UAE Law and Practice Contributed by: Arsalan Tariq, Nil Acar and Ahmed Kamran, BSA LAW
Free Zones DIFC and ADGM courts, which are based on common law systems, provide greater flexibility in recognising and enforcing foreign law and jurisdiction clauses, making them attractive venues for cross-border financings. 6.3 Foreign Court Judgments Foreign Judgments The enforcement of foreign court judgments in the UAE is governed by Article 222 of Federal Decree-Law No 42 of 2022. This provision sets out the conditions under which a foreign judgment may be recognised and enforced by the UAE courts. In essence, the judg- ment must be final and binding, issued by a com- petent court, and must not conflict with UAE public order or an existing UAE judgment. The parties must also have had proper notice and an opportunity to be heard. One of the most important conditions is reci- procity; the UAE courts must be satisfied that a UAE judgment would be similarly enforceable in the foreign court’s jurisdiction. In 2023, the UAE and the UK signed a Memoran- dum of Guidance confirming reciprocal enforcement of judgments between UAE onshore courts and the courts of England and Wales. This formal recognition removes historical uncertainty around reciprocity and has been cited in UAE court decisions to support the enforcement of English court judgments. While the MoG is not a binding treaty, it reflects an alignment in enforcement approaches and is expected to stream- line cross-border recognition processes between the two jurisdictions. Even in the absence of a treaty, UAE courts may con- sider enforcement based on principles of international comity, particularly where it can be demonstrated that UAE judgments would be reciprocally enforced in the foreign court’s jurisdiction. However, this route is less predictable and subject to stricter judicial scrutiny, including a detailed review of the foreign court’s pro- cedures, jurisdiction and whether due process was followed. The burden of proof rests with the party seeking enforcement, and UAE courts retain discre- tion to refuse enforcement if any of the statutory con- ditions are not clearly met.
• Shares and commercial pedge – enforcement of pledged shares requires compliance with the UAE Commercial Companies Law and the articles of association of the pledged entity. Share pledges are enforceable through UAE courts, though some share pledges in free zones (eg, DIFC or ADGM) may allow for contractual enforcement if agreed. • Guarantees – personal or corporate guarantees can be enforced through judicial means. UAE courts recognise both absolute and conditional guarantees, provided they are in writing and signed by the guarantor. Restrictions and Concerns • Public order concerns – UAE courts may strike down enforcement provisions deemed contrary to public policy. • Practical delays – judicial enforcement of security may involve procedural delays, especially in the enforcement of real estate mortgages or share pledges not governed by special regimes. 6.2 Foreign Law and Jurisdiction UAE courts generally recognise and uphold foreign governing law clauses, subject to the limitations set out below. Foreign Law Recognition UAE courts (onshore) may accept foreign law as the governing law of a contract in commercial matters, provided the choice does not contravene public order or morality. However, the UAE court may disregard the chosen foreign law if its application would violate mandatory provisions of UAE law. Jurisdiction Clauses A contractual submission to a foreign jurisdiction may be recognised, but it does not oust the jurisdiction of UAE courts entirely, particularly if the dispute involves UAE-based parties, assets located in the UAE, or if the performance of the contract is linked to the UAE. Waiver of Sovereign Immunity Waivers of immunity may be upheld, especially in commercial transactions involving state-owned enter- prises or governmental bodies, but enforcement may be complex and require scrutiny under UAE sovereign immunity principles.
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