On 11 November 2024, Singularity kickstarted the inaugural day of Dubai Arbitration Week 2024 with a dynamic panel discussion titled “Litigation Framework in the DIFC and its Implications for Global Enforcement and Recovery Strategies”. The event spotlighted the DIFC and its arbitration ecosystem, exploring how this evolving hub serves as a meaningful alternative to other prominent arbitration centres globally.
The discussion delved into the DIFC’s pro-arbitration approach, its transformation into a default seat alongside the Dubai International Arbitration Centre (DIAC), and the mechanisms that make DIFC Courts a reliable forum for enforcing judgments. Key themes included the DIFC’s evolving enforcement landscape, recent jurisprudence, and groundbreaking trends shaping global recovery strategies.
Moderated by Mr. Prateek Bagaria (Partner at Singularity Legal) the session brought together a stellar panel of experts who shared insights and experiences into developing an effective global enforcement strategy. The panel comprised:
1. DIFC as an upcoming arbitral seat
Mr. Bagaria invited Dr. Pryles to share his views on the DIFC since his appointment as President of the DIAC Arbitration Court. Dr. Pryles traced the origins of the Dubai International Arbitration Centre (DIAC), established in 1994 by the Dubai Chamber of Commerce & Industry. He highlighted the 2008 joint venture between the DIFC and the London Court of International Arbitration (LCIA), which resulted in the creation of the DIFC-LCIA Arbitration Centre. This centre quickly became a popular choice for arbitration and other alternative dispute resolution (ADR) proceedings in the region.
However, following Dubai Decree No. 34 of 2021, which replaced the DIFC-LCIA with DIAC, the latter faced the challenge of internationalising itself to remain competitive. [See our alert about the new DIAC Rules.] Dr. Pryles noted that DIAC had to address a backlog of cases and implement systematic reforms in its administration to boost efficiency. Despite these challenges, he observed that the DIFC and Dubai exude a vibrant energy reminiscent of Singapore 25 years ago—a jurisdiction that successfully attracted investment by staying committed to innovation through progressive legislation.
Post the Dubai Decree 34 of 2021 which replaced the DIFC-LCIA with DIAC. DIAC had to internationalise itself to keep up with the change. Dr. Pryles noted that DIAC had a backlog of cases and an administration system that required systematic reforms to boost output. However, he remarked that Dr. Pryles remarked that the DIFC and Dubai mirrored a vibrant energy he witnessed in Singapore 25 years ago – a jurisdiction keen to invite investment that has stayed true to its commitment through various innovative legislation.
Building on this, Mr. Bagaria suggested that in light of the emergence of BRICS as a counterbalance to the Western world, the DIFC could position itself as an institution of choice for countries like Russia. Dr. Pryles remarked that this potential was already being realised, as the DIFC’s development has attracted parties from Eastern Europe. Mr. Petrov added that Russian parties increasingly favour arbitrations seated in the DIFC and administered by DIAC or the Russian Arbitration Centre in the DIFC. This preference stems from factors such as the DIFC’s neutral stance on Russian sanctions, its reliance on English law, and logistical convenience.
2. The jurisdictional reach of the DIFC Courts
Mr. Bagaria then turned to Mr. Reed to discuss the mechanisms by which the DIFC Courts exercise jurisdiction over disputes and parties. Mr. Reed began by explaining Article 5A(1) of the Judicial Authority Law (JAL), which outlines various ways the DIFC Courts can assume jurisdiction. Under Article 5A(1)(a), the DIFC Courts can assert jurisdiction over cases involving parties such as banks recognised by the Dubai Financial Services Authority (DFSA) within the DIFC. Article 5A(1)(b) and (c) allow the DIFC Courts to assume jurisdiction based on contract or tort, respectively. Contracts made within the DIFC or to be partly or wholly performed there fall within the DIFC Courts’ jurisdiction, as do tortious claims linked to the DIFC.
Mr. Reed also highlighted the derivative jurisdiction under Article 5A(1)(e), which is based on DIFC laws and regulations. While laws like the Arbitration Law are straightforward, the application of DIFC Court Rules can be more controversial, as seen in many cases. As an example, he referred to the Sandra Holdings case, where the DIFC Courts invoked the “necessary and proper party jurisdiction” under their joinder rule. [See our alert on the Sandra Holdings decision.]
He noted that some of the most intriguing cases arise under Article 5A(1)(e) and discussed party jurisdiction over banks with reference to the Lamarg case. In this case, Justice Field broadly interpreted the term “authorised” to include banks regulated by entities other than the DFSA but still operating within Dubai’s financial framework. The CFI decision was appealed, where the Court case extended jurisdiction to UAE banks “recognised” by the DFSA for regulatory purposes.[1]
Continuing the discussion, Mr. Bagaria asked about the implications of the Barclays decision, which held that establishing a nexus with a person was sufficient to attract DIFC Court jurisdiction.[2] Mr. Reed explained that this decision significantly impacts financial institutions like Goldman Sachs and JP Morgan Chase that operate within the DIFC. He clarified that institutions with branches (not subsidiaries) in the DIFC fall under the jurisdiction of the DIFC Courts for their global activities.
3. Enforcement of Interim Awards before the DIFC Courts
The next theme discussed by Mr. Bagaria was the process of obtaining interim awards and enforcing them before the DIFC Courts. He invited Mr. Montagu-Smith to elaborate on interim measures and their enforcement in this context. Mr. Montagu-Smith began by providing background on the development of interim measures in the DIFC, noting that, unlike London, which has a well-established body of jurisprudence on interim measures, the DIFC’s framework has evolved more recently.
He explained that the fundamental requirement for obtaining an interim measure is establishing territorial jurisdiction. For instance, in cases where the party against whom an interim measure is sought is registered in the DIFC, jurisdiction is relatively straightforward. He highlighted the Brookfields case, the first anti-suit injunction decided by the DIFC Courts, as an example where adjudication was relatively simple due to the defendant’s registration in the DIFC.[3]
However, challenges arise when a party seeks an interim measure based on an asset located within the DIFC. In the 2009 case of Dhir v. Waterfront, Deputy Chief Justice Michael Wang ruled that DIFC Courts could grant interim measures based on an arbitration agreement only in DIFC-seated arbitrations.[4] Despite this limitation, Mr. Montagu-Smith noted that practitioners have successfully used two alternative strategies to obtain interim orders in non-DIFC-seated arbitrations. The first strategy relies on the DIFC Courts’ powers under the Rules of the DIFC Courts and the Courts Law to grant freestanding injunctions with worldwide reach. The second involves leveraging the court’s enforcement jurisdiction to support a potential future arbitration award or judgment.
A significant development in this area came with the Sandra Holdings case, which took a more restrictive approach to jurisdiction.[5] The ruling clarified that provisions allowing injunctions do not automatically confer territorial jurisdiction. While provisions enabling the enforcement of foreign judgments or arbitral awards may confer jurisdiction, this is only applicable when the judgment or award already exists. This decision has sparked a reassessment of earlier cases like Dhir v. Waterfront and raised questions about whether Sandra Holdings was correctly decided. It has also brought into focus whether cases like Collateral Ltd. v. Broad Idea[6] might alter the analysis, particularly regarding the courts’ ability to exercise jurisdiction based on a prospective judgment—one that does not yet exist. These questions remain unresolved.
On the enforcement of interim measures, Mr. Bagaria prompted Mr. Montagu-Smith to address the enforcement of non-monetary relief in the DIFC. Mr. Montagu-Smith emphasised that the DIFC Court of Appeal has confirmed in Neal v Nadir the enforceability of interim arbitration awards, including freezing orders and anti-suit injunctions, under DIFC law unless specific defences under the New York Convention apply.[7]
4. Sovereign enforcement in DIFC using the conduit jurisdiction
Mr. Bagaria opened a discussion on sovereign enforcement within the DIFC and Gulf Cooperation Council (GCC) countries, inviting Mr. Montagu-Smith to share insights on sovereign immunity and arbitration awards. Mr. Montagu-Smith addressed the multifaceted challenges of sovereign legal interactions, emphasising two primary dimensions of sovereign debt claims: the fundamental issue of sovereign immunity and the complexities of the act of state doctrine.
He began with the Pearl Petroleum case,[8] which showcased conflicting judicial interpretations. Mr. Montagu-Smith referenced Jeremy Cooke’s initial approach, which suggested that sovereign immunity under UAE law was largely treaty-dependent. However, a subsequent ruling by the current Chief Justice in the Fal Oil case presented a slightly contrasting perspective.[9] Mr. Reed elaborated on this decision, which held that sovereign immunity does not apply within the UAE, particularly in cases involving government entities or entities representing individual emirates.
Building on this, Mr. Bagaria highlighted the strategic potential of the DIFC as a jurisdictional conduit for enforcement. He argued that the absence of sovereign immunity at the UAE level offers an advanced mechanism for enforcing judgments across multiple jurisdictions. This position gains further support from practices in other GCC countries, such as Saudi Arabia and Oman, where the concept of sovereign immunity remains underdeveloped.
The discussion then turned to the act of state doctrine, which Mr. Montagu-Smith explained as the principle that domestic courts should not assess the validity of acts performed by foreign states. However, he noted that the phrase “pronouncing on the validity of acts of a foreign state” remains highly contested. He provided nuanced examples from recent arbitration cases that highlighted the practical challenges of determining sovereign actions, particularly in disputes involving port blockades and contractual conflicts. The DIFC Courts have taken a sophisticated approach, focusing on the practical consequences of sovereign actions rather than directly ruling on their validity.
A key observation emerged about the evolving legal framework of the DIFC. Mr. Montagu-Smith suggested that the DIFC Courts are carving out an independent identity, gradually detaching from their historical foundations while upholding international legal standards. He noted that the interplay between public policy rules and contract law is an area of dynamic development, particularly with the emergence of a new judicial bench.
5. Enforcement of Judgments from Russian Courts passed under the sanction laws before the DIFC Courts
In a comprehensive discussion on Russian dispute resolution and cross-border legal challenges, Mr. Bagaria initiated a nuanced exploration of jurisdictional complexities with Mr. Petrov and Mr. Montagu-Smith. The conversation focused on Article 248 of the Russian Commercial Code (Lugovoy Law), which grants exclusive jurisdiction to Russian courts in sanctions-related disputes, even when parties have agreed to foreign court arbitration.
Mr. Petrov elaborated on the mechanisms of this legal framework, identifying three key conditions for exercising exclusive jurisdiction: the foreign forum’s location in a sanctions-supporting jurisdiction, absence of parallel litigation, and disputes involving sanctioned entities. He noted that Russian courts have adopted a broad interpretation of these conditions, strategically extending their jurisdictional reach. Article 248.2 complements this by introducing anti-suit injunctions, enabling Russian companies to restrict foreign proceedings, as evidenced in cases like RusChemAlliance[10] and JP Morgan Chase Bank[11]. Non-compliance with these injunctions can result in fines up to the claim value and potential criminal liability.[12]
The discussion then turned to the challenges faced by Russian parties and the reasons they need to move under the Lugovoy Law. However, the foreign courts have not been very receptive of the same. For instance, in Barclays v. VEB-RF,[13] the English Commercial Court granted anti-suit and anti-enforcement injunctions to Barclays restricting VEB to proceed before the Russian courts. The Court rejected VEB’s argument that the arbitration agreement had become inoperative on account of sanctions. In support of its contentions, VEB cited difficulties in securing legal representation, problems in paying fees to lawyers and LCIA, and inability of parties and witnesses to attend the hearings in person.
Mr. Bagaria also discussed an alternative route of execution of the Russian judgment i.e., through winding u proceedings. In support of this route, he referred to the English court’s judgment of March 2024,[14] where the court held that the Russian court’s judgment remained unsatisfied and is a judgment debt. The court held that a winding up or a bankruptcy petition can be entered based on a foreign judgment, notwithstanding that an application for recognition of such foreign judgment had not been made.The discussion transitioned to cross-border insolvency proceedings, with Mr. Petrov outlining a two-tier framework introduced by the Russian Supreme Court in February 2024. Drawing inspiration from the UNCITRAL Model Law on Insolvency and its Centre of Main Interest (COMI) concept, this framework distinguishes between main insolvency proceedings targeting primary business locations and secondary proceedings for foreign companies with peripheral connections. Mr. Petrov also described an alternative approach involving tort liability for corporate groups, allowing claims against parent companies and affiliates. This approach circumvents traditional sanctions-related restrictions, offering broader avenues for creditors.
Mr. Bagaria and Mr. Reed explored the potential for enforcing Lugovoy Law judgments in the DIFC Courts, recognising the unique challenges. While English courts typically reject such judgments, the DIFC’s non-aligned jurisdiction might provide greater flexibility. Mr. Montagu-Smith identified three criteria for establishing jurisdiction: company presence, individual presence, and voluntary submission. He emphasized that mere participation in proceedings does not constitute automatic jurisdictional submission.
Concluding the discussion, Mr. Bagaria cautioned funders about the significant risks associated with such cases, noting the evolving nature of the DIFC Courts’ approach. He emphasised their efforts to balance international legal principles with regional considerations while maintaining rigorous jurisdictional scrutiny. He concluded by pointing to a chapter authored by Singularity, which provides a detailed exploration of these issues.
6. Remedies of committal and sequestration available before the DIFC Courts and its cross-border reach
Mr. Bagaria initiated the discussion by inviting Mr. Montagu-Smith to address the first reported case of asset sequestration in the DIFC Courts, underscoring the expanding possibilities within the court’s jurisdiction. Regarding freezing orders, their effectiveness, similar to other jurisdictions like London, largely depends on identifying assets and their custodians, as custodians are generally more compliant than potential fraudsters.
A key distinction was noted regarding the DIFC Courts’ contempt powers compared to English courts. While DIFC Courts do not have the direct power to imprison individuals, they can refer cases to the Attorney General and impose significant fines—approximately $100,000, which, as Mr. Bagaria remarked, has proven effective for ensuring compliance with court orders. Mr. Reed, however, pointed out that claimants often prefer to avoid fines, as they reduce the available asset pool, with the fines going to the DIFC rather than the claimants.
The enforcement mechanism via Attorney General referrals, though slower, has proven to be effective, especially due to the implicit threat of travel restrictions (in personam actions) and border alerts. Mr. Bagaria emphasised the efficiency of the system, where cases are directly referred from the Attorney General for investigation, thus eliminating the need for lengthy arguments over sentencing. Successful implementation of travel bans has been demonstrated through coordination between DIFC Courts and local courts.
However, Mr. Montagu-Smith noted that there is limited evidence of actual imprisonment resulting from DIFC court order breaches. The discussion then moved to ongoing contempt of court reforms in England, acknowledging that criminal sanctions are not ideal for enforcing civil orders. The most practical approach for commercial parties, as highlighted by Mr. Montagu-Smith, remains identifying and serving orders on custodians, especially through onshore mechanisms. This, however, can sometimes lead to overly restrictive account freezes that fail to accommodate standard exceptions for business operations and legal expenses, which are typically included in freezing orders.
7. Remedies available in local courts on a DIFC Enforcement Order
The discussion, initiated by Mr. Bagaria, focused on the effectiveness and enforceability of interim measures from DIFC Courts, particularly in local jurisdictions. Mr. Montagu-Smith explained that the Court of Appeal has clarified the enforceability of interim arbitration awards in the DIFC, stating that measures like freezing orders or anti-suit orders issued by arbitration tribunals qualify as arbitration awards under DIFC arbitration law.
Regarding the historical development of foreign judgment enforcement in DIFC, Mr. Montagu-Smith described how the current framework evolved from a presentation he gave approximately a decade ago, which was later formalised into an enforcement guide which he had been invited to author. This was further developed through the memorandum of guidance between the English commercial court and DIFC court, and later reinforced through the DNB Bank case[15] in the Court of Appeal. While DIFC traditionally follows the English common law approach, which primarily focuses on final money judgments, Mr. Montagu-Smith noted that other jurisdictions, such as Australia, take a broader approach by enforcing injunctions. This raises questions about potential expansion of DIFC’s enforcement scope.
Regarding enforcement in local courts, the Dubai courts and broader UAE judiciary have shown adaptability in enforcing various forms of interim relief, including freezing orders. This was exemplified in a case where Sir Richard Field’s injunction regarding hotel signage changes was successfully taken to local courts, though implementation faced practical challenges unrelated to legal issues. This experience suggests a growing acceptance and effectiveness of DIFC orders in local jurisdictions, despite some operational challenges in enforcement. Mr. Bagaria concluded the topic by remarking that, beyond the remedy to approach local courts, the contempt jurisdiction of DIFC Courts has further strengthened the framework.
8. The DIFC Courts as supervisory courts for DIAC arbitrations and its impact on enforcement of awards
Mr. Bagaria then shifted the discussion to the pro-arbitration approach of DIFC Courts, highlighting their active granting of anti-suit injunctions and non-recognition of judgments that breach exclusive jurisdiction or arbitration agreements. Mr. Reed responded, stating that the supervisory jurisdiction of DIFC Courts has been well established through years of development. However, its supportive jurisdiction—a distinction made by DIFC judges—is a lesser-explored avenue, particularly demonstrated by the anti-suit injunctions granted by DIFC in support of arbitration. He discussed the Lural v. Listral decision,[16] where the court refused to recognize an Abu Dhabi Court order, citing the agreement’s express provision of exclusive jurisdiction to the DIFC. He also mentioned the YYY v. ZZZ case,[17] where an onshore judgment was rejected for breaching the New York Convention by applying UAE law instead of the parties’ chosen English law.
The supervisory jurisdiction of the DIFC Courts has evolved significantly following the enactment of the DIAC Rules 2022 and Decree No. 34 of 2021. The new DIAC Rules establish that, in the absence of an agreement on the seat of arbitration, the DIFC will be presumed to be the seat, a notable shift from the previous 2007 DIAC Rules that designated onshore Dubai as the default seat. This change is expected to increase the relevance of DIFC Court judgments in arbitration matters within the UAE. In Ledger v. Leeor, the DIFC Courts declined to grant an interim injunction preventing a party from pursuing claims in onshore Dubai courts, arguing that it was not sufficiently probable that the arbitration was seated in the DIFC.[18] The Court acknowledged a limited prospect for appeal but ultimately did not provide guidance on interpreting the DIAC Decree.
A significant discussion point was the impact of Decree 34 on party autonomy. While decisions from the Louisiana District Court and Singapore Court held that parties choosing the now-abolished DIFC-LCIA system must opt for ad hoc arbitration or risk invalidating arbitration clauses, Justice Black’s Narciso v. Nash decision provided a contrasting view.[19] He emphasised that the dominant intention in arbitration agreements is to avoid litigation, thus supporting party autonomy. [See our alert about the Nash v. Narciso decision.] This stance also aligns with Gary Born’s view that arbitration agreements are autonomous and should follow the seat law, including Decree 34 for DIFC-seated arbitrations. However, challenges remain, particularly concerning the arrangement between DIAC and LCIA for case administration, which falls outside the UAE’s regime and is not covered by the Gary Born rider, suggesting an area needing further consideration. Mr. Bagaria concluded by remarking that Decree 34 has introduced effective damage control, allowing institutions to function seamlessly through these decisions.
Conclusion
Mr. Bagaria addressed the evolution of DIFC Courts’ approach to English judgments, emphasising a shift toward principled neutrality, especially in sanctions-related cases. Rather than automatically following English precedents, DIFC Courts now apply neutral common law principles, offering a balanced platform for dispute resolution. Mr. Reed clarified that this shift does not represent an abandonment of English authority but rather a more questioning approach to English precedents.
The discussion turned to conduit enforcement, with Mr. Montagu-Smith explaining that controversies arose not from public policy violations but from territorial and sovereignty concerns. He noted that tensions emerged when judgments from jurisdictions without UAE enforcement treaties were processed, or when UAE onshore arbitration awards were routed through DIFC for enforcement. This illustrated a broader debate about the balance between attracting foreign investment and maintaining sovereignty. The establishment of DIFC Courts represented a sovereignty trade-off that, in practice, has proven more extensive than initially anticipated.
The session concluded with an acknowledgment of the varying perspectives on DIFC Courts’ enforcement approach, while recognising their role in providing a neutral forum for international disputes. Mr. Bagaria closed the discussion with a note of appreciation for the panel’s active participation.
In connection with the event, Singularity published a comprehensive book analysing these topics and innovative enforcement options within the DIFC, available for download here
