<p>The Defendants they are suing in such proceedings will, however,  often be located in the DIFC and have assets there or elsewhere in the  UAE, making them susceptible to enforcement proceedings brought by  successful Claimants.&nbsp; Although it is usually only worth suing  Defendants who are solvent, there is less to stop a financially fragile  Claimant with no assets in the DIFC (or anywhere else in the UAE) from  filing a claim in the DIFC Courts. &nbsp;</p>
<p>When it comes to parties&rsquo; legal costs, the DIFC Courts follow the  common law principle that the successful party at trial is usually  entitled to recover a significant share, sometimes the entire share, of  its costs from the losing party following the trial.&nbsp; If a losing  Claimant does not have the funds to satisfy a resulting costs order or  simply refuses to comply with it and the winning Defendant is unable to  enforce the costs order in another jurisdiction (where the losing  Claimant has assets), the Defendant&rsquo;s trial victory may be pyrrhic if  the considerable financial cost of achieving it cannot be recovered from  the Claimant in practice.&nbsp; The enforceability of Court judgments and  orders in other jurisdictions is, even if possible, often complicated  and slow.&nbsp; This is particularly relevant to proceedings before the DIFC  Courts, given the relatively transient nature of Dubai and the ease with  which assets can be moved out of the jurisdiction at short notice if a  party feels its assets are vulnerable to a Court judgment or order. &nbsp;&nbsp;</p>
<p>From a Defendant&rsquo;s perspective, the scenario outlined above gives  rise to the possibility of relatively risk-free litigation on the part  of a Claimant with a weak claim and who may have few if any assets.&nbsp; One  option available to a Defendant in the DIFC Courts to lessen the risk  of being left to bear significant costs even if it wins a trial is to  make a security for costs application against the Claimant pursuant to  Part 25 of the Rules of the DIFC Courts (RDC).&nbsp; Such an application, if  successful, involves the Respondent (Claimant) paying specified funds  into the Court&rsquo;s account to ensure that its costs liabilities can and  will be met should the Court order it to pay a portion of the  Applicant&rsquo;s (Defendant&rsquo;s) costs following a trial.&nbsp; Apart from providing  Defendants with the intended costs security, such applications also  help to weed out weak claims at a relatively early stage because  Claimants will need to think long and hard before parting with  significant funds relatively soon after filing a claim they may  themselves not have full confidence in.&nbsp;</p>
<p>The DIFC Courts will consider a number of factors when determining a  security for costs application and will order security for costs to be  provided if they are satisfied, having regard to all the circumstances  of the case, that it is just to make such an order and if one or more of  the conditions set out in Rule 25.102 of the RDC are met.&nbsp; The key  conditions are that the Respondent: (1) is resident outside the UAE; (2)  is a company or other body and there is reason to believe it will be  unable to pay the Applicant&rsquo;s costs if ordered to do so; (3) the  Respondent has changed addresses since the claim was filed in order to  evade the consequences of litigation; (4) the Respondent did not include  its (correct) address in the claim form; or (5) the Respondent has  taken steps in relation to its assets that would make it difficult to  enforce a costs order against it.</p>
<p>It is clear that these conditions give the DIFC Courts a wide  discretion to grant security for costs, but this discretion must be  exercised in accordance with established principles and with regard to  the underlying purpose of such orders.&nbsp; This was stated by the DIFC  Court of Appeal in Rafed Abden Mohsen Bader Al Khorafi, Mrs Amrah Ali  Abdel Latif Al Hamad and Mrs Alia Mohamed Sulaiman Al Rifa v Bank  Sarasin-Alpen Limited (CA 001/2010 and CA 002/2010), where the following  passage of the judgment in the English case of De Bry v Fitzgerald  ([1990] 1 WLR 352) was cited with approval:&nbsp;</p>
<p><em>&ldquo;a defendant should be entitled to security if there is reason to  believe that, in the event of his succeeding and being awarded the  costs of the action, he will &nbsp; &nbsp; have real difficulty in enforcing that  order&hellip;..If this difficulty [in enforcing the order] would arise from the  impecuniosity of the plaintiff, the court will of course have to take  an account of the likelihood of his succeeding in his claim, for it  would be a total denial of justice that poverty should bar him from  putting forward what is prima facie a good claim&hellip;..If, on the other  hand, the problem is not that the plaintiff is impecunious but that, by  reason of the way in which he orders his affairs, including where he  chooses to live and where he chooses to keep his assets, an order for  costs against him is likely to be unenforceable, or enforceable only by  significant expenditure of time and money, the defendant should be  entitled to security.&rdquo;</em></p>
<p>In overturning the order of DIFC Court of First Instance requiring  security for costs from the Claimants, the DIFC Court of Appeal stated  that the burden of establishing facts sufficient to justify such an  order rests on the applicant and that the difficulty of enforcing a  costs order (in another jurisdiction) is a material consideration.&nbsp; The  Claimants in Al Khorafi are Kuwaiti nationals and the applicant  Defendant had not met the burden of proving that a costs order could not  be enforced against the Claimants in Kuwait, according to the DIFC  Court of Appeal.&nbsp; The &ldquo;conflicting evidence&rdquo; on this particular question  included the Riyadh Arab Agreement for Judicial Cooperation (commonly  known as the Riyadh Convention), pursuant to which a costs order of the  DIFC Courts should be enforceable by the Kuwaiti Courts, although the  DIFC Court of Appeal itself was not able to reach any conclusion as to  the risk that such enforcement would not in fact be possible.&nbsp; In Al  Khorafi, the DIFC Court of Appeal also stated that applicants for  security for costs are required to provide a detailed schedule showing  the breakdown of their total figure for the requested security.</p>
<p>In summary, while few parties have a desire to be sued, the DIFC  Courts do at least provide a Defendant with the useful tool of a  security for costs application to: (a) help protect its costs position  should it choose to see a claim through to trial; and (b) make a  Claimant consider the costs and merits of its claim more thoroughly than  it may have otherwise done.&nbsp; However, the prospects of succeeding with  such an application will depend, in particular, on the location of the  Claimant and its assets, its financial standing and the legal and  practical difficulties faced by the Defendant in enforcing any eventual  costs order against the Claimant.</p>