DIFC Court dismisses constitutionality challenge to arbitration enforcement

February 17, 2015

DIFC Court dismisses constitutionality challenge to arbitration enforcement

In a judgment which has recently been made public (X v Y, CFI, 5 Jan 2015), the DIFC Court has dismissed a challenge to the constitutionality of the DIFC laws permitting enforcement of foreign arbitration awards.

The Claimants brought a claim in the DIFC Courts for recognition and enforcement of a foreign arbitration award under Articles 42 and 43 of the DIFC Arbitration Law.

The Defendants applied for an order staying the claim and referring an issue to the Union Supreme Court on the grounds that various provisions of DIFC law were unconstitutional.

The Defendants’ position was that the effect of the relevant DIFC laws was to permit parties to side-step the Dubai Courts and the provisions of the Federal Civil Procedures Code by enforcing in the DIFC and then pursuing reciprocal enforcement of the DIFC judgment in Dubai.

In particular, the Defendants argued that, under Article 31(1) of the Civil Procedures Code, they were entitled to have the claim for recognition and enforcement heard and decided in the Dubai Courts. Further, the requirements for ratification under Article 215 of the Civil Procedures Code would be sidestepped.

The result, according to the Defendant, was an attempt through DIFC law to do something which was prohibited by Federal Law, which was a breach of the Constitution.

H.E. Justice Ali Al Madhani dismissed the application. He found that a party seeking an order referring an issue to the Union Supreme Court had to persuade the DIFC Court that its constitutionality complaint was correct. It was not sufficient simply to make an application.

The Judge found that there could not be a conflict between DIFC law and the Civil Procedures Code as the latter did not apply in the DIFC, a situation which was expressly permitted by the Constitution. Insofar as any issues of constitutionality arose on reciprocal enforcement in Dubai, that would be a matter for the Dubai Courts.

This decision will be a welcome confirmation of the DIFC Courts’ pro-enforcement stance. It comes on the heels of the decisions on jurisdiction in X v Y (CFI, 28 Nov 14) and Meydan v Banyan Tree (3 Nov 2014) in which the DIFC Courts confirmed their jurisdiction to enforce foreign awards, whether or not the parties had any assets or presence in the DIFC.