Rania Tadros Managing Partner
DIFC Courts as a conduit jurisdiction: the end of the road?
In this article we consider whether the recent judgment of the Dubai Judicial Tribunal in the case of Endofa DMCC v D’Amico Shipping Italy (The Cielo Di Milano) (Cassation No. 4/2017 (JT) issued on 12 September 2017) marks the end of the road for the role of the DIFC Courts as a “conduit” jurisdiction to onshore enforcement of foreign arbitral awards and judgments in the United Arab Emirates (UAE).
The DIFC Courts are common law courts based in the Dubai International Financial Centre (DIFC) free zone. The DIFC Courts have consistently demonstrated a pro-enforcement approach applying the New York Convention to enforcement of foreign arbitral awards in the DIFC and common law principles to enforcement of foreign judgments in the DIFC. Contrast that with the UAE onshore courts, which only recently have started to refuse challenges to enforcement of foreign arbitral awards which are not based on the New York Convention. The position in relation to enforcement of foreign judgments in local courts has been and remains largely very difficult, unless there is an agreement between the UAE and the originating country for mutual recognition and enforcement of judgments.
The DIFC Courts have therefore been viewed as an attractive conduit jurisdiction to onshore enforcement in the UAE. A number of parties have been able to obtain judgments from the DIFC Courts to enforce foreign arbitral awards or judgments in the DIFC with the intention of then enforcing the DIFC Court judgment in the onshore Dubai Courts, which is a straightforward procedure ((1) Egan (2) Eggert v (1) Eava (2) Efa  DIFC ARB 002).
However, in 2016 the Judicial Tribunal for the Dubai Courts and the DIFC Courts (JT) was established by Dubai Decree No. 19 of 9 June 2016. The JT’s remit is to determine conflicts of jurisdiction between the DIFC Courts and the Dubai Courts. The JT is comprised of four Dubai Court judges and three DIFC Court judges.
The decisions of the JT are published on the DIFC website, which currently lists eleven published decisions. Seven of those decisions concern enforcement of a Dubai/foreign arbitration award or a foreign judgment in the DIFC as a conduit jurisdiction (i.e. where the defendant has no assets in the DIFC). Four of those cases involved an actual conflict between the proceedings in the DIFC Courts and the proceedings in the Dubai Courts. All these conflicts were resolved by the JT in favour of the Dubai Courts with the effect that the enforcement proceedings in the DIFC Courts had to be ceased (Cassation No. 1 of 2016 (JT), Cassation No. 2 of 2016 (JT), Cassation No. 3 of 2017 (JT), Cassation No. 1 of 2017 (JT)). In three other cases (Cassation No. 3 of 2016 (JT), Cassation No. 5 of 2016 (JT), Cassation No. 5 of 2017 (JT)) there were no parallel proceedings pending before the Dubai Courts and so the JT ruled that proceedings in the DIFC Courts could continue. As can be seen, there is a clear trend for the JT to find in favour of the Dubai Courts each time there are parallel proceedings in place.
In our view the latest case of The Cielo Di Milano (yet to be published) heralds the end of the DIFC Courts as a conduit jurisdiction with respect to the enforcement of foreign court judgments. In this case the claimant filed a case in the DIFC Courts for recognition of an English court judgment. The case had otherwise no connection with the DIFC. The defendant applied to the JT disputing the jurisdiction of the DIFC Courts. At the time of the defendant’s application to the JT no parallel proceedings had been started in the Dubai Courts but the defendant subsequently started such proceedings unconventionally seeking an order for refusal of recognition and enforcement of the English court judgment in the UAE. The JT found in favour of the Dubai Courts’ jurisdiction on the following basis:
1. The Dubai Courts and the DIFC Courts are competing for jurisdiction in the same case and it is irrelevant when each of the proceedings were started. All that matters is that both proceedings are in existence at the time when the JT issues its judgment.
2. The fact that the defendant appeared before the DIFC Courts and expressed its intention to defend all of the claims in that forum does not infer the defendant’s consent to the jurisdiction of the DIFC Courts. Such consent must be express and in writing and cannot be inferred. In absence of such express written consent, the defendant could continue to challenge the jurisdiction of the DIFC Courts.
3. The Dubai Courts must be the competent courts to decide this case “because they have the general jurisdiction embodied in the procedural laws.”
It is clear therefore that (a) the JT will rule in favour of the Dubai Courts’ jurisdiction whenever there are parallel proceedings issued in the DIFC and Dubai Courts, and (b) the defendant can start parallel proceedings in the Dubai Courts at any point simply by seeking an order of refusal to enforce. This is nothing short of a death sentence to the DIFC Courts’ status as a conduit jurisdiction as it appears that any defendant has a simple means of derailing DIFC enforcement proceedings by starting a competing case in the Dubai Courts.
Related news & insights
Insights / The Hague court of appeal finds in favour of Nigerian farmers against Shell
16-02-2021 / Energy & Infrastructure
On 26 June 2005, Shell Nigeria was notified of a leak in an underground oil pipeline near Oruma. As a result of the leak, oil was visible bubbling out of the ground. Before the leak was closed, around 400 barrels of oil had been spilled (approximately 65,000 litres).
Insights / Take or pay: does a breach of capacity obligation cause loss?
09-02-2021 / Energy & Infrastructure
British Gas Trading Limited v Shell UK Limited, Esso Exploration & Production UK Limited  EWCA Civ 2349
Insights / Brexit: Jurisdiction clauses and the enforcement of judgments... where are we now?
27-01-2021 / Energy & Infrastructure
The Brexit transition period came to an end on 31 December 2020, shortly before which the UK and the EU were finally able to agree on a trade deal.
Insights / Brexit: what does this mean for jurisdiction clauses and the enforcement of judgments?
19-10-2020 / Energy & Infrastructure
It is important not to lose sight of the potential impact that Brexit will have on disputes that are governed by English law and subject to the English court jurisdictions
Insights / New UK restructuring tool set to jack up floundering offshore sector
16-07-2020 / Energy & Infrastructure
The Covid-19 pandemic has brought considerable challenges, as well as potential opportunities, to the offshore sector. Offshore drilling continues to face difficulties and is expected to be the worst performing subsector of the oil sector, with rig utilisation at around 60%.
Insights / Scottish Court sanctions the Premier Oil Scheme of Arrangement confirming the flexibility of the scheme of arrangement to implement novel restructuring solutions
12-05-2020 / Energy & Infrastructure
Successful creditor challenges to schemes of arrangement are incredibly rare, and ARCM’s challenge to Premier Oil’s scheme  has not bucked this trend. This scheme raised a broad range of issues which, subject to the outcome of the appeal, have been addressed to confirm the broad, flexible scope of the scheme of arrangement to implement creative restructuring solutions in the face of opposition from minority creditor groups. We provided an overview of the scheme of arrangement process and some of the issues raised by the Premier Oil scheme in our previous bulletins  .