Enforcing International Arbitral Awards in the UAE and The DIFC Courts: A conduit jurisdiction Simon Roderick Yacine Francis April 2016 www.allenovery.com
2 Meeting you today Simon Roderick Partner Dubai Tel +971 4 426 7101 Simon.Roderick@AllenOvery.com Yacine Francis Senior Associate Dubai Tel +971 4 426 7228 Yacine.Francis@AllenOvery.com
3 Overview Introduction to enforcement of international arbitral awards and The New York Convention; Enforcement in the UAE - Historically; and The DIFC Courts: A conduit jurisdiction for enforcement in the UAE.
4 1. Introduction to enforcement
5 Enforcement overview Importance of the seat; Voluntary compliance; Recognition versus enforcement; Choosing place of enforcement; The New York Convention; and Multi-lateral and bi-lateral treaties. Recognition vs enforcement Recognition Introducing an award in a national legal order without enforcement. Interest of a party in establishing res judicata effect. Recognition and enforcement of an award is usually applied at the same time. Enforcement Declaration that an award can be enforced in the same way as a local court judgment. Provides for forced execution in the absence of voluntary compliance. Leave for enforcement granted by judiciary of the place of enforcement (exequatur).
6 Enforcement The New York Convention ratified not ratified
7 Enforcement The New York Convention 156 states are party to The New York Convention, including: the UAE; Qatar; Oman; Egypt; Kingdom of Saudi Arabia; and Pakistan. Important for the seat and the place of enforcement. Limited grounds for refusing enforcement under Article V of The New York Convention Incapacity of the parties. Invalid arbitration agreement. Lack of proper notice or inability to present party s case. Dispute was outside scope of the arbitration agreement or the Tribunal exceeded its mandate (possibility of partial recognition and enforcement). Award has been set aside.
8 Additional limited grounds under Article V of The New York Convention Authority in the country where recognition and enforcement is sought finds that: subject matter of dispute is not capable of settlement through arbitration; or recognition or enforcement is contrary to public policy of the jurisdiction where enforcement sought. Multilateral treaties and Bilateral Treaties RIYADH CONVENTION the UAE, Morocco, Bahrain, Qatar, Kuwait, Oman, Jordan, Lebanon, Saudi Arabia, Syria, Tunisia, Algeria, Djibouti, Sudan, Somalia, Iraq, Palestine, and Libya. GCC CONVENTION Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. BILATERAL JUDICIAL CO-OPERATION TREATIES For example, the UAE with, amongst others, France, Egypt, India, Morocco, and Pakistan.
9 2. Enforcement in the UAE Historically
10 United Arab Emirates Signatory to The New York Convention since 2006. Party to the Riyadh (1999) and GCC Conventions (1987). Numerous bi-lateral treaties, including with Egypt, Morocco and Pakistan. Outdated arbitration law. FOREIGN AWARDS HAVE BEEN ENFORCED IN THE UAE PURSUANT TO THE NEW YORK CONVENTION: Abu Dhabi Court of Cassation, Commercial Appeal No. 679-2010 (issued in June 2011); and Dubai Court of Cassation, Macsteel v Airmech, Oct. 2012. ENFORCEMENT, HOWEVER, IS NOT GUARANTEED: In 2013, the Dubai Court of Cassation refused to enforce a foreign award on the basis of lack of jurisdiction (CCI v MOI, Case No. 156/2013 Civil Cassation). In 2016, the Dubai Court of Appeal refused to enforce a London seated award on the absis of no evidence being submitted of the UK having ratified The New York Convention (Fluor v Petrixo Oil & Gas).
11 UAE Onshore Enforcement of Awards - Historically FOREIGN AWARD (WITH NY CONVENTION SEAT) Open a claim before the onshore Court of First Instance. Enforcement based on The New York Convention, which provides limited grounds to appeal the Award. Risk that the onshore Court would not follow The New York Convention. Then potentially two levels of appeal: the Court of Appeal, then the Court of Cassation. AWARD WITH ONSHORE SEAT Open a claim before the onshore Court of First Instance to ratify the Award. Ratification or annulment based on Article 215 of the CPC: valid arbitration agreement; tribunal did not exceed limits; award issued by properly appointed arbitrators; and the award and proceedings not invalid. Risk that the onshore Court will go beyond the narrow language of Article 215. Then potentially two levels of appeal: Court of Appeal, then the Court of Cassation. AWARD WITH DIFC SEAT Apply to the DIFC Court to convert the Award to a DIFC Court judgment. Then, apply to the Dubai Court Execution Judge to enforce the DIFC Court judgment. No grounds for merits review or appeal. Once enforced in Dubai, enforceable in any other Emirate.
12 UAE Onshore Enforcement of Awards Historically In theory, the UAE should be a jurisdiction where enforcement of foreign awards is easy. In practice, this was not always the case. Foreign awards enforced directly onshore into the UAE Courts, utilising The New York Convention, were time consuming and inconsistently enforced by the UAE Courts. UAE Courts had occasionally reopened the underlying merits of a dispute on abstract procedural or public policy grounds. Even where the UAE Courts had enforced a foreign award, the Respondent could delay such enforcement through two further layers of onshore appeal. Following the handing down of a foreign award, against a UAE based Respondent, delays in enforcement of 2 to 3 years were not uncommon.
13 3. The DIFC Courts: A conduit jurisdiction for enforcement in the UAE
14 The Relevant Laws Article 7 of the Judicial Authority Law (Dubai Law No.12 of 2004 as amended by Law No. 16 of 2011): 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. Article 42 of the DIFC Arbitration Law: An arbitral award, irrespective of the State or jurisdiction in which it was made shall be recognized as binding within the DIFC and, upon application in writing to the DIFC Court, shall be enforced subject to the provisions of this Article and of Articles 43 and 44 Awards recognized by the DIFC Court may be enforced outside of the DIFC in accordance with the Judicial Authority Law.
15 Banyan Tree Corporate PTE Ltd v Meydan Group LLC Banyan Tree and Meydan were involved in a contractual dispute where Banyan Tree claimed damages for wrongful termination. Banyan Tree took Meydan to binding DIAC arbitration and was awarded USD19,505,528.78. Meydan did not pay Banyan Tree the amount awarded by the DIAC arbitration. On 19 December 2013, Banyan Tree applied for recognition and enforcement of the DIAC award in the DIFC Courts despite none of the award, Banyan Tree nor Meydan having any connection with the DIFC. The obvious benefit of recognition and enforcement of the DIAC award in the DIFC Courts was that it could be enforced outside of the DIFC and into Dubai without proceeding through the onshore courts of Dubai. On 27 May 2014, the DIFC Court of First Instance held that the DIFC Courts had jurisdiction to decide if the DIAC Award could be recognised as binding within the DIFC, despite the lack of any nexus with the DIFC. Meydan appealed the DIFC Court of First Instance decision on jurisdictional grounds to the DIFC Court of Appeal.
16 Banyan Tree Corporate PTE Ltd v Meydan Group LLC On 3 November 2014, the DIFC Court of Appeal upheld the DIFC Court of First Instance decision. Meydan appealed the DIFC Court of Appeal decision on conflict of jurisdiction grounds to the UAE Union Supreme Court (The highest Federal Court in the UAE). On 23 December 2015, the UAE Union Supreme Court decided that the DIFC Courts could recognise the DIAC Award and that there was no conflict of jurisdiction with the onshore Dubai Courts if the DIFC Courts did so. This means that the DIFC Courts has the power to recognise any arbitral awards as well as enforce them onshore in the UAE, and that the UAE Federal Courts accept the legal basis of the DIFC Courts to do so.
17 DNB Bank ASA v Gulf Eyadah Corp and Gulf Navigation Holding PJSC The DIFC Courts acting as a conduit jurisdiction for enforcement is not limited to arbitral awards. On 25 February 2016, the DIFC Court of Appeal overturned a DIFC Court of First Instance decision and held that the DIFC Courts can be used as a conduit jurisdiction for the enforcement of foreign court judgments. Again, this decision does not require there to be any connection between the foreign court judgment or the parties with the DIFC.
18 What does this mean for you in practice? Any UAE entity which is the subject of a binding foreign arbitral award or an unappealable foreign court judgment, against it, is now at greater risk of UAE enforcement of that award or judgment. A UAE respondent in foreign arbitration, or defendant in foreign litigation, can no longer assume that they will be able to delay enforcement of such an award or judgment in the onshore UAE Courts. Any party seeking to enforce against a UAE entity is likely to use the DIFC Courts as a conduit jurisdiction for enforcement as this will reduce any risk of the onshore UAE Courts investigating the merits of the dispute or the enforcement being subject to onshore appeal. The DIFC Courts have previously issued interim remedies such as Freezing Injunctions which have, on occasion, been enforced onshore in Dubai (Mohammed Usman Saleem v. Oasis Crescent Capital (DIFC) Limited and HSBC Bank Middle East Limited). We expect that any party seeking to enforce against a UAE entity, using the DIFC Courts as a conduit jurisdiction, could also simultaneously apply for interim remedies against the Respondent UAE entity. Such interim remedies could be very detrimental to the commercial operations of the Respondent UAE entity.
19 DIFC Courts as a conduit jurisdiction The new process Foreign Award (with NY Convention Seat) Apply to the DIFC Court to recognise the Foreign Award and convert it to a DIFC Court judgment. Then, apply to the Dubai Court Execution Judge to enforce the DIFC Court judgment. No grounds for merits review or appeal. Once enforced in Dubai, enforceable in any other Emirate. The DIFC Courts as a conduit jurisdiction for foreign arbitral awards simplifies the process and makes enforcement across the UAE much more efficient. We expect this procedure to be almost universally adopted for foreign arbitral awards enforced into the UAE going forward.
20 Enforcement of Foreign Awards DIFC Courts as a conduit jurisdiction We are currently acting on the enforcement of a London seated ICC arbitral award for a Japanese client against a Sharjah based entity, using the DIFC Courts as a conduit jurisdiction. Neither the award nor the parties have any link to the DIFC. Following the new process for enforcement, set out in the slide above, we expect enforcement against the Sharjah based entity within 6 months of commencing the DIFC proceedings.
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