Cross-border disputes: An introduction to navigating legal issues arising in multi-jurisdictional disputes

Tom Webley, partner in London, Steve Cooper, partner in New York, and Ranna Musa, senior associate in Dubai, explore the issues and complexities of cross border disputes. In this introductory session, they discuss the issues around discovery, enforcement and privilege and the different approaches of the England & Wales, New York and UAE legal systems.

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Transcript:

Intro: Welcome to Disputes in Perspective, a Reed Smith podcast. This podcast series will discuss disputes-related trends, hot topics, and developments occurring in the global legal landscape, and hopefully provide you with some helpful insights and practical tips. If you have any questions about any of the episodes, please feel free to contact our speakers. 

Tom: Hello, and welcome back. This is another podcast in our Disputes in Perspective series. And today we're going to be looking at cross-border disputes, including a number of different jurisdictions. As you can all probably imagine, in a firm like Reed Smith, we've got 33 offices over a number of different countries, a sort of global footprint. So these are issues that we tend to see all of the time. It'll be unrealistic to get colleagues to join us from all offices, but we have managed to at least get a nice cross-section, I hope. My name's Tom Webley. I'm in the commercial disputes team in London. I'm delighted to be joined today by Ranna Musa, who's based in UAE, and Steve Cooper from New York. So two very different jurisdictions there. The scale of this topic is rather huge, to be honest. I mean, there's so many different issues that we see in litigation and arbitration involving a number of different jurisdictions, so we can't possibly cover them all in any detail today. What we're planning on doing in this podcast is more of an introduction, a sort of appetizer, if you like, just to flag some of the sort of issues which can arise, things that we see arising all of the time, with a view to then going into a much deeper dive into each of them in subsequent podcasts. So on that basis, I think to start off with, I mean, one issue that certainly tends to crop up quite a lot for us and something that we see which has international elements to it tends to be in relation to documentary discovery or disclosure. And Steve, as we've got you on the line with your U.S. perspective, I mean, I think it's fair to say that a lot of our clients over this side of the pond absolutely balk at the idea of getting involved in U.S. domestic litigation from the discovery point of view, the scale and the scope of it. But apart from that in relation to U.S.-specific disputes, do you ever see more international issues arising in relation to discovery? Yeah.

Steve: Yes. Thanks, Tom. We see quite a bit of discovery from foreign disputes in the U.S., and there are a number of reasons for that. I mean, primarily, the U.S. is a notoriously wide-open, broad discovery forum. It permits a wide-ranging document discovery. It permits depositions, which is something that is not always available in other jurisdictions, that it is, of course, pre-trial testimony that is taken down by a court reporter. The whole thinking in the U.S. is to permit as much discovery as possible in order to avoid trials. Let each side know what the other side's information is, and hopefully. One, the case settles, or two, nobody is blindsided at trial. So as a result, we get a lot of requests in connection with foreign proceedings. Primarily, we see it in the 1782 context, that is 28 U.S.C. 1782, which is a very, very useful tool for foreign litigants that permits discovery in the U.S. in connection with foreign actions. We also see enforcement collection of judgment proceedings quite a bit because many defendants have assets in the US and also the discovery rules are quite favorable here when it comes to locating assets. And of course, we see a lot of issues involving the Hague Convention and the New York Convention on the Enforcement of Arbitration Awards, which we can discuss a little later or perhaps in a subsequent podcast. But the overarching idea is that the U.S. is a very ripe forum for discovery and very useful for foreign litigants.

Tom: That's really interesting, Steve. I think one point that really sort of struck me on that was the idea that discovery hasn't just sort of created itself into this huge process over there, but that's almost deliberate. And actually, it is there to maybe reach the end goal a bit quicker. And not only for the solely U.S. disputes and litigation, but actually also for any party either looking to enforce or looking to support litigation in another jurisdiction. So that's very interesting. I mean, Ranna, I don't know about the position in the UAE. I mean, is it very different from that in the UAE?

Ranna: Thank you very much, Tom. When we're talking about discovering the UAE, perhaps first of all, we should first explain the distinction between the different legal systems in the UAE itself. So in the UAE, we have two separate legal systems, the onshore legal system, which is based on the civil law. And then we have the offshore legal system, which is a common law system that exists both in the DIFC, i.e. The Dubai International Financial Center, and then the ADGM, which is the Abu Dhabi Global Market Courts. And then on the onshore legal system itself, we then have two layers. The first layer is the federal court system, which basically covers the jurisdiction of the Emirates of Fujairah, Umar Al-Qawain, and Ajman. And then we have the local court system, where the federal court system has no jurisdiction. And this system covers the Emirates of Abu Dhabi, Dubai, Ras al-Khaimah, and Sharjah. On the topic of discovery in the onshore courts or in the onshore legal system, and contrary to popular belief, the UAE law does permit parties to seek disclosure in ongoing proceedings. So long as, of course, the parties that are seeking disclosure demonstrate the document's relevance, comply with various requirements, and, of course, provide specific requests to the court. Then the court may order disclosure of the documents. In addition to that as well, the UAE has entered into various bilateral agreements with various countries, and some of those bilateral agreements do permit taking evidence in the UAE for ongoing proceedings in another jurisdiction. So this is another very interesting point. From an offshore court perspective, which is a common law system, I believe that really follows the general perspective or practice, rather, in the common law system. So, for example, in the DIFC courts, disclosure is expected, basically. Parties are to expect being required to disclose evidence either by the court's own discretion or if either of the parties do request such disclosure. And the same will then apply for the ADGM as well.

Tom: That's absolutely fascinating. The difference between the onshore and the offshore then, even for something like disclosure, really is marked in that case. It's incredible to see varying degrees and scope and extent of the disclosure and discovery which might be required. It's certainly something that not only clients should consider if that jurisdiction is going to become relevant for anything they do. But I think it warrants a topic in its own right on one of the subsequent podcasts. So we may well be digging further into that later on. From an English perspective, I mean, one point, does arise quite a lot in relation to litigation involving either a number of jurisdictions or connected proceedings in a number of jurisdictions that I think is worth mentioning is what we call the collateral use restriction. This means that as part of the disclosure process over here, if a document is disclosed to a party, that party can only use it for the purpose of the English proceedings. That is a very strict procedural rule. You can't then take that document and go and try and use it elsewhere. If you wanted to do that, you would need to apply for the court and you can get permission from the court if you are able to show that in the precise circumstances of that particular matter, there was a real reason why it would be beneficial for you to use it. And that overrode the public interest in the idea that litigants deserve of privacy in the documents that they provide as part of the litigation. So it's really important because it's such a strict restriction that it's very easily breached, even, for example, discussing it with legal counsel in another jurisdiction, just to see if there is a claim that can be brought. So I think a lot of people fall foul of that. So that's certainly something that's worth bearing in mind as well. Really, really tough. And it is, as I say, very much a procedural rule. Moving on to a point I think you mentioned, Steve, actually, I mean, going on to enforcement. Probably, I think it's fair to say, but you both might disagree, one of the times that we see a sort of multi-jurisdictional cross-border element actually comes post-judgment. It's when a party's got either a judgment or an award that they need to enforce. Increasingly, I think, you know, parties and defendants against whom these things are being enforced have assets, all over the globe. And so that's when these issues really can arise. We've had issues in the past, I think, trying to enforce judgments in certain jurisdictions. One thing that your clients always need to bear in mind is they need to think from the outset exactly what sort of judgment they need to be able to enforce it where they need to enforce it. For example, we've had issues in the past where enforcing judgments in default or judgments which haven't been considered fully on the merits, that you haven't been able to enforce them in certain courts, in certain jurisdictions. And that's something that you obviously need to bear in mind before going out and getting those judgments, because then it won't be worth the paper that they're printed on. But Steve, I mean, the U.S., given its position as a, you know, absolute sort of, global financial leader, a lot of companies based there, a lot of assets based there, a lot of bank accounts based there. I mean, that must be a pretty popular jurisdiction for enforcement, isn't it?

Steve: New York in particular is a very attractive forum for enforcement because so many assets are here and so much banking goes on here. One interesting aspect of discovery that you see is discovery in connection with wire transfers. Any wire transfer that is converted into U.S. Dollars will go through banks in the U.S., and most of the banks have a presence in New York. I mean, you can go into other states, of course, but New York tends to be a popular forum for this, and there's a lot of law that is generated in New York as a result. So parties will seek to follow assets, follow wire transfers, and they're able to get discovery with regard to wire transfers that end up in U.S. dollars. So you do see quite a bit of discovery in that regard. The New York and U.S. Laws, I mean, I should say the state and U.S. laws are pretty generous to creditors. First of all, the framework in the federal law, in the U.S. Code, permits the domestication, the recognition of foreign judgments in the U.S. and then from there, there are discovery tools that are available. It's Rule 69 for further discovery. And then if assets are located, interestingly, the state laws click in. If assets, say, are located in New York, you would then use the procedures under the CPLR code, which is the state procedural code, to seize those assets, to serve attachments, to serve liens, to have what they call turnover proceedings, whereby assets that are located can be obtained. And then the court could order a transfer to the creditor. So there are a lot of mechanisms available. And of course, given the amount of banking and the amount of investment in the U.S., you see quite a bit of enforcement and collection actions in these jurisdictions.

Tom: Steve, can I just ask a quick question on that? I mean, as you know, you and I have worked on these sort of issues before involving a number of different jurisdictions, including the U.S. And in relation to those sort of Section 69 applications when the party does have to provide information about assets, would that be information about assets purely located in the U.S. So that further U.S. enforcement action could then be taken?

Steve: Yes. These are mechanisms that are targeted to assets in a particular jurisdiction. The state courts in New York are not, for instance, going to have jurisdiction over assets outside of the state of New York. And the U.S. courts are not going to have jurisdiction over information or assets that are outside the United States. But what can happen is a party can, through discovery, identify the transfer of assets, the movements of money in the United States that give them the opportunity to then go to France, to go to the UAE, to go to the UK and say, you know, XYZ Bank made a transfer through the U.S. we want to then seek discovery and we have a good faith basis to do it in that foreign jurisdiction because we've identified the wire transfer in the U.S.

Tom: Yeah, they're very interesting, isn't it? Sort of following that paper trail and working out, you know, where the assets are moving. And in circumstances where, you know, as technology increases, it's increasingly easy to move things around. And if you are able to identify assets in the US, are you then able to freeze them? Is there the mechanism to either attach or freeze?

Steve: Yes. Yes. It's a very helpful mechanism. It does vary from state to state, but you can't seize them. And as I say, you can get them turned over. You can get the court to order that the asset either be sold or that it be transferred to the creditor.

Tom: Very, very useful tool to have. And Ranna, in relation to the UAE, I mean, obviously, you've already flagged the fact that there are very different processes involved, depending on whether you're onshore or offshore. But for enforcing a judgment, would it be a similar process over there?

Ranna: So for enforcement of judgments, really, it depends on what system we are discussing exactly. For example, if we are talking about the onshore system, if you had asked me three years ago or let's say four years ago, really, how long it took to enforce foreign awards or foreign judgments, I would have said it takes about three to four years. But luckily that had changed a few years ago and right now it takes about really a few days only for a judgment to be issued from the local courts from the onshore courts to recognize the foreign award to recognize the foreign judgment for enforcement within the UAE so this is a huge development to be honest for the onshore system here and has made the UAE as a result a very popular jurisdiction for enforcement. This is, of course, I wouldn't say that it's only because of how streamlined the process is, but also because of the jurisdiction's popularity as well when it comes to, for example, high net worth individuals keeping some of their assets here. And as well, a lot of MNCs are based in the UAE and have a few assets in the UAE that can be enforced against. But with regards to going back again to enforcement, because the UAE is signatory to both the New York Convention, in addition to... various regional conventions for the purposes of enforcing foreign judgments and awards, for example, Riyadh and GCC conventions. This makes, again, the process of enforcing judgments and awards pretty streamlined, especially foreign judgments and foreign awards. The first step for enforcing a judgment would be to seek its recognition. And then after that, but once the recognition is granted, you would be seeking enforcement before the execution court. And that would really give you access to everything that an individual or a company owns in the UAE as a general. For example, bank accounts, vessels, property, anything really that you can think of with regards to assets. So it's a really quite progressive system.

Tom: No, it certainly sounds it. I mean, what a dramatic change to the timeframe as well. I mean, it's incredible. It held so much shorter. It's gone. And by the sounds of that, I mean, it's a very efficient system in jurisdictions or in parts of the world where, as you say, Ranna, I mean, there are often assets to go after. So that is very interesting and very useful to know. One question I had Ranna out on that was there, going back to a comment I made earlier, where there's sometimes issues enforcing certain types of judgment. Maybe it hasn't been fully considered on the merits, for example. If you had a default or summary judgment from a foreign court, would you be able to enforce that in the UAE?

Ranna: That's a very good question, Tom. So unfortunately, summary and default judgments cannot really be enforced in the UAE onshore system, because before a judgment is considered for recognition, the court will have to consider, first of all, that it had met a few criteria. One of those criteria is that the parties have already been served and been duly represented during the proceedings, which would result into summary and default judgments not being enforceable, unfortunately, in this jurisdiction.

Tom: Very interesting. It's a problem that occasionally comes up where a party simply doesn't engage in the process and therefore they haven't been represented and therefore you can't enforce the judgment. A strategic issue that certainly has to be dealt with. Steve, looking at the difference that Ranna mentioned in the onshore and the offshore systems in UAE. I mean, is there a similar position in the U.S.? I mean, obviously, you've got sort of the federal versus state.

Steve: Yeah, you do have big distinctions between the federal and the state. And with regard to Ranna's last point on the defaults, the courts in the States will recognize default judgments. However, they will tend to do more of a hearing to make sure that all of the procedures were in place and the party was given an opportunity to be heard and was given good notice. And the U.S. has treaties with certain countries, so the ones where they have favorable reciprocity treaties, they will enforce default judgments in the U.S. And that law, going to your question, Tom, is also a matter of state and federal law. If there is a judgment that's entered in the federal courts here, that would be under federal law. If it's entered in the state courts, it's state law. I mean, oddly, it is similar to the UAE with these two systems. And this can be very confusing to foreign litigants because you essentially have 51 different jurisdictions, the federal jurisdiction and every state. And the procedures will vary from state to state. So you generally need practitioners in those particular jurisdictions to hack their way through the rules. But you can get very favorable treatment in a lot of these jurisdictions and you can be very successful. I mean, one thing we don't have, and I'd be curious to hear what the situation is in the UAE, we don't really have a lot of prejudgment attachments. In other words, you earlier said it doesn't make sense to pursue an action or you always have to consider with regard to your litigation whether or not you can collect anything at the end of the day. And some jurisdictions will give you the flexibility to attach assets prior to getting an award, prior to getting a judgment, which can be very favorable. The U.S. tends to not enforce that. You would have to make a considerable showing that the assets are going to leave the jurisdiction, that there's some fraud involved, something like that. But the inclination is not to permit the prejudgment attachment. But I would be curious as to whether the UAE has a similar setup.

Ranna: Thank you, Steve. So the UAE has the opposite stance with regards to precautionary attachments, and that's what they're called here in the UAE. So precautionary attachments are very popular in this jurisdiction. So any party can seek before starting their substantive proceedings, they can seek to attach an asset for the other side in the UAE, regardless of the jurisdiction clause. So even if the UAE does not have jurisdiction or the UAE courts don't have jurisdiction over the underlying dispute itself, the UAE courts will have jurisdiction to consider attaching any assets that are based in the UAE. So even, for example, if we have an arbitration clause, the UAE courts will still have jurisdiction over doing something like that. So long as, of course, the party seeking such a measure is able to prove that there is a risk of dissipation, that they have either started proceedings or they undertake to start proceedings within a specific timeline. And also, at times, the court would request the parties or order the party that is seeking such a measure to present security undertaking. And the purposes of security undertaking, which I personally really, really like, is to prevent basically parties taking these steps just for the purposes of bringing malicious claims against each other, really. So that's a very interesting point here and it applies both on the onshore and the offshore system.

Tom: Again, I mean, it's sort of incredibly interesting, particularly, I think, to see the US and the UAE being such sort of ostensibly different positions. I mean, they're very different positions in relation to disclosure and discovery. And as you said, rather than just in relation to the sort of post and pre-judgment attachments, but with actually quite a lot of underlying similarity in certain areas as well. So it really is interesting to see how the different courts operate in relation to those points. Another sort of issue, I think it's probably sort of quite sort of close to my heart, I suppose, that we see coming up quite a lot. I mean, not just for the English litigation, but for when there is a multi-jurisdictional element to it. And that's privilege. I mean, certainly, you know, the English view of this is that it is a total and fundamental right to protect the confidentiality in certain documents and certain communications. But, I mean, certainly in the past, there have been some quite high-profile issues that have arisen in relation to privilege when you're dealing with either litigation or, for example, regulatory enforcement action in a number of different jurisdictions. Because although in relation to one action or one piece of litigation that any documents created, any communications internally or with lawyers will be protected. Then there might be another bit of litigation or regulatory enforcement elsewhere. And actually, a different test applies. And the documents that you've created suddenly have to be disclosed, even though they're sort of quite damaging and prejudicial, which merely, I think, probably goes to a point that runs through all of the topics that we've discussed so far that, you know, as you mentioned, Steve, you really do need to take specific advice in each jurisdiction to ensure you've got the maximum protection. But I mean, Steve, is there a sort of that sort of protection for documents created over there? I mean, do you have a sort of litigation privilege or client-attorney privilege?

Steve: Yes, you do have privileges, but going back to my initial statement, it's still pretty wide open here. The privileges are somewhat narrow. You don't have the same, for instance, privacy protections that you see in Europe, through the GDPR. Here, the main privileges are attorney-client communications. Work product by a lawyer, settlement discussions. All of those are mandated as privilege under the federal rules of civil procedure. You may have certain privacy statutes in particular states. For instance, California is tending in that direction. But generally, other than these privileges, the discovery is available. Now, going back to what you said earlier, although we don't have statutory limitations on the ability to use this material. Almost every case, there is a protective order which says you cannot use this material outside of the litigation. So there are protections in that the only ones who will see it will be ones who are litigants in that particular case. So that gives you protection. It's not like it's going to be made public, put on social media, et cetera. But other than those protections, the U.S. is pretty liberal. The only other point I'd make on this is if you have international discovery, if you have discovery coming from multiple jurisdictions, for instance, the U.S. and the U.K. Or the U.S. and France, you have to be sure to produce documents that are permitted in those jurisdictions. The U.S. Production is likely going to be very different from the production, say, of emails from U.K. Employees or French employees. You have to be mindful that each jurisdiction has its own protections, that each jurisdiction has its own bank secrecy laws that you may have to abide by. So you can't say one size fits all when you're doing international production of documents.

Tom: That's a very, very interesting point. And again, sort of goes back to the importance of the local advice, I think, in relation to those. And one point you did mention, Steve, which I think is sort of often overlooked in the area of privilege, and that is settlement. I mean, we have a sort of what we call without prejudice, which is a form of privilege that applies and protects those sort of settlement discussions. Ranna, I mean, is there the same sort of protection for settlement discussions over in the UAE?

Ranna: So, we had this always when it comes to the offshore system. The offshore system had adopted the without prejudice concept. But very interestingly, the Dubai courts recently issued a groundbreaking judgment where it upheld the without prejudice concept during settlement proceedings, which means that communications exchanged during the settlement discussions are now protected and cannot be considered as evidence before the courts. This is a huge development in this region. And of course, it brings the UAE local courts closer to international standards. And as well, it encourages parties to seek settling disputes as much as possible because, again, it offered them this immunity against disclosure before the court. Or even if it's disclosed before the court, the court would simply not consider this as evidence.

Tom: That's an incredibly significant development, isn't it, really? And on that, maybe it's because England is, although constantly evolving as a jurisdiction, is maybe slightly more slow in its evolution and progression. Is that a sign, generally, that the courts over there are a bit faster moving? Is there an element of progression that's ongoing?

Ranna: Definitely. I would definitely say so. So in the past, honestly, few years, we have witnessed huge developments here in the UAE, specifically when it comes to the onshore system. Every now and then, we either find a new law that has been passed, again, bringing the system closer to the international standard, or the practice of the courts themselves change, again, following the same international standards.

Tom: Very interesting and I think probably the you know the message there from a practical point of view is just maybe just because you had experience with courts a few years ago you shouldn't think that the same applies now when there are these sort of constant and actually quite significant changes which are taking place.

Ranna: Certainly certainly.

Tom: I mean that there's I mean that's sort of three topics which you know I think to our mind arise when when you're having to deal with cross-border multi-jurisdictional disputes or enforcement, whatever it is. But I mean, obviously, there are far, far more than that, which the time limitation of a podcast precludes from discussing. I mean, I think as a starting discussion, it's been absolutely fascinating. Certainly, I've learned an awful lot about the different jurisdictions and how they operate, the similarities as well as differences, really. I think a great foundation for moving on through this series of podcasts or sub-series on cross-border disputes, and hopefully we'll get the opportunity to look into all of these in a bit more detail at a later stage and in later podcasts. But as a final sort of takeaway from both of you, is there sort of one point you'd like to leave the listeners with? I mean, Ranna, if I turn to you first, is there sort of one takeaway issue that sort of springs to your mind?

Ranna: I'd really like to echo what Steve has said earlier. One size does not fit all. You should always seek advice from your local lawyers. And the position, as we have seen today, is different from one jurisdiction to the other. And maybe closer to home, of course, the UAE legal system is really fast evolving with the ongoing reforms that are really shaping our system here. Before agreeing on jurisdiction, commencing proceedings, or even starting enforcement proceedings, please do check with your lawyers to ensure a smooth and an effective process.

Tom: No, I think very, very good advice around it. And Steve, how about from your personal view or from sort of the New York side of things?

Steve: Yeah, I mean, my final thought would be, you have to think about the US if you're involved in foreign disputes, whether it's arbitration or litigation. First of all, U.S. almost always has some connection to the litigation and there could be valuable discovery if you have a global company and they have operations here. You think in terms of availing yourself of the U.S. Discovery laws. And secondly, there are just a lot of assets here, a lot of bank accounts here, a lot of wire transfers here. So if you're in a position where you have to collect the judgment, the U.S. is a very important jurisdiction to consider. So, you know, with that, I would say thanks for listening. And if anybody has follow-up questions, obviously feel free to reach out to any of us. Music.

Outro: Disputes in Perspective is a Reed Smith production. Our producers are Ali McCardell and Shannon Ryan. For more information about Reed Smith's litigation and dispute resolution practice, please email disputesinperspective@reedsmith.com. You can find our podcast on podcast streaming platforms, reedsmith.com, and our social media accounts at Reed Smith LLP. 

Disclaimer: This podcast is provided for educational purposes. It does not constitute legal advice and is not intended to establish an attorney-client relationship, nor is it intended to suggest or establish standards of care applicable to particular lawyers in any given situation. Prior results do not guarantee a similar outcome. Any views, opinions, or comments made by any external guest speaker are not to be attributed to Reed Smith LLP or its individual lawyers. 

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