United Arab Emirates: The Dubai Judicial Tribunal – The Beginning Of The End For The DIFC As A ‘Conduit' Jurisdiction?

Last year we reported that the DIFC had successfully established itself as a so called 'conduit' jurisdiction for the enforcement of foreign and domestic arbitral awards as well as foreign money judgements.

This status could now be in jeopardy after the newly established Dubai Judicial Tribunal has issued its first decisions, which significantly curtail the DIFC's jurisdiction.

What has happened so far...

In recent years the DIFC Courts have established a good track-record of enforcing arbitral awards (foreign and domestic) and foreign money judgments even when the relevant assets against which the award or judgment was to be enforced were located outside the DIFC and within the jurisdiction of Dubai's 'onshore' courts. On the back of those decisions, the DIFC has become popular as a so-called 'conduit' jurisdiction.

  • Meydan Group LLC v. Banyan Tree Corporate Pte Ltd [CA-005-2014] – concerning a domestic arbitration award
  • (1) Egan, (2) Eggert v. (1) Eava, (2) EFA1 [ARB 002/2013] – concerning a foreign arbitral award
  • DNB Bank ASA v. Gulf Eyadah and Gulf Navigation Holdings PJSC [CA-007-2015] – concerning a foreign money judgment

Reasons why parties prefer to take this additional step through the DIFC Courts rather than the direct route through the Dubai Courts include the ease of doing so and the prospects for enforcement, which are considerably greater in the DIFC Courts than in the Dubai Courts. Once the DIFC Courts have issued the enforcement order, the order (as a final judgment of the DIFC Courts) is then referred to the Dubai Courts for execution outside the DIFC under Article 7(2) of Dubai's Judicial Authority Law (Law No. 12 of 2004).

The legitimacy of this conduit route has now been thrown into question by recent decisions issued by the newly established Judicial Body of the Dubai Courts and DIFC Courts (the Judicial Tribunal). As a consequence of those decisions, it is at least questionable whether the DIFC will remain as a viable conduit route in the future, at least in so far as the enforcement of domestic arbitral awards is concerned.

The Judicial Tribunal

The Judicial Tribunal was established by Dubai Decree No. 19 of 2016 (the Decree). The Decree was issued in June 2016, but was only published much later in the year, when it came as a surprise to many in the business and legal community. In summary, the Judicial Tribunal is authorised to:

  • determine conflicts of jurisdiction between the Dubai Courts and the DIFC Courts;
  • determine which judgment should be enforced in case of the conflicting judgments of the Dubai Courts and the DIFC Courts; and
  • propose rules and regulations necessary to avoid conflicts on jurisdiction between the Dubai Courts and the DIFC Courts.

The Judicial Tribunal is made up of three judges each appointed from the Dubai Courts and the DIFC Courts, together with the Secretary General of the Judicial Council. The President of the Dubai Court of Cassation is the chairman of the Judicial Tribunal and holds the casting vote in the event of any hung decisions.

In mid-December 2016 the Judicial Tribunal handed down its first decision, in Case No. 1/2016 (JT), Daman Real Estate Capital Partners Company LLC v. Oger Dubai LLC (the Daman Case). In summary, Oger had been successful against Daman (a DIFC-based company) in a domestic arbitration in Dubai and proceeded to the DIFC Courts for the enforcement of the award against Daman. In turn, Daman commenced proceedings in the Dubai Court of First Instance for the annulment of the arbitration award and requested the DIFC Courts to stay the enforcement proceedings pending the outcome of the annulment proceedings in the Dubai Courts. The DIFC Courts agreed and ordered a stay of the proceedings on the condition that Daman pay sufficient security into the court, which Daman failed to do. As a consequence, the DIFC Courts proceeded to recognise and enforce the award and actions were brought for the winding-up of Daman. In the meantime, the Dubai Court of First Instance and, subsequently, the Dubai Court of Appeal both determined that they had no jurisdiction because the award had already been enforced by the DIFC Courts.

The Judicial Tribunal's decision in the Daman Case

Having been unsuccessful in resisting the enforcement of the award, Daman decided to refer the matter to the Judicial Tribunal under Article 4 of the Decree.

The Judicial Tribunal decided that:

  • the case be remitted for trial by the Dubai Courts; and
  • the DIFC Courts should "cease from entertaining" the case.

There has been much debate about what the wording of the Judicial Tribunal's order to the DIFC Courts to "cease from entertaining" means and what consequences it has. This is particularly so as the recognition and enforcement proceedings in the DIFC Courts had already been concluded. One interpretation is that parties (at least in Dubai-seated arbitrations) will not be able to enforce awards before the DIFC Courts until annulment proceedings have been concluded in the Dubai Courts. This could add several months of delay to the enforcement process and would effectively curtail the DIFC Courts' jurisdiction under their own laws to recognise and enforce awards within the DIFC. The decision is remarkable as the Daman Case is not a typical conduit-jurisdiction case. In fact, the Daman entity against which enforcement was sought was an entity established in the DIFC.

Unfortunately, the Judicial Tribunal's decision contains very little reasoning from which one could extrapolate its general approach on this topic. Importantly, not every member of the Judicial Tribunal agreed with the decision, and all three DIFC Court judges expressly dissented on the issue of the DIFC Courts ceasing from entertaining the case, though the reasons for the dissent are yet unknown.

Nevertheless, the Judicial Tribunal deemed it important to point out that there was no similarity between this case and the case where the enforcement of a foreign arbitral award is concerned.

The Judicial Tribunal's subsequent decisions

It recently transpired that during the Judicial Tribunal's session on 19 December 2016, it also decided on at least four other cases which had been brought before it:

  • Case No. 2/2016 (JT) – Dubai Water Front LLC v. Chenshan Liu
  • Case No. 3/2016 (JT) – Marin Logistics Solutions LLC & others v. Wadi Woraya LLC & others
  • Case No. 4/2016 (JT) – [no information is available]
  • Case No. 5/2016 (JT) – Gulf Navigation Holding PJSC v. DNB Bank ASA

Case No. 2/2016 is similar to the Daman Case in that it concerns parallel proceedings for the enforcement of a domestic arbitral award before the DIFC Courts, while annulment proceedings were pending before the Dubai Courts. The Judicial Tribunal ordered the case to be remitted to the Dubai Courts and the DIFC Courts to cease entertaining the case, echoing its decision in the Daman Case.

Case No. 3/2016 concerns an action brought before the DIFC Courts for the recognition and enforcement of a foreign arbitral award where the arbitration was seated in London. However, as proceedings were only pending before the DIFC Courts but not before the Dubai Courts, the Judicial Tribunal decided that there was no conflict or dispute as to the jurisdiction between the two courts and, therefore, dismissed the case.

Case No. 5/2016 concerns proceedings brought before the DIFC Courts for the enforcement of a foreign money judgment rendered by the Commercial Court in London. Similar to its decision in Case No. 3/2016, the Judicial Tribunal ruled that the issue was not one of conflicting jurisdiction, as no case has been brought before the Dubai Courts, and dismissed the case accordingly.

Unfortunately, there is only anecdotal information available about Case No. 4/2016 as the Judicial Tribunal's decisions are (rather unhelpfully) not published. However, it appears that in that case the Judicial Tribunal upheld the jurisdiction of the DIFC Courts. It is unclear whether such decision came about as a result of a dismissal of the case for reasons similar to those in Case Nos. 3 and 5 or whether there was a positive endorsement of the relevant DIFC Court's jurisdiction in circumstances where proceedings were pending before both the DIFC courts and a Dubai courts and a conflict of jurisdiction had therefore arisen between these two courts.

What are the consequences?

There have been strong reactions and responses from both the business and legal communities since information about the Judicial Tribunal's decisions became public. Many were quick to announce the end of the DIFC as a conduit jurisdiction and that parties would no longer be able to enforce arbitral awards and foreign money judgments in the DIFC Courts only to then seek execution of the award (as a DIFC judgment) outside the DIFC by the Dubai Courts under the Judicial Authority Law (Law No. 12 of 2004).

There is no doubt that the Judicial Tribunal's decisions (and the Decree itself) will have an impact on the way the DIFC Courts are used to side-step the Dubai Courts in certain circumstances. However, at least for the moment, there is no evidence that the Judicial Tribunal plans to end the DIFC conduit route generally and in all scenarios.

The two cases which the Judicial Tribunal ordered be remitted back to the Dubai Courts and the DIFC Courts to cease from entertaining concern the enforcement of domestic arbitral awards issued in (onshore) Dubai. In those cases the Dubai Courts have exclusive jurisdiction to decide on the annulment of the award. Such jurisdiction is separate from that of the DIFC Courts (or, in fact, any other court) to enforce the award within the DIFC. It is therefore not an issue of the Dubai Courts and the DIFC Courts having competing or conflicting jurisdictions as they are concerned with different issues, i.e., annulment v. enforcement. It is likely that this was the reason why the DIFC Court judges who are members of the Judicial Tribunal (partially) dissented with the rest of the Judicial Tribunal.

The important question which remains unanswered is whether the Judicial Tribunal's order to the DIFC Courts to cease entertaining the case is meant as an order to stay the proceedings pending a final decision from the Dubai Courts in the annulment proceedings, or as an order to relinquish its jurisdiction of the case generally. In other words, does the Judicial Tribunal's decision spell the end of the enforcement of the domestic arbitral awards through the DIFC in the absence of any enforceable assets in the DIFC, or is it simply a 'traffic-light' like measure by which the DIFC Courts have to delay enforcement proceedings until a final decision on the validity of the arbitral award has been made by the Dubai Courts?

Providing a conclusive answer to this question is akin to reading tea leaves. It does not help that the Judicial Tribunal's decisions contain hardly any reasoning at all from which one could extract a general direction as to how the Judicial Tribunal intends to deal with such situations in the future. This is further amplified by the general cloak of secrecy which the Judicial Tribunal applies to its activities and decisions. All of this causes uncertainty and insecurity as to whether the conduit route through the DIFC Courts is still available for the enforcement of arbitral awards and foreign money judgments.

In so far as the Daman Case is concerned, the Judicial Tribunal's order to the DIFC Courts to cease from entertaining the case can only be interpreted to mean a temporary stay of proceedings pending the outcome of the decision in the Dubai Courts, as the enforceable assets are located in the DIFC and only the DIFC Courts have jurisdiction to enforce and execute judgments against assets located within their jurisdiction.2 As such, the Daman Case is not a conduit-jurisdiction case and therefore is of limited relevance.

In Case No. 2/2016 on the other hand, which presents a true conduit scenario, the Judicial Tribunal adopted the exact same language as in the Daman Case. One could therefore draw the conclusion that the Judicial Tribunal wanted to treat this case in a similar way by ordering the DIFC Courts to only temporarily stay proceedings rather than to fully relinquish their jurisdiction for the enforcement of the domestic award. However, the limited number of cases decided so far, the very limited reasoning provided by the Judicial Tribunal and the fact that the decisions have been translated from Arabic (as the official language) into English, all taken together, prevent any reliable prediction as to the future of the DIFC as a conduit jurisdiction.

In so far as the conduit route for the enforcement of foreign arbitral awards is concerned, at least the Judicial Tribunal found it necessary to point out that the cases at hand (Case Nos. 1/2016 and 2/2016) are different from those concerning the enforcement of foreign arbitral awards. This could be interpreted to mean that the Judicial Tribunal will continue to allow the enforcement of foreign arbitral awards through the DIFC Courts as a conduit jurisdiction, but only curtail the DIFC Courts' jurisdiction in respect of domestic awards. But again, this uncertainty will remain until the Judicial Tribunal addresses this issue in clear and certain terms, ideally by way of rules or guidelines, which it is authorised to do under Article 2(3) of the Decree.


  1. Prior to the new convention adopted by the DIFC Courts for anonymised case reverences, this case was also referred to as (1) X1, (2) X2 v. (1) Y1, (2) Y2.
  2. This also appears to be the interpretation adopted by the Chief Justice of the DIFC in its administrative ruling in the Daman Case to "put on hold" all further proceedings until further notice.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions