parties to the agreement were under some incapacity to make such agreement; or
- the agreement is invalid under the governing law chosen by the parties.
These were the arguments made against non-enforcement in this case. None of the arguments was based on the public policy exception under the New York Convention. However, this is a welcome confirmation by the Dubai courts that it is willing to enforce arbitral awards made internationally.
DIFC Court White Paper on enforcement of DIFC decisions outside of the DIFC
The DIFC Courts have issued a White Paper on the subject of enforcement of DIFC court and DIFC-LCIA arbitral awards in Dubai, in the other emirates in the UAE and overseas. The DIFC Courts have invited comments on the White Paper and, in particular, examples of overseas enforcement of DIFC decisions.
The White Paper notes that, in relation to enforcement in the rest of the UAE and overseas, it may be better to seek enforcement by first applying to the Dubai courts for an enforcement order, under the enforcement protocol between the DIFC Courts and the Dubai courts. This is because the DIFC Courts recognise that some jurisdictions may be slow to recognise the DIFC as part of the legal system of Dubai. In particular, this may be an issue where the local courts operate on the basis of civil law and/or Shari'ah principles and the fact that the DIFC Courts operate on the basis of common law principles may be less familiar. The White Paper notes the existence of the Riyadh Convention and the GCC Convention as pan Middle East enforcement treaties which should enable DIFC Court decisions to be enforced without a re-examination of the merits of the case. The DIFC benefits from the UAE's ratification of those treaties.