The trend towards reciprocity in the enforcement of Judgments between the English and Dubai Courts continues

Background

Mr Almakhawi, a UAE national, was the beneficial owner and a director of a company in Dubai, which entered insolvent liquidation in September 2014.  In order to support the company’s borrowing from Emirates NBD Bank, Mr Almakhawi, along with other directors (“the Guarantors”), provided personal guarantees to the Bank. During the liquidation, the Bank initiated proceedings in the Dubai Courts against the company and the Guarantors for recovery of the sums due.  The case went up to the Dubai Court of Cassation and Judgment was obtained in favour of the Bank; the Guarantors were ordered to pay c.AED 211.3m (c.£47.5m) plus interest.

Following limited recoveries, the Bank sought enforcement of the Dubai Court Judgment in England and Wales, against Mr Almakhawi, who, after the Dubai Court of First Instance had entered Judgment against him, transferred his assets to his son, by way a gift, but retained the beneficial title (“the Transfers”). The Bank argued that (i) the Transfers created a trust in favour of Mr Almakhawi, and that (ii) they were transactions which defrauded the relevant creditors.

English Court Judgment

Justice David Edwards KC ordered the following:

• The Dubai Judgment was enforceable as a matter of common law under English law; precedent was set in the case of Lenkor.
• The Dubai Judgment was final and conclusive, it was issued in personam, and it was for a definite sum of money.  Therefore, the Judgment was not contrary to the rules of natural justice which would have made it unenforceable; proof of a mere procedural irregularity in foreign court proceedings is not sufficient.
• The Dubai Judgment is enforceable in England and Wales and the Court entered monetary Judgment against Mr Almakhawi.
• With regards to the Transfers, the Court held that while one of the purposes was the preservation of assets and succession planning, another purpose was a prohibited purpose, i.e. to put the assets beyond the reach of, and to prejudice the interest of, the creditors, including the Bank.  The timing of the Transfers was a principal factor for determining that Mr Almakhawi both foresaw and desired that they would prejudice the creditors. The Court held that the Transfers were transactions which defrauded the creditors but dismissed the argument that they created a resulting trust in favour of Mr Almakhawi.

Comment  

There remains no bilateral treaty between the UAE and the UK for the reciprocal recognition and enforcement of judgments. However, the Emirates NBD Judgment is a further example of the trend towards reciprocity between the two jurisdictions.

Although we are not aware of an English Court Judgment yet having been enforced in the UAE onshore Courts, the trend towards reciprocity combined with the directive from the UAE Ministry of Justice in September 2022 – which referred expressly to Lenkor – should provide confidence to judgment creditors looking to enforce English Court judgments in the UAE that the UAE onshore Courts, if so requested, would permit the enforcement. This developing relationship not only provides confidence to creditors in both jurisdictions where a counterparty’s assets are located in the other, but also widens the options for suitable choice of forum clauses.

We have specialist lawyers with experience in acting for UAE individuals and companies in the English courts and can support with enforcement of foreign judgments, including court orders, judgments and arbitral awards.  Please contact Russell J Strong if you need advice.