Clever Thinking Out of Dubai

Dubai, February 2015: DIFC Courts Practice Direction No. 2 of 2015 – parties can now choose to refer their DIFC money judgments for enforcement through the DIFC-LCIA Arbitration Centre, effectively converting their judgement to an arbitral award.

Having done that, the arbitration award should be enforceable in all New York Convention countries thereby avoiding limitations of state court judgments that they are not normally enforceable outside of the home jurisdiction absent the usual and limited reciprocal enforcement mechanisms.

To some extent this mirrors the efforts by some in the mediation community, including the IBA, to find a mechanism to turn a cross border mediated settlement into an arbitral award which would then be enforceable internationally under the New York Convention.

For more, see two short Kluwer articles The Handbrake on Global Mediation and The Race towards a New York Convention for Cross-border Mediated Settlement Agreements: the Fable of the Tortoise and the Hare Revisited?

This lack of any coherent method of enforcement is widely seen as a major impediment to further globalisation of mediation, the argument being how can we expect parties involved in large international commercial disputes to embrace mediation if there is a risk that any outcome might be, to all intents and purposes, unenforceable.

DIFC’s innovative Practice Direction issued in February and subject of much discussion since late 2014, is the first of its kind globally – it offers parties the advantages of both litigation and arbitration since it allows the DIFC-LCIA Arbitration Centre to provide an additional remedy to the judgment creditor if the parties choose to submit any disputes they may have about the payment of money judgments to arbitration under the auspices of the DIFC-LCIA Arbitration Centre. In this way the judgment creditor obtains an arbitral award for their unpaid money judgment that can be enforced in the 150 plus New York Convention countries providing greater enforcement internationally.

As Michael Hwang, Chief Justice of the DIFC Courts, says

 we have developed an important tool to synthesize litigation and arbitration by giving concurrent remedies for enforcement and thereby resolve one of the great problems of international litigation

DIFC Courts Practice Direction No. 2 of 2015 – Referral of Judgment Payment Disputes to Arbitration

DIFC Courts – Chief Justice’s Explanatory Lecture on Referral of Judgment Payment Disputes to Arbitration – November 2014

The Role of Mediation in the DIFC Courts

Published with the kind permission of the author – Natasha Bakirci, Assistant Registrar – Dubai International Financial Centre Courts

DIFC logoLondon, 5 January, 2015.

The DIFC Courts, Dubai’s commercial and civil common law jurisdiction, were established in 2006 to hear disputes concerning the Dubai International Financial Centre and those doing business in, with or from the Centre. The Courts’ jurisdiction was later extended by Dubai Law No. 16 of 2011, which amended Law No. 12 of 2004 and allowed for external parties to opt-in to the Courts’ jurisdiction in writing either before or after a dispute has arisen[1]. Mediation already plays a role in the Courts’ procedure and it is envisaged that there will be more of a focus on encouraging early settlements of disputes in the future.

The Small Claims Tribunal (SCT)

The Small Claims Tribunal (SCT) of the DIFC Courts, which drew inspiration from the Singaporean model, features a formal session of mediation as part of its procedure. Claims with a maximum value limit of 500,000 AED (UAE Dirhams) can be considered by the SCT if both parties agree, or in the context of employment related matters without a value limit provided both parties agree in writing to the SCT’s jurisdiction [2].

Approximately 90% of applications before the SCT settle at the “consultation” phase which is a mandatory Court–guided mediation session. Only if the parties are unable to reach a settlement will a judge of the DIFC Courts go on to hold a hearing and deliver a Court judgment. SCT proceedings are confidential and parties are not normally legally represented.

Part 27 of the Rules of the DIFC Court (RDC) on Alternative Dispute Resolution 

Mediation is also provided for in Part 27 of the RDC which makes provision for Alternative Dispute Resolution, which was previously referred to by the term “Justice by Reconciliation” (JBR) prior to the amendment of the RDC in April 2014[3].

RDC Part 27.1 emphasises the Courts’ “primary role as a forum for deciding civil and commercial cases” whilst encouraging “parties to consider the use of alternative dispute resolution (such as but not confined to mediation and conciliation) as an alternative means of resolving disputes or particular issues.” RDC Part 27.2 highlights that alternative dispute resolution can significantly help parties to save costs, save parties the delay of litigation, enable parties to achieve settlement of their disputes while preserving their existing commercial relationships and market reputation, provide parties with a wider range of solutions than those offered by litigation and would also contribute to the more efficient use of judicial resources. Part 27 provides for judges to invite parties to consider whether their disputes could be resolved through alternative dispute resolution, either at the Case Management Conference stage or at another juncture if deemed appropriate. Furthermore, legal representatives are exhorted to consider with their clients and the other parties concerned, the possibility of attempting alternative dispute resolution and to ensure that their clients are fully informed as to the most cost effective means of resolving their dispute[4]. Despite ample provision being made in the RDC for alternative dispute resolution, there are few examples of Part 27 being implemented in practice. Specific case examples in which Part 27 of the RDC has been used include, inter alia,  the case of Dr Aziz Kurtha v. Bin Shabib & Associates (BSA) LLP & ORS (CFI 004/2008) Order of 19 January 2009 on Mediation – Justice by Reconciliation, in which Sir Anthony Colman ordered the parties to select a neutral mediator and to “take such serious steps as they may be advised to settle their dispute by JBR”; and a number of Court case management orders including that of H.E. Justice Shamlan Al Sawalehi of 2 June 2014 in the case of BGC Brokers L.P. v. Mourad Abourahim (CFI 027/2013) where the parties were ordered to exchange lists of three neutral individuals who were available to conduct ADR procedures by a certain date, and subsequently to in good faith endeavour to agree a neutral individual from the lists so exchanged and provided.

The Establishment of the Dispute Resolution Authority (“DRA”)

Dubai Law No. 7 of 2014, amending Dubai Law No. 9 of 2004, which was issued on 21 May 2014 established the Dispute Resolution Authority (“DRA”). The DRA will comprise of the following entities: (i) the DIFC Courts; (ii) the Arbitration Institute; and (iii) any other tribunals or ancillary bodies established in accordance with Article 8 (5) (b) of this Law, which empowers the Chief Justice of the DIFC Courts in his new role as Head of the DRA to set up such ancillary tribunals and establishments. There is discussion at the current moment as to whether this might allow for Court-ordered mediation through the eventual establishment of a DIFC Mediation Centre, which would in fact form part of the DIFC Arbitration Institute.

A potential future DIFC Mediation Centre 

Singapore, which the DIFC Courts often looks to as an exemplary common law system has its Singapore Mediation Centre (SMC). The SMC was established in 1997 to promote and facilitate the settlement of disputes through alternative dispute resolution. The SMC is a not-for-profit organisation structured as a company limited by guarantee by the Singapore Academy of Law. The DIFC Courts are currently considering the creation of a separate DIFC Academy, very much akin to the Singaporean model, which would cover all of the DIFC Courts’ activities which are not specifically related to litigation. As the Courts’ caseload increases, it may well be that certain cases which a judge feels would be suitable for an attempt at settlement would be sent for mediation before the Court would consider entertaining an application. This would achieve a number of the purposes set out in RDC 27.2 cited above.Continue Reading