Enforcing Foreign Judgments in the UAE: An Update in Light of DNB Bank ASA v Gulf Eyadah Corporation

Mondial | Publication | March 15, 2016

In a ruling likely to have significant implications for enforcement actions against parties with assets in the UAE, the DIFC Court of Appeal confirmed in the case of DNB Bank ASA v Gulf Eyadah Corporation and Gulf Navigation Holdings PJSC (CA 007/2015) that the DIFC Courts can recognise and enforce a foreign judgment and then refer the resulting DIFC judgment to the onshore Dubai Courts for execution.

Background: Foreign Judgments in the UAE

The UAE is a civil law jurisdiction composed of seven Emirates, including Abu Dhabi and Dubai. Each Emirate has established several “free zones,” with the Dubai International Financial Centre (DIFC) being one of the most prominent. Unlike most other free zones, the DIFC is an autonomous jurisdiction with its own civil and commercial laws and courts that operate under a common law system with binding precedent.

The relationship between the DIFC Courts and the onshore Dubai Courts is governed by laws including Dubai Law No. 12 of 2004 and its amendment Dubai Law No. 16 of 2011. Under this Judicial Authority Law, the DIFC Courts can refer a final and enforceable judgment to the Dubai Courts for execution without reconsidering the merits, provided the judgment is translated into Arabic and a letter is sent from the DIFC Courts to the Chief Justice of the Court of First Instance detailing the execution process.

Historically, the Dubai Courts have been reluctant to enforce judgments from jurisdictions with no reciprocal enforcement treaty with the UAE. Even where such a treaty exists, enforcement can be lengthy, costly, and sometimes unsuccessful.

In contrast, under DIFC law, the DIFC Courts are required to recognise and enforce final and binding foreign judgments, regardless of whether the UAE has a treaty with the relevant country.

This has led practitioners to apply to the DIFC Courts for recognition and enforcement of foreign judgments and then rely on the Judicial Authority Law to execute the resulting DIFC judgments in Dubai, avoiding re-examination of the merits or stricter enforcement tests in Dubai.

The DNB Bank Case

DNB Bank took this approach to enforce a judgment obtained from the English Court for USD 8.7 million plus costs against Gulf Eyadah Corporation and Gulf Navigation Holdings PJSC. Despite the judgment debtors having no assets or connection to the DIFC, the bank initiated proceedings in the DIFC Courts, seeking a judgment matching the amount awarded by the English Court.

The judgment debtors challenged the DIFC Court’s jurisdiction, arguing they had no assets in the DIFC and thus the court lacked authority.

The Court of First Instance Decision

At the Court of First Instance, H.E. Justice Ali Al Madhani held that the DIFC Courts had jurisdiction, independent of whether the defendants had any DIFC-based assets.

The judge also held that “recognised foreign judgments” could not be referred to the Dubai Courts for execution, reasoning that Article 7(2) of the Judicial Authority Law only allows referral of “judgments, decisions, and orders rendered by the [DIFC] Courts” and does not mention recognised foreign judgments.

Accordingly, the Court of First Instance concluded that although the DIFC Courts could recognise and enforce foreign judgments, they lacked the power to refer these judgments to the onshore Dubai Courts.

The Court of Appeal Decision

DNB Bank appealed, arguing that the Court of First Instance erred. The bank contended that enforcement of a foreign judgment by the DIFC Courts produces a local DIFC judgment that can be executed in Dubai under Article 7 of the Judicial Authority Law.

At the Court of Appeal, Chief Justice Michael Hwang, Justice Sir David Steel, and H.E. Justice Omar Al Muhairi overturned the lower court’s decision. The Court confirmed that the DIFC Courts have jurisdiction to enforce foreign judgments even if the defendants have no assets or connection to the DIFC.

The Court also affirmed that once recognised in the DIFC Courts, a foreign judgment becomes a local DIFC judgment, falling within “judgments, decisions, and orders rendered by the [DIFC] Courts” under Article 7(2). Therefore, DIFC Courts can refer any judgment recognising a foreign judgment to the onshore Dubai Courts for execution.

Conclusion

The Court of Appeal’s decision in DNB Bank is likely to make enforcement of foreign judgments in the UAE faster and more reliable than before.

Given the benefits of using the DIFC Courts as a conduit for enforcement in onshore Dubai, a significant increase in applications for recognition and enforcement of foreign judgments in the DIFC Courts is expected.