Life After Lenkor: The High Court’s latest judgment reinforces reciprocity between the UAE and English Courts

On 12^th May 2023, the High Court of England and Wales issued another significant judgment which is expected to advance the progress of reciprocal enforcement of judgments between the courts of the United Arab Emirates (UAE) and England and Wales.

In Emirates NBD Bank PJSC v Mr A and Others [2023] EWHC 1113 (Comm), Justice David Edwards KC ordered that the Dubai Court judgment in favour of Emirates NBD Bank PJSC (the Bank), was enforceable in England and Wales, thereby, allowing the Bank to take action against the defendant’s UK assets.

This decision follows in the footsteps of the landmark High Court ruling in Lenkor Energy Trading DMCC v Puri [2020] EWHC 75 (Lenkor), which also ordered that a UAE court judgment was enforceable, and therefore comes as a welcome confirmation that Lenkor is not an isolated judgment.

Dubai Court proceedings

According to the judgment, the defendant, a UAE national, was initially the sole beneficial owner of a Dubai based construction company, which experienced significant losses and went into liquidation in September 2014.

In January 2010, before its liquidation, the company entered into a facility agreement with the Bank, to provide financial facilities and credit support. The defendant, along with the other company directors, agreed to provide personal guarantees as security.

After entering liquidation, the Bank initiated legal proceedings in October 2015 in the onshore Dubai Courts to recover the outstanding amount from the company under the facility and hold the directors liable for the equivalent amount under their personal guarantees.

The Dubai Court of First Instance, Court of Appeal and Court of Cassation all ruled in favour of the Bank culminating in an order in July 2019 that the company and the guarantors pay the Bank AED 211.3 million (approximately £47.5 million) plus interest (the Dubai Judgment).

The High Court enforcement proceedings

After limited success in recovering payment, the Bank eventually turned to the High Court to pursue recovery against the assets of the defendant which were located in UK.

As there is no treaty for the recognition and enforcement of judgments between the UK and the UAE, the Bank sought an order under common law that it could enforce the Dubai Judgment in England and Wales.  The key issue between the parties concerned one of the exceptions to enforcement that: “A foreign judgment may be impeached if the proceedings in which the judgment was obtained were opposed to natural justice.” [at para. 23].

The defendant argued that the Dubai Judgment was obtained through a breach of natural justice due to issues with the two reports submitted by the Dubai court-appointed expert. In particular, the reports referred to Law No. 8 of 1974 “Regulating the Experts before the Courts” (the 1974 Law), which at the time of the reports had been replaced by Federal Law No. 8 of 2012 “On the Regulation of Expertise Before the Judicial Authorities”.

In his judgment, Edwards J. rejected the argument that the mistaken reference to the 1974 Law rendered the reports null and void with the result that the Dubai courts were not entitled to rely upon them. He held that the mistaken reference in the reports to the 1974 Law was nothing more than “a defect in form or a mere procedural irregularity” and he therefore rejected the argument that “the Dubai court’s reliance upon those reports meant that the judicial process in the Dubai Proceedings was substantially unjust.” [at paras. 86 and 87]

Edwards J. also held that it was difficult for the defendant to establish that there had been a substantial injustice, given a remedy had previously been available to the defendant in the Dubai Courts. Edwards J. commented that reference in the expert reports to the 1974 Law was plain to see and, therefore, could have “formed the basis of an appeal to the Court of Appeal or the Court of Cassation by either of his two sets of Dubai lawyers” [at para.91 and 103].

In his conclusion, Edwards J. ruled that the natural justice exception had not been made out. He therefore declared that the Dubai Judgment was enforceable in England and Wales and entered a monetary judgment against the defendant accordingly [at para. 104].

The remainder of the judgment addressed the Bank’s claims regarding the transfer of assets made by the defendant to his son in 2019, including a London property and cash transfers of approximately £2.5 million. The Bank was granted relief under section 423 of the Insolvency Act 1986 which dealt with transactions for a “prohibited purpose”, including putting assets out of creditors’ reach. Edwards J. concluded that he was quite satisfied that one “purpose of the transfers, and not merely a consequence of them, was a Prohibited Purpose, i.e., to put [his] assets beyond the reach of, and to prejudice the interests of, the Bank and his other creditors.”

Reciprocity and legal co-operation

The Emirates NBD judgment follows the landmark decision in Lenkor in January 2020. More than three years have passed and, although we are still waiting to see an English Court judgment enforced in the UAE’s onshore courts, the UAE’s Ministry of Justice letter of 13 September 2022 (MOJ Letter) suggested that the onshore Dubai Courts ought to take note of the Lenkor judgment and reciprocate with the enforcement of future English court judgments.

Furthermore, in the November 2022 decision in Invest Bank PSC v El Husseini and others [2022] EWHC 3008 (Comm), the High Court accepted that Lenkor and the MOJ Letter was evidence of reciprocity between the two courts and decided that there was no real risk of substantial obstacles to the enforcement of an England and Wales Court judgment in the UAE.

With this latest High Court decision, the English courts have reiterated the message that the door to reciprocal enforcement with the UAE is well and truly open. We will hopefully not have to wait too long for the UAE Courts to respond in kind.