Abu Dhabi Global Market enhances its dispute resolution framework

Out-Law Analysis | 11 Jun 2020 | 8:52 am | 3 min. read

Recent changes in the law mean businesses now have greater scope to resolve disputes before courts in the Abu Dhabi Global Market (ADGM) free-zone but will be unable to use those courts as a conduit for enforcing non-ADGM judgments and arbitral awards rendered outside of the ADGM.

The amendments to the ADGM founding law, issued alongside accompanying guidance were announced on 27 May 2020 (Abu Dhabi Law No. 12 of 2020).

A more explicit opt in system

Since opening for business in October 2015, the ADGM, an international financial centre in Abu Dhabi, has gained significant recognition for developing a business-friendly environment.

The ADGM has its own court system distinct from the onshore Abu Dhabi courts, but the ADGM's founding law, Abu Dhabi Law No. 4 of 2013, has now been amended to bring the two systems into closer alignment. The recent enhancements will encourage the selection of the ADGM courts or, alternatively, the ADGM as a seat of arbitration where the ADGM courts act as the supervisory courts.

Lord David Hope, chief justice of ADGM courts, recently said: “In a very short space of time we have earned a reputation as international common law commercial courts that have transformed the delivery of judicial services through the innovative and unique use of technology." 

The ADGM courts and its judiciary are broadly modelled on the English judicial system in order to create a coherent, recognised and accepted legal framework. Accordingly, English common law, including the rules and principles of equity, are directly applicable in the ADGM.

The recently amended law makes clear that the ADGM courts are considered to be part of the Abu Dhabi courts and that their judgments will be "issued in the name of the Ruler of Abu Dhabi". This change adds clarity for enforcement of ADGM judgments both within the UAE and further afield.

In tandem with that change, the new law has clarified the matters over which the ADGM courts have "exclusive jurisdiction" and also makes it easier for businesses to choose – or "opt in" –  to litigate before the ADGM courts, or alternatively pursue arbitrations seated in the ADGM, even if they have no connection to the free-zone. Parties must record their agreement to opt in in writing, either in their contracts or after a dispute has arisen. The founding law previously provided for an opt in jurisdiction, but the recent amendments provide increased clarity.

Enforcement of judgments and awards 

The amended law also now effectively codifies a memorandum of understanding that has existed between the ADGM courts and the Abu Dhabi courts since 11 February 2018, bringing greater clarity over the procedure for mutual recognition and enforcement of judgments and arbitral awards in Abu Dhabi and the ADGM.

The change makes clear that judgments and orders, and recognised or ratified arbitral awards, of each jurisdiction will be enforced in the other without any review of the merits by the enforcing court. However, the amended law explains that the ADGM courts cannot be used to enforce non-ADGM judgments or arbitral awards rendered outside of the ADGM, with the exception of when the originating judgment comes from another court within Abu Dhabi.

This is an important clarification, as it seeks to ensure that the ADGM does not become a "conduit jurisdiction" for enforcement. The guide on the recent amendments states that "[a]s a matter of principle, it has always been ADGM courts’ position that parties should go to the place where the relevant assets are located for the purpose of enforcement".

The potential challenges of a court system being used as a conduit for enforcement have been seen in neighbouring Dubai. The Dubai Joint Judicial Tribunal, established in 2016, continues to operate to deal with matters of conflicts of jurisdiction between the Dubai courts and the courts of the Dubai International Finance Centre (DIFC). Much of its caseload has addressed the issue of parties seeking to by-pass the onshore Dubai court enforcement process and use the common law DIFC courts instead.

The amended law does not prevent parties applying to the ADGM courts for recognition and enforcement of non-ADGM judgments and awards, even if there are no relevant assets in the ADGM. However, in these circumstances, the ADGM courts will not affix the "executory formula" to any subsequent ADGM court judgment or order for the purpose of enforcement, including execution, in other jurisdictions.

The UAE is unique in that it benefits from two reputable common law international commercial court systems, namely the DIFC courts and the ADGM courts, both of which are harnessing technology and innovation to deliver their services more efficiently. The recent enhancement of the ADGM's dispute resolution framework is a positive development for local and international businesses requiring efficient, transparent and robust means by which to resolve their disputes. 

Damian Crosse, Seema Bono and Melissa McLaren of Pinsent Masons, the law firm behind Out-Law, are specialists in dispute resolution in the UAE.