Judicial Tribunal Renders Further Decisions on the DIFC Courts’ Jurisdiction

by White & Case LLP
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The Judicial Tribunal in Dubai has rendered new decisions, continuing to give priority to on-shore Dubai Courts vis-à-vis the offshore DIFC Courts.

Background

In one of our previous alerts here, we summarized the impact of Dubai's Judicial Tribunal on the DIFC Courts' "conduit jurisdiction".

By way of background, decisions of the on-shore Dubai Courts and the DIFC Courts are mutually recognized and enforced, including enforcement proceedings for arbitration awards. The DIFC Courts have adopted an expansive approach to their jurisdiction, holding that they could be used as a 'conduit' to enforce foreign and domestic (on-shore) arbitration awards (which would have been recognized by the DIFC Courts). The Judicial Tribunal was set up, in part, as a reaction to this practice of the DIFC Courts and is to decide upon conflicts of jurisdiction and judgments between the on-shore Dubai Courts and the offshore DIFC Courts.

We elaborate below on the decisions the Judicial Tribunal has rendered since our previous alert, and consider whether these decisions have reduced the jurisdiction of the DIFC Courts further.

Further Developments Through the Judicial Tribunal Decisions

The following scenarios now have to be distinguished if an award creditor seeks enforcement in the DIFC Courts:

  1. Annulment Proceedings are Pending

    As long as annulment proceedings are pending before the on-shore Dubai Courts in relation to an award rendered in on-shore Dubai, the recognition and enforcement of the award cannot proceed in the DIFC Courts and has to be stayed. This applies even if there is a link to the DIFC, for example, if the dispute is related to a project located in the DIFC (as in Daman Real Capital Partners Company LLC v Oger Dubai LLC).

    Since our previous alert, the Judicial Tribunal has re-confirmed its position, relying upon the principle that the Dubai Courts have "general jurisdiction" in Ramadan Mousa Mishmish v Sweet Homes Real Estate LLC.

  2. Formal Mediation Proceedings are Pending

    The Judicial Tribunal in Gulf Navigation Holding PSC v Jinhai Heavy Industry Co. Limited has also recently addressed for the first time the situation that settlement proceedings are pending before the Dubai Centre for Amicable Settlement of Disputes (the "Settlement Centre"), which is attached to the on-shore Dubai Courts. The Judicial Tribunal held that the recognition and enforcement of an award cannot proceed before the DIFC Courts, if such settlement proceedings are pending. The Judicial Tribunal gave preference to the Dubai Courts, although the award in question was rendered in London and the claim was initiated before the Settlement Centre a year later. Unsurprisingly, three of the seven Judicial Tribunal Justices issued dissenting opinions, arguing that the Judicial Tribunal should not have interfered with the enforcement in the DIFC Courts, on the basis of the New York Convention.

  3. No Annulment Proceedings / Formal Mediation Proceedings are Pending

    By contrast, an award creditor can enforce the award both in the offshore DIFC Courts and the on-shore Dubai Courts where no annulment / formal mediation proceedings are pending either in the DIFC Courts or in the on-shore Dubai Courts, or where these proceedings have been concluded unsuccessfully. This appears to apply irrespective of the seat of the arbitration. This also appears to apply irrespective as to whether there is any link with the DIFC and whether there are any assets of the award debtor in the DIFC.

    The Judicial Tribunal recently confirmed this in respect of an award that was rendered in the DIFC (Assas Investments Limited v Fius Capital Limited). In this case, annulment proceedings had been concluded unsuccessfully. The award creditor initiated proceedings in the DIFC Courts to enforce the award, in parallel with execution proceedings in on-shore Dubai Courts. The Judicial Tribunal clarified that there was no conflict of jurisdiction since execution proceedings were carried out with respect to different assets, those in the DIFC and those in on-shore Dubai.

    This recent decision is consistent with two of the Judicial Tribunal's earlier decisions, where the jurisdiction of the DIFC Courts was invoked to enforce foreign awards and judgments. In both instances the cases had no connection with the DIFC, the DIFC Courts' jurisdiction was invoked to seek recognition of the foreign award and judgment, so as to simplify execution proceedings in the on-shore Dubai Courts. In these decisions, the Judicial Tribunal had held in favour of the DIFC Courts' jurisdiction since there no conflict with the jurisdiction of the on-shore Dubai Courts.

Conclusion

In its most recent decisions, the Judicial Tribunal has continued its restrictive approach towards the jurisdiction of the DIFC Courts in relation to the recognition and enforcement of awards. Notably, the Judicial Tribunal has now also given priority to the on-shore Dubai Courts in the case that mediation proceedings are pending before the Settlement Centre. Parties seeking enforcement of arbitral awards in the DIFC Courts must now be wary of attempts at settlement under the aegis of the Settlement Centre, since that may unwittingly create a conflict of jurisdiction. A party seeking enforcement of an award may therefore prefer to take recourse to informal settlement attempts instead.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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