gavel

Dubai's new Judicial Tribunal calls into question DIFC courts’ “conduit jurisdiction”

Article

Posted by , on

Summary: The Judicial Tribunal (the “JT”), established last year to rule in cases concerning conflicts of jurisdiction between the DIFC Courts and the Dubai Courts, has issued its first decision (Cassation No. 1/2016 (Judicial Tribunal)). By majority vote (with all three DIFC Court Judges dissenting) the JT has determined that the DIFC Courts should “cease from entertaining the case” and the dispute should be taken forward by the Dubai Courts.

The decision has unsurprisingly generated much debate within Dubai’s legal community. Many had hoped that the introduction of the JT would enhance Dubai’s judicial systems by providing clarity and certainty in situations of conflict. However, the JT’s first decision appears to have instead cast a shadow over the DIFC’s role as a “conduit jurisdiction”.

Key case: Daman Real Estate Capital Partners Company LLC v Oger Dubai LLC

Background

Dubai is unusual[1] in that it runs two court systems in parallel. Since 2006 the DIFC Courts have operated as an independent common law jurisdiction in the UAE, in contrast to the  Dubai Courts which function as a civil law jurisdiction. The interaction between the two is premised on a concept of “mutual recognition” which imposes an obligation on the Dubai and DIFC courts to recognise and enforce each other’s judgments without a review of the merits.

Recently a series of cases has chipped away at the edges of the Dubai Courts’ jurisdiction, redefining an ever-increasing jurisdictional reach of the DIFC Courts. Most notably the DIFC Courts have confirmed that they are a legitimate “conduit jurisdiction” for recognising and enforcing domestic and foreign arbitral awards and foreign judgments - even where the judgment debtor has no assets in the DIFC.  

In June 2016, the Ruler of Dubai established the Joint Judicial Tribunal of the Dubai Courts and the DIFC Courts (Decree No. (19) of 2016) (the “Decree”) with immediate effect. The Decree outlines the twofold role of the JT: first, to determine jurisdiction disputes between the Dubai Courts and the DIFC Courts, including questions of the DIFC Courts acting as a conduit jurisdiction (Article 2(1)); and second, to decide which of two conflicting judgments from the Dubai Courts and DIFC Courts involving the same parties and subject-matter has jurisdiction, including in the case of conflicting enforcement orders (Article 2(2)).

There are seven members of the JT, comprising four members from the Dubai Courts and three members from the DIFC Courts. The Chairman of the JT has the casting vote: this is the Head of the Dubai Court of Cassation. The Committee is quorate with four members and decisions of the JT are final.

The JT’s first decision

In Daman Real Estate Capital Partners Company LLC v Oger Dubai LLC, the claimant was successful in a DIAC arbitration. Subsequently, Oger sought enforcement of the DIAC Award in the DIFC Courts and Daman sought its annulment in the Dubai Courts. At the same time, Daman applied for a stay of proceedings and permission to appeal in the DIFC Courts. Its application failed on both counts. Subsequently, Oger sought and was granted a winding up order against Daman. This was granted and, even beyond the JT’s decision, is believed to remain in place. Running in parallel to events in the DIFC Courts, Daman had its application to annul the award dismissed in both the Dubai Court of First Instance and Dubai Court of Appeal. At the time of Daman’s application to the JT, the case was pending at the Dubai Court of Cassation.

Judicial Tribunal’s decision

It is within this context that the Defendant applied to the JT, basing an argument on Article 2(1) of the Decree, specifically, that there was a conflict as to which of the Dubai Courts and the DIFC Courts had jurisdiction. The JT confirmed that a conflict did exist as the Defendant had filed a case for annulment in the Dubai Courts and was “doubtless” awaiting the determination of the Dubai Court of Cassation. The Defendant was within its rights to bring the case to the JT.

As an aside, the JT confirmed that if the substantive claim had not related to an arbitration then the DIFC Court would unquestionably have had jurisdiction because the asset in dispute, Daman Tower, was located in the DIFC and the Defendant was a DIFC registered entity.

The majority decision stated that: “According to the general principles of law embodied in the procedural laws / the Dubai Courts are the competent courts to entertain this case”, but gave no elaboration as to the source and content of the ”general principles” referred to.

It further ordered the case to be reinstated to the Dubai Courts for trial and demanded that the DIFC Courts should cease to entertain the case.

In a short dissenting opinion, the three DIFC judges (Michael Hwang, Omar Al Mahairi and Sir David Steel) agreed on the competence of the Dubai Courts to hear the annulment application, but unsurprisingly dissented on the second point, namely that DIFC Courts should cease to entertain the case.

Analysis

The JT was established on the premise that there might be cases in which an apparent conflict between the respective jurisdictions of the Dubai Courts and the DIFC Courts would need to be resolved.  The irony of this case however is that the Dubai Courts (the Court of First Instance and the Court of Appeal) themselves considered that they did not have jurisdiction, albeit that the decision of the Dubai Court of Appeal was issued the day before the Decree was promulgated.  It will therefore be interesting to see what happens to the case when it is remitted back to the Dubai Courts.

The fact that the JT was willing to direct that the DIFC Courts should cease to entertain the case raises serious doubts as to the future use of the DIFC Courts as a conduit jurisdiction to enforce “onshore” arbitration awards through those courts.  These doubts are underlined by the fact that in this case there was a clear nexus to the DIFC, in particular that the Respondent was incorporated in the DIFC, and that the property which was the subject matter of the dispute was situated within its precincts.  Whilst it remains to be seen whether future decisions of the JT follow a similar approach, the use of the DIFC as a conduit jurisdiction to side-step the examination of onshore awards by the Dubai Courts looks to no longer be the attractive strategy it once was.


[1] This is a model which has been replicated in Abu Dhabi with the recent creation of the Abu Dhabi Global Market.

Stay informed

Sign up to receive email alerts from our award winning Expert Insights team

Sign up now

See more insights by category

This site uses cookies to help us improve our services and your browsing experience. For further information about cookies, including about how to change your browser settings to no longer accept cookies, please view our privacy policy.