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DIFC Court of Appeal opens door for foreign judgments

March 1, 2016

In a landmark judgment in the case of DNB Bank ASA v Gulf Eyadah [CA-007-2015] (25 February 2016), the DIFC Court has confirmed that parties may enforce foreign judgments in the DIFC Courts and then take the ensuing DIFC Court judgment on into the Dubai Courts for execution. In doing so, the DIFC Court of Appeal reversed the finding of the first instance judge that foreign judgments could be enforced in the DIFC, but could not be taken further.

The effect of the judgment is a significant change to the long-standing position, which has made it difficult and often impossible to enforce foreign judgments in the UAE.

DNB Bank obtained a judgment against the Defendants in the English Commercial Court in the sum of USD8.7m. The Bank then brought proceedings for the enforcement of the judgment in the DIFC Courts seeking, inter alia, judgment in the amount of the English judgment sum.

The Defendants disputed the jurisdiction of the DIFC Courts, arguing that there were no assets in the DIFC against which the judgment could be enforced and there was no other connection with the DIFC which could justify the proceedings.

The Defendants also argued that the proceedings were an abuse of process. The Bank’s aim, they said, was to enforce the judgment in the DIFC and then take it on for execution in the Dubai Courts, relying on the reciprocal enforcement mechanisms available under Article 7 of the Judicial Authority Law. Those provisions provided for (inter alia) the mutual enforcement of judgments between the DIFC Courts and the Dubai Courts. This, the Defendants argued, was abusive as it sought to avoid engagement with the Dubai Courts and the more restrictive test for enforcement of foreign judgments in Dubai.

At first instance, H.E. Justice Ali Al Madhani dismissed both complaints.

The DIFC Court had jurisdiction and it was not dependent on establishing any assets in or other connection with the DIFC.

The Judge also dismissed the abuse of process complaint, but did so on a basis not argued by either party. The Judge found that it would not be possible to enforce the foreign judgment in the DIFC Courts and then take it on to the Dubai Courts for enforcement. The abusive behaviour which was asserted was not possible.

Article 7(2) of the Judicial Authority Law provides for the enforcement in the Dubai Courts of:

“judgments, decisions and orders rendered by the [DIFC] Courts and the Arbitral Awards ratified by the [DIFC] Courts”.

The Judge noted that, while recognised foreign arbitral awards were referred to, “recognised foreign judgments” were not. Recognised foreign judgments did not therefore fall within the reciprocal enforcement provisions of the Judicial Authority Law. As a result, it was not possible to enforce a foreign judgment in the DIFC Court and then take it on into Dubai.

Although it was the successful party on the application, the Bank appealed on the basis that the decision might establish an issue estoppel in the Defendants’ favour which would prevent it from deploying the ensuing judgment in Dubai. The issue was, in any event, an issue of significant legal importance.

The Defendants cross-appealed against the findings on jurisdiction, abuse of process and costs. The jurisdiction and abuse cross-appeals were abandoned at the hearing. Despite this, the Court of Appeal dealt with them in its judgment.

The Court found that it would entertain the Bank’s appeal against the decision as the issue was one of legal significance. In doing so, the Court applied English authorities on the circumstances in which there is jurisdiction to hear a winner’s appeal.

The Court confirmed that it had jurisdiction to enforce foreign judgments within the DIFC under Article 24(1) of the DIFC Court Law and Articles 5(A)(1)(e) and 7(6) of the Judicial Authority Law. The presence of assets in the DIFC was not a precondition to the DIFC Court exercising jurisdiction.

The Court also confirmed that the proceedings were not abusive, but for different reasons than those relied on by the Judge below. By analogy with the DIFC Court’s decisions on enforcement of arbitration awards, there was nothing wrong with using the DIFC Court as a “conduit” jurisdiction.

On the central issue, the Bank’s position was that the Judge had erred in treating the judgment resulting from enforcement proceedings as a “recognised foreign judgment”. The DIFC Court adopted the common law, rather than the civil law, approach to the enforcement of foreign judgments. This position has been recorded in a non-binding Memorandum of Guidance signed between the English Commercial Court and DIFC Court in 2013. Similar Memoranda had subsequently been signed with courts of other jurisdictions. Under common law principles, the judgment would be an independent judgment of the DIFC Courts. As such, it was a “judgment” within the meaning of Article 7(2) of the Judicial Authority Law and so would be available for execution in the Dubai Courts.

The Court of Appeal accepted this position. Drawing support from decisions from around the Commonwealth, the Court found that the result of the claim for enforcement of a foreign judgment would be an independent DIFC Court judgment. This would fall within the term “judgments, decisions and orders rendered by the [DIFC] Courts” set out in Article 7(2).

Like any other such judgment, this could therefore be enforced in the Dubai Courts under Article 7 of the Judicial Authority Law. There was therefore no need for Article 7 to provide for enforcement of “recognised foreign judgments”. By contrast, recognised foreign awards were referred to because the process of recognition of a foreign arbitration award did not necessarily result in judgment in terms of the award.

The result is that foreign judgments may now be enforced in the DIFC Courts and the ensuing judgment taken on for execution in the Dubai Courts. This is a significant departure from the previously existing position under which it was difficult and often impossible to enforce a foreign judgment in Dubai.

Tom Montagu-Smith, instructed by Tarek Shrayh and Robert Karrar-Lewsley of Al Tamimi & Co. appeared for the Bank.

Tom was also the draftsman of the Memorandum of Guidance as to Enforcement between the DIFC Courts and the Commercial Court.