March 14, 2016
The DIFC Court of Appeal has unanimously held in DNB Bank ASA v Gulf Eyadah (CA-007-2015) that it is "not wrong" to use the DIFC Courts as a conduit jurisdiction. The decision, which overturns the holding at first instance, makes clear that parties with or without assets in the DIFC can (a) enforce a foreign judgment in the DIFC Courts and (b) take the resulting DIFC Court judgment to the Dubai Courts for execution pursuant to the enforcement provisions of the Judicial Authority Law. Absent resistance from the Dubai courts, the decision in DNB has opened a far easier route to enforcing foreign money judgments in onshore Dubai.
DNB Bank Asa ("DNB") commenced proceedings against Gulf Eyadah in the English Commercial Court. That litigation resulted in a judgment in favour of DNB for USD 8.7 million. DNB brought enforcement proceedings in the DIFC Courts. Gulf Eyadah contested jurisdiction on the basis that (a) it had no assets in the DIFC against which judgment could be enforced (b) there was no other connection between the parties and the DIFC that could support the court’s jurisdiction and (c) the proceedings were in any event an abuse of process because DNB was (as it admitted) using the DIFC Courts as a "conduit jurisdiction", i.e., DNB simply wished to obtain a DIFC Court judgment in order to take advantage of reciprocal enforcement provisions between the DIFC and Dubai Courts that would enable execution against assets in onshore Dubai.
At first instance Justice Ali Al Madhani dismissed all of Gulf Eyadah’s objections and issued judgment in favour of DNB. In dismissing the abuse of process submission the learned Justice held that the "abuse" asserted by Gulf Eyadah was an impossibility: a party could not, he said, enforce a foreign judgment in the DIFC Courts and then take the resulting DIFC Court judgment to the Dubai Courts for execution. DNB, although the victor, was concerned that the Justice’s dictum might create an issue estoppel that would prevent enforcement in Dubai. DNB therefore brought an appeal, which the court decided to hear because of the "legal significance" of the question raised. Gulf Eyadah cross-appealed against the first instance findings on jurisdiction, abuse of process and costs. All but the costs appeal was later abandoned.
The appeal was heard by Chief Justice Hwang SC, Justice Sir David Steel and Justice Omar Al Muhairi. The core issue in the appeal was DNB’s contention that the judge at first instance had erred in holding that a judgment of the DIFC Court in enforcement proceedings was a "recognised foreign judgment" that could not be referred on to the Dubai Courts for execution under Article 7(2) of the Judicial Authority Law. The court held, with reference to the dictum of Sir John Chadwick in Bocimar International N.V. v Emirates Trading Agency LLC (CFI 008/2015), that the phrase "recognised foreign judgment" is not a term found in the Judicial Authority Law. Instead, properly understood, the judgment that DNB sought to enforce was a foreign money judgment, which is enforceable by the DIFC Courts. And once such a judgment is enforced it becomes an independent local judgment of the DIFC Court, such that it is within the scope of – and so enforceable under – Article 7(2) of the Judicial Authority Law.
In a word of caution, the DNB judgment notes that attempting to use the DIFC Courts as a conduit jurisdiction is at a party’s own risk: the DIFC Courts are neither concerned with nor have control over what the Dubai Courts will do when presented with a DIFC Court judgment that recognises a foreign judgment.
The DNB decision is the foreign court judgment equivalent of the decision in (1) X1, (2) X2 v. (1) Y1, (2) Y2 (ARB 002/2013) regarding ratified foreign arbitration awards. In both cases the DIFC Courts have signaled that they are content to be used as a conduit jurisdiction, but how these judgments will be received in the Dubai Courts remains to be seen. A sea change for enforcing against assets in onshore Dubai may be afoot. For now all that can be said is that a new gateway is open (at least from the DIFC Courts’ perspective).
Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding the above developments. Please contact the Gibson Dunn lawyer with whom you usually work, or the authors:
Please also feel free to contact the following leaders of the firm’sInternational Arbitration Practice Group:
© 2016 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.