Are UAE assets untouchable?

Is Dubai a safe haven for errant husbands to avoid paying maintenance or capital orders to their former spouse? For many years, UAE assets have been seen as ‘untouchable’, but recent changes to laws in the UAE may mean times are changing. In this article, Byron James considers the whether foreign money orders can be enforced in Dubai. This article first appeared in the UAE Wealth magazine.

The efficacy of a court order or judgment is only as good as the ability to enforce it. As the influence and relevance of the UAE grows on the international stage, the world increasingly wants to interact with the UAE in a number of ways that are legalistic as well as commercial.

Inherent in this is the enforceability in, say, Dubai of an order obtained somewhere else in the world. There is a growing trend, perhaps reflecting the more long term, settled plans of expatriates in the UAE, of purchasing property and using the country as a base for their self-run businesses. Consequently there is a lot of individuals’ and families’ money finding its way to the UAE. The ability to rely upon the local jurisdiction to recognise and enforce international orders would provide fairer and more cost efficient routes for expatriates in a variety of contexts, from personal to commercial.

It was with this in mind that there was a degree of interest in the decision of DNB Bank ASA v Gulf Eyadah [CA-007-2015] (25 February 2016) which appeared to confirm that parties would be able to have a foreign order recognised in the DIFC court and then use this recognition to obtain enforcement in the Dubai court. The case involved a banking dispute, where an English order was made in the Chancery Division and the DNB bank wanted to enforce that order in the Dubai court. The decision at first instance held that there was jurisdiction in the DIFC court for the application to enforce to be made but that it would not be possible to take the next step in the process of seeking enforcement through to the Dubai court.

The first instance judge stated what many had understood the position to be for some time: that foreign arbitral awards were recognised (under the New York Arbitration Convention on the Recognition of Foreign Arbitral Awards) but foreign judgments were not.

The successful applicant bank brought the appeal on the ground that the barrier to enforcement from DIFC to Dubai court would undermine their ability to enforce the English order effectively, and ultimately undermine the order obtained in the DIFC court. The appellant bank argued that halting the progress from DIFC court to the Dubai court on the ground that the order obtained was a recognised foreign judgment was wrong because once the English order had been ratified in the DIFC court then it would progress thereafter as an order of that court rather than as a foreign one. This argument succeeded and the Appellate Court upheld the appeal on this basis – creating what some have termed ‘a conduit jurisdiction’.

There was thereafter a clear route to overcome the inability to enforce foreign judgments in the Dubai court, by filtering them first through the DIFC court and enforcing that order in the Dubai court removing the foreign judgment label. There is no “forum non conveniens” test applicable between courts based within the UAE and therefore one can choose to apply freely in the first instance to the more commercial and globally minded DIFC court.

This decision had the potential to be very significant and, whilst applicable in a banking case, clearly had a wider reach: if an any international court made a money order against a person, and that person only had assets in the UAE, there was now a possible route available to have that judgment debt enforced against them. It had the potential to open the door to enforcement against a wide array of persons who had previously them considered their UAE assets beyond the touches of international courts.

However these ‘open doors’ caused concern; consequentially, on 9th June 2016, the Ruler of Dubai established the “Judicial Tribunal for the Dubai Courts and DIFC Courts”.  The specific purpose of this Tribunal is stated as being to resolve any conflict of jurisdiction that might arise between the DIFC courts and the Dubai courts. The dynamic between the two courts is complex and interesting.

There is therefore a continued uncertainty as to the extent to which international orders will be capable of enforcement in Dubai/UAE through the conduit jurisdiction, although it is now closer to a reality than ever before. The legal advice now to clients will be to adopt a wait and see approach, to see how the Tribunal itself will respond to future such attempts to achieve enforcement and recognition.

It remains however that some clients face little choice where agreements both as to substance and to arbitrate remain unforthcoming. These two mechanisms, binding agreements and arbitration, continue to provide the safest means of achieving certainty in legal cases involving the UAE and another country. They remain the clearest, unimpeded route to recognition and enforcement within the UAE courts.

You may also be interested to read: ‘Dealing with the non-compliant spouse‘.