This White Paper sets out the legal framework for the Enforcement of DIFC Courts’ judgments and orders outside the DIFC in a) Dubai; b) the UAE; c) the region and d) the rest of the world. It is open for consultation for the period of one month and the public is invited to send their feedback to the consultation email address (firstname.lastname@example.org) before 4pm 25 April 2012. Practical case examples of DIFC decisions which have been enforced outside the DIFC would be particularly appreciated.
ENFORCING DIFC COURT JUDGMENTS AND ORDERS OUTSIDE THE DIFC
1. This paper will consider the enforcement of DIFC Court judgments and orders:
a. In Dubai, but outside the DIFC;
b. In the UAE, but outside Dubai; and
c. Outside the UAE.
2. A selection of English language versions of some of the relevant parts of the source materials referred to below are included in an annex
to this paper.
A. The Enforcement of DIFC Court Judgments and Orders in Dubai, but outside the DIFC
3. A system has been established for the enforcement of DIFC Court judgments and orders in Dubai. The system is designed to be simple, swift and effective.1 It has been used successfully on numerous occasions since its introduction in 2004.2 In order to increase the efficiency of the system, the process has been slightly modified by the amendment to Dubai Law No. 12 of 2004 (“the DIFC Law”) in October 2011.3
4. DIFC Court judgments, decisions or orders may be enforced through the Dubai Courts
if three conditions are satisfied (Article 7(2) of the DIFC Law):
a. They must be final and executory;
b. They must be translated into Arabic;
c. They must be certified by the DIFC Courts for execution and have a formula of execution affixed by the Courts.
5. The procedure for enforcement is described in Article 7(3) of the DIFC Law (as amended).
6. The enforcing party must first request an execution letter from the DIFC Courts. This is a letter written by the DIFC Courts to the Chief Justice of the Court of First Instance of the Dubai Courts, setting out the procedures required for the enforcement of the order.
7. The party seeking enforcement must then present an application for enforcement to the execution judge at the Dubai Courts, accompanied by the execution letter and a legal translation into Arabic of the judgment, decision or order.
8. Prior to the amendment of the DIFC Law, the DIFC Courts and Dubai Courts entered into a Protocol of Enforcement (“the Protocol”). Amongst other things, the Protocol clarified two of the requirements for the enforcement of DIFC Court judgments in Dubai.4
9. First, the Protocol clarified (at footnote 1) that a judgment is “final” if either:
a. It is final and unappealable; or
b. It is an order made either before or during the course of proceedings and is said on its face to be an “Execution Order”.
10. Second, the Protocol clarified (at footnote 2) that a “legal” translation was a translation carried out by a translator authorised by the UAE Ministry of Justice.
11. On receipt of the application, the Dubai Courts must enforce the judgment, decision or order in accordance with the Federal Civil Procedures Law.5 The basis on which enforcement may be challenged is set out in that law. Importantly, however, the execution judge may not re-open the merits of the case — Article 7(3)(c) of the DIFC Law (as amended).
12. Enforcement in Dubai of a money judgment from the DIFC Courts will therefore be relatively straightforward and swift. It has proved a reliable procedure to date. For a good example of this see the case of Property Concepts Fze v. Lootah Network Real Estate & Commercial Brokerage (the “Property Concepts Case”)6, in which a DIFC — LCIA7 arbitration award was ratified by the DIFC Courts and then executed directly by the Dubai Courts.
13. DIFC Court judgments are likely to be considerably easier to enforce in Dubai than judgments of foreign courts.8
14. Article 235 of the Federal Civil Procedures Law states that the UAE Courts will not enforce a foreign judgment if they would themselves have had jurisdiction over the dispute. This requirement was applied in 1993, for example, in Dubai Court of Cassation decision No. 117/93. In that case, the defendants were residents of the UAE and therefore, under UAE law, the Dubai court was deemed to have jurisdiction to hear the case. On that basis, the Dubai Court of Cassation refused to enforce a Hong Kong money judgment against them.
15. There are a number of cases where DIFC Court orders have been enforced by the Dubai Courts. DIFC Court orders which have been so enforced include interim orders, such as freezing orders (Mareva injunctions). However, there is no record of the execution of any DIFC Court search orders (Anton Piller orders) by the Dubai courts. This is due to the practice of the Dubai courts of only enforcing applications for the execution of orders against assets but not, by contrast, against documents and other evidence.
B. Enforcement in the UAE outside Dubai
16. Prior to the coming into force in November 2011 of Law No. 16 of 2011 amending certain provisions of Law No. 12 of 2004, the enforcement of DIFC Court judgments and orders outside the UAE had to be pursued through the process of “deputisation” or “referral”, as provided under Article 221 of the Federal Civil Procedures Law.
17. Article 221 provides for the following procedure:
a. The “competent execution judge” (in this case, the Dubai execution judge) shall refer the judgment or order to the execution judge for the area in which the judgment or order is sought to be enforced, and provide the latter with all the legal papers required for execution.
b. The execution judge to whom the referral is made shall take all the decisions necessary to execute the referral and shall rule on procedural objections relating to the execution raised before him, and his appealable decisions shall be subject to appeal before the court of appeal in his area.
c. The execution judge who has carried out the execution shall inform the competent execution judge who made the referral of what has happened, and shall transfer to him any items received by him or other property as a result of the sale of things attached.
d. If the execution judge to whom the matter has been referred finds that there are legal reasons precluding the execution, or if it is impossible for him to execute for any other reason, he must notify the competent execution thereof.
18. Article 7(2) of Law No. 16 of 2011, which amends certain provisions of Law No. 12 of 2004 provides that:
“where the subject matter of execution is situated outside the DIFC, the judgments, decisions and orders rendered by the Courts and the Arbitral Awards ratified by the Courts shall be executed by the competent entity having jurisdiction outside DIFC in accordance with the procedure and rules adopted by such entities in this regard…”
This has been interpreted as indicating that following the coming into force of this amending Law, DIFC Court judgments and orders will be able to be sent directly from the DIFC Courts for execution by the local “competent entity” within the UAE, without the need for going through the Dubai execution judge and the process of “deputisation” or “referral” set out in the above-mentioned Article 221 of the Federal Civil Procedures Law.
19. However, given that there is as yet no established practice of this, parties seeking to enforce judgments and orders emanating from the DIFC Courts might be better advised to opt for the “tried and tested” means provided by Article 221.
C. Enforcement outside the UAE
20. In principle, the enforcement of DIFC Court judgments outside the UAE will be exactly the same as the enforcement of a judgment of the Dubai Courts. Constitutionally, the DIFC Court is part of the Dubai judicial system and so its judgments have the same weight as Dubai Court judgments.9
21. Where there is a relevant treaty in place between the UAE and the target jurisdiction, enforcement will be governed by the terms of that treaty. Where there is not, enforcement will depend on the laws of the state in which the judgment creditor is seeking to enforce.10
22. The UAE has entered into three treaties with other countries which govern the reciprocal enforcement of judgments:
a. The GCC Convention (1996);
b. The Riyadh Arab Agreement for Judicial Cooperation (“the Riyadh Convention” 1983); and
c. The Convention on Judicial Assistance, Recognition and Enforcement of Judgments in Civil and Commercial matters signed between France and the UAE (“the Paris Convention” 1992).
The GCC Convention
23. The other signatories to the GCC Convention are Bahrain, Saudi Arabia, Oman, Qatar and Kuwait.
24. Article 1 of the GCC Convention states:
“Each of the GCC countries shall execute the final judgments issued by the courts of any member state in civil, commercial and administrative cases…”
25. In order for a judgment to be enforceable, the originating court must have had jurisdiction, within the definition provided in the Convention. The various jurisdictional gateways are set out in Article 4. They include:
a. Domicile or residence of the defendant in the jurisdiction (Article 4.A);
b. Disputes relating to the activity of a branch in the jurisdiction (4.B);
c. Disputes about the performance of a contract which took place or should have taken place in the jurisdiction (4.C);
d. Disputes about acts which occurred in the jurisdiction (4.D);
e. The existence of a jurisdiction agreement (4.E); and
f. Submission to the jurisdiction by defending the action (4.F).
26. The Convention sets out a number of grounds on which enforcement may be contested. However, the merits of the claim may not be reviewed:
“The task of the judicial authority of the state where the judgment is required to be executed shall be limited to confirming whether the judgment fulfils the requirements as provided by this agreement, without discussing the subject matter.” 11
27. On the premise that the DIFC Courts are the courts of a GCC member state, other GCC nations should enforce DIFC Court judgments in accordance with Article 1 of the Convention, and should not distinguish between them and other judgments emanating from the Dubai Courts.
28. Notwithstanding their constitutional status, in the light of the relatively recent establishment of the DIFC Courts, in practice it may be prudent to obtain recognition of the judgment or order in the Dubai Courts first, before going on to seek enforcement outside the UAE. However, it might be ventured that given the process which the DIFC Courts follow, in particular their significant common law influence and their drawing from the practice of the English courts, their judgments and orders might lend themselves to easier enforcement outside the UAE, especially in legal systems which follow similar procedures, simply because the process is more likely to be recognized and to be considered “safe” and therefore enforceable in the foreign courts concerned.
|A. Example case of the enforcement of a DIFC Court order outside the UAEGlobal Strategies Group (Middle East) FZE v. Aqeeq Aviation Holding Company LLC 12In this case an arbitral award creditor filed an application in the DIFC Courts to enforce the award rendered in its favour. The Courts issued an order ratifying the award, but asked the applicant to serve it outside the DIFC, namely in Kuwait, where the arbitral award debtor was located. The DIFC order was recognized by the UAE Ministry of Foreign Affairs, the Kuwaiti embassy in the UAE and the Ministry of Justice in Kuwait, who served the respondent. All of this occurred in the absence of any stamp of the Dubai courts on the DIFC Court order.
|B. Example case of the enforcement of a GCC order in the DIFC CourtsFarooq Al Alawi v. Lloyds TSB Bank PLC and Credit Suisse AG 13In this case the DIFC Courts ordered that the respondents enforce a judgment which had been issued by the Bahraini Family Courts and a resolution emanating from the Bahraini Board of Minors’ Funds Custody. The order in question made reference to the Rules of the DIFC Courts; the 1983 Convention on Judicial Cooperation between States of the Arab League; and the 1995 Protocol on the Enforcement of Judgments Letters Rogatory and Judicial Notices issued by the Courts of the Member States of the Arab Gulf Co-operation Council. 14The background to the case was as follows: The applicant had been issued with a Power of Attorney by the Minor Affairs Directorate of the Ministry of Justice and Islamic Affairs in the Kingdom of Bahrain. He had subsequently instructed the two respondent financial institutions located in the DIFC (where a Bahraini national, who had been subject in Bahrain to an order of distraint, had bank accounts) to comply with the terms of the judgments and resolutions issued by the Bahraini courts. However, before so doing, an Execution Order from the DIFC Courts had to be issued first.
These serve as good illustrations of both the enforcement of a DIFC Court order outside the UAE, in a GCC country, on the one hand, and the enforcement of an order from another GCC country by the DIFC Courts on the other, reference being made to the relevant applicable international conventions.
The Riyadh Convention (1983)
29. The other parties to the Riyadh Convention are: Jordan, Bahrain, Tunisia, Algeria, Djibouti, Saudi Arabia, Sudan, Syria, Somalia, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Morocco, Mauritania and Yemen.
30. Article 25 of the Riyadh Convention states that, subject to certain provisos:
“each contracting party shall recognize the judgments made by the courts of any other contracting party in civil cases including judgments related to civil rights made by penal courts and in commercial, administrative and personal statute judgments having the force of res judicata and shall implement them in its territory in accordance with the procedures stipulated in this Part…”
31. The Riyadh Convention requires that the originating court have jurisdiction in accordance with the laws of the enforcing state. However, the Riyadh Convention also sets out the circumstances in which the originating court shall be considered to have jurisdiction. These are very similar to, but slightly more extensive than, the jurisdictional gateways set out in the GCC Treaty.
32. Once again, although the Riyadh Convention sets out a number of bases on which enforcement may be refused, the enforcing Court may not review the merits of the decision:
“The duties of the competent judicial body of the contracting party requested to recognize or to execute the judgment concerned shall be confined to establishing that the judgment complies with the provisions of this Agreement without examining the subject matter thereof” 15
Paris Convention (1992)
33. Finally, the UAE has the benefit of a bilateral treaty with France, described as a “Convention on judicial assistance, recognition and enforcement of judgments in civil and commercial matters” (“the Paris Convention”).
34. Article 13(1) of the Paris Convention states that, if certain conditions are fulfilled:
“Judgments rendered by the courts of one State shall be recognized and may be declared enforceable in the other State if (certain) conditions are met…”
35. The originating court must have had jurisdiction either according to the laws of the enforcing state or according to the rules set out in Article 14 of the Convention.
36. Article 14 provides for jurisdictional gateways which are very similar to those set out in the GCC Treaty. Additional gateways are provided in respect of cases relating to immovable property, inheritance, maintenance and the custody of minors.
37. Article 15 makes clear that the merits are not to be reviewed.
Where no treaty exists
38. The question of whether a DIFC Court judgment or order will be enforced in a foreign country with which the UAE has no relevant treaty will be a matter for the courts of that country. This is not intended to be a comprehensive review of those enforcement procedures. However, the following general comments can be made.
39. In some countries, such as Russia, Denmark, Iceland, Finland and Norway, the courts will not enforce a foreign judgment at all, in the absence of a relevant treaty.
40. In other countries, the courts will require reciprocity and so will investigate the question of whether the originating court would enforce its own money judgments. This approach was historically taken more widely. More recently, it is no longer a requirement in many countries. Examples of courts which continue to require reciprocity are Germany, Austria, Japan, Nigeria, Singapore and a small number of states of the United States of America.
41. When considering whether to enforce a DIFC Court judgment, it is open to question whether the foreign court would investigate the question of reciprocity by looking at the laws applicable in the Dubai Courts or those applicable in the DIFC Courts.
42. At present, there are no decided cases in which the DIFC Court has had to grapple with the question of whether its powers to enforce foreign judgments are wider than those of the Dubai Courts. The relevant legislation appears to give the DIFC Courts a relatively free hand in determining the circumstances in which they will enforce a foreign judgment. Article 7(6) of Dubai Law No. 12 of 2004 (as amended) simply states that foreign judgments “shall be enforced within the Centre in the manner prescribed in the Rules of the Courts.” This language is echoed in Article 42 of the DIFC Court Law. Article 24 of the Court Law is expressed in similarly broad terms.
43. If the DIFC Courts’ powers to enforce foreign judgments are wider than those of the Dubai Courts, then, in principle, DIFC Court orders may be easier to enforce in those foreign countries which require reciprocity.
44. In most (possibly all) countries, the courts of the enforcing state will require that the originating court had jurisdiction according to the enforcing court’s own criteria. Those criteria will vary from country to country. In many cases, the rules applied are quite restrictive, sometimes more restrictive than those rules by which that Court determines its own jurisdiction.
45. One example of this is the approach of the English courts. Where no relevant treaty exists, the English Courts will apply the common law to determine whether the originating court had jurisdiction. In this context, in the case of a personal judgment, in order to establish that the originating court had jurisdiction, it needs to be shown that either:
a. The judgment debtor was physically present in the jurisdiction at the time that proceedings were instituted;
b. The judgment debtor was the claimant or made a counterclaim in the proceedings;
c. The judgment debtor submitted by voluntarily appearing in the proceedings; or
d. The judgment debtor is bound by a valid jurisdiction agreement.
46. Where no treaty exists, the English Courts therefore adopt a more restrictive test in determining a foreign court’s jurisdiction than they would take when deciding whether they have jurisdiction over a case.
47. Most foreign countries will refuse to enforce certain types of judgment or order on policy grounds. For example, English courts will not enforce orders for punitive damages. Awards of multiple damages under Article 40(2) of the DIFC Law of Damages and Remedies might therefore be difficult to enforce. Few courts will enforce judgments for the recovery of taxation. Many courts in the Arab world will refuse to enforce a judgment which is contrary to the principles of Sharia.
48. In many foreign countries, the enforcing court will not reopen the merits of the case. In the Courts of England and Wales, for example, the law considers that the existence of a judgment of a competent foreign court creates a free-standing and enforceable obligation to pay the money which the defendant has been ordered to pay. The objections which may be raised to the enforcement of such a judgment are limited, such as that the foreign court did not have jurisdiction to try the case, the judgment is not for a liquidated sum of money (a foreign judgment can only be enforced in England and Wales if it is finally quantified), or that the judgment is not final and conclusive.16
49. In some countries, however, such as Belgium, Italy and Portugal, the courts will allow the merits to be reviewed in certain circumstances.
50. The decisions of the DIFC Courts are decisions of one of the courts of the Dubai judicial system and so should be capable of enforcement at least as widely as Dubai Court judgments and orders.
51. Within the GCC and Riyadh Convention states and in France, enforcement will be governed by the treaties currently in place. In many Arab countries, a DIFC Court judgment is likely to confer a significant advantage.
52. Enforcement further afield will be determined by the laws of the target jurisdiction.
53. In considering whether to enforce a DIFC Court judgment, a foreign court will generally consider whether the DIFC Court had jurisdiction according to the foreign court’s own criteria. Those criteria may well differ from the provisions of Article 5(A) of the Judicial Authority Law by which the DIFC Court determines its own jurisdiction17. There may therefore be circumstances in which a foreign court would refuse to enforce a DIFC Court judgment on jurisdiction grounds. However, the same applies to judgments of any other Court. More importantly, in very many courts, the relevant jurisdiction test will be satisfied if the judgment debtor submitted to the jurisdiction, either by means of a jurisdiction agreement or by participation in the proceedings. Parties who agree to bring their claims before the DIFC Court can therefore be confident that any judgment in their favour will be enforceable in a very wide range of foreign courts.
54. In practice, given its relatively recent history, some foreign courts may be slow to recognize the DIFC Courts as part of Dubai’s judicial system. In the circumstances, it may be prudent first to obtain a fast-track enforcement order from the Dubai Courts before then going on to seek enforcement further afield. In time and with experience, it is to be hoped that this first preliminary step will no longer be required.
Shamlan Al Sawalehi, Judicial Officer and Natasha Bakirci, Judicial Clerk – DIFC Courts
1 An interesting distinction can be noted between the common law system, which the DIFC Courts to a large extent adopt, and in which judgments can be enforced even where an appeal is still available against them, save where a stay of execution pending appeal is granted; and the civil law system to which the Dubai courts pertain, and in which judgments cannot be enforced until the time-limits for any available appeals against them have expired, save where an urgent order for execution has been granted.
2 See Dubai Law No.12 of 2004 in respect of The Judicial Authority at Dubai International Financial Centre.
3 See Law No. 16 of 2011 Amending Certain Provisions of Law No. 12 of 2004 Concerning the DIFC Courts.
4 It is still unclear whether these two requirements in the new Article 7 will be interpreted in the same way by the Dubai Courts.
5 Civil Procedure [Fed. Law 11 of 1992] as amended — referred to in Article 7(3)(c) of Law No. 12 of 2004 (as amended).
6 ARB 001/2010, Order of 19 October 2010
7 London Court of International Arbitration
8 Though a distinction can be drawn between the Dubai Courts as established by Law 3 of 1992 and the DIFC Courts established under Law No. 12 of 2004, the DIFC Courts are Dubai courts themselves and form an integral part of the Dubai judicial system, as is evidenced by the swift procedures in place for their execution through the Dubai courts.
9 The exact nature of the DIFC Courts as a judicial body might be described as sui generis. Though established by an amendment to Article 121 of the UAE Constitution and the Federal and Dubai laws which followed, it does not form part of the Dubai courts Judicial Council and has to date been reliant on the Dubai courts for the execution of its judgments and orders outside the DIFC. How Article 7 of the amending Law. No 16 of 2011 might affect the enforcement procedure in the future remains to be seen.
10 For the applicable procedure to be followed, see Article 7 of Law No. 12 of 2004, as amended.
11 Article 7 of GCC Convention 1996.
12 Arbitration 002/2010.
13 Execution Order of 19 January 2011, Enforcement Order No: 02/2012.
14 This was later revised on 31 January 2012, and the respondents were ordered to enforce a new Order of the Ministry of Justice and Islamic Affairs in Bahrain.
15 Article 32 of the Riyadh Convention.
16 However, there is a general presumption that a foreign judgment is conclusive.
17 Now significantly broadened in scope by Article 5 of Law No. 16 of 2011.
Click here to download the Annex in PDF format.