Rupert Reed KC and Gregor Hogan acted for the successful respondent in the landmark DIFC Court of Appeal judgment in Nael v Niamh [2024] CIFC CA 015 (9 January 2025).

The respondent had obtained an AED 160,722,046 (c. USD 43 million) DIFC-seated arbitral award which it sought to have recognised and enforced in the DIFC. The award required the appellant award debtor to make payment under a series of unconditional and on-demand guarantees, which are a common form of security in construction projects in the UAE. The appellant challenged recognition and enforcement on public policy grounds pursuant to Article 44(1)(b)(ii) of the DIFC Arbitration Law (which incorporates the UAE’s obligations under the New York Convention into DIFC law), which were said to arise from an allegedly inconsistent judgment of the onshore Dubai bankruptcy court.

Justice Michael Black KC, writing for a unanimous Court of Appeal, dismissed the respondent’s challenge. Whilst the Court of Appeal did not reject the possibility that inconsistent DIFC and onshore Dubai court judgments might in principle give rise to a successful public policy objection under the Arbitration Law, the appellant’s objection “did not come close to satisfying the criteria” under Article 44(1)(b)(ii).

The Court of Appeal noted that the potential for conflicting intra-emirate judgments “pale[d] into insignificance when compared to the proper functioning of the system of unconditional on-demand engagements and of the international regime for the enforcement of arbitral awards”. Justice Black KC held that while the “latter truly ‘affect the basic principles of public and economic life’ [in the UAE] the former by comparison, does not” and “[w]hile it is desirable to avoid circularity of proceedings, that cannot justify either an attack on the principle of pacta sunt servanda, nor the extinguishment of a right to enforce an otherwise valid arbitral award”.

The Court of Appeal’s judgment is of particular significance because it conducted the first comprehensive review at appellate level in the DIFC of the international jurisprudence and commentaries on the narrow meaning and application of the public policy objection to enforcement of arbitral awards found in the New York Convention, the UNICTRAL Model Law and Article 44(1)(b)(ii) of the Arbitration Law itself. If further confirmed that the DIFC Courts were directly bound by the New York Convention despite some doubts following the earlier decision of the Court of Appeal Lahela v Lameez [2020] DIFC CA 007 (9 May 2021).

Finally, Justice Black KC considered that Justice Shamlan Al Sawalehi at first instance would have been justified in exercising his discretion to recognise and enforce the award even in the face of a good public policy objection in light of the appellant award debtor’s conduct in seeking to avoid its obligations under the guarantees through the Dubai bankruptcy court as opposed to challenging the award itself in the DIFC courts.

Rupert and Gregor were instructed by Mohammed Zaidan and Salem Rawabdeh at Prime Case and Celine Kanakri at BLK Partners.

Rupert is co-editor of the DIFC Courts Practice, the leading practitioners’ text on DIFC law and procedure to which Gregor contributes the chapter on Arbitration. 

Click here to read the full judgment.