On September 13, 2022, Judge Abdul Rahman Murad Al-Blooshi, Director of the International Cooperation Department of the UAE Ministry of Justice, issued a communiqué to His Excellency Tarish Eid Al-Mansoori, Director General of the Dubai Courts, directing the Dubai Courts to enforce judgements issued by the English Courts (the “Directive”). This follows the English Courts’ decision in Lenkor Energy Trading DMCC v Puri  EWCA Civ 770 to enforce a judgment of the Dubai Courts concerning dishonored cheques.
The pro-enforcement Directive might foreshadow an increasing number of enforcement actions by judgement creditors of the English Courts against assets domiciled in Dubai.
The Facts: Iranian Sanctions Evasion and Bounced Cheques
The Lenkor cases concerned the enforcement of a Dubai Courts judgment ordering the defendant, Mr. Irfan Puri, to pay AED 123,272,048 (USD ~33.5 million and GBP ~30 million) plus interest at 9% to Lenkor Energy Trading DMCC.
In overview, the underlying transaction was the sale of oil by Lenkor to a Pakistani buyer, Mr. Puri. Half of the cargo value was to be paid under a USD-denominated letter of credit, and the other half by a USD-denominated wire transfer. The port of discharge was Port Qasim, Karachi. However, the judgement records that, while Lenkor was supposed to be supplying UAE origin “High Speed Diesel” (HSD), it actually supplied Iranian origin “Heavy End Product” (HEP). To conceal that fact, Lenkor “alter[ed] shipping documents, falsif[ied] loadport test results and forg[ed] a certificate of origin.” This misled Mr. Puri, customs authorities, and the commercial banks involved in processing the transactions. Later, Mr. Puri’s bank came to know that the vessel had called into an Iranian port and Mr. Puri unilaterally decided to pay Lenkor in instalments only when or after he had on-sold the product to third parties and received payment for those onward sales.
Ultimately, Lenkor sought to cash two cheques that Mr. Puri had issued in Lenkor’s favor under the original contract requiring Mr. Puri to guarantee 100% of the cargo’s value. However, the account on which Mr. Puri had drawn the cheques was insufficiently funded and the cheques were not honored. Lenkor commenced civil proceedings against Mr. Puri under Article 599(2) of the Dubai Commercial Transactions Law, a statutory provision that imposes personal liability on the drawer of a cheque in circumstances where the account on which the cheque is intended to draw has insufficient funds to cover the amount due. On May 30, 2017, the Dubai Courts issued judgment in favor of Lenkor. That judgment was subject to various appeals and reached the highest court, the Dubai Court of Cassation, on two occasions, where it was ultimately upheld on August 5, 2018, exhausting Mr. Puri’s rights of appeal in Dubai. Lenkor sought enforcement in England & Wales.
The Decision: The English Courts Reject the Common Law “Public Policy” Defense
Mr. Puri advanced several arguments to resist enforcement, but by the time the case got to the English Court of Appeal, only one argument remained live: the assertion that it would be contrary to public policy to enforce the judgment because the underlying contract pursuant to which the cheques were issued was tainted by illegality. In particular, Lenkor had deceived Mr. Puri about the nature of the product, which was HEP rather than HSP, and the origin of the product, which was Iran rather than the UAE, and had acted in bad faith by creating fraudulent documentation. The English Court of Appeal rejected this argument, emphasizing that the issue was “not a question of enforcing a contract [but was instead] a question of enforcing a judgment given by a foreign court of competent jurisdiction.” Lord Justice Lewison gave the lead judgment, with which Arnold LJ and Edis LJ agreed.
The Establishment of Reciprocity between the Courts of Dubai and England & Wales
Reciprocity is typically established by bilateral or multilateral treaties. For example, the UAE is a party to GCC Convention for the Execution of Judgments, Delegations and Judicial Notifications 1996 (the GCC Convention) and the Riyadh Convention on the Judicial Cooperation between the States of the Arab League 1983 (the Riyadh Convention), both of which facilitate the enforcement of judgments between the signatory states.
The UAE and the UK are parties to a treaty on Judicial Assistance in Civil and Commercial Matters, dated December 7, 2006, but that treaty does not address mutual enforcement of judgments. Therefore, a party seeking to enforce a judgment of the English Courts in the UAE must provide evidence of reciprocity. Until now, the Dubai Courts have not been satisfied that such evidence existed. However, the Directive confirms that the principle of reciprocity as between the Courts of Dubai and England & Wales has now been established in the form of the Lenkor case.
Other Enforcement Requirements
It is important to note that reciprocity alone is not enough to enforce a judgment of the English Courts (or any other foreign court). In addition to reciprocity, Article 85(2) of the UAE Civil Procedure Code requires that the UAE Courts also be satisfied that:
- The UAE Courts did not have exclusive original jurisdiction over the dispute and the foreign court that issued the judgment did have competent jurisdiction;
- The foreign judgment complies with the law of the country in which it was issued;
- The parties subject to the foreign judgment were summoned and duly represented;
- The foreign judgment has res judicata status; and
- The foreign judgment does not conflict with a UAE judgment or order and does not contravene UAE public policy.
The precise application of the Directive remains to be seen and particularly whether it extends to all the Courts of the UAE. While the Directive is addressed to the Dubai Courts, it does state reciprocity between the two countries (the UAE and the UK), suggesting that its treatment may extend beyond the Dubai Courts. However, in general terms, the Directive marks a significant development in judicial cooperation between the UAE and the UK. Though it is not legally binding and does not guarantee enforcement, it should engender confidence on the part of UK investors who might need to enforce judgment debts in the UAE. Additionally, the Lenkor case could lead to more early settlements, on the basis that litigants might be more concerned than before about potential enforcement against their overseas assets, while the apparent availability of those overseas assets could result in an increase in third party funding activity.
Please do not hesitate to reach out if ever you have any questions regarding recognition and enforcement. It is always best to consider those topics prior to commencing potentially costly litigation, to ensure as much as possible that prospective judgment debtors possess sufficient assets or wealth in favorable locations to satisfy any judgment you might obtain. Furthermore, we can assist you to obtain urgent ancillary relief—including freezing injunctions, search and seizure orders, disclosure orders and passport surrender orders before competent courts in virtually every major financial center around the world—which is critical for the purpose of preventing prospective judgment debtors from frustrating the enforcement of any future judgment in your favor by obfuscating assets or dissipating them to less favorable jurisdictions.