The answer is Yes. In the realm of international commerce and investment, disputes often transcend borders, leading to the need for cross-border enforcement of judgments. The United Arab Emirates (UAE) has historically posed challenges for enforcing English Court judgments due to the absence of a formal treaty between the two jurisdictions. However, a significant development occurred on 13 September 2022, when the UAE Ministry of Justice issued a Directive affirming that judgments from English Courts can be enforced in the UAE based on the principle of reciprocity. This Directive not only marks a crucial shift in the historical difficulties associated with enforcing English Court judgments in the UAE but also has far-reaching implications for parties engaged in contracts with a UAE counterparty or those with assets in the UAE.
Framework for Recognition of Foreign Judgments in the UAE
As international business transactions and cross-border investments become increasingly prevalent, the likelihood of disputes arising before foreign courts or in international arbitration grows. Parties involved in such contracts seek assurance that any judgment or award they obtain will be enforceable against the counterparty. In the absence of a bilateral treaty or convention for the reciprocal recognition of judgments, the enforcement of foreign judgments in the UAE is primarily governed by local domestic law.
Under UAE law, specifically Cabinet Decision No. 57/2018 on the Regulations of Federal Law No. 11/1992 on the Civil Procedure Code, the conditions for the enforcement of foreign judgments are outlined. Article 85(1) of the Cabinet Resolution dictates that judgments and orders from a foreign state can be enforced in the UAE under the same conditions as specified in the law of that foreign state. Essentially, this emphasizes the necessity of reciprocity when there is no formal treaty for enforcement.
Article 85(2) of the Cabinet Resolution details the conditions for the enforcement of foreign judgments, including that the foreign judgment must comply with the issuing foreign court’s laws, the parties must have had proper representation, there should be no conflict with UAE court judgments, and the foreign judgment should not violate public order or morality.
Historical Challenges in Enforcement of English Court Judgments in the UAE
The historical difficulty in enforcing English Court judgments in the UAE stemmed from the absence of a mutual recognition treaty between the two nations. This lack of reciprocity was a significant impediment, as demonstrated in the Dubai Court of Cassation No. 269 of 2006, where the Court declined to enforce an English civil judgment, citing the failure to provide evidence of reciprocity between the UAE and England for mutual recognition of judgments.
Similarly, English Courts were also reluctant to enforce UAE Court judgments until the groundbreaking decision in Lenkor Energy Trading DMCC v Puri (2020) EWHC 75 (QB). In this case, the English High Court enforced a Dubai Court of Cassation judgment, establishing a precedent for reciprocity between the UAE and England. Prior to this decision, the absence of reciprocity had been a barrier to enforcing English Court judgments in the UAE.
The Lenkor Decision and UAE Ministry of Justice Directive
The Lenkor decision, a turning point in the enforcement landscape, showcased reciprocity between the UAE and England. Building on this, the UAE Ministry of Justice issued the Directive on 13 September 2022, instructing the Dubai Courts to take legal actions regarding the enforcement of judgments and orders issued by English Courts. The Directive solidifies the principle of reciprocity initiated by the English Courts and directs UAE Courts to enforce English Court judgments.
The Directive emphasizes that, in the absence of a formal treaty for mutual recognition of judgments, the Lenkor decision establishes the required reciprocity for enforcing English Court judgments in the UAE. However, foreign judgments seeking enforcement in the UAE must still adhere to the conditions outlined in Article 85(2) of the Cabinet Resolution.
Implications of the Directive
While the full impact of the Directive is yet to be seen, it signifies a positive development in the enforcement of English Court judgments in the UAE. The confidence of parties opting for English Court jurisdiction clauses in contracts with a UAE counterparty or involving UAE assets is likely to increase. Additionally, the Directive expands avenues for enforcing foreign arbitration awards in the UAE.
Previously, parties seeking to enforce London-seated arbitration awards in the UAE had to apply to the UAE Courts under the New York Convention. With the Directive in place, parties may choose to enforce their awards in the English Courts first and then seek enforcement of the English Court judgment in the UAE. This flexibility provides an alternative route for parties involved in London-seated arbitrations, potentially streamlining the enforcement process.
Framework for Recognition and Enforcement in the UAE
The enforcement of foreign judgments in the UAE is governed by Federal Decree-Law No. 42/2022, known as the New Civil Procedure Law. Specifically, Chapter 3 of the law, particularly Article 222, outlines the conditions and provisions for the execution of foreign judgments, orders, and bonds.
Article 222 emphasizes that judgments and orders delivered by a foreign country can be executed in the UAE under the same conditions prescribed in the law of that foreign country for the execution of judgments and orders issued in the UAE. The application for execution is initiated through a petition submitted to the execution judge, who is mandated to issue an order within five days from the date of submission. However, it is crucial to note that execution cannot proceed until the verification of certain conditions, including:
- The courts of the UAE are not exclusively competent in the dispute, and the foreign courts that issued the judgment have competence in accordance with international jurisdiction rules established by their law.
- The judgment or order is delivered by a court in accordance with the law of the country where it was issued and duly ratified.
- The litigants in the case were summoned and duly represented.
- The judgment or order has the force of res judicata in accordance with the law of the issuing court.
- The judgment does not conflict with a judgment or order rendered by a UAE court and does not violate public order or morals.
Additionally, the execution judge has the right to obtain documents supporting the application before issuing a decision.
Limitation Period for Enforcement
One crucial aspect that parties must consider when seeking the enforcement of a foreign judgment in the UAE is the limitation period. Surprisingly, the New Civil Procedure Law, specifically Section 3, Article 222, does not explicitly define a limitation or specify a timeframe for enforcing awards. Instead, it stipulates the conditions and provisions for enforcement, providing parties with an opportunity to object to the award based on the lack of compliance with Article 222.
The broader context of limitation periods for various specific rights is governed by Federal Law No. (1) of 1987 concerning the Civil Transactions Law of the UAE, specifically under Section 3, ‘Lapse of time barring a right’ (Articles 473 to 488). When enforcing a foreign judgment, the court may consider the lapse of time barring a right, especially if raised by the defendant.
Types of Enforceable Orders
Article 222 of the New Civil Procedure Law provides clarity on the types of remedies ordered by a foreign court that are enforceable in the UAE. The judgment or order seeking enforcement must acquire the force of res judicata in accordance with the law of the issuing court. Furthermore, it should not conflict with a judgment or order rendered by a UAE court, and it should not contain anything contrary to public policy or morals.
Competent Courts for Enforcement
Cases seeking enforcement of foreign judgments must be brought before the UAE Courts of Execution at the first instance, as per Section 3, Articles 222–225 of the New Civil Procedure Law. Any party has the right to appeal before the Court of Appeals and then to the Supreme Court if necessary.
Separation of Recognition and Enforcement
In the UAE, the process for obtaining judicial recognition of a foreign judgment is separate from the process for enforcement. The two-stage enforcement process involves the ratification of the award itself by the Supreme Court, followed by the ‘collection or execution stage,’ occurring after the final Supreme Court order or Appeal Court order.
Defenses and Injunctive Relief
Defendants in enforcement proceedings have the opportunity to raise merits-based defenses, particularly if the provisions are not in line with the New Civil Procedure Law. This includes arguments against the applicability of laws or policies in the UAE, such as Shariah and cultural, political, or social policies, or anything contrary to international treaties like the New York Convention.
Injunctive relief is available to parties seeking to prevent foreign judgment enforcement proceedings in the UAE. Parties can challenge the enforcement order by filing an appeal before the appeal court to halt the process granted by the judge in the first stage.
Examination of Foreign Judgment
The examination of a foreign judgment for enforcement in the UAE involves several factors:
Basic Mandatory Requirements:
The New Civil Procedure Law clearly stipulates the mandatory requirements for recognition and enforcement of a foreign judgment. Article 222 emphasizes compliance with the conditions set forth in the law of the issuing country, summoning and representation of litigants, and the judgment having the force of res judicata.
Other Non-Mandatory Factors:
In addition to the mandatory requirements, the court may consider other non-mandatory factors. For instance, the court may request a document or certificate from the foreign court confirming the finality of the order to be enforced.
Procedural Equivalence:
The New Civil Procedure Law, particularly Section 3, Article 222, stipulates requirements that foreign judicial proceedings must correspond to due process. The court evaluates factors such as proper summons and representation of litigants.
Jurisdiction of the Foreign Court:
The enforcing court examines personal and subject-matter jurisdiction. The litigant must provide submissions, including a court certificate from the foreign court, a copy of the foreign law, and a copy of the contract defining the relationship between the parties and the competent court.
Service:
Proper service is a crucial factor for enforcement. Article 222 2(c) specifies that execution is not admissible until the litigants in the foreign judgment were summoned and duly represented.
Fairness of Foreign Jurisdiction:
Article 222 2(a–b) addresses the fairness of the foreign jurisdiction. The court evaluates whether the UAE courts have exclusive competence in the dispute and whether the foreign courts that issued the judgment are competent according to international jurisdiction rules.
Vitiation by Fraud:
While Article 222 provides conditions for enforcement, the court’s examination is limited to the provisions of this article. Fraud allegations will be subject to common law practice.
Public Policy:
The court examines the foreign judgment for consistency with the enforcing jurisdiction’s public policy and substantive laws. Article 222 2(e) explicitly states that execution is not admissible if the judgment conflicts with a judgment or order rendered by a UAE court or violates public order or morals.
Conflicting Decisions:
If the foreign judgment is in conflict with another final and conclusive judgment involving the same parties, enforcement will be rejected, as stated in Article 222 2(e).
Enforcement Against Third Parties:
Enforcement is limited to the named judgment debtor. However, Section 3, Article 252 of the New Civil Procedure Law grants the obligee the right to apply for attachment over the debtor’s property in the hands of third
COMMON PITFALLS IN SEEKING RECOGNITION OR ENFORCEMENT OF FOREIGN JUDGMENTS IN THE UAE
While the UAE has established a framework for the recognition and enforcement of foreign judgments through Federal Decree-Law No. 42/2022, parties must navigate potential pitfalls to ensure a successful outcome. Understanding the key provisions and potential challenges is essential for a smooth enforcement process.
Provisions Governing Pitfalls
Article 222 2(e) of the New Civil Procedure Law explicitly outlines the provisions related to common pitfalls. Specifically, the court examines whether the foreign judgment conflicts with a judgment or order rendered by a UAE court and whether it contains anything contrary to public order or morals.
Legal and Commercial Characteristics Examination
The UAE court, in its examination process, delves into the legal and commercial characteristics of the foreign judgment. The nature of the agreement and the business relationship between the parties are scrutinized to authorize enforcement only if the order aligns with public policy and morals. This examination seeks to avoid enforcement of orders involving activities contrary to public policy (e.g., money laundering, drug-related activities) or public morals, including considerations of Islamic culture and local traditions.
Update and Trends
In the realm of foreign judgment enforcement in the UAE, certain trends and hot topics have emerged:
- Competence in the Dispute:
UAE courts have rejected foreign judgment enforcements in cases where they deemed themselves competent in the dispute. The examination process focuses on determining whether the UAE court has exclusive competence or jurisdiction in the matter. Verification includes assessing the approved dispute resolution clause between the parties, the place of performance of the signed contract, the currency of the contract, and the physical addresses of the parties. - Case-by-Case Approach:
The approach to examining foreign judgments and potential pitfalls is not uniform but varies on a case-by-case basis. The nuances of each case, including the specifics of the dispute, contractual agreements, and the parties involved, contribute to the unique considerations in the examination process.
Parties seeking recognition or enforcement of foreign judgments in the UAE must be vigilant in addressing these potential pitfalls. Ensuring compliance with the legal and commercial aspects of the judgment, as well as alignment with public policy and morals, is crucial for a successful enforcement process. Additionally, staying abreast of emerging trends and updates in the enforcement landscape is essential for a well-informed and strategic approach.
The UAE Ministry of Justice Directive, following the Lenkor decision, has ushered in a new era of enforceability for English Court judgments in the UAE. By affirming the principle of reciprocity, the Directive provides a clearer path for judgment creditors seeking enforcement in the UAE. As international business transactions continue to grow, this development is likely to enhance confidence in the enforceability of English Court judgments in the UAE, benefiting parties engaged in cross-border contracts and investments. The implications of this Directive extend beyond the realm of contractual disputes, potentially influencing the enforcement landscape for foreign judgments and arbitration awards in the UAE.
