LEGAL PERSPECTIVE
Reciprocating territories: Bridging the gap Following recognition as a reciprocating territory by the Indian government, UAE banks begin to prepare for legal actions against defaulters in India. Sachin Kerur, Head of Middle East Region at Reed Smith, explains how this new move will impact the banking sector
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n January 2020, the Indian Ministry of Law and Justice published an official notification recognising the United Arab Emirates as a ‘reciprocating territory’ for the purposes of enforcement of foreign judgments in India. This development potentially marks the dawn of a new era in the “golden age” of UAE-India trade, commercial, political and legal cooperation. At the same time, it has the potential to open floodgates of litigation and execution action against credit defaulters that have assets in India or have fled to India to avoid enforcement. Banks in the UAE are now said to be in good stead to pursue long-pending claims against their customers from whom financial recovery was, until now, a bleak prospect.
What does the notification entail? The 2020 notification (the Notification) provides that civil judgments issued by superior courts in the UAE are going to be directly enforceable in India, much like a judgement issued
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BANKER MIDDLE EAST | APRIL 2020 | ISSUE 229
by an Indian court. “Superior courts” for this purpose are identified as the UAE Federal Courts, the local Emirate Courts as well as the courts of the Abu Dhabi Global Market and the Dubai International Financial Centre. Important exceptions to this enforceability principle are judgments from the UAE criminal courts and those relating to taxation or administrative charges and penalties.
Why is it so important? It is no secret that Indian and Indian-led businesses have a huge presence in the UAE—indeed the Indian expat population represents the largest foreign community in the UAE. Some of the biggest players in the real estate, manufacturing, infrastructure and retail sectors in the UAE are those of Indian origin. Many of these businesses have obtained credit facilities from UAE banks or UAE branches of foreign banks on the back of assets located in other jurisdictions including India and guarantees issued by Indian corporates or individuals.
