Setback for DIFC Courts as a ‘conduit jurisdiction’

Dubai's newly established Judicial Tribunal has ordered the DIFC Courts to 'cease from entertaining' a case being heard between Oger LLC and Daman Real Estate Capital Partners Limited.

The status of the DIFC Courts as a “conduit jurisdiction” for the upholding of judgements and arbitration awards made outside the free zone has suffered a setback following a judgement from Dubai’s newly established Judicial Tribunal for the Dubai Courts and DIFC Courts.

The Judicial Tribunal, in what appears to be its first decision since its formation in June 2016, has ordered the DIFC Courts to “cease from entertaining” a case being heard between Oger LLC and Daman Real Estate Capital Partners Limited.

Oger originally filed a claim with the DIFC Courts in August 2015 seeking recognition and enforcement of a Dh965 million arbitration award made by the Dubai International Arbitration Centre in its favour against Daman Real Estate, a DIFC-based company.

After a protracted legal case, the DIFC Courts ordered in June 2016 that Daman Real Estate be wound up, in accordance with the DIFC’s insolvency law, following the company’s inability to pay the arbitration award debt.

However, the Judicial Tribunal, in a decision handed down recently, ordered that the case be remitted for trial by the Dubai Courts and that the DIFC Courts should “cease from entertaining the case”.

The decision came even though Daman Real Estate had twice attempted to have the original arbitration decision annulled by the Dubai Courts in 2016, with both attempts ending in failure.

In a dissenting opinion published by the Tribunal, three DIFC Courts judges stated that while the DIFC Courts respect the fact that the court with competence to annul an arbitration award rendered onshore in Dubai is the Dubai Court, the DIFC Courts hold exclusive jurisdiction to hear applications to enforce those arbitral awards within the DIFC.

Lawyers from Herbert Smith Freehills (HSF) said in a briefing note that the Tribunal’s decision arguably represents a “damaging setback” for the status of the DIFC as a conduit jurisdiction.

“What is perhaps most surprising is not necessarily that it decided in favour of the Dubai Courts, but that it held that the DIFC Court must relinquish jurisdiction entirely, in effect constraining the DIFC Court and preventing it from making any further interim orders in support of the award,” HSF said.

The Judicial Tribunal for the Dubai Courts and DIFC Courts was established in June last year by Decree 19 of 2016, to rule on conflicts of jurisdiction and conflicts of judgements between the two courts.

The seven-member Tribunal consists of the head of the Dubai Court of Cassation, who sits as chairman, with three judges each from the Dubai Courts and the DIFC Courts.

Representatives of the DIFC Courts and the Dubai Courts were unavailable for comment.

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