Setback for DIFC Courts as a ‘conduit jurisdiction’ – a response

Daman Real Estate Capital Partners Ltd replies to a report published earlier this month by this newspaper

We refer to your article, published February 4, 2017, regarding the recent decision of the newly established Judicial Tribunal for the Dubai Courts and DIFC Courts. As we have not been approached to comment on the subject prior to publication, we feel it is important to set the record straight on what transpired and to clarify some inaccuracies in the article.

At the onset, it is important to understand the difference between Daman Real Estate Capital Partners Ltd (“Recap”) and Daman Investments (“Daman”). The former company, Recap, which is the party to the dispute referenced in your article, is a DIFC-licensed special purpose company that carried out the subject development in the DIFC and is an independent company from Daman. The latter company, Daman, is a UAE-based investment company responsible for managing the development, but is not party to the dispute. We note that your article framed the decision of the Judicial Tribunal in negative terms, as a “setback” for the DIFC Courts, rather than highlighting the decision’s very positive aspects for both courts which find themselves working somewhat differently within the same jurisdiction.

To appreciate those positive aspects, it is important to understand the case at the heart of the decision arose. Recap was brought to arbitration by a construction company, Oger Dubai, whom we had hired to carry out a large building project, but had to terminate due to slow and substandard performance. Although we do not delve into the details of the legal case, it is important to note that the arbitral tribunal itself agreed that Oger was in “culpable delay”, but exonerated them on other grounds we believe are highly questionable under Dubai law.

Despite these delays, it is true, as your article states, that the outcome of the arbitration conducted by the Dubai International Arbitration Centre (DIAC) was heavily (and we believe incorrectly) in Oger’s favor.

Subsequent to that arbitral decision, this case was conducted between the two courts, with the Dubai Courts hearing our case for annulment of the arbitral award on the one hand (as Dubai was the seat of the arbitration proceedings), and the DIFC Courts entertaining Oger’s recognition and enforcement of the arbitral award without deferring to the Dubai Courts. These parallel proceedings exposed a legal no-man’s-land, which are especially tricky to comprehend as both courts operate within the same legal system of Dubai.

Ultimately, without having the merits of our annulment challenge decided by the Dubai Courts, the DIFC Courts pressed ahead with the enforcement of the award, imposing a series of harsh measures which culminated in an order to wind-up Recap and appoint a liquidator. This action effectively sentenced Recap to a corporate death by the DIFC Courts on the basis of misplaced assumptions and conclusions applied by a judiciary which was unwilling to grant deference to Dubai laws. For us, this added up to an element of unfairness which is difficult to describe otherwise, especially as all of this could have been avoided if these proceedings had simply been brought before the Dubai Courts, in keeping with Dubai law.

Just prior to the date set for the winding up and appointment of the liquidator by the DIFC Courts, we petitioned the Judicial Tribunal established under Decree 19/2016. To understand our plea to the Judicial Tribunal, it is important to explain what had been happening with our annulment challenge in the Dubai Courts while the DIFC Courts proceeded with the measures summarized above.

The article states that our attempts to annul the award in the Dubai Courts ended “in failure”. This is not correct. In fact, at the time of our petition to the Judicial Tribunal our annulment application was still being considered at the Dubai Court of Cassation. While both the Dubai Court of First Instance and the Court of Appeal denied to hear our case, these decisions were taken on the mistaken conclusion that they did not have jurisdiction over the matter. Neither court ruled on the merits of our challenge. Subsequently, and as all parties (even the DIFC Court judges) agree, these decisions were incorrect as the Dubai Courts did have jurisdiction to hear the matter. The Judicial Tribunal has resolved that issue once and for all by having remitted our case to the Dubai Court of First Instance, where finally we will have our case heard.

In line with that ruling, the Judicial Tribunal has also ruled that the DIFC Courts should “cease from entertaining” the case at all. This means that all of the enforcement actions taken by the DIFC Courts in its judgment against us are no longer in effect. In other words, all aspects of the case will now be heard before one court, where they should have been in the first place.

This makes perfect sense. Both sides of the case – annulment and recognition/enforcement – are tied closely together and should be heard before one court instead of two courts avoiding the risk of creating confusion. This is even more obviously the case where the two courts (Dubai Courts and DIFC Courts) are part of the same legal system (that of Dubai), and literally down the street from each other.

Having experienced first hand a very real case of conflicting legal actions within the same jurisdiction, we are grateful that the Judicial Tribunal has called a halt to those actions and placed our case in the hands of a single competent court and judges who are best positioned to determine our legal rights. As noted by the Judicial Tribunal in its decision, granting jurisdiction to only one of the two courts to determine all aspects of the case is “for the sake of justice and to avoid contradictory judgments”.

The Judicial Tribunal addresses an important gap in a legal system that encapsulates two very different courts by aligning these two courts towards a single effort. The composition of the Tribunal with its membership, including six of the highest judges from both the Dubai Courts and the DIFC Courts, ensures that its decisions are comprehensive and learned. In the final analysis, this adds clarity and strength to the legal system in Dubai and can hardly be categorised as a “setback” as your February 4 headline suggests.