Jurisdiction and the Dubai Courts: Self-Immolation or Order out of (Potential) Chaos?

By Bodnar, Andrew; Kenney, Martin | Business Law International, May 2018 | Go to article overview

Jurisdiction and the Dubai Courts: Self-Immolation or Order out of (Potential) Chaos?


Bodnar, Andrew, Kenney, Martin, Business Law International


Introduction

The Emirate of Dubai continues to develop as a regional and global financial centre. It has earned itself a reputation in no small part due to the establishment in 2004 of the Dubai International Finance Centre (DIFC), an offshore financial free zone located in the heart of 'mainland' or 'onshore' Dubai. The DIFC, unlike the majority of offshore financial centres established in other jurisdictions, however, has its own court system (comprising a court of first instance and a court of appeal) and its own body of substantive laws modelled on English law. In effect the DIFC is a jurisdiction in its own right distinguished from the civil law jurisdiction of mainland Dubai and the wider United Arab Emirates (UAE), in that it generally applies common law. ChiefJustice Michael Hwang, the current President of the DIFC Courts, has described the DIFC as 'a common law island in a civil law ocean'. Until relatively recently it was unique in that respect,1 its development as a bridge between the financial markets of the East and West and a gateway for capital and investment to and from this region has earned it a reputation as a catalyst for the economic renaissance of the Middle East and North Africa (MENA) region.

As a gateway facilitating flows of investment, however, it is also susceptible to fraud; it has been targeted by international criminals using increasingly sophisticated methods to defraud companies and investors. Money and activity can flow across jurisdictions simply by crossing the road. Furthermore, in the context of recovering the proceeds of fraud and corruption, and enforcement of judgments or arbitral awards, the juxtaposition of a civil and a common law jurisdiction raises issues of compatibility. To date the DIFC Courts have rarely been asked to decide cases of fraud and corruption, but as Dubai continues to develop as a financial centre the very peculiar jurisdictional boundaries and limitations of the DIFC Courts will inevitably raise issues for fraud and corruption inquiries.

Recently, in long-running and very high-value divorce proceedings in the UK, a yacht was 'arrested' by an interim attachment order made by the Dubai Courts, supporting a freezing order made by the DIFC Court, itself made in support of enforcement of the financial provision order made in those divorce proceedings. Those developments provide an opportune moment to review the difficulties which can be caused by the particular features of the jurisdiction of the DIFC Court and its relationship with the rest of the Dubai Courts system.

On 9 June 2016 a Decree2 (the 'Decree') was issued by the ruler of Dubai dealing with, inter alia, the resolution of conflicts of jurisdiction between the DIFC Courts and the onshore courts of Dubai. The Decree establishes a Judicial Committee of the Dubai Courts and the DIFC Courts (the 'Dubai-DIFC Judicial Committee', referred to in the translation of its own decisions as the 'Judicial Tribunal'). Pursuant to Article 2 of the Decree, the Judicial Tribunal is responsible for the determination of jurisdictional disputes in relation to conflicts ofjurisdiction between the Dubai and the DIFC Courts, and conflicting judgments of the Dubai and DIFC Courts, involving the same parties and bearing on the same subject-matter, including conflicting orders of enforcement issued by the Dubai and DIFC Courts in relation to the same arbitral award. There was a great deal of academic and professional commentary about the Decree even before an official translation was released,8 not least in the context of the development of Dubai as a 'conduit jurisdiction' for proceedings in the Middle East. Some have commented that it represents a curb on the jurisdiction of the DIFC Courts,4 all are agreed that it represents a fundamental change in the way such conflicts are to be resolved. So, what is all the fuss about and what does the Decree mean for asset recovery in cases that touch Dubai?

Background

First, a little more background is provided. …

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