Vortac,
It may seem strange to you but at most Ex-Pat airlines that is exactly what happens. An FO who upgrades will then join the bottom of the seniority list as a Captain as he has changed positions. I have worked at 2 previous ExPat jobs and seniority did not count for much but in the few instances it was utilized if an FO upgraded he would then become the bottom level Captain. This is different than a US seniority system which Fly Dubai seems to be using, the difference here being no US carrier hires DECs. The system is what it is however and new joiners will have to realize this and look at their FOs as being senior to them in seniority. It reminds me of the old adage "Don't piss your Copilot off as someday he will be your Chief Pilot."