A turning point in the enforcement of UK court judgments in the UAE? | Dacheng

Last week, the UAE Ministry of Justice issued a notice to Dubai courts, which could mark an important turning point in the enforcement of UK court judgments in courts within the UAE. Given the ubiquity of UK law and the popularity of UK courts as a preferred jurisdiction for transactions involving international parties, this development is likely to have considerable implications for all companies involved in commercial transactions and financing in the UAE.

existing practice

Although the UAE and the UK signed a mutual legal assistance treaty as early as 2008, it did not extend to the mutual recognition and enforcement of judgments. Therefore, the enforcement of English court judgments in the courts within the UAE is still subject to the general provisions of Article 85 of the Regulations for the Implementation of the UAE Civil Procedure Law regarding the enforcement of foreign judgments in the respective domestic courts. This includes the following requirements for mutual reciprocity:

“Judgments and orders made in foreign countries may be enforced in the UAE on the same conditions as those provided for by foreign laws to enforce judgments and orders made in the UAE.”

Until recently, there has been a lack of clear examples of UK courts enforcing judgments of courts in the UAE, so UAE courts often refuse to enforce UK court judgments on the basis of insufficient evidence that the reciprocity condition has been met (in other words, UAE courts often refuse to enforce UK court judgments). judgments because they were not satisfied that the UK courts would enforce the judgments of the UAE courts in the same circumstances).

Concerns about the ability to enforce UK judgments in courts within the UAE have historically been reflected in dispute resolution clauses in UAE commercial and financial contracts. English law remains popular as the governing law, and many international parties, including financial institutions, often wish to retain the option of litigating in English courts. However, this is often presented as an alternative to another court that can be more easily enforced in the UAE – most commonly arbitration (which allows enforcement under the New York Convention), or where appropriate, litigation in a DIFC or ADGM court.

What happened?

The UK High Court recently enforced a judgment in a Dubai court case Lenkor Energy Trading DMCC v Puri (2020) EWHC 75 (QB) ( Lenkor verdict). One of the main arguments against enforcement is that it would be against public policy for a UK court to enforce a Dubai judgment based on an allegation that the underlying transaction was unlawfully influenced. However, the High Court rejected this argument, stating that the issue was not whether the underlying transaction violated public policy; it was whether there were public policy reasons for not enforcing the Dubai court judgment. The High Court concluded that there was no public policy basis for refusing to enforce the Dubai court’s judgment, which was upheld on appeal by the Court of Appeal in May 2021.For those interested in the details of the case, the UK Court of Appeal decision can be found here.

The Lenkor judgment is a welcome example of a UK court’s enforcement of a Dubai court judgment, which itself is likely to be seen as evidence that the UK court has satisfied the reciprocity requirement.

However, recent developments provide further encouragement. In a circular (MOJ Circular) dated 13 September 2022 to the Director General of Dubai Courts, the UAE Ministry of Justice explicitly drew the attention of the Dubai Courts to the Lenkor judgment and concluded:

“we discover [the reciprocity] Given that the UK courts have enforced the Dubai Court’s judgment based on the final judgment handed down by the High Court … this is in line with the judicial precedent and binding principles of all UK courts in accordance with their judicial system.”

The Department of Justice expressly acknowledges that it considers the Lenkor judgment to show that the principle of reciprocity has been met and that any party wishing to enforce a UK judgment will undoubtedly rely on it. However, it is important to remember that this circular has no legal status and is not binding on the courts. In fact, the notice was limited to expressing “the hope that, where enforcement of judgments and orders made by English courts is required, the necessary legal steps will be taken in accordance with the laws in force in both countries in order to reinforce the principle of reciprocity initiated by English courts and to ensure that English courts and Continuity between UAE courts.” Nonetheless, we expect this to be very persuasive and we hope it will mark a turning point in the enforcement of judgments in the UK.

What does this notice mean for future practice?

This is obviously very welcome news for parties with UK court judgments (or the ability to obtain UK court judgments) who wish to enforce against UAE assets. However, care should be taken because:

1. As stated above, the notice merely expresses the opinion of the UAE Ministry of Justice on whether the Lenkor case establishes the required reciprocity. While it may be somewhat persuasive, it does not bind the UAE courts that need to decide for themselves whether a Lenkor judgment is sufficient to establish the required reciprocity.
2. UAE courts (unlike UK courts) do not have a binding system of judicial precedents, which means that even if one UAE court does follow the notice, it is not legally certain whether a subsequent UAE court will do the same;
3. Even if the principle of reciprocity is met, UAE courts may have reasons not to follow the decision.In particular, the execution shall be ordered only after verification of the following¹

• UAE courts do not have exclusive jurisdiction over disputes over which judgments or orders have been issued, and foreign courts that have issued the same judgment or order have jurisdiction in accordance with the rules of international jurisdiction provided for by their laws.
• The judgment or order is issued and duly certified by a UAE court in accordance with the laws of the country in which the judgment or order is issued.
• Litigants in foreign judgments have been required to appear and be properly represented.
• A judgment or order has the legal effect of res judicata under the law of the issuing court, but a certificate proving that res judicata has been obtained or a certificate stating the judgment or order is required.
• The judgment neither conflicts with previous judgments or orders issued by the UAE courts, nor does it involve anything contrary to public order or morals.

Therefore, we do not expect that the Lenkor Judgment or the MOJ Circular will have a negative impact on the approach taken by commercial and financial parties to jurisdiction (eg, using the New York Convention for arbitration, and (with respect to the financing agreement) an option to litigate in the English courts) . However, these parties will no doubt observe with interest whether UAE courts have established a consistent practice of enforcing UK court judgments. In particular, parties with current claims and the option to pursue them in arbitration or court should carefully consider whether these developments will change their strategic approach to pursuing claims.

• As stated in Article 85 of the Implementing Regulations of the UAE Civil Procedure Code↩