June 17, 2021 - Authors : Meysan Partners

On May 21, 2021, the DIFC Court of Appeal ruled in Lahela v Lameez that the Riyadh Convention is not part of DIFC law, and in any event provides a non-exclusive service regime. This appeal is concerned with the service of documents relating to proceedings brought in the court by Lameez against Lahela relating to the enforcement of an arbitral award made in favor of Lameez and against Lahela in an arbitration conducted in the DIFC.

This is good news to all DIFC Court practitioners who have been struggling with Pearl Petroleum and its underlying impediments it created concerning DIFC Court documents in the GCC Region. The DIFC Court can now order alternative service or dispense with service in respect of a receiving party domiciled in a Riyadh Convention state.

The Court also clarified that the implementation of international agreements relating to civil and commercial matters to which the UAE is part of are not automatically part of DIFC Law. This is an important development with wide-ranging implications for the source and content of DIFC Law, as well as for the enforcement of DIFC-seated arbitrations.

Few weeks earlier, on May 9, Meysan Partners in association with Gibson Dunn obtained a similar judgment ordered by the DIFC Court dismissing Korek Telecom Company LLC’s (“Korek”) appeal to set aside the order for alternative service of the Modern Global Company for General Trading of Equipment, Supplier for Construction and Real Estate WLL (“Modern Global”) award. This appeal included the service of documents relating to proceedings brought in the DIFC Courts by Modern Global against Korek relating to the enforcement of an arbitral award made in favor of Modern Global and against Korek. The latter had contended that even though it received copies of the relevant court documents, they were not in accordance with the procedures specified in the Riyadh Convention. At first instance, the Judge concluded that the Convention was not part of DIFC Law to be applied by the Court and therefore, dismissed Korek’s appeal to set aside the order for alternative service.

What Happened in Pearl Petroleum?

The DIFC Court of Appeal in Pearl Petroleum set aside an order for alternative service of a recognition and enforcement order.

The DIFC Court judged that based on the Article 5 of UAE Federal Law No. 8 of 2004 treaties which form part of the law of the UAE are binding in the DIFC. Additionally, the Court found that, not only was the Riyadh Convention applicable in the DIFC, but the service regime in Article 6 of the Riyadh Convention was compulsory and exclusive. Explicitly, the terms of the Riyadh Convention could never be bypassed by an order for alternative service or to dispense with service altogether.

As a result, Pearl Petroleum caused complications to DIFC Court practitioners and users. If the Court of a Convention State refused or failed to serve a DIFC Court recognition and enforcement order pursuant to the Convention Service regime, the recognition and enforcement order never became enforceable. Hence, the service and implications of other court documents became very challenging.

The Riyadh Convention is Not Part of DIFC Law

In summary, the DIFC Court in Lahela v Lameez made the following key judgements:
1. Article 5 of Federal Law No. 8 of 2004 does not mention that international agreements to which the UAE is part of are not automatically part of DIFC Law Subject to Article 3(2) , unless and until a relevant Emirate expressly implements the international agreement into the domestic law of the relevant Financial Free Zone, such obligations will not form part of that domestic law. The Riyadh Convention is not therefore part of DIFC Law.
2. In any event, the Riyadh Convention does not provide an exclusive service regime.
3. The DIFC Court can order alternative service or dispense with service in respect of a receiving party domiciled in a Convention State.
4. Moreover, if a receiving party is domiciled in a Convention State, the Riyadh Convention can still be considered, provided the DIFC Court Rules are satisfied.

Certainly, the Court of Appeal’s decision will be appreciated by DIFC Court practitioners and users. It will offer them some clarity to an issue that has been haunting them since Pearl Petroleum and will give them some flexibility regarding service-out of DIFC Court documents on parties residing in Convention states.

This decision also endorses the DIFC Court to be a regional dispute resolution hub that is pro-arbitration and committed to enforcement.