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Client Alert: UAE Law And Practice Update: Courts To Support International Business

January 20, 2025
Firm Memoranda

Recent developments from the DIFC and ADGM Courts evince the continued evolution of law and practice to support the demands of the international business community in 2025.  Not least, the DIFC Court has overturned prior authority to find power and jurisdiction to grant interim relief in support of oversees proceedings; has found jurisdiction to enforce foreign interim awards; and the DIFC Courts have indicated that DIFC-LCIA arbitration clauses will be upheld.  The ADGM Courts have also confirmed that fraudulent and wrongful trading claims can be brought against former directors for conduct that took place prior to enactment of the ADGM legislation.  Read our highlights of some of the key 2024 developments below.

I. DIFC Court of Appeal clarifies jurisdiction and power to grant interim relief in support of foreign proceedings

In Carmon v Cuenda [2024] DIFC CA 003[1], the DIFC Court of Appeal confirmed that the DIFC Court has jurisdiction and power to grant freezing orders in support of pending foreign proceedings, referring to jurisdiction arising under Article 5(A)(1)(e) of the Judicial Authority Law No. 12 of 2004 and finding that the power to grant such interim remedies was necessary to prevent the Court’s jurisdiction to recognise and enforce foreign judgments from being thwarted.

Notably, this decision departed from the 2023 Court of Appeal decision in Sandra Holding[2].  In reaching its decision, the Court noted that the doctrine of precedent does not prevent the Court from departing from its previous decisions in limited circumstances, including where an earlier decision embodies an error of law that may impede the effective administration of justice.  The Court found that the decision in Sandra Holding did not rest upon a principle that had been carefully worked out in a significant succession of cases; nor was there evidence that it had been independently acted upon, in a manner which would otherwise militate against its reconsideration.

II. DIFC Court of Appeal issues decision on the enforceability of foreign interim arbitral awards

In Neal v. Nadir [2024] DIFC A 001[3], the DIFC Court of Appeal held that interim arbitral awards issued by tribunals seated outside the DIFC are enforceable within the DIFC. 

The primary issue before the Court was whether the power of the Court to enforce interim measures is limited to DIFC seated arbitrations (under Article 24 of the DIFC Arbitration Law No. 1 of 2008 (as amended)) or whether it extends to the enforcement of interim awards rendered by foreign-seated tribunals (pursuant to the terms of Articles 42 – 44 of the DIFC Arbitration Law).  This issue turned on the construction of the term “award” under DIFC Arbitration Law, and whether it is question of “finality” or “the binding nature of the award which is critical".

The Court held that: (a) an award includes interim, provisional, partial and final awards; (b) there is also nothing in the Arbitration Law which draws any distinction between these types of award, and Article 24 refers to interim measures in an award which occurs prior to the award which finally determines the dispute; and (c) there is no reason why an interim or partial award (which is binding for a limited period of time until a further decision is made) should not be treated as an award for the purposes of enforcement.

III. ADGM Court of Appeal confirms availability of fraudulent and wrongful trading claims under ADGM law against directors for onshore conduct pre-dating continuation into the ADGM and prior to the enactment of ADGM Insolvency Regulations

In [2024] ADGMCA 0001[4] , the Abu Dhabi Global Market (ADGM) Court of Appeal (The Chief Justice (Lord Hope), Justice Kenneth Hayne and Justice Dame Elizabeth Gloster) confirmed an earlier decision by Justice Sir Andrew Smith of the ADGM Court of First Instance, holding that fraudulent and wrongful trading claims under ADGM insolvency laws can be brought against former directors of companies for conduct that took place before the ADGM legislation was enacted creating the offences and before the companies became ADGM companies.

The Court of Appeal, having considered English case law, further confirmed that there did not necessarily need to be a connection between the defendant and the jurisdiction (the ADGM in this case), and the question of sufficient connection was a matter of discretion for the Court in granting relief.

IV. ADGM Court decision puts into focus the importance of clear arbitration clauses and the choice of seat

In A15 v B15 [2024] ADGMCFI 0012[5], the ADGM Court considered an application for the recognition and enforcement of an arbitral award where the arbitration clause had specified that the place of arbitration was the “U.A.E.”.  The primary question before the Court was whether the seat was the ADGM or Dubai (onshore Dubai or DIFC).  Having considered the agreement between the parties pursuant to Article 18 of the ICC Rules, and the fact that the arbitration was governed by the procedural rules of the UAE, the Court determined that the seat of arbitration was onshore Dubai, and that the place of hearing (which was the ADGM) was not relevant for determination of the seat.

Taking into account ongoing set aside proceedings in Dubai Court of Cassation, the ADGM Court exercised jurisdiction to adjourn the recognition and enforcement application pending a decision of the Dubai Court of Cassation on the basis that the Court may refuse enforcement if the award has been set aside at the seat of arbitration.

V. DIFC Court weighs in on the enforceability of DIFC-LCIA clauses

The latest case to consider the issue of enforceability of DIFC-LCIA clauses, following the abolition of the DIFC-LCIA pursuant to Dubai Decree 34 of 2021, is the DIFC Court of First Instance judgment in Narciso v Nash[6].  The Court indicated that the approach of the DIFC Courts when considering the enforceability of DIFC-LCIA clauses is likely to be in line with the Abu Dhabi Court of Appeal judgment (upholding the decision of the Court of First Instance in Case No. 1046/2023 – Vaned Engineering GmBH v. Reem Hospital), i.e., Decree 34 has not rendered the DIFC-LCIA arbitration clause null and void, inoperative or incapable of being performed, taking into account the wider context of Decree 34 and constitution of the DIFC and UAE arbitral entities.

Notably in this respect, the DIFC and the Abu Dhabi Courts have taken a different approach to that adopted by the Courts of Louisiana  and Courts of Singapore.

***

If you have any questions about the issues addressed in this memorandum, or if you would like a copy of any of the materials mentioned in it, please do not hesitate to reach out to:

Joanne Strain
Email: joannestrain@quinnemanuel.com
Phone: +97 15 0775 8307

Parnika Chaturvedi
Email: parnikachaturvedi@quinnemanuel.com
Phone: +97 15 5574 6260

END NOTES:

[1]   Carmon Reestrutura-engenharia E Serviços Técnios Especiais, (Su) LDA v Antonio Joao Catete Lopes Cuenda [2024] DIFC CA 003 | DIFC Courts

[2] (1) Sandra Holding Ltd (2) Nuri Musaed Al Saleh v (1) Fawzi Musaed Al Saleh (2) Ahmed Fawzi Al Saleh (3) Yasmine Fawzi Al Saleh (4) Farah El Merabi [2023] DIFC CA 003

[3]   Neal v Nadir [2024] DIFC CA 001 | DIFC Courts

[4]https://assets.adgm.com/download/assets/ADGMCA-2024-001%3B+ADGMCA-2024-002/526713f4c73f11efb5403e3cab5cfee5

[5]   feb1dc8886f411ef94e51ac427ea239a

[6]   ARB 009/2024 Narciso v Nash | DIFC Courts