We have recently written on a landmark and profound judgment by the DIFC Court . We are now pleased to write again about another welcome and progressive development, this time in respect of the Abu Dhabi Global Markets (ADGM). On May 27, 2020, ADGM, Abu Dhabi’s financial free zone, made eight key amendments to its founding law by enacting Law No 12 of 2020 (Amended Founding Law). The Amended Founding Law:
a) Confirms that parties without any connection to the ADGM (for example companies and individuals not registered in the ADGM) can “opt-in” to the jurisdiction of the ADGM to determine their disputes.
b) Confirms that the ADGM Courts have exclusive jurisdiction over certain civil and commercial claims and disputes;
c) Clarifies that the ADGM Courts cannot be used as a “conduit jurisdiction” for the enforcement of non-ADGM judgments and arbitral awards in other jurisdictions.
d) Clarifies that cases involving the interpretation of the Global Market Regulations are to be decided first by the ADGM Court of First Instance instead of by the ADGM Court of Appeal.
e) Codifies the framework for reciprocal enforcement of ADGM and Abu Dhabi Court Judgments set out in the Memorandum of Understanding between ADGM Courts and Abu Dhabi Judicial Department dated February 11, 2018 into law.
f) Confirms the status of ADGM Courts as courts of the Abu Dhabi judicial system.
g) Provides that ADGM Court judgments are issued in the name of the Ruler of Abu Dhabi.
h) Gives effect to the protection of ‘Netting Agreements’ in relation to the enforcement of non-ADGM judgments, decisions, orders and awards.
The ADGM has also issued a guidance document that explains the key amendments.
The amendments clarifying whether the ADGM is a conduit jurisdiction, codifying the reciprocal enforcement of ADGM and Abu Dhabi Court Judgments, and clarifying whether and how parties can opt-in to the jurisdiction of the ADGM are particularly significant.
ADGM is not a conduit jurisdiction
Article 13(14) of the Amended Founding Law clarifies that parties cannot use the ADGM Courts for the enforcement of judgments and orders that originate outside Abu Dhabi, and arbitral awards made outside of the ADGM.
The practice of using a jurisdiction as a “conduit jurisdiction” – enforcing foreign judgments and awards in the courts of a free zone as an avenue to then execute these judgments/awards in onshore jurisdictions with which the enforcing jurisdiction has reciprocal enforcement agreements – has historically been a source of judicial controversy between the ADGM’s competitor, the DIFC and the Dubai Courts2.
From its founding, the ADGM Courts have in principle taken the position that parties should enforce judgments in the place where the relevant assets are located. The ADGM Courts previously reflected this stance in its Memoranda of Understanding with the Abu Dhabi Judicial Department, the Ras Al Khaimah Courts and the UAE Ministry of Justice. The Amended Founding Law codifies this position and clarifies that the ADGM Courts cannot be used as a conduit jurisdiction for enforcement of any non-Abu Dhabi judgments or non-ADGM awards.
ADGM Court Judgments should be enforced by Abu Dhabi Courts and vice-versa
Articles 13(15) and 13(16) of the Amended Founding Law codify the reciprocal enforcement of ADGM Court judgments and Abu Dhabi Court judgments. The ADGM Courts and Abu Dhabi Courts signed a Memorandum of Understanding dated February 11, 2018 setting out a reciprocal enforcement mechanism. However, because this MOU did not have the status of law, it was not clear whether it would withstand a challenge in the courts. The Amended Founding Law codifies this mechanism and provides certainty to claimants who may wish to enforce ADGM Court judgments against assets or parties in Abu Dhabi through the Abu Dhabi Courts.
Parties can opt-in to the ADGM’s jurisdiction for dispute resolution
Articles 13(8) and 13(9) of the Amended Founding Law confirm that parties who have no connection with the ADGM can “opt in” to the jurisdiction of the ADGM Courts to resolve their civil or commercial claims or disputes, including opting in to arbitration seated in the ADGM. Parties must agree in writing to the ADGM’s jurisdiction either before a dispute arises or after the claim or dispute has arisen. Article 13(9) clarifies that parties do not require a nexus to the ADGM to opt for ADGM-seated arbitrations, putting to rest the claims of some commentators that a nexus was required.
The Amended Founding Law provides much-needed clarity around several important aspects of the ADGM’s dispute resolution regime, and should steer the ADGM away from thorny issues such as the “conduit jurisdiction” question that have caused judicial controversy elsewhere.
These reforms are likely to burnish the ADGM’s growing reputation as a dispute resolution venue.