Michael Kerr, Regional Managing Partner, Dentons, on the international reach of the DIFC Courts: Viewpoint

Michael Kerr, Regional Managing Partner, Dentons

Operated and supported by modern administrative and regulatory regimes, the Dubai International Financial Centre (DIFC) also benefits from an English-language court modelled on the High Court in London, as well as a modern arbitration framework. For the first few years of its existence, the DIFC Courts’ jurisdiction was limited to disputes that had some connection with the DIFC, either through the presence of one of the parties or because the dispute related to business conducted in the DIFC. However, in 2011 the DIFC expanded the courts’ jurisdiction.

The DIFC’s initiative to extend jurisdiction of its courts to the wider business community has paid dividends, but it has also created the need to address a key challenge in litigation, namely to ensure effective enforceability of DIFC Courts’ judgments outside its territorial borders. Arbitration awards are extremely exportable thanks to the New York Convention, but court judgments are much less so. The challenge is this: any successful litigator can only capitalise on that by converting the judgment into real money. To do so, the successful party must be able to chase the assets of the unsuccessful party wherever those assets might be. If a party secures a judgment in state X when its opponent’s assets are in state Y, the usefulness of the judgment depends on the extent to which the courts of state Y are permitted, or required, to recognise a judgment made outside its borders.

The starting point for the DIFC Courts was to ensure that judgments would be effective in the rest of Dubai. This was addressed with the establishment of a protocol between the DIFC Courts and Dubai’s onshore courts, whose jurisdiction extends to the other Dubai free zones. Under the protocol, any DIFC Courts judgment would be rubber-stamped without examination and converted into a Dubai onshore judgment. As for the rest of the UAE, although provision was made in UAE federal law to allow for direct enforcement of DIFC Court judgments in the other emirates of the UAE, practitioners were, and largely remain, sceptical. The practice remains to take a DIFC Courts judgment and use the protocol to convert it to a Dubai onshore judgment for enforcement on a pan-emirate basis. In addition, the DIFC established memoranda of understanding with both the UAE federal court system and the courts of Ras Al Khaimah.

The greater challenge is to enable enforcement of DIFC Courts judgments internationally. The UAE has international arrangements relating to enforcement of judgments within the GCC and the wider Arab community, but these have limitations. Where no specific treaty exists between two relevant states, a common principle in most legal systems is that a state will give effect to a judgment of another state if the latter would reciprocate. The DIFC has therefore established a series of ad hoc reciprocal arrangements with the court systems of many states, including England, Australia, Jordan, Korea, Kenya and Uzbekistan. Under these, the courts of the two jurisdictions undertake to facilitate enforcement of money judgments made by each other. However, the DIFC Courts have gone further. In 2015 they issued a judgment to confirm that they have an inherent jurisdiction to allow direct enforcement of judgments made in any foreign state, though such a decision could not be rubber-stamped into a Dubai onshore judgment.

As a further comfort for parties concerned about the effectiveness of DIFC Court judgments, in early 2015 the DIFC Courts introduced a practice direction providing for parties who submit to the jurisdiction of the DIFC Courts also to agree that any dispute relating to non-payment of a DIFC judgment debt could also be arbitration in the DIFC. This would convert the unpaid judgment into a DIFC arbitration award, which would then benefit from the global exportability that is provided under the New York Convention. These are strong signals that the DIFC aims to be viewed as the go-to forum in the Middle East for disputes.

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Michael Kerr

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