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A watershed moment for the Dubai Court? – Ashley Cukier on DNB Bank v Gulf Eyadah

In this article, Ashley Cukier looks at the recent judgment of the DIFC Court of Appeal in DNB Bank ASA
v Gulf Eyadah Corporation CA 007/2015, a potential game-changer for litigators
seeking to enforce in Dubai, the UAE and, indeed, further afield.

Introduction: The UAE
– a challenging enforcement landscape

In 2015 the Dubai International Financial Centre (“DIFC”)
Courts handled cases valued at over $1 billion, the first time since its
establishment in 2004 that the DIFC Courts had crossed the $1 billion threshold
for the year. The DIFC Courts’ 2015 Annual Review, published last month, makes
impressive reading, and points to continued growth of the DIFC Courts as a
major dispute resolution centre.[1]

Previously, however, enforcement of foreign court judgments
in the DIFC Courts has proved a challenge for foreign litigators. Where no
international treaty for the mutual recognition and enforcement of judgments
existed between the UAE and a foreign country, the UAE courts have, as a matter
of course, refused to enforce the judgments of the foreign court. Similarly,
even in circumstances where such an international treaty has existed, litigators
have shied away from seeking enforcement in the DIFC Courts, given the inherent
difficulty in converting a DIFC judgment into a judgment in ‘onshore’ Dubai.

That legal landscape has arguably taken on a rather different
character following the recent ruling of the DIFC Court of Appeal in DNB Bank ASA v Gulf Eyadah Corporation CA
007/2015.[2] The ramifications for litigants and/or litigators involved, or contemplating
litigation, in Dubai are highly significant.

DNB Bank v Gulf
Eyadah: the Facts

The Appellant, DNB Bank ASA (the Claimant in the original
English proceedings) sought recognition and enforcement of an Order made by the
English High Court on 30 September 2014, requiring Gulf Eyadah Corporation and
Gulf Navigation Holdings PJSC, the Respondents (and Defendants in the original
English proceedings) to pay $8.7 million plus costs under various finance
documents and a guarantee. The Respondents, a Dubai-based shipping company and
its affiliate, were located in ‘onshore’ Dubai and had no ostensible connection
to the DIFC.

The Respondents contested the DIFC Courts’ jurisdiction to
enforce the foreign court judgment, arguing that none of the jurisdictional
gateways to enforcement under Article 5A of the amended Judicial Authority Law,
Dubai Law No.12 of 2004 had been satisfied.[3] At First Instance, H.E. Justice Ali Al Madhani dismissed the Respondents’
application contesting jurisdiction, concluding that the English Court Order
constituted a “foreign” court order
within the meaning of the amended Article 7(6) of the Judicial Authority Law,
Dubai Law No.12 of 2004, and therefore fell within jurisdictional gateway
5(A)(1)(e). Accordingly, the DIFC Court was obliged to accept the Order for
recognition and execution within the DIFC, in accordance with the Rules of the
DIFC Court. Importantly, however (and concomitant with the previous practice of
the DIFC Court) the Court at First Instance further stated that recognition and
execution of the Order was limited to the DIFC, and could not be referred to
the ‘onshore’ Dubai Courts for execution.

The Appellant appealed to the DIFC Court of Appeal, arguing
that the DIFC Court at First Instance had erred in finding that the DIFC Courts
had no power to refer a foreign judgment to the ‘onshore’ Dubai Courts for
execution. The Court of Appeal concurred. Giving the judgment of the Court of
Appeal, Chief Justice Michael Hwang SC explained, inter alia, that the
judgment sought to be enforced was a foreign money judgment, and, accordingly:

“a foreign judgment,
when granted recognition in the DIFC Courts, therefore becomes a local judgment
of the DIFC Courts and should therefore be treated as such by the Dubai Courts
(amongst others). [§104]

Interestingly, the Court had considered the Memorandum of
Guidance entered into between the DIFC Courts and the Commercial Courts of
England and Wales, and the common law principle that a foreign money judgment
could be sued upon in a common law action, the result of which, if successful,
is an independent judgment of the common law court, which can be enforced in
turn. In this instance, once the judgment was enforced, it would become an
independent local judgment by virtue of Article 7(2) of the Judicial Authority
Law.

The DIFC Court of Appeal also found that the presence of
assets in the DIFC was not a precondition of enforcing foreign court judgments
in the DIFC Courts. Rather, in what (for some) represented a startling
departure from the conventional wisdom regarding enforcement in Dubai hitherto,
Chief Justice Hwang explained:

“From the perspective of
the DIFC Courts, it is not wrong to use the DIFC Courts as a conduit
jurisdiction to enforce a foreign judgment and then use reciprocal mechanisms
to execute against assets in another jurisdiction.” [§129]

Accordingly,
the DIFC Courts would “not be concerned” as a general rule, with what happens in any subsequent jurisdiction in which
the Appellant sought to enforce its local judgment as the DIFC Court “does not have the jurisdiction to dictate what
they should do”.

Implications: a
watershed moment?

The first obvious consequence of this decision is the newly-secured
ability of parties seeking enforcement of a foreign judgment effectively to
execute and enforce such judgment in the ‘onshore’ Dubai courts, via the DIFC,
even in the absence of a treaty of mutual recognition and enforcement between
the UAE and the foreign country. This “conduit
jurisdiction” in itself, will likely constitute a significant attraction to
litigants seeking enforcement against assets held or situated in Dubai or in
other Emirates in the UAE, where previously such attempts would have been
arduous and, most likely, unsuccessful. The decision opens the door to the
possibility of, for instance, proceedings being brought against a party for a
tortious act instigated in the UAE but causing damage in the UK; those
proceedings could be litigated in the English High Court and any judgment
obtained could then be enforced in the DIFC and, subsequently, in the wider Emirates’
courts.

However, the ramifications of this judgment arguably extend
further still. By virtue of the ability to secure an ‘onshore’ Dubai, or
indeed, other domestic UAE judgment, litigants can now expect to be able, in
turn, to enforce such a judgment in any one of the countries with which the UAE
has signed a treaty of mutual recognition and enforcement, including the
signatories to the GCC Convention (Bahrain, Kuwait, Oman, Saudi Arabia &
Qatar) and the Riyadh Convention (Egypt, Iraq, Jordan, Lebanon, Saudia Arabia
& Syria). The UAE has, notably, also entered into similar stand-alone
treaties with France, India and China. It is evidently a list not to be sniffed
at.

With this decision, and the publication last year of a DIFC
Courts Practice Direction[4] enabling its Arbitration decisions to be upheld in the signatory countries to
the New York Convention, it would appear that the DIFC Courts are making a
renewed push for Dubai to become a leading international legal destination for
commercial litigants. Whether the decision in DNB Bank v Gulf Eyadah proves to be the watershed moment for
Dubai’s flagship dispute resolution centre, time will surely tell; but it would
be difficult to argue that the decision does not represent a sizeable leap
forward.

Littleton’s
practitioners often appear before the DIFC Courts and are well placed to assist
parties thinking about bringing, or having to defend, proceedings in the DIFC
Courts. For more information, please contact Tim Tarring on 020 7797 8600.