Multi-jurisdictional win highlights the complications of cross-border financial disputes in Dubai

Posted on Monday February 17, 2020

James AttonOn 23 January 2020 judgment was given by Master Davison in the High Court of Justice in London in an claim brought by Mackrell.Solicitors client, Lenkor Energy Trading DMCC, to recognise a judgment of the Dubai First Instance Court, in the amount of AED (Dirhams) 184,500,000 (plus continuing interest) or £38,000,000.00 GBP.

The claim concerned two cheques signed by the Defendant (the sole shareholder in and Managing Director of a Dubai company) drawn on a branch of a Dubai bank, and dealt with issues and parties in a number of different jurisdictions. In essence, both of the cheques in question , in the amount of AED (Dirhams) 208,500,000/£43,000,000.00 GBP, were signed by the Defendant on behalf of his company and made payable to Lenkor. The underlying transaction concerned the sale by Lenkor of six cargoes of gasoil with the Dubai Company acting as a middleman.

The Dubai company acted to guarantee 100% of the cargo value by cheque prior to the loading of the vessel. It was in reliance on this agreement that the two cheques were drawn.

Following delivery of two of the six cargos, part payment of the monies due to Lenkor were paid to the sister company of the Dubai Company but it did not remit the monies to Lenkor as it was contractually obligated to do. With no payment received for the two delivered cargoes, Lenkor sought to cash the cheques, the Dubai Company did not have sufficient funds in its account to honour them and they were not honoured. This led to both criminal and civil proceedings in Dubai against the Defendant.

In an warning to the unwary doing business in Dubai (either on behalf of themselves or companies in Dubai) where cheques are being drawn on the accounts of Dubai Banks, the Dubai Courts confirmed that the Defendant was criminally liable for the dishonouring of the cheques and was sentenced to 3 years in prison.

In the separate civil proceedings, Lenkor applied Article 599/2 of Dubai’s Commercial Transactions Law which provides that the cheque drawer for another account is personally liable in respect of his funds, unless the drawer proves that the drawee of the cheque had sufficient funds, the intention of the Article being to encourage probity in cheque transactions by placing on the drawer a burden to ensure that the drawee account was in funds.

Although the value of the cheques exceeded the overall judgment, Lenkor only sought payment of the amount received by the Dubai company or its sister, together with a rate of interest comparable to that which a UK Court would order.

The proceedings on the cheque passed through all the various level of appeal in the UAE Court, including the Court of Cassation, which is the highest Court and the judgment was found to be good. Upon the expiration of the final appeal in Dubai, proceedings were issued in London by Mackrell.Solicitors for the amount of the judgment.

The Defendant sought to introduce a variety of reasons as to why the conclusive judgment of the Dubai Court could not be recognised in England on the grounds of public policy, which included illegality, impermissible piercing of the corporate veil and whether the interest rate was a penalty.

All of these arguments were considered by the Master and found not to be an impediment to the recognition of the Dubai judgment, as there was a powerful rationale behind the personal liability on the dishonouring of cheques and that although it might not be the law of this country, English law certainly recognises that a cheque gives rise to rights and liabilities that are unconditional and autonomous such that a cheque is treated as akin to cash

Ultimately, it is the judgment and not the underlying transaction upon which the judgment is based which must offend English public policy and the Master found that the judgment of the Dubai court should be recognised.

How we can help

Navigating the complex and often unfamiliar legal landscape of a different jurisdiction is at times a daunting and perilous endeavour. Through the Mackrell International legal network not only were we able to coordinate the passage of the Dubai and English proceedings resulting in an substantial judgment for our client but we are able to manage disputes over an number of jurisdictions simultaneously utilising local expertise.

If you would like to know more about what this ruling or how multi – jurisdictional claims are handled, please contact James Atton or Thomas Spencer.