Commercial Courts and International Arbitration – Competitors or Partners

Doug Jones

Good evening Chief Justice Allsop, Professor Riley, Your Honours, ladies and gentlemen. It's my great pleasure to welcome you to the continuing tradition of the Clayton Utz Sydney University International Arbitration Lecture.

We are heading towards our second decade of lectures but this is the first time that this lecture has been held during Sydney Arbitration week. It's only the second of Sydney Arbitration weeks this week but this lecture is part of a series of very significant events in which we are celebrating international arbitration in its various forms during this week.

It's my great pleasure for this lecture to introduce our speaker for this year who follows the tradition of leaders in international arbitration coming to Sydney to deliver this lecture. Michael Hwang will be known to many of you, a local from the region but also from further afield than the region. He has been a senior counsel of the Singapore Supreme Court for many years and presently holds the position of Chief Justice of the Dubai International Financial Centre Courts. He has two law degrees from Oxford University where he was a college scholar.

He has as many of you know been very active in international arbitration over the last many years. Among other things Michael has served as a Judicial Commissioner of the Supreme Court of Singapore, Singapore's non-resident ambassador to Switzerland, President of the Law Society of Singapore, Vice Chairman of the ICC Court of Arbitration, Vice President of the International Council for Commercial Arbitration, a court member of the LCIA, a council member of the International Council for Arbitration for Sport, a visiting professor at the National University of Singapore and a Commissioner of the United Nations Commission on Compensation for the First Gulf War. This year Michael was conferred by the University of Sydney with the honorary degree of Doctor of Laws.

He's going to address us tonight on the subject of commercial courts and international arbitration competitors or partners and just before he does so I would like to once again acknowledge the assistance of the Federal Court and of its Chief Justice in facilitating the use of this wonderful venue. Will you welcome Michael Hwang.

Michael Hwang

Thank you Doug for that generous introduction.

This is an emotional occasion for me.

First, I have admired the Clayton Utz Sydney University lecture series from afar for many years and I consider it a great honour to follow in the footsteps of many distinguished arbitration practitioners who have preceded me in delivering this lecture, so I thank Doug Jones and his colleagues as well as Chester Brown and his colleagues from Sydney University for this invitation to share my thoughts with you this evening. In fact I was with one of the previous lectures from this series, Sally Harpole, a few days ago participating in a conference in Los Angeles and she is following this lecture online tonight.

Secondly, I am returning to a place which has special meaning for me. Apart from being born in Sydney, I spent 1966 and 1967 as a member of the Law Faculty at Sydney University at 167 Phillip Street, so I know this street very well.

My topic was torts and I had to teach this subject under the guidance of Professor Bill Morrison who was one of the founding members of this faculty, someone whom everyone held in awe. The only problem was that his lectures were at such a high plane for Law 1 students that Ross Parsons, another icon of the faculty, once said to him, "Bill I think maybe you should try giving your lectures in the crypt of St Mary's". He said "why?". "Because your lectures are so cryptic." It was into this climate that I came fresh from Oxford to start my teaching career. I shall say no more about it than to mention the fact that in my class there were some stars in the Sydney legal constellation including former Chief Justice Spigelman, Geoffrey Robertson QC and Alan Cameron. However there are many distinguished who themselves by their absence from my lectures, so when I'm asked about how many of my students became famous practitioners I answer that my students succeeded in their careers in inverse ratio to the number of my lectures that they attended. I'm mostly enormously grateful to the Sydney Law School for honouring me with this honorary Doctorate of Laws – by the way conferred on me by my former student Alan Cameron – and this lecture is a small way of repaying my debt to the Law School.

I have been sent this question as a topic of my lecture, "Commercial Courts and International Arbitration – Competitors or Partners". The answer to the question could possibly be answered in one word and we could all go home – and the short answer is "both". They are both competitors and they're both partners. Whether that is a good or bad thing is another story which I will develop in the rest of this lecture. This morning I was unable to arrive in Sydney in time to hear a lecture delivered by Chief Justice Allsop on the courts and rule of law in the Asia-Pacific region. I have had a very quick look at it and it is a very fine survey of the problems which actually complements what I'm about to say, so I'm going to build on Chief Justice Allsop's paper which all of you should read in due course because I think we are both on the same page.

Most model law countries agree that curial courts should adopt an arbitration-friendly policy and that is manifested by:

  • an unwillingness to set aside awards for error of fact or law, however gross
  • a tendency to read awards generously and not look assiduously for defects in process unless really serious violations of due process have occurred; and
  • of course, real prejudice.

Furthermore, courts should intervene quickly in support of arbitration by issuing appropriate orders enforcing tribunal decisions where judicial assistance is needed.

In short, courts should supervise with a light touch but assist with a strong hand. I will make some very quick remarks about how other courts, both common law and civil law, have perhaps not quite followed this maxim.

In India we are familiar with what might generally be called eccentric decisions in their interpretation of arbitration laws despite the fact that India's 1996 Act is meant to be based on the model law. In fact Chief Justice Allsop in his paper has covered quite extensively the position in India. I do commend all of you to get that so I don't need to really take this particular subject much further.

I will mention in passing the situation in the United Arab Emirates, primarily in Dubai. Dubai is a very active arbitration jurisdiction. DIAC, the Dubai International Arbitration Centre, has over 400 new filings a year. The problem with the UAE is that it's not yet a model law country and it works on a handful of provisions relating to arbitration in an all-civil procedure code based on Egyptian principles as opposed to a comprehensive arbitration code. This means that model law standards of curial review are not yet in place in mainland Dubai. However in the Dubai International Financial Centre, which I will call the DIFC, there is in force an Arbitration Law 2008 which is firmly based on the model law and the DIFC courts will apply contemporary principles of model law jurisprudence in carrying out their role as curial courts of arbitrations which are seated in the DIFC. More about this later.

But there are limits to arbitration.

On the theoretical plane there is the concept of arbitrability. Some subjects are simply not capable of resolution in arbitration, although where the reliefs claimed are beyond the powers of an arbitrarial tribunal the underlying contractual dispute can very often still be fought out and decided by a tribunal leaving a national court only the function of enforcing the decision of the tribunal in a practical way or in a legally enforceable way.

From the practical point of view there are also constraints on individual arbitration. This problem comes mainly from the construction industry, the insurance industry and the commodities industry and I'm talking about the problem of string contracts. Where you have a web of contracts between different parties in related transaction – some having arbitration clauses and some having not, or each having arbitration clauses but with different parties – it is very difficult to get an ideal solution that resolves all of the contractual problems in a consistent way. This is highlighted by the fact that in the construction industry most contracts have an arbitration clause. Nevertheless in England the Technology and Construction Court remains a sought-after forum and the reason is where you have these string contracts the only tribunal with power to consolidate or join third parties without the consent of all parties concerned will normally be a national court, and the problem of multiple party arbitrations remains an unsolved one in arbitration.

Let me now move on to another topic of current interest. What is the role of the forthcoming Singapore International Commercial Court, which I'll call the SICC and that will be launched in January next year? I have no mandate for speak for the Singapore Government or the Singapore judiciary but what I tell you is based on public knowledge and private briefings for senior counsel of the Singapore Bar. In short what will happen next year will be the establishment of a separate division of the High Court of Singapore, which is equivalent to your Supreme Court, to hear international, commercial and offshore cases (and these are all defined terms). The main aims of the SICC can be summarised as follows:

First, to establish the Singapore brand for dispute resolution in line with the country's increasingly sophisticated jurisprudence.

To cater to the expected growth in cross-border multi‑jurisdictional dispute resolution services as Asia becomes an increasingly popular destination for foreign trade and investment.

To harmonise the existing differences between legal systems in Asia, which have led to uncertainty and inconsistency, by developing a freestanding body of international commercial law which other national courts might follow.

To provide a solution to some of the limits of arbitration such as the issue of arbitrability, joinder of non‑parties, and creating a right of appeal.

And, fifth, to further Singapore's goal of being a centre of legal excellence and the legal hub of dispute resolution in Asia.

Singapore intends to leverage its image of four points of view:

1.                  first, neutrality;

2.                  second, legal expertise;

3.                  third, integrity;

4.                  four, efficiency.

People who are involved in cross-border disputes will rely on the courts in London or New York if they do not want to arbitrate. What Singapore wants to do is to be the default court for Asia. The source of jurisdiction of the SICC will be:

·                     Jurisdiction agreements from parties to refer the disputes to the SICC – in other words, elective choice of the SICC as the forum;

·                     Cases which are filed in the Singapore High Court and which the High Court determines come within the jurisdiction of the SICC without a jurisdiction agreement. In other words, cases which have already been filed in the regular High Court will be looked at again in January and when the Chief Justice decides that they fit the criteria set out for cases to be tried in the SICC he will have the power to transfer the cases over, after consultation with the parties.

There are other interesting features about the jurisdiction of the SICC. One of the negative criteria is that the claims cannot be seeking relief against the State or the sovereign of the State, nor can the parties seek administrative law relief in the sense of prerogative orders.

There are many other interesting features of the SICC but for purposes of this lecture my only analysis would be this. What is the likely effect of the SICC on the work and reach of the Singapore International Arbitration Centre, which I will call the SIAC?

First, the SICC is not meant to cannibalise the case load of the SIAC. The special appeal of having a court with certain attributes of arbitration procedure can be attractive to certain parties who would not otherwise choose international arbitration as practiced by arbitration institutes, let alone consider ad hoc arbitrations. But these parties would also not be happy with national courts, particularly the national courts of one of the parties to the dispute. The target client pool of the SICC would therefore be parties which have disputes, actual or potential, with the counterparties who do not immediately feel that arbitration is an option.

The best example of how international commercial courts exist side by side with international arbitration centres in complete harmony comes from London which arguably has the most successful commercial court in the world. Yet London is one of the major centres for international arbitration, not simply through the London Court of International Arbitration (LCIA) but as a seat for many other institutional and ad hoc arbitrations, as well as being home to CEDR which is one the world's leading mediation institutions. Singapore shares many of the characteristics of the London scene, especially in the financial sector, and I expect that both the SICC and the SIAC will complement each other in providing dispute resolution options to commercial parties.

Secondly, to some extent the SICC will have to compete for new business in the same way as a fledgling international arbitration centre has to, and as the SIAC had to struggle for many years until achieving its present level of case load in the last five years. The SICC will have to learn to market its services, particularly to overseas parties. That is a task to which courts are not accustomed and it may have to learn from the SIAC how it will be a long slog before the number of new filings at the SICC starts becoming significant. Even on the most optimistic scenario, a serious campaign of overseas marketing would take at least a year or two, after which SICC would hope that parties will start writing SICC jurisdiction clauses into their contracts. Judging from the experience of arbitration institutions it is not likely that there will be significant numbers of post‑dispute submissions to the jurisdiction of the SICC, so they have to catch them by getting the SICC written into their commercial contracts. The SICC would then have to wait for disputes under those agreements to arise a year or two after the date of entry into those agreements, so we are looking at a timeline of perhaps three to four years, or even longer, after marketing begins before any new cases are filed.

But the SICC has one big advantage which may enable it to kick-start its marketing efforts in a way which would not be available to any new arbitration institution. I've earlier referred to one source of jurisdiction that the SICC will have. The High Court can transfer cases which meet the requirements of SICC jurisdiction – in other words international, commercial and/or offshore – to the SICC after consultation with the parties. Assuming that the High Court could secure the consent of the parties – and possibly even if such consent is not forthcoming – there could be a steady pool of cases coming through the SICC quite soon after its launch. Actual numbers would not necessarily be critical at this stage but the point is that the SICC would be working, and be seen to be working, almost immediately after its launch, and the commercial world can then see how the new court and its advertised advantages will work. Publicity will be given to its cases in a way that cannot be done for arbitration because of the need for confidentiality, so the public awareness of the SICC would be much higher than when the SIAC was launched.

Thirdly, to the extent that some of the features of the SICC procedure prove popular, arbitration institutions can re-examine their own procedures and practices to see if these can be modified or even replaced by an equivalent SICC procedure. This will enable the SIAC and indeed other arbitration institutions to remain alive to the preferences of their client pool and improve their services to meet client demands. Institutions are already sensitive to client preferences and responses to new initiatives because of the relatively close nature of the arbitration market where there are endless conferences and a plethora of publication from best practices in arbitration. The result is that every new initiative in arbitration is broadcast and discussed, and starting a bandwagon is not therefore difficult.

The best example of this is the way in which arbitration institutions over the last few years have, one after the other, introduced the emergency arbitrator procedure. There is every reason to believe that innovative procedures introduced by the SICC will be closely studied not only by other commercial courts but by arbitration institutions as well. The same can also be said of the DIFC courts which have from their inception introduced innovative dispute resolution solutions, such as a Small Claims Tribunal which offers mediation services and fast-track adjudication of small claims without legal representation, a pro bono program, as well as having a female judge on our Bench. All these innovations have been followed in one or more other Middle East jurisdictions. Therefore the success of the DIFC courts in introducing innovations which other legal systems can emulate may augur well for the success of the SICC in being the potential leader of legal change in East and South Asia.

Fourthly, some may worry about the degree of international enforceability of SICC judgments as compared to the breadth of coverage of international arbitration rewards, bearing in mind that more than 150 countries have acceded to the New York Convention. It's true that people tend to think about treaty arrangements for reciprocal enforcement of judgments. Between Commonwealth countries there is usually reciprocal enforcement of judgments, but this reciprocity is not universal even within the Commonwealth. For non‑Commonwealth countries bilateral or multilateral arrangements are necessary but they are uncommon in the Asia-Pacific region. So how does the SICC hope to make its judgments widely enforceable? In the first place SICC judgments will be enforceable in common law countries, and by that term I include the USA, and they can be enforced by a common law action to enforce a foreign judgment which applies even without reciprocity and to judgments from civil law countries as well. Enforcement of such judgments may even be faster under common law than under the New York Convention because of the availability of the summary judgment procedure for a fast-track judgment, compared to a disputed enforcement application under the New York Convention which would require full arguments of fact and law in respect of any ground under Article 5 of the Convention which is relied on to support a denial of enforcement.

These points have all been noted by the DIFC courts which have utilised the common law action on a foreign judgment to highlight the wide enforceability of our own judgments and we have done so by signing memoranda of guidance which we will call MOGs with different Commonwealth countries, starting with the English Commercial Court followed by the Supreme Court of New South Wales and the Federal Court of Australia and soon to be joined by Kenya later this month, Singapore in January next year and a Judicial Court of the Southern District of New York in March, thus proving my point that the doctrine of suing on a common law judgment extends to the US. We call them memoranda of guidance rather than memoranda of understanding because MOUs usually import some positive undertakings by each party. In our MOGs neither party undertakes anything. The MOG is a common declaration of the broad principles which guide common law courts in recognising and enforcing foreign judgments. Each party speaks the law in practice in its own courts and the statements by the two jurisdictions are for all practical purposes the same apart from differences in procedural practice which are identified in the MOGs.

But I know that Singapore is banking its hopes to some degree on the Hague Convention and choice of court agreements which is a sort of mini version of the New York Convention for the enforcement of court judgments. Until April this year only Mexico, the USA and the European Union, excepting Denmark, had signed the Convention and only Mexico has ratified it. But once the EU ratifies the Convention you will immediately have 27 more countries which will recognise and enforce judgments of any court which has been expressly chosen as a dispute resolution forum of the disputing parties. Now that the US signed the Convention Singapore is hoping that there will be a bandwagon effect, with other countries particularly in the Asia-Pacific region signing and ratifying as well. The idea is therefore that the concept of Singapore as a dispute resolution hub will persuade those law firms which have the task of advising their international clients, particularly those with businesses or investments in Asia, to look seriously at Singapore as a dispute resolution centre to resolve their disputes with their international counterparties because Singapore will be offering a variety of dispute resolution solutions, one of which should fit the particular client's needs and preferences. In passing I would add that the same could be said of Dubai in relation to the Middle East as I will elaborate later.

So the conclusion is that the SICC and the SIAC will to some degree be competitors because there will be parties who when faced with a choice of the Singapore High Court and the SIAC might have chosen the SIAC, and would now be attracted by some features of the SICC. However the greater likelihood is that the SICC will attract a breed of disputants who essentially prefer or need the dispute to be resolved by litigation before a national court rather than arbitration by an arbitration institution or ad hoc and would have chosen the most suitable neutral national court outside the courts of either of the disputants, typically London or perhaps New York. Those disputants will now have an additional choice of a national court specifically designed to cater to the needs of international parties with little or no connection to Singapore and which also recognises their special needs. I'm now going to describe some features of the SICC which have already been made public:

·                             First, the SICC will have more limited discovery and interrogatories than traditional common law rules. In this respect the SICC is following the DIFC courts' example in adopting document disclosure rules based on the IBA Rules and the taking of evidence in international arbitration.

·                             Second, as all of you know confidentiality normally attaches to arbitration whereas court hearings are normally in open court, but for the SICC the indications are that the court will be receptive to applications for confidentiality in terms of private hearings and restrictions on the release of information concerning the case to the public.

·                             Third, there will be special provisions relating to joinder and consolidation, again addressing one of the perceived shortcomings of arbitration.

·                             Fourth, there will be the exclusion of normal rules of evidence and substitution of foreign rules of evidence where appropriate, so this is very arbitration-like.

·                             Proof of foreign law may be made by submissions from qualified foreign law experts rather than by affidavit evidence subject to cross-examination. What this means is that again the SICC is following a typical arbitration practice where, instead of bringing experts on foreign law to give affidavits and be cross-examined on the affidavits of expert report, the foreign experts will simply be treated as counsel and making the submissions directly to the court without cross-examination.

·                             Finally, and this is good news for the international litigation or arbitration community, allowing parties the right to appoint foreign counsel to appear for them in cases where there is no substantial connection with Singapore save for the choice of the SICC and the choice of Singapore law. This will apply to what is defined as offshore cases, which are those which have no substantial connection with Singapore except that you have chosen Singapore to fight your case.

So in this respect the SICC is like a hybrid. While it's emulating some of the distinctive features of international arbitration, it is clearly intended to remain a national court but one possessing certain features peculiar to arbitration tribunals. Let me complete the picture of the dispute resolution landscape in Singapore. Last week the Singapore International Mediation Centre (SIMC) was launched. Chaired by Edwin Glasgow, a distinguished English QC, and having a panel of experienced international mediators, SIMC is poised to attract mediation for international disputes to be held under the auspices of a dedicated mediation centre catering for the needs of international clients. The SIMC will therefore complete the suite of dispute resolution options available in Singapore and which are also available to non‑Singaporean disputants by opt-in jurisdiction.

Let me now turn to another commercial court, the DIFC Courts. A very brief word on the essential features of these courts: I have described them as a common law island in a civil law ocean because UAE laws are based on a civil law while the governing law and the DIFC are laws enacted specifically for the DIFC and based on common law. The DIFC is an area of approximately 110 acres situated in the heart of the Emirate of Dubai which is well publicised internationally by its iconic symbol, The Gate. It's a free trade zone of which there are many in Dubai, but what distinguishes this zone is that it has its own civil and financial administration, its own legal system and its own courts.

Our legal system is based substantially on English law in codified form but with civil law influence. We have an Arbitration Law 2008 which is based closely on the model law and applies to all arbitration seated in the DIFC. The DIFC is a separate seat from Dubai itself, so contractual references to arbitration in Dubai will be interpreted as meaning seated in the Emirate of Dubai excluding the DIFC, and those arbitrations will be subject to the UAE federal laws on arbitration and supervised by the Dubai National Courts as the curial court. If an analogy is needed for this remarkable experiment one may find it in China with Hong Kong living under one country, two systems.

The DIFC courts can be characterised as an international court in two ways: first nearly all of our cases involve at least one party which is not from Dubai or the UAE, which is to be expected since our primary jurisdiction is over cases related to parties incorporated or registered in the DIFC, or cases which relate to something happening within the DIFC. Secondly we have since the end of 2011 had opt-in jurisdiction in the same way as the SICC now has, and we now have jurisdiction to hear cases which are the subject of the written jurisdiction agreement. That puts us in the same position as the SICC will be, except that we do not have a separate court with special rules. Arguably we do not need such special rules like the SICC since our practices and procedures are largely based on the English Civil Procedure Rules, the CPR, particularly the rules of the English Commercial Court which are generally accepted as being the most suitable set of rules to determine the trying of complex commercial cases.

We have foreshadowed the problem of courts versus arbitration when the DIFC was first established in 2006. The original concept was that the DIFC courts would have a partnership with the proposed DIFC LCIA Arbitration Centre, we handling litigation and the Arbitration Centre handling arbitration and mediation. When the courthouse was built the DIFC courts shared our premises with the Arbitration Centre for some years until our expansion made it necessary for the Arbitration Centre to move out and seek alternative premises.

However we have turned full circle and as from this year the courts and the Arbitration Centre are now legally housed under an overarching authority known as the Dispute Resolution Authority which comprises two arms: first, the DIFC Courts with myself as the Chief Justice and second, the DIFC Arbitration Institute which owns the Arbitration Centre which is currently operated by the LCIA. I am the head of this Institute. So we have an unusual situation of a Chief Justice who not only heads the courts but also acts as the nominal head of the Arbitration Centre. I should point out that this is not unique because Singapore has such a situation up to four years ago when the SIAC was housed in the Supreme Court building and was managed under the supervision of the Academy of Law whose president was the Chief Justice.

Under our arbitration law all arbitration seated in the DIFC, which as I've said is an independent seat within the Emirate of Dubai, will be supervised by the DIFC courts which will therefore act as the curial court of the Arbitration Centre as well as other arbitration seated there. To prevent conflict of interest I have appointed a board of trustees who will effectively manage the business and case load of the Arbitration Centre and who will not report to me.

Despite this separation of powers and responsibilities this new authority fulfils a dream that the DIFC authorities and my predecessor, former Chief Justice Sir Anthony Evans, had of making our courthouse a house of justice in its different forms.

The DIFC courts have one significant advantage concerning the enforceability of our judgments over the SICC. DIFC court judgments are under Dubai law registrable in the State Court of mainland Dubai without any challenge posed to the substance of the judgment. In other words, there can be no challenge on merits. When registered, those judgments translated into Arabic will become judgments of the mainland Dubai courts and will be treated as such in the UAE. There is an organisation called the Gulf Co-operation Council which is made up of six GCC countries: Jordan, Bahrain, Qatar, Kuwait, Oman and the UAE. There is a GCC Convention which provides for mutual recognition and enforcement of all court judgments between GCC countries. This makes the DIFC courts' judgments fully enforceable throughout the Gulf Region, which is why last year we undertook a marketing trip to Australia and had discussions with certain large Australian companies suggesting that they might consider writing in DIFC courts for the disputes anywhere in the Middle East because if they got a DIFC court judgment they could take that anywhere else in the Gulf Region.

But the significance of this arrangement is that neither the DIFC courts nor the Arbitration Centre considers such co-operation to be against their own interests and like Singapore the imperative is to make DIFC the legal hub of the Middle East and North Africa, the MENA region, by offering a suite of legal options for dispute resolution and making sure that each option is satisfactorily delivered in accordance with parties' expectations. Like Singapore, Dubai has been inspired by London's example in maintaining a number of vibrant legal forms of dispute resolution, thereby enlarging the pool of disputes being resolved in our legal hub and interlinked to each other as necessary, for example between arbitration and mediation.

We enter the home strait now. This is perhaps the most interesting part of the lecture. We are now about to launch in the DIFC an experiment without parallel in arbitration history. We have recently circulated for public consultation a draft practice direction setting out an initiative in the form of a guidance note that will have the effect of "converting" court judgments into arbitration awards. As I will explain later I use the term "convert" as shorthand for a more complex process.

Now for the next part of this lecture can I ask you please to refer to the handout and on the first page of the handout should have the relevant guidance note. Let me read that very quickly. What the practice note says is that when parties submit to the jurisdiction of the DIFC courts by jurisdiction agreement, in other words by choosing the DIFC courts as their forum of choice, they may include within that submission agreement an arbitration clause in the following terms:

"Any dispute arising out of or in connection with the enforcement of any judgment given by the DIFC courts, including any dispute or enforceability of the State judgment, and satisfying all of the referral criteria shall be and finally resolved by arbitration under the Arbitration Rules of the Arbitration Centre".

In your copy I think it says LCDAI Arbitration Centre but I think in the final version we will leave that blank because feedback has shown that parties want to have a choice of which arbitration centre they might want to refer to.

"Which Rules meaning the rules of the relevant centre are deemed to be incorporated by reference into this clause. The number of arbitration shall be one or 3. The seat of the arbitration shall be the DIFC. The language to be used in the arbitration shall be English. The contract, including any provisions relating to a choice of forum, shall be governed by and construed in accordance with the laws of the DIFC."

Now the critical term in that clause is referral criteria and that is defined as follows:

1.                  Judgment is taken effect in accordance with Rule 36.29 [that basically means immediately].

2.                  The judgment is a judgment for payment of money.

3.                  There is an enforcement dispute in relation to the judgment.

4.                  The judgment is not subject to any appeal and the time permitted for a party to the judgment to apply for permission to appeal is expired.

5.                  The judgment creditor and judgment debtor have agreed in writing that any enforcement dispute between them shall be referred to arbitration pursuant to the Practice Direction.

Now the most important criterion is the term "enforcement dispute" and that is defined as a "dispute between a judgment creditor and judgment debtor with regard to money including costs claimed as due under a judgment ,including a failure to pay on demand a sum of money due under the judgment". I'll leave out the last few words. Now bear with me a moment while I summon up a quote that I want to read to you.

"The net effect of this initiative is we hope that following a money judgment of the DIFC courts the judgment creditor will be able to demand payment of the judgment sum and if payment is not made pursuant to that demand for any reason the judgment creditor will be able to consider that an enforcement dispute has arisen and can refer the dispute to arbitration at our Arbitration Centre or indeed any other arbitration centre. The Arbitration Centre in turn will progress the arbitration and appoint one or 3 arbitrators that the parties have chosen in their arbitration agreement and the dispute will then be referred to the Tribunal for its decision in the usual way in accordance with the relevant Arbitration Rules."

This process is what I meant to explain by the term "conversion" of a judgment into an arbitration award but it is not a conversion in the strict sense of that word. The process enables a judgment creditor to have an additional option for enforcement of its judgment without losing its rights under the judgment in any way.

After our public consultation we received a fair number of comments from the law firms within the DIFC. Two principal worries have been raised and I will just take you through them.

First, many respondents felt that our definition of enforcement dispute will not work in creating a dispute on a judgment sum, which in their view cannot be disputed and the question is whether another national court which has to enforce the arbitration award will consider that it was a mere rubberstamping. Now my reply to that is this. There is a long line of common law jurisprudence which clearly establishes that for the purposes of arbitration a dispute exists when one party makes a claim for payment of the sum allegedly due of another party and the respondent either refuses to pay or keeps silent but in any event does not make payment. This is so even if the issue of whether the debt is owing is beyond dispute. Only an admission of liability or actual payment will mean that there is no dispute.

If you look at section 4 of the English Arbitration Act 1950 the words in bold explain that under that Act there was to be a mandatory stay of court proceedings if there was an arbitration agreement "unless the court is satisfied that there is no in fact any dispute between the parties with regard to the matter agreed to be referred". It was this phrase which led to a series of cases in England about what is meant by a dispute and the classic formulation or rather the classic example given which everybody quotes and some of you may well be familiar with it comes from a case called Hayter v Nelson Home Insurance, a famous example given by Justice Saville, later Lord Saville. He said "Two men have an argument over who won the University boat race in a particular year. In ordinary language they have a dispute over whether it was Oxford or Cambridge. The fact that it can be easily and immediately demonstrated beyond any doubt that one is right and the other wrong does not and cannot mean that the dispute did not in fact exist. Because one man can be said to be indisputably wrong does not in my view entail that there was never any dispute between them". And that is the short answer to that particular problem.

But then that led to another problem which is not raised by any respondent but I have now raised myself. What if a clever judgment debtor reads Lord Saville's dictum and he replies to the judgment creditor, "I acknowledge my liability for the judgment debt but I simply have no liquid assets to satisfy the judgment and I seek time for payment." Will there still remain a dispute for the purposes of a valid arbitration?

Now my view is that this problem can be resolved by expanding the definition of enforcement dispute to include any dispute about the judgment debtor's ability or willingness to make payment of the judgment sum.

Accordingly, with appropriate amendments to meet the concerns of our users we hope to launch the actual initiative early next year. The overall reactions from our legal community in the DIFC have been largely encouraging of our intention to give DIFC judgments more global reach. If our experiment subsequently proves successful we will have developed an important tool to synthesise litigation and arbitration by giving concurrent remedies for enforcement, and thereby resolve one of the great problems of international litigation – but only if you litigate in the DIFC.

This would be the ultimate partnership between commercial courts and arbitration so I hope that all of you will wish us good luck in this venture. Thank you.

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