UK court sees no obstacles to enforcing judgments in UAE

The English Commercial Court held that there was no real risk of English court judgments being refused enforcement in the UAE where security for costs was applied against a United Arab Emirates (UAE) registered bank.

background

In November 2022, the British Commercial Court made a judgment on the provisional application for security for costs filed by some defendants (Invest Bank PSC v El Husseini et al [2022] EWHC 3008 (Communications)). The case arose out of a claim by a UAE bank that accused the first defendant of fraud and sought various orders to undo the alleged distribution of cash and assets to other defendants. The plaintiff has obtained judgment against the first defendant from the Abu Dhabi court.

The security for costs application was made on the basis that there was a real risk that any costs award against the defendant by a UK court might not be enforceable in the UAE.

analyze

Rule 25.13(2)(a) of the English Rules of Civil Procedure provides that the English courts may, at their discretion, provide security for costs where the plaintiff is resident outside the jurisdiction but not in a country bound by the 2005 Hague Convention – conditional on this case The plaintiff resides in Sharjah, United Arab Emirates. English case law states that the standard to be met is whether there is a “real risk” that the costs award may not be enforceable against the plaintiff.

The court considered two enforcement routes: (i) enforcement of the constructive costs judgment directly in courts within the UAE, and (ii) enforcement through the Dubai International Financial Center (DIFC) courts as a “conduit” jurisdiction. Petitioners argued that through either avenue, defendants would face a serious hurdle, representing a real risk that they would not be able to enforce the fee award against plaintiff. Both plaintiff and defendant cited expert evidence on UAE law.

law enforcement on land

The defendant argued that there were three obstacles to enforcement through the courts within the UAE, namely:

1. The real risk of UAE courts refusing to enforce judgments on the grounds that there is no reciprocity between UK and UAE courts;

2. There is a real risk that UAE courts will refuse to enforce the judgment on the grounds that they have exclusive jurisdiction over the subject matter in dispute; and

3. There is a real risk that a UAE court will refuse to enforce a judgment on the grounds that enforcing a costs order is contrary to public policy.

Reciprocity

Courts in the UAE require the principle of reciprocity to enforce foreign court judgments. The court held that the principle of reciprocity was clearly established. Following the recent enforcement of the UAE court judgment by the UK courts (Lenkor Energy Deal DMCC v Puri [2020] EWHC 1432 (QB)), the UAE Ministry of Justice sent a letter to the Director-General of the Dubai Courts confirming that the principle of reciprocity is satisfied compared to the English courts.Although in Lenko If the plaintiff resided in the emirate of Sharjah, the court considered the letter to be very strong evidence to satisfy the requirement of reciprocity.

exclusive jurisdiction

The defendants argued that there was a real risk that the UAE courts would exercise exclusive jurisdiction over the dispute and therefore refuse to enforce the English judgment. Exclusive jurisdiction would arise, they argued, because the proceedings in the English courts were partly to enforce the judgment of the Abu Dhabi courts in the UK. The court rejected this argument, arguing that enforcement proceedings were necessarily territorial and that it would be pointless for UAE courts to assert exclusive jurisdiction over UK enforcement proceedings.

public policy

The defendants argued that enforcing the English judgment representing the legal costs award would be contrary to UAE public policy and there was reason to refuse enforcement. Often, UAE courts award only small or nominal legal costs, rather than allowing the prevailing party to recover most or all of the legal costs (like UK courts).

However, English courts found no evidence of a public policy prohibiting the award of high legal costs. The court noted in particular:

• The willingness of UAE courts to award a sum (even if only nominal) in terms of legal fees does not favor an injunction as a matter of public policy;

• DIFC courts can award full legal costs in the same manner as English courts (whose judgments can be enforced onshore); and

• UAE court enforces arbitral award, demands payment of costs.

Enforcement through DIFC courts

Another option is to enforce the judgment in the DIFC courts and then enforce the DIFC judgment in the UAE. The common thread between the experts on both sides was that the plaintiff had no proper grounds for refusing to enforce the judgment of the English courts in the DIFC. Instead, the defendants argued that the plaintiffs could block enforcement by initiating parallel proceedings in courts within the UAE seeking to declare the judgment of the English courts unenforceable, which could create a conflict of jurisdiction that would need to be resolved by the Joint Judicial Committee. The court rejected this argument for two reasons. First, courts within the UAE do not have jurisdiction to hear claims for declaratory relief brought by plaintiffs against defendants who do not reside in the UAE. Second, the plaintiff expressed its willingness to contractually agree to submit to the jurisdiction of the DIFC courts for enforcement purposes and undertook to the court not to initiate parallel onshore UAE court proceedings. Therefore, it is unlikely that the Court does not consider that there is a genuine risk of enforcement through the DIFC as a conduit jurisdiction.

in conclusion

The judgment represents welcome confirmation that there are no unnecessary difficulties in enforcing English court judgments in the UAE, at least in the eyes of the English commercial courts.Following UK’s recent enforcement of UAE court judgment Lenko In this case, the judiciaries in both jurisdictions appear to have come to recognize that the principle of reciprocity applies and that their judgments should be mutually enforceable.