Dubai Court Directs Enforcement of UK Court Judgment

On September 13, 2022, Judge Abdul Rahman Murad Al-Blooshi, Director General of the Department of International Cooperation, Ministry of Justice, UAE, issued a communiqué to the Director General of Dubai Courts, His Excellency Tarish Eid Al-Mansoori, directing Dubai Courts to enforce the judgments made by the English Courts (“Orders”) .This is after the British court in Lenkor Energy Trading DMCC v Puri [2021] EWCA Civ 770 enforces Dubai court judgments on dishonoured cheques.

The support for the enforcement order could herald an increasing number of enforcement actions by judgment creditors in the UK courts against assets registered in Dubai.

Fact: evading Iran sanctions and bouncing checks

The Lenkor case involved the enforcement of a Dubai court judgment ordering the defendant, Mr. Irfan Puri, to pay Lenkor Energy Trading DMCC AED 123,272,048 (approximately US$33.5 million and approximately £30 million) plus 9% interest.

All in all, the underlying transaction is Lenkor’s sale of oil to Pakistani buyer Mr Puri. Half the value of the goods is paid by USD-denominated letter of credit and the other half by USD-denominated wire transfer. The port of discharge is Qasim Port in Karachi. However, judgment records show that while Lenkor was supposed to supply “High Speed ​​Diesel” (HSD) from the UAE, it actually supplied “Heavy Finished Product” (HEP) from Iran. To hide this fact, Lenkor “Change[ed] Shipping documents, forged[ied] loadport test results and falsification[ed] Certificate of Origin. “ This misled Mr Puri, the customs authorities and the commercial banks involved in processing the transaction. Later, Mr. Puri’s bank learned that the ship had docked at an Iranian port, and Mr. Puri unilaterally decided to pay Lenkor in instalments only after he had resold the product to a third party and received payment for subsequent sales.

Ultimately, Lenkor attempted to cash two cheques issued by Mr. Puri for Lenkor under the original contract, asking Mr. Puri to guarantee 100% of the value of the goods. However, the account from which Mr Puri wrote the cheque was insufficiently funded and the cheque was not cashed. Lenkor brought a civil action against Mr Puri under section 599(2) of the Dubai Commercial Transactions Act, a statutory provision imposing personal liability on the drawer of a cheque in the event of insufficient funds in the account used for the cheque withdrawal to pay the amount due. On May 30, 2017, the Dubai Court ruled in favor of Lenkor. The verdict was subject to multiple appeals and twice reached the Supreme Court of Justice, Dubai’s Supreme Court of Appeal, and was finally upheld on 5 August 2018, exhausting Mr. Puri’s right of appeal in Dubai. Lenkor seeks enforcement in England and Wales.

Verdict: UK court rejects common law ‘public policy’ defence

Mr Puri made several arguments against enforcement, but when the case was brought to the UK Court of Appeal, only one remained: the assertion that enforcing the judgment would be against public policy because the underlying contractual basis was unlawfully tainted by cheques issued. In particular, Lenkor deceived Mr. Puri as to the nature of the product (HEP instead of HSP) and the origin of the product (Iran instead of UAE) and acted maliciously by producing fraudulent documents.The UK Court of Appeal rejected this argument, emphasizing that the issue “is not a matter of enforcing the contract” [but was instead] Enforcement of judgments made by foreign courts of competent jurisdiction. Justice Lewison delivered the main judgment, with Arnold LJ and Edis LJ concurring.

Reciprocal relationship between the courts of Dubai and the courts of England and Wales

Reciprocity is usually established by bilateral or multilateral treaties. For example, the UAE is a party to the 1996 GCC Convention on the Enforcement of Judgments, Delegations and Judicial Notifications (GCC Convention) and the 1983 Riyadh Convention on Judicial Cooperation among Arab League States (Riyadh Convention), both of which facilitate the Execute the judgment.

The UAE and the UK are parties to the Treaty on Judicial Assistance in Civil and Commercial Matters signed on 7 December 2006, but the treaty does not deal with the mutual enforcement of judgments. Therefore, a party seeking to enforce a British court judgment in the UAE must provide evidence of reciprocity. So far, Dubai courts have not been satisfied with the existence of such evidence. However, the directive confirms that the principle of reciprocity between the courts of Dubai and the courts of England and Wales is now established in the Lenkor case.

Other Law Enforcement Requests

It is important to note that reciprocity alone is not sufficient to enforce a judgment of a UK court (or any other foreign court). In addition to reciprocity, Article 85(2) of the UAE Civil Procedure Code requires UAE courts to meet the following conditions:

• The courts of the UAE do not have exclusive original jurisdiction over the dispute, the foreign court that rendered the judgment does have jurisdiction;

• The foreign judgment complies with the law of the country in which the judgment was made;

• The party subject to the foreign judgment is summoned and duly represented;

• Foreign judgments have justification status; and

• Foreign judgments do not conflict with UAE judgments or orders, nor do they violate UAE public policy.

Other considerations

The specific application of the directive remains to be seen, especially whether it applies to all courts in the UAE. While the directive is aimed at Dubai courts, it does provide for reciprocity between the two countries (UAE and UK), suggesting that its treatment may extend beyond Dubai courts. Overall, however, the directive marks a significant development in judicial cooperation between the UAE and the UK. Although it is not legally binding and does not guarantee enforcement, it should give confidence to UK investors who may need to enforce judgment debts in the UAE. In addition, the Lenkor case could lead to an earlier settlement, as litigants may be more concerned than before about potential enforcement of their overseas assets, the apparent availability of which could lead to an increase in third-party funding activity.

It’s a good idea to consider these topics before beginning a potentially costly lawsuit to ensure, as much as possible, that a potential judgment debtor has sufficient assets or wealth in a favorable location to satisfy any judgment you may acquire. In addition, we can assist you in obtaining emergency supplementary relief in competent courts in almost every major financial center around the world – including freezing injunctions, search and seizure orders, disclosure orders and passport surrender orders – essential to prevent future judgments The debtor will not obstruct the enforcement of future judgments in your favor by confusing assets or moving them to less favorable jurisdictions.

Michael Davar and Dara Shahab also contributed to this article.