Update: Dubai Judicial Committee hands down further decisions

Litigation Update

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Following on from its first decision in the case of Daman Real Capital Partners Company LLC v. Oger Dubai LLC, Cassation No. 1/2016 (read our previous article), the recently- formed judicial committee (the Committee) established to adjudicate conflicts of jurisdiction or judgments between the Dubai International Financial Centre (DIFC) Courts and the onshore Dubai Courts (the Onshore Courts) has handed down further decisions which will be of significant interest to the legal market and to businesses operating in this region.

In summary, the Committee's recent decisions have confirmed that:

  • The DIFC Courts cannot be used as a conduit jurisdiction for the enforcement of arbitral awards rendered in non-DIFC Dubai (Onshore) in circumstances where there are parallel annulment proceedings on foot in the Onshore Courts
  • The Committee will not intervene to prevent the DIFC Courts being used as a conduit jurisdiction for the enforcement of foreign arbitral awards and court judgments in Onshore Dubai in circumstances where there are no Onshore proceedings on foot involving the same parties and relating to the same subject matter

A brief summary of the recent decisions is set out below.

Dubai Waterfront LLC v Chenshan Liu, Cassation No. 2/2016

Following an arbitration seated in Onshore Dubai, Chenshan Liu obtained a DIAC award against Dubai Waterfront LLC (an onshore company with no presence or assets in the DIFC). Liu subsequently applied without notice to the DIFC Courts for the recognition and enforcement of that award, and the DIFC Courts granted that order. Dubai Waterfront LLC applied to the DIFC Courts for that order to be set aside. In addition, it also:

  • Filed an application in the Onshore Courts (which had supervisory jurisdiction over the arbitration) seeking the annulment of the award
  • Applied to the Committee for an order stating that the Onshore Courts were the competent courts to determine whether the award should be enforced or annulled

Consistent with the Daman decision, the Committee found in favour of Dubai Waterfront LLC, ruling that a conflict of jurisdiction had arisen between the Onshore Courts and the DIFC Courts and ordering (by majority) that:

  • The case be remitted for trial to the Dubai Courts
  • The DIFC Courts should "cease from entertaining the case"

As with the Daman decision, all three of the DIFC Court judges sitting on the Committee dissented from the ruling that the DIFC Courts should cease from entertaining the case.

Marine Logistics Solutions LLC and other v Wadi Woraya LLC and others, Cassation No. 3/2016

The parties had arbitrated a dispute in London, in which an award was rendered in favour of the respondents, Wadi Woraya LLC (and others), on 12 October 2012 (Wadi). Wadi subsequently sought to enforce the award in the DIFC Courts, even though the award debtors (Marine) are located onshore and have no connection with the DIFC. Marine applied to the Committee to determine whether the DIFC Courts or the Dubai Courts had jurisdiction to hear the enforcement action.

In its brief decision, the Committee rejected the application and found (unanimously) in favour of Wadi. The following passage encapsulates the Committee's decision:

"Since the appellants have not raised a case before the Dubai Courts, then there is no dispute or conflict regarding jurisdiction between the two courts to be considered and resolved [by the Committee]. Hence the cassation should be dismissed."

Gulf Navigation Holding PJSC v DNB Bank ASA, Cassation No. 5/2016

In the landmark DIFC Court case between these two parties, the DIFC Court of Appeal had previously confirmed that, provided certain procedural requirements are met, they could be used as a conduit jurisdiction for the enforcement of foreign court judgments in Onshore Dubai, even in circumstances where the judgment debtor has no connection with the DIFC whatsoever. This judgment is generally regarded as being of great legal and commercial significance, because direct enforcement of a foreign judgment is not possible in the Onshore Courts in the absence of a mutual enforcement treaty between the UAE and the country from which the court judgment originated (of which there are still relatively few).

DNB Bank had applied to the DIFC Courts for the recognition and enforcement of a judgment handed down by the English Commercial Court in 2014.

Following the DIFC Court of Appeal's ruling and the establishment of the Committee, Gulf Navigation referred the matter to the Committee on 3 November 2016 and sought an order "annulling" the DIFC Court judgment on the grounds that it was given without jurisdiction.

Following the same basic reasoning applied in the Marine decision, the Committee dismissed the application on the basis that, since there were no parallel proceedings in the Onshore Courts, a conflict of jurisdiction with the DIFC Courts had not arisen.

Commentary

While the Committee's decisions are regrettably short and lacking in clearly defined principles, nevertheless in Daman and Dubai Waterfront the Committee has now sent an unequivocal signal that arbitral awards rendered in Onshore Dubai cannot be enforced in the DIFC Courts in any circumstances if the same award is also subject to ongoing annulment proceedings in the Onshore Courts. These decisions effectively overturn the seminal DIFC Court of Appeal judgment in Meydan Group LLC v Banyan Tree Corporate PTE Ltd, and close off the conduit enforcement route for Onshore award creditors (as Onshore award debtors subject to enforcement proceedings in the DIFC Courts can now simply bring those proceedings to a halt by commencing annulment proceedings in the Onshore Courts).

By contrast, the decisions in the Marine and DNB Bank cases indicate that the Committee will refuse to intervene in circumstances where no parallel proceedings exist. In practice, this will often be the case where the relevant judgment or award concerned is a foreign one, as in those circumstances any appeal or annulment/set aside proceedings could only be brought in the courts of the relevant foreign country.

Presently therefore, it would appear that, as long as there is no conflict of jurisdiction between the two Dubai-based sister courts, the conduit route of enforcement for foreign judgments and arbitral awards remains intact.

However, the Committee's approach to the question of the DIFC Court's status as a conduit jurisdiction for foreign decisions has yet to be tested in circumstances where there are parallel proceedings on foot in both the Dubai Courts and the DIFC Courts (for whatever reason).

In theory at least, it may for example be possible for a recalcitrant foreign judgment/award debtor who is subject to enforcement proceedings in the DIFC Courts to engineer a conflict of jurisdiction by commencing fresh proceedings in the Onshore Courts, and arguing that the foreign litigation/arbitration and/or the resulting foreign judgment/award was in some way invalid (and that, as a result, the Onshore Courts have jurisdiction to consider the merits of the dispute afresh). Only time will tell what the Committee will make of such tactics, which are unfortunately not uncommon in this jurisdiction.