Thought leadership from our experts

Dubai International Financial Centre: A go-to jurisdiction for enforcement

The Dubai International Financial Centre ("DIFC"), the common law off-shore exception within the UAE's civil law system, is quickly evolving into a go-to jurisdiction for enforcement actions.

In the first half of 2016, as compared to the whole of 2015, the DIFC reported a 244% increase in enforcement actions filed.

This substantial growth can be attributed, at least in part, to a series of recent DIFC court decisions which establish the DIFC courts as a conduit jurisdiction. The jurisdiction becomes a "conduit" when the purpose of an enforcement action is to obtain a DIFC court order that can be taken to another jurisdiction, such as onshore Dubai, to be executed against assets in that jurisdiction.

There are good reasons to make this extra judicial stop in the enforcement process. The DIFC has established itself as a reliable jurisdiction, with well-trained judges, straightforward procedures, modern laws, and publicly reported cases. As the DIFC courts are part of the Dubai court system, a DIFC order should be treated as a domestic order by the onshore Dubai execution court, eliminating the risks associated with onshore recognition and enforcement actions

DIFC Courts as Conduit Jurisdiction

  • In (1) X1, (2) X2 v. (1) Y1, (2) Y2,1 the DIFC Court of First Instance held it had jurisdiction to recognize and enforce foreign arbitral awards, also in the absence of the award debtor's assets in the DIFC or other geographic nexus with the DIFC.
  • In Banyan Tree v. Meydan Group LLC,2 the DIFC Court of Appeal held that the DIFC courts have jurisdiction to hear actions for recognition and enforcement of domestic arbitral awards rendered outside the DIFC, even in the absence of the award debtor's assets in the DIFC or other geographic nexus within the DIFC.
  • In DNB Bank ASA v. Gulf Eyadah3 the DIFC Court Appeal held that DIFC courts have jurisdiction to enforce a foreign monetary judgment even if no assets are located within the DIFC.

In each of these cases, the creditor sought a DIFC order even though there were no assets in the DIFC against which to execute the order. In (1) X1, (2) X2 v. (1) Y1, (2) Y2 the DIFC Court acknowledged: "it is plain that the Claimants are seeking recognition and enforcement of the arbitration awards with the sole purpose of taking the DIFC Order to the Dubai/UAE Courts." 4

The DIFC Court of Appeal was even more explicit in DNB Bank ASA v. Gulf Eyadah: "From the perspective of the DIFC Courts, it is not wrong to use the DIFC Courts as a conduit jurisdiction to enforce a foreign judgement and then use reciprocal mechanisms to execute against assets in another jurisdiction."5

Once DIFC courts have recognised and/or enforced an arbitral award or foreign monetary judgment, the DIFC's award becomes a local court order that may then be referred to the Dubai courts for execution outside the DIFC under Article 7(2) of Dubai's Judicial Authority Law.

Conduit for Arbitral Awards

While onshore Dubai courts are slowly evolving into a more arbitration-friendly jurisdiction, the DIFC courts still provide a more predictable and straightforward jurisdiction in which to recognise and enforce both foreign and domestic arbitral awards.

The DIFC's Arbitration Law is modelled on the UNCITRAL Model Law, with limited scope for judicial review of arbitral awards and grounds to deny recognition. The DIFC Court of First Instance's orders are subject to appeal, but only with one round of appeal. In addition, the DIFC courts' judges are well-trained and decisions are published. With a DIFC order recognising an arbitral award, the order should be referred to the Dubai execution court for execution against onshore assets.

The ratification process in the onshore Dubai courts, by contrast, can be long and unpredictable.

The UAE does not have a stand-alone arbitration law, although one has been in draft form for several years. Dubai courts recognise and enforce domestic arbitration awards pursuant to the UAE Civil Procedure Code ("CPC"). The award creditor presents the arbitral award to the Dubai Court of First Instance for ratification. Although the courts' scope of review is limited, in particular the merits of the dispute are not to be reviewed, in the event of a possible violation of UAE public policy, the Dubai courts will undertake a full review of the merits.

The award debtor may resist ratification by filing a nullification defence on the basis of the grounds listed in the CPC, which include a long list of procedural grounds for nullification. In the past, Dubai courts have often taken a formalistic approach–nullifying awards on the basis of procedural irregularities such as failure of the tribunal to sign every page or failure to administer the correct form of oath.

The Dubai Court of First Instance's ratification order may be appealed both to the Court of Appeal and the Court of Cassation. Appeals are common in the onshore courts and are generally filed as a matter of course.

For foreign arbitral awards, the procedure for enforcement is the same as for domestic awards. The UAE is a signatory to the New York Convention and its provisions entered into force, without reservations, by Federal Decree. Nevertheless, there remains a risk that onshore courts will review the award for procedural irregularities as they would a domestic award, rather than just on the limited grounds set out in the New York Convention.

Conduit for Foreign Monetary Judgments

The value of the DIFC courts as a conduit jurisdiction is even more significant with respect to foreign monetary judgments.

The DIFC courts enforce foreign monetary judgments upon finding that the foreign court had jurisdiction over the dispute according to common law principles.6 That order may then be referred directly to the Dubai execution court for execution against onshore assets.

As a practical matter, onshore Dubai courts will not enforce a foreign judgment unless there is a treaty in place between the UAE and the foreign jurisdiction for the reciprocal enforcement of judgments. The CPC provides that foreign judgments shall not be enforced if the UAE courts would otherwise have jurisdiction to hear the dispute, which may already be the case if a defendant, or some of the defendant's assets, are located within the UAE.

The Riyadh Convention

The DIFC courts may provide other benefits, as yet untested, as a conduit jurisdiction.

For example, the UAE is a signatory to the Riyadh Convention. The Riyadh Convention provides for the reciprocal execution of court judgments and arbitral awards by signatories, with limited exceptions.

Iraq, one of the few remaining hold-outs from the New York Convention, is also a signatory to the Riyadh Convention.

If an award or judgement debtor has assets in Iraq, the creditor could seek recognition and/or enforcement in the DIFC courts instead of directly in the Iraq courts. With a DIFC order in hand, the creditor may be able to then execute the order pursuant to the provisions of the Riyadh Convention.

A Word of Caution

As a word of causation, execution by the Dubai courts is not publicly reported and, therefore, execution of referred DIFC orders cannot be confirmed with certainty.

It should also be noted that on 9 June 2016, the Ruler of Dubai issued Dubai Decree No. 19 of 2016 "Concerning the establishment of a Judicial Tribunal for the Dubai Courts and DIFC Courts" (the "Decree"). The Decree establishes a judicial tribunal to decide jurisdictional conflicts between the DIFC and Dubai courts. It remains to be seen if the tribunal will use its authority to rein in the DIFC court's jurisdiction.

We are hopeful that the tribunal will recognise that the availability of the DIFC courts as a conduit jurisdiction to execute foreign monetary judgments and arbitral awards against Dubai-based assets, enhances confidence of those doing business with Dubai-based companies.


In view of the recent case developments and positive reputation, judgement and award creditors should consider the DIFC courts when evaluating how best to collect against foreign monetary judgements and arbitral awards when assets are located in the Dubai and beyond.