The creation of the DIFC common law jurisdiction in coexistence with the civil law jurisdiction of the UAE has been a unique and successful development.
The DIFC Courts have established themselves as a conduit jurisdiction for the recognition and enforcement of both domestic (i.e. onshore, or mainland Dubai) and foreign arbitral awards for onward execution against assets of award debtors in onshore Dubai even in the absence of any connection with the DIFC. Notwithstanding this, the proximity of the two jurisdictions, onshore and DIFC, has given rise to questions of jurisdictional conflict.
In order to overcome a conflict of judgments and by adoption of a decree last year (see Decree No. (19) of 2016 forming the Judicial Committee of the Dubai Court and the DIFC Courts, dated 9 June 2016), which entered into immediate effect, the Ruler of Dubai established a Judicial Committee of the Dubai Courts and the DIFC Courts (the Dubai Judicial Committee).
The Dubai Judicial Committee is comprised of seven members: three judges from the DIFC Courts, three judges from the Dubai Courts and the Secretary General of Dubai’s Judicial Council, with the President of the Dubai Court of Cassation (one of the three Dubai Court judges) having the casting vote.
The Dubai Judicial Committee has been established to promote the full mutual integration of the Dubai and DIFC Courts and to internalise any constitutional conflict between the onshore Dubai Courts and the DIFC Courts.
The Dubai Judicial Committee rendered its first decision in the case of Daman Real Capital Partners Company LLC v. Oger Dubai LLC (Cassation No. 1/2016) where it was asked to decide which of the two courts, the DIFC Courts or the onshore Dubai Courts, had jurisdiction to hear the case.
The case involved two parallel actions before the two courts, specifically (1) an application for annulment of a DIAC award rendered in mainland Dubai as the seat of the arbitration before the onshore Dubai Courts which were the courts with supervisory jurisdiction over the arbitration and (2) an application for the recognition and enforcement of that award before the DIFC Courts for execution in the DIFC. It is crucial to note that the action for annulment before the onshore Dubai Courts was served first and preceded the action for recognition and enforcement before the DIFC Courts.
In the DIFC Court proceedings, the DIFC Court ordered a stay of the enforcement action awaiting the outcome of the annulment action in the onshore Dubai Courts, however, only on the condition and order that Daman paid security into court. After failing to comply with this order, the DIFC Court proceeded to recognise and enforce the award and ordered that Daman be wound up.
Alongside this, the onshore Dubai Courts, hearing Daman’s annulment case, held that they had lacked jurisdiction to do so as the DIFC Court had already declared the enforceability of the award. Following this decision, Daman applied to the Dubai Judicial Committee on the grounds that a conflict of jurisdiction had occurred between the onshore Dubai Courts and the DIFC Courts.
Against this background, the Dubai Judicial Committee held that:
- there was a conflict of jurisdiction between the two courts;
- the case be remitted for trial to the Dubai Courts;
- the DIFC Courts“should cease from entertaining the case” and
- “there is no similarity between this case and the case when it’s sought to enforce or annul a foreign arbitral award in several jurisdictions pursuant to the New York Convention 1958”.
All three of the DIFC Court judges sitting on the Committee dissented from the ruling that the DIFC Courts should cease from entertaining the case.
It is clear from the Dubai Judicial Committee’s findings that in order to prevent a conflict of jurisdiction that may occur from contradictory outcomes of the courts, the Dubai Judicial Committee relied on a first-seized rule, giving preferential jurisdiction to the onshore Dubai Courts, which were seized in an action for annulment of the award prior to the application for ratification and enforcement being filed with the DIFC Courts.
The legal analysis surrounding the Dubai Judicial Committee’s decision is short and lacks guidelines further assist the parties and legal professionals in general. Given the current lack of detail in the Dubai Judicial Committee’s findings that the DIFC Court “should cease from entertaining the case“, it is currently difficult to form a decisive view as to the full reasoning behind the decision.
In another development relating to the DIFC Courts, the Dubai Court of First Instance issued a judgment on 15 February 2017 annulling the DIFC Courts’ judgments in the case of Meydan v Banyan Tree. This development comes soon after the Dubai Judicial Committee’s ruling in the Daman Real Capital Partners Company LLC v. Oger Dubai LLC case which has effectively limited the ability of the DIFC Courts to act as a conduit jurisdiction for domestic awards.
The judgment of the Dubai Court of First Instance in Meydan v Banyan Tree suggests that further guidance and more detailed reasoning from The Judicial Committee in the future would greatly assist the legal community in making its own determination when considering the scope and acceptance of the jurisdiction of the DIFC Courts across onshore Dubai