In Brief
- Recent judgments have clarified the impact of the jurisdictional expansion of the Abu Dhabi Global Market ("ADGM") to include Al Reem Island following the issuance of UAE Cabinet Resolution No. 41 of 2023 ( “ADGM Al Reem Resolution”).
- A key consequence of the ADGM Al Reem Resolution is that entities based in Al Reem Island and legal claims associated with it would be subject to the jurisdiction of the English-language common law ADGM Court, rather than the Arabic-language civil law courts of the UAE commonly referred to as the onshore courts.
- The Abu Dhabi Courts have now affirmed in several cases that the ADGM Al Reem Resolution has retroactive effect in this regard.
- This retroactive application has been upheld across various scenarios, including where:
- the case was initiated before the resolution’s issuance;
- the entity in question never obtained an ADGM license or such a license has expired;
- there are ongoing onshore cheque enforcement proceedings; or
- a jurisdiction clause between parties selected a different court.
Established in 2013, the ADGM is a Financial Free Zone located in the Emirate of Abu Dhabi with its own regulatory and legal framework in respect of civil and commercial matters. Disputes falling under the jurisdiction of the ADGM are heard before the common law English-language ADGM Courts, and not the Arabic-language civil law onshore courts of the UAE. Given the significant differences between the two systems, the question of jurisdiction can have substantial impacts on a parties’ legal position.
Following the issuance of the ADGM Al Reem Resolution, the jurisdiction of the ADGM expanded to include Al Reem Island, increasing geographically from 1.7 to 14.3 million square meters.
As a result of the ADGM Al Reem Resolution, it was expected that claims against entities located in Al Reem Island or relating to contracts performed or executed in Al Reem going forward would need to be brought in the ADGM Courts and not the onshore Abu Dhabi Courts.
Recently, a series of judgments issued by the onshore Abu Dhabi Court have shed light on the immediacy and retroactive effect with which entities in Al Reem Island were included within the ambit of the ADGM, as well as the implications on onshore jurisdiction clauses and previously filed proceedings.
Relevant Cases
In Abu Dhabi Cassation Case No. 512 of 2024 and Abu Dhabi Cassation Case No. 1096 of 2023, parties located in Al Reem Island argued that the Abu Dhabi Court retained jurisdiction since the parties had not yet obtained an ADGM license. Furthermore, the grace period of up to 31 December 2024 to do so had not yet expired. In each of these two cases, the Abu Dhabi Court confirmed that the transitional grace period had no bearing on the immediate effect of the ADGM Al Reem Resolution and held that the ADGM had jurisdiction.
In Abu Dhabi Cassation Case No. 243 of 2024, it was held that an agreement between the parties selecting the jurisdiction of the Abu Dhabi Court would not override the effect of the ADGM Al Reem Resolution. Under UAE law, the question of jurisdiction is a matter of public policy, meaning that parties cannot privately contract out of the same.
Each of the above judgments has also confirmed the retroactive effect of the ADGM Al Reem Resolution, alongside Abu Dhabi Cassation Case No. 1100-2023, Abu Dhabi Cassation Case No. 1058-2023, and Abu Dhabi Cassation Case No. 645 of 2024. In the latter case, it was expressly held that the ADGM Al Reem Resolution would apply even to claims that were already filed before the issuance of the resolution, provided no final decision has been issued. While a different view was taken in Abu Dhabi Cassation Case No. 1141 of 2024, the vast majority of available judgments by the Abu Dhabi Court of Cassation support this retroactive effect.
In Abu Dhabi Cassation Case No. 60 of 2024, a finding that the ADGM Courts had jurisdiction resulted in the cancellation of ongoing execution proceedings that were based on the onshore enforcement of a bounced cheque. Thus, despite being at the asset enforcement stage, the ADGM Al Reem Resolution led to the cancellation of the writ of execution previously granted by the Abu Dhabi Court. The Abu Dhabi Court also clarified in its judgment that the expiry of the ADGM party’s corporate license did not affect their findings as to the jurisdiction of the ADGM Court.
The above cases strongly indicate that entities located in and operating in Al Reem are under the jurisdiction of the ADGM Courts, and thus unable to avail of the onshore Abu Dhabi Court, even in respect of legal claims that arose and were filed prior to the ADGM Al Reem Resolution.
The existence of agreements between parties specifically purporting to select the Abu Dhabi Courts will likely not affect the findings of the Abu Dhabi Court as to the ADGM’s jurisdiction. This is consistent with how the onshore UAE courts have generally dealt with jurisdiction clauses. Nonetheless, it is interesting to observe that the common law approach to such clauses would ordinarily uphold the agreement of the parties as to the applicable jurisdiction.
The relevant judgments also indicate that cheque enforcement cases will no longer be available to parties falling within the jurisdiction of the ADGM. Such cases represented one of the most expedient and cost-efficient ways to reach the asset enforcement stage before the onshore courts. Where expediency is necessary, those parties will instead have to rely on the common law concept of summary judgment.
It remains to be seen to what extent the above approach will be followed in the courts of other Emirates, such as Dubai. Thus far, the Dubai Court has shown more willingness to assert its own jurisdiction in situations relating to ongoing ADGM insolvency proceedings. Such issues will likely become more prominent given the increasing instances of onshore entities falling under ADGM-based holding structures.
Ultimately, the ADGM Al Reem Resolution and the various judgments dealing with it highlight the potential of falling within the jurisdiction of another court, including on an unplanned basis. It is therefore always important that parties in the UAE bear in mind the full legal landscape of the UAE comprised of both common law and civil law courts.
For any query related to this article, please contact Mohammed Abbas Al-Obaidi at m.abbas@hadefpartners.com.