Last week the UAE Ministry of Justice issued a circular to the Dubai Courts that potentially marks a significant turning point in relation to the enforcement of English Court judgments in the onshore UAE Courts. Given the prevalence of English law and the popularity of the English Courts as a favoured jurisdiction for transactions involving international parties, this development is likely to be of considerable importance to all companies involved in commercial transactions and financing in the UAE.
While the UAE and the UK entered into a treaty for mutual judicial assistance as early as 2008, this did not extend to the mutual recognition and enforcement of judgments. As a result, the enforcement of an English Court judgment in the onshore UAE Courts remains subject to the general provisions relating to the enforcement of foreign judgments before the respective domestic courts in Article 85 of the Implementing Regulations of the UAE Civil Procedure Code. This includes the following requirement which imposes a mutual reciprocity requirement:
"Judgments and orders issued in a foreign country may be ordered to be enforced in the UAE under the same conditions prescribed in the law of the foreign country for the enforcement of judgments and orders issued in the UAE."
Until recently, there was a lack of clear examples of the English Courts enforcing judgments from the onshore UAE Courts, and as such the onshore UAE Courts frequently declined to enforce judgments from the English Courts on the basis of insufficient evidence that the reciprocity condition was satisfied (in other words, the UAE Courts have frequently declined to enforce English Court judgments because they were not satisfied that the English Courts would enforce a judgment of the UAE Courts in the same circumstances).
Concerns around the ability to enforce English judgments in the onshore UAE Courts has historically been reflected in the dispute resolution provisions in commercial and financial contracts in the UAE. English law remains popular as a governing law and many international parties (including financial institutions) often wish to retain the option to issues proceedings in the English Courts. However, this is usually included as an alternative option to another forum that would allow easier enforcement in the UAE – most commonly arbitration (which allows enforcement under the New York convention) or, where appropriate, litigation in the DIFC or ADGM Courts.
What has happened?
The English High Court recently enforced a Dubai Court judgment in the case of Lenkor Energy Trading DMCC v Puri (2020) EWHC 75 (QB) (the Lenkor Judgment). One of the key arguments against enforcement was that it would be against public policy for the English Courts to enforce the Dubai judgment on the basis of an allegation that the underlying transaction was tainted by illegality. However, the High Court rejected this argument, noting that the question was not whether the underlying transaction offended public policy; rather whether there was a public policy reason not to enforce the Dubai Court judgment. The High Court concluded there was no public policy basis for refusing to enforce the Dubai Court judgment and this was upheld on appeal by the Court of Appeal in May 2021. For those interested in the details of the case, the UK Court of Appeal judgment can be found here.
The Lenkor Judgment is a welcome example of the English Courts enforcing a Dubai Court judgment and in itself is likely to be relied upon as evidence that the English Courts have satisfied the reciprocity requirement.
However, a recent development provides further encouragement. In a circular issued on 13 September 2022 to the Director General of the Dubai Courts (the MOJ Circular), the UAE Ministry of Justice expressly drew the attention of the Dubai Courts to the Lenkor Judgment and concluded that:
"We find that [the reciprocity] principle is met given that English courts have enforced a judgment rendered by the Dubai Courts under a final judgment handed down by the High Court….which is judicial precedent and binding principle for all English courts according to their judicial system".
The express acknowledgment from the Ministry of Justice that it considers the Lenkor Judgment to demonstrate that the reciprocity principle has been met will no doubt be relied on by any parties wishing to enforce English judgments. However, it is important to remember that this circular has no legal status and is not binding on the Courts. Indeed, the circular is limited to expressing a "hope that, in the event of requests for the enforcement of judgments and orders rendered by the English courts, the requisite legal steps are taken in accordance with the laws in force in both countries, in order to consolidate the principle of reciprocity initiated by the English courts, and to ensure its continuity between the English courts and the UAE courts." Nevertheless, we expect that this will be highly persuasive, and we are hopeful that this will mark a turning point in the enforcement of English judgments.
What does the Circular mean for future practice?
This will clearly be very welcome news for parties with an English Court judgment (or the ability to obtain an English Court judgment) that they would like to enforce against assets in the UAE. However, caution should be noted because:
- As noted above, the circular simply expresses the opinion of the UAE Ministry of Justice on whether the Lenkor case establishes the required reciprocity. While it is likely to have some persuasive force, it does not bind the UAE Courts which will need to decide for themselves whether the Lenkor Judgment is sufficient to establish the required reciprocity.
- UAE courts (unlike the English courts) do not have a binding system of judicial precedent, meaning that even if one UAE court did follow the circular, it is not legally certain that subsequent UAE Courts would take the same approach;
- Even if the principle of reciprocity is met, there may be reasons why a UAE court is entitled not to follow that decision. In particular, the enforcement may be ordered only after the following is verified1
- That the UAE Courts do not have exclusive jurisdiction over the dispute on which the judgment or order has been issued, and that the foreign courts that issued the same have jurisdiction according to the rules of international jurisdiction prescribed in their law.
- That the judgment or order has been issued by a UAE Court in accordance with the law of the state in which the judgment or order has been issued and duly certified.
- That the parties to the lawsuit on which the foreign judgment is issued have been required to appear and are properly represented.
- That the judgment or order has acquired the legal effect of res judicata according to the law of the issuing court, provided that a certificate shall be furnished indicating that the judgment has acquired the legal effect of res judicata, or where the same is already stated in the judgment itself.
- That the judgment neither conflicts with a judgment or an order previously issued by a UAE Court nor involves anything that violates the public order or morality.
As a result, we do not expect the Lenkor Judgment or the MOJ Circular to have any immediate impact on the approach that commercial and finance parties will take to jurisdiction (e.g. arbitration to make use of the New York Convention, together with (in relation to finance agreements) an option to litigate before the English courts). However, such parties will no doubt be watching with interest to see whether the UAE Courts establish a consistent practice of enforcing English court judgments. In particular, parties with current claims and an option to proceed either in arbitration or the Courts should carefully consider whether these developments change their strategic approach to pursuing their claims.
- As set out in Article 85 of the Implementing Regulations of the UAE Civil Procedure Code↩