Jurisdiction & Enforcement in UAE Cross-Border Commercial Disputes

Introduction

The United Arab Emirates has become one of the leading commercial and investment hubs in the region, attracting businesses, investors, financial institutions, and multinational companies from across the world. As cross-border transactions continue to increase, commercial disputes involving foreign parties, overseas contracts, international payments, foreign judgments, and assets located in different jurisdictions have become more common.

In the context of a cross-border commercial dispute in the UAE, the legal questions that may arise include which court has jurisdiction, whether an arbitration clause applies, how foreign judgments or arbitral awards can be enforced, and whether proceedings should be brought before the onshore UAE courts. These issues require a clear understanding of the UAE’s legal framework, especially the rules governing the jurisdiction of the UAE courts, enforcement of foreign judgments and arbitration.

In recent years, the UAE has undertaken significant legal reform to improve certainty, efficiency and enforceability in commercial disputes. These developments have strengthened the UAE’s position as a pragmatic forum for the resolution of international commercial disputes. This article discusses the key jurisdictional rules, dispute resolution options and enforcement mechanisms applicable to cross-border commercial disputes in the UAE.

Direct Judicial Jurisdiction over Foreign Defendants

The jurisdiction of UAE onshore courts over foreign parties is governed by Federal Decree-Law No. 42 of 2022 on the Civil Procedure Law as amended, which repealed the Federal Law No. 11 of 1992. Articles 19 to 23 set out the main rules under which UAE courts may assume jurisdiction in civil and commercial claims involving foreign parties.

UAE courts have jurisdiction to hear claims filed against UAE nationals and against foreigners who have a domicile or place of residence in the UAE, except for lawsuits related to real property located abroad, according to Article 19. Article 20 expands the jurisdiction of the UAE courts over certain civil and commercial claims against a foreigner who has no domicile or place of residence in the UAE, provided that one of the statutory connecting factors exists.

These connecting factors include cases where the foreign defendant has an elected domicile in the UAE, where the claim relates to real estate in the UAE, a national’s inheritance, or an estate opened in the UAE. Jurisdiction may also arise where the claim relates to an obligation that arose, was performed, or was required to be performed in the UAE, a contract required to be authenticated in the UAE, an incident that arose in the UAE, or bankruptcy declared by a UAE court.

These provisions are particularly relevant in the case of commercial disputes, as they allow UAE onshore courts to hear claims that have a sufficient legal connection to the UAE even if the defendant is a foreign party without domicile or residence in the State. Article 21 also allows UAE courts to consider incidental claims, related pleas and urgent or provisional measures enforceable in the UAE. Under Article 22, where the defendant does not appear and where jurisdiction has not been established, the court shall rule on its own motion to declare lack of jurisdiction. Article 23 also stipulates that any agreement contrary to the rules on jurisdiction in this chapter is null and void.

The Civil Procedure Law also contains important safeguards for parties who do not speak Arabic. Under Article 5 of Federal Decree-Law No. 42 of 2022, Arabic is the language used before the UAE courts. Where litigants, witnesses, or other persons appearing before the court do not know Arabic, their statements may be heard with the assistance of an interpreter who has taken the required oath in accordance with the law.

Article 5 also permits English to be used in certain specialized circuits or categories of cases, where approved by the Chairman of the Federal Judicial Council or the president of the local judiciary. In such cases, proceedings and submissions may be conducted in English, subject to the relevant decision.

Article 8 further supports procedural fairness in claims with foreign defendants. If the official language of the defendant is not the Arabic language, the plaintiff shall attach to the notice the certified English translation thereof, unless the parties had previously agreed that the translation should be made in another language. This requirement helps to ensure that foreign defendants are adequately informed of the proceedings served on them and minimizes the risk of disputes over lack of notice or misunderstanding.

The Recognition and Enforcement of Foreign Judgments

For international investors, a foreign judgment is only useful if it can be practically enforced against assets located in the UAE. Under the UAE onshore legal framework, the recognition and execution of foreign judgments and orders are governed primarily by Article 222 of Federal Decree-Law No. 42 of 2022 on the Civil Procedure Law.

Article 222 states that judgments and orders of a foreign country shall be enforceable in the UAE under the same conditions as in the foreign country for the enforcement of judgments and orders of the UAE. This means that enforcement is generally available where UAE judgments and orders would be given the same treatment as judgments and orders from that foreign jurisdiction. The application for enforcement is made by petition to the execution judge, who is obliged to issue an order within the period prescribed by Article 222 from the date of submission. The order may be appealed in accordance with the applicable rules of appeal.

The execution judge does not reconsider the merits of the foreign dispute. Instead, the judge verifies whether the statutory requirements for enforcement have been satisfied. These include confirming that the UAE courts do not have exclusive jurisdiction over the dispute and that the foreign court had jurisdiction under its own rules of international jurisdiction. The judgment or order must also have been issued by a court in accordance with the law of the country where it was rendered and must be duly ratified.

Article 222 further requires that the litigants in the foreign proceedings were properly summoned and duly represented. The foreign judgment or order must also have acquired the force of res judicata under the law of the issuing court, either as stated in the judgment itself or supported by appropriate evidence from the foreign court. In addition, the judgment must not conflict with any judgment or order issued by a UAE court and must not contain anything contrary to UAE public order or morals.

The execution judge may seek supporting documents before making a decision. This usually means that applicants should be prepared to provide the foreign judgment, proof of finality if required, proof of proper service or representation, and any necessary legalization or translation documents. These are important requirements in cross-border commercial disputes as they allow foreign judgments to be enforced in the UAE whilst preserving basic safeguards relating to jurisdiction, due process, finality and public policy.

Article 225 provides that the rules on enforcing foreign judgments are subject to any international treaties or agreements between the UAE and other countries. In other words, if a treaty governs the recognition and enforcement of judgments, the treaty’s provisions will apply.

The Legal Framework for International Commercial Arbitration

Where parties to an international commercial contract agree to resolve disputes outside the ordinary court system, arbitration is often used as an effective mechanism in the UAE. The main federal framework is Federal Law No. 6 of 2018 on Arbitration, as amended by Federal Decree-Law No. 15 of 2023. The law applies to arbitrations conducted in the UAE, unless the parties have agreed to apply another law, and may also apply to international commercial arbitrations conducted abroad where the parties agree that the UAE Arbitration Law will govern the arbitration, provided this does not conflict with UAE public order and morality.

Article 6 provides that the arbitral clause shall be independent of the main contract. This implies that the invalidity, cancellation, or termination of the underlying contract does not automatically affect the arbitration clause, provided that the arbitration agreement is valid in itself and the issue does not concern the incapacity of a party.

The 2023 amendments also introduced Article 10 bis, which regulates the appointment of certain persons connected with the supervisory or regulatory bodies of the competent arbitration institution. Such appointment shall only be permitted where the conditions laid down in Article 10 bis are met, such as institutional rules allowing for the appointment, the existence of safeguards against conflict of interest, the written agreement of the parties, and limits on the number of cases brought before the arbitrator. Failure to comply with these conditions may affect the validity of the arbitral award and may give rise to claims for civil compensation.

Article 19 adopts the rule that the arbitral tribunal may determine its own jurisdiction, allowing the arbitral tribunal to rule on its own jurisdiction, including objections based on the existence, validity, or scope of the arbitration agreement. The tribunal may decide this issue either as a preliminary question or in the final award. Where the tribunal rules on jurisdiction as a preliminary matter, any party may challenge that decision before the Court within fifteen (15) days after receiving notice of it. The Court will then decide whether the tribunal has jurisdiction, and its decision is final.

Article 55 sets out the procedure for recognition and enforcement of a final arbitral award once it is made. The party seeking enforcement shall submit the necessary documents, including the original award or a certified copy thereof, the arbitration agreement, an Arabic translation where the award is not in Arabic, and a copy of the minutes of deposit of the award with the Court. The order of recognition and enforcement shall be issued by the president of the Court or a delegated judge within 60 days from the date of filing unless a ground for nullification under Article 53 is established.

In the case of foreign arbitral awards, Article 223 of the Civil Procedure Law should also be considered. It provides that the rules concerning foreign judgments in Article 222 shall also apply to foreign arbitral awards, provided that the subject of the award is capable of settlement by arbitration under UAE law and the award is enforceable in the country where it was issued. This means that enforcement in cross-border disputes may require application of both the UAE Arbitration Law and the Civil Procedure Law, depending on the seat of the award, whether it is seated in the UAE or abroad.

Conclusion

The UAE has a legal framework for cross-border commercial disputes, including jurisdiction, court procedures and enforcement of foreign judgments and arbitration. The relevant rules will depend on a number of factors, including the parties involved, the link of the dispute to the UAE, contractual dispute resolution clauses and any relevant international treaties.

International commercial disputes are frequently settled by litigation and arbitration. Foreign judgments and foreign arbitral awards can be enforced on the satisfaction of the statutory conditions. Businesses involved in cross-border transactions should therefore consider jurisdiction, arbitration, service, translation and enforcement issues when structuring their commercial relationships.