Selection of Forum and Enforcement of Foreign Judgments in the UAE, At all Possible?

Enforcement of Judgments in the UAE – Introduction

The enforcement of judgments in the UAE is not always straight forward. We come across a number of inquiries where clientes or foreign counsels brag about their negotiating skills when drafting a contract with a UAE flavour. This is highly unrecommended when the forum law of the counter party is unknown.

The purpose of this publication is to raise awareness of important excerpts of the UAE Procedural Code, specially at the time of deciding national courts vs. arbitration at the initial contractual stages, when evaluating the enforcement of judgments in the UAE.

Through very basic questions we will guide you over what the UAE Procedural Code has to say and draw some in principle practical general conclusions.

 Would it be valid a clause in a contract that selects a foreign forum?

In principle, the UAE system does allow for contractual forum selection, however in practice there are a number of points to be considered at the time of making this selection. These follow below.

Under Article 20 of Federal Decree-Law No. 42/2022 (“the Civil Procedural Code or “CPC“), if the dispute relates to properties or transactions with UAE based entities, the UAE Courts could refuse enforcement of a judgment rendered abroad. So while you could contractually select a foreign forum it could end up being useless based on Article 20 of the CPC.

Article 20 of the CPC reads as follows:

The courts shall be competent to hear civil and commercial actions brought against a foreigner having no domicile or place of residence in the State in the following cases:

• • 1- If he has an elected domicile in the State.
  • 2- If the action is related to real estates in the State, a national’s heritage, or an estate opened therein.
  • 3- If the action relates to an obligation that arose, was performed or was required to be performed in the State, or to a contract required to be authenticated therein, or to an incident that arose therein, or to a bankruptcy declared at one of its courts.
  • 4- If the action is brought by a wife having a domicile in the State against her husband having had a domicile therein.
  • 5- If the action is related to an alimony of one of the parents or the wife or an interdicted person or a minor, or his next of kin, or guardianship of a person or property, in case that the claimer of the alimony, the wife, the minor, or the interdicted person has a residence in the State.
  • 6- If the action is related to any matter of personal status and the plaintiff is a national or a foreigner having domicile in the State, where the defendant has no known foreign domicile, or if national law is applicable to the lawsuit.
  • 7- If one of the defendants has a domicile or residence in the State.

 

The above with respect to national state courts. Arbitration will also be excluded in matters over which, due to public policy considerations, are esteemed to fall under the exclusive jurisdiction of the UAE Courts: employment, commercial agencies or some real estate affairs especially when they involved registration of the transactions with the authorities.

Therefore arbitration offers more flexibility however will also be warranted if the goal of the arbitration will be to enforce a foreign award in the UAE.

Will I be able to enforce a judgment in the UAE (Foreign) against a UAE based entity?

The enforcement of judgments in the UAE (foreign) is regulated by Articles 222 and following of the UAE Civil Procedural Code.

In order for a foreign judgment to be enforced in the UAE, the conditions listed in Article 222(2) of the CPC must be cumulatively satisfied. Pursuant to these provisions, the judgment creditor seeking enforcement needs to evidence the following:

1. The judgment is final and not subject to any appeal.
2. Any UAE court did not have competence or jurisdiction to hear the case.
3. The foreign court had jurisdiction and competence to hear the case.
4. The Defendant was duly summoned and represented during the hearing.
5. The ruling or order has the force of an accomplished fact according to the law of the court which issued it.
6. It does not conflict with a ruling or order previously issued by a court in the UAE and that is not contrary to the public policy of the UAE.

Point 2 above is the most worrisome as in accordance with Article 20 of the Civil Procedural Code (as displayed above), UAE Courts have jurisdiction to hear all actions brought against individuals or companies having an address or place of residence in the UAE.

The Courts of the UAE have not reacted in a constant and predictable manner when faced with exclusive jurisdictional clauses, pursuant to which the jurisdiction of the courts of the UAE is denied and granted instead to a foreign court.

Some courts have interpreted Article 222(2) (former 235(2)) CPC to be of imperative application, thereby disallowing the selection of jurisdiction by agreement of the Parties. However, most common practice gives full enforceability to the intention of the Parties to litigate in the jurisdiction of their choice.

DIFC Courts have a similar approach when considering the enforcement of judgments in the UAE?

The approach of the DIFC Courts to the enforcement of foreign court judgments is different to that of the Dubai Courts. The DIFC Courts can, as a matter of DIFC law, recognize foreign court judgments. Article 7 of the Judicial Authority Law and Article 24 of the DIFC Court Law (DIFC Law No. 10 of 2004) grant the DIFC Courts jurisdiction to ratify any judgment of a recognized foreign court. Using the Protocol of Enforcement between the DIFC Courts and the Dubai Courts there’s room to argue that upon its ratification it could be enforced through the Dubai Courts.

Would an arbitral award face the same luck in the UAE ?

The execution of a foreign arbitral award could be blocked by the UAE Courts if the subject matter related to matters deemed to fall within the exclusive jurisdiction of the UAE Courts (for example, employment matters or commercial agency affairs deemed within the public policy domain).

This being said a party’s domicile will not be deemed to be sufficient reason to withhold the execution.

This is because since 2006 the UAE is a member to the New York Convention on the Enforcement of International Awards and hence is committed to respect its predicaments, which mainly are the rule of enforcement save any of the exceptions to the general default rule being applicable.

Such exceptions are found in Article V of the Convention, which can be summarized as follows:

• Parties to the agreement are under some incapacity under their law or the agreement is not valid under their law;
• A Party against which an award was made was not given sufficient notice of the appointment of tribunal or proceedings;
• The award exceeds the arbitrators’ scope;
• The tribunal was not formed in line with the parties’ agreement or defaulting the seat of arbitration’s law;
• The Award has not yet become binding or has been set aside.

Recognition and enforcement of judmay also be refused if the competent authority in the country where recognition and enforcement is sought finds that the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or the recognition or enforcement of the award would be contrary to the public policy of that country.

It is important to note the facultative reading of Article V which reads that recognition and enforcement ‘may be’ but it does not ‘have to’ be refused.

So is it better to plug in an arbitration clause in the UAE instead of a foreign forum selection clause?

In principle it is better to enforce a foreign arbitral award than a foreign judgment.

The UAE is a member to the New York Convention who signed the New York Convention in 2006 on reciprocity basis (only applies when award comes from another New York Convention member country) envisioning to strengthen the UAE as a commercial hub as it did make clear under the Convention’s reservations that its intention was to support legal relationships considered commercial.

We trust that the above is of assistance when evaluating the enforcement of judgments in the UAE (foreign, that is). For more information about UAE law  you can visit all our publications in this link as well as the videos of our director Maria Rubert.