DIFC Court of Appeal confirms its jurisdiction to recognise and enforce awards rendered outside of the DIFC

In Banyan Tree v Meydan Group LLC (Case CA-005-2-14), the DIFC Court of Appeal has confirmed its jurisdiction to recognise and enforce arbitral awards rendered outside the DIFC even when neither party is based or has assets in the DIFC. The decision is not particularly surprising given the law was clear on this point. However, both debtors had assets in onshore Dubai and neither had assets in the DIFC and, while there is no reason for the DIFC Courts to refuse jurisdiction or indeed to refuse to enforce the awards in the DIFC, it does raise the question as to why the creditors did not immediately seek recognition and enforcement in the Dubai courts.

Background

The background to the case is summarised in a previous blog (here). In summary, two award creditors sought to have arbitral awards rendered in onshore Dubai enforced in the Dubai International Financial Centre (DIFC) (a separate and autonomous jurisdiction within the United Arab Emirates UAE). This was despite the fact the award debtors had no immediate nexus to the DIFC (both were based in Dubai) and no assets situated in the DIFC. In both cases the DIFC Court of First Instance confirmed its jurisdiction to recognise and enforce within the DIFC arbitral awards rendered outside the DIFC. The main basis for the decision was the clear language of Article 42 of the DIFC Arbitration Law which provides that the DIFC Courts should recognise or enforce arbitral awards “irrespective of the State or jurisdiction” subject to Articles 43 and 44 of the DIFC Arbitration Law, which effectively mirror Article V of the New York Convention and were not relevant in either of the cases.

One of the award debtors (Meydan Group LLC) then appealed to the DIFC Court of Appeal, which was asked to decide two issues:

1. Do the DIFC Courts have the jurisdiction to recognise and enforce such arbitral awards within the DIFC; and
2. If the answer to question 1 is yes, are there reasons why the DIFC Courts should not exercise this jurisdiction.

The Court of Appeal (Justice Sir David Steel, Justice Roger Giles and H.E. Justice Ali Al Madhani) handed down its decision on 3 November 2014 and in upholding the findings of the Court of First Instance concluded that the DIFC Courts have jurisdiction to recognise and enforce any arbitral award, irrespective of the seat of arbitration. This was the clear intention behind Article 42 of the DIFC Arbitration Law and applies even where the parties have no connection to the DIFC and there are no assets within the DIFC. The Court of Appeal did, however, reserve its position on Issue 2 and stated that it will decide the question later in the proceedings.

Comment

The DIFC Court's decision is not at all surprising given the language of the relevant legislation. What is clear from this case is the DIFC Courts will not entertain an argument that bringing a claim to enforce an arbitral award in the DIFC but which has been rendered in onshore Dubai is an abuse of process.

What is interesting about this is case is the motive of the award debtors in bringing this enforcement claim in the DIFC Courts and not the Dubai Courts, given that the award debtors had assets in Dubai and neither had assets in the DIFC. The Court of Appeal, like the Court of First Instance, was keen to stress that the DIFC Courts only have jurisdiction to make an order in relation to the DIFC and therefore if the creditors want to get their money they will have to take any DIFC Order to the Dubai Courts. However, if the Claimants succeed in the merits of their enforcement application before the DIFC Courts, the claimants will be able to take a DIFC Court Order for enforcement in Dubai rather than the underlying arbitral awards (albeit the DIFC Court Order will, of course, be in relation to the awards).

The Judicial Authority Law which established the DIFC provides that the Dubai Courts do not have discretion or jurisdiction to review the merits of a DIFC Court judgment or arbitral award and therefore perhaps the claimants are of the view that this process will be relatively quick as opposed to the “usual” process for ratification of awards in the Dubai Courts which can sometimes be time consuming and can (although it should not) involve a review of the merits of the underlying dispute. Nonetheless, it will be interesting to see how the Dubai Courts respond if they form the view that the underlying enforcement application is one that they should have heard in the first place. The Court of Appeal may have issued its final judgment, but this saga is unlikely to be considered concluded at this time and it is one that anyone with an interest in arbitration in Dubai and the DIFC should watch with interest as it develops.

For further information, please contact Stuart Paterson, Partner, Mike McClure, Senior Associate, or  your usual Herbert Smith Freehills contact.