Tag: Dubai

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Which ‘Dubai’? Guest post on Goel v Credit Suisse. The DIFC Court of Appeal on choice of court for ‘the Courts of Dubai’.

This guest  post was written by Ahmed Alzaabi, a legal researcher based at Abu Dhabi. It is great material for comparative conflicts purposes, as it highlights issues like ‘clearly demonstrated’ choice of court, hybrid jurisdiction clauses, and lex contractus for choice of court. Geert.

Introduction

The Dubai International Financial Center Court of Appeal (DIFC CA) delivered an interesting judgment in Goel and others v Credit Suisse (Switzerland) Limited [CA-002-2021} on 26 April 2021, which addresses the DIFC Courts opt-in jurisdiction. It is the most important decision since the opt-in clauses came into force in 2011. The case deals with personal guarantees entered into by Goel and others as Guarantors, and Credit Suisse AG as Lender. A term of the guarantee agreements refers to the jurisdiction of the “Courts of Dubai”.

An ex parte application was filed before the DIFC Court of First Instance (CFI) and was dismissed by H.E. Justice Ali Al Madhani on ground that the words “Courts of Dubai” were not specific, clear and express as required by Article 5(A)(2) of the DIFC Judicial Authority Law[i] (“JAL”) to opt-in into the DIFC jurisdiction.

The application was appealed and determined by Justice Wayne Martin, who ruled that the DIFC CFI has the jurisdiction to hear and decide any substantive claim filed by the Respondent. Justice Wayne Martin issued a world-wide freezing order (WFO) against the Guarantors and the order was appealed on the basis that the jurisdiction term in the Guarantee Agreements refers to the Courts of Dubai, and not to the DIFC Courts, therefore, the DIFC Courts shall have no jurisdiction to decide on this matter. The DIFC CA dismissed the appeal and upheld the ruling of Justice Wayne Martin.

Overview of the dispute:

  • Description of the parties. Credit Suisse AG (was a DIFC Establishment), and Credit Suisse (Switzerland) LIMITED (Respondent) are both subsidiary banks wholly owned by a Credit Suisse Group (a company registered in Switzerland). Goel and others (Appellants) are shareholders and directors of GP FZC (a parent company of GP Group of companies and offices all over the world).
  • Facts. On 13 May 2016, the Appellants entered into Guarantee Agreements with the Credit Suisse AG guarantying the performance of various borrowers of GP Group under a Credit Facility Agreement. Furthermore, on September 2016, Guarantee Transfer Agreements were signed between the Credit Suisse AG and the Appellants providing for the transfer of the rights and obligations of the guarantees to benefit the Respondent. The Appellants undertook to perform their obligations toward the Respondent as if the Respondent has been a party to the original Guarantee Agreements. At the time of signing the Guarantee and Transfer Agreements, the Credit Suisse AG was a “DIFC Establishment” within the definition of DIFC JAL. Neither Appellants nor Respondent were a DIFC Establishment.

The Guarantee Agreements provide in its clause 16 that the governing law is the Law of the Emirate of Dubai and the Applicable Federal Law of the United Arab Emirates. Clause 17 of the Guarantees (enforcement provision) refers to the jurisdiction of the Courts of Dubai, and clause 17.1 entitles the lender, Credit Suisse AG, to initiate legal proceedings before any other competent court. On the other hand, clause 7 of the Guarantee Transfer Agreements[ii] refers to the applicable law and jurisdiction, which states that any contractual or non- contractual obligations of the Transfer Agreements shall be governed by the Laws of the Emirate of Dubai, and the applicable Federal Laws of the United Arab Emirates. In addition, any dispute arising out of the Transfer Agreements which relates to any provisions of the Guarantees (as transferred and amended) shall be subject to the same jurisdictional provisions of the Guarantee Agreements.

  • Proceedings. The Respondent filed an application before the DIFC CFI requesting for a world-wide freezing order (WFO) to restrain the Appellants from dealing or disposing of their assets until the determination of the Respondent’s substantive claim. The CFI dismissed the claim on the ground that it has no jurisdiction, and stated that the order sought would have been granted if the court has the jurisdiction, as the Respondent made all the grounds for making such order. The Respondent appealed that decision, and the CA allowed the appeal and upheld that the judge of CFI should have granted that order on the basis that there is a good arguable case to the extent that the court has the jurisdiction. The CA added that, the CFI judge should have leave it open to the Appellants to challenge the court’s jurisdiction. Following this decision, the WFO was issued on 13 September 2020 and served on the Appellants. The Appellants filed an application to challenge the court’s jurisdiction arguing that the court lacked jurisdiction to issue that decision, and requested to dismiss the proceedings. Justice Martin, the assigned judge to hear the Appellants’ application, dismissed the application and held that DIFC Courts had the jurisdiction to hear and determine the Respondent’s substantive claim and the WFO against the Appellants, and he published his interesting reasoning for that decision on 4 October 2020.
  • CFI Decision. It was common ground for the judge and the parties that the applicable law governing the guarantees are the laws of the Emirate of Dubai and the applicable Federal Law of the United Arab Emirates. Justice Martin referred to Article 6 of the JAL, which provides that “the Court shall apply the DIFC Laws and Regulations, except where the parties have explicitly agreed to another law to govern the dispute, provided that that law doesn’t contradict with the public policy and morals”. Accordingly, he pointed that this article clarifies that the parties may select another governing law than DIFC Laws. However, the choice made by the parties will not place the dispute outside the DIFC Courts jurisdiction.

Justice Martin then focused on whether the Court has the jurisdiction to enter the WFO in support of the Respondent’s substantive claim. He had to determine a question of if the Respondent could establish that the claim against the Appellants passed through one or other of the “gateways” to the jurisdiction of the CFI as stipulated in Article 5 of the JAL. His finding was that the only available “gateway” is Article 5(A)(2) of the JAL, which states the following: “the Court of First Instance may hear and determine any civil or commercial claims or actions where the parties agree in writing to file such claim or action with it whether before or after the dispute arises, provided that such agreement is made pursuant to specific, clear and express provisions”. He further noted that the Respondent submitted and Appellants denied that clauses 17.1 and 17.2 of the Guarantee Agreements constitute an agreement in writing within the meaning of Article (5)(A)(2) of the JAL.

Justice Martin analysed the UAE Civil Transactions Code as a governing law applied to the contract and cited Articles 258 and 265, which address the intention of the parties to a contract. He also looked at a commentary on the Civil Transactions Code approved by the Ministry of Justice. The result of his analysis is that: “the both UAE legal system and the common law require the Court to confirm the join intention of the parties. The joint intention could be ascertained by interpreting words which the parties have used to record their agreement objectively, as they would be understood by a reasonable business person having the knowledge of the circumstances known to the parties at the time they entered into their contract”.

Justice Martin then referred to three prior decisions of DIFC Courts (Sunteck, Taalem, and IGPL), in which the CA rejected the proposition that the words “Dubai Courts” mean only non-DIFC Courts. He extracted from these three decisions the following propositions:

(a) it is not mandatory for the contract to specifically refer to the jurisdiction of the “DIFC Courts” to consider the gateway to the jurisdiction specified by Article 5(A)(2) of the JAL;

(b) the Court is to determine the question whether the joint intention of the parties meant to select the jurisdiction of DIFC Courts to hear such kind of dispute;

(c) that question could be resolved by referring to the natural and ordinary meaning of the jurisdictional words as the parties would have been mutually understood them having regard to the circumstances, the nature of the agreement and the context in which the words are used;

(d) if the Court concluded that the parties intended to refer to the DIFC jurisdiction when using the words recorded in their contract, those words will satisfy the requirements set by Article 5(A)(2) ““specific, clear and express provisions”;

(e) the words (Dubai Courts) or (Courts of Dubai) in their natural and ordinary meaning refer to all courts established in the Emirates of Dubai, including the DIFC Courts and the non-DIFC Courts;

(f) if one of the parties was a DIFC establishment at the time of signing a jurisdiction agreement, the other party would have taken into consideration and understood that the DIFC Courts, by default, would have the exclusive jurisdiction within Dubai to hear and determine any dispute arising out of that agreement. It would require a clear and express words to come to the result that the parties’ mutual intention is to exclude the jurisdiction of DIFC Courts.

Justice Martin selected the IGPL among the other two decisions, although it was an opt-out and not op-in case, but it shares common facts which are relevant to the question that the judge has to decide. The similarities with IGPL being (a) the relevant agreements were governed by the applicable Laws of UAE; (b) the words used in the jurisdiction agreements were identical (c) one of the party was a DIFC establishment at the time that the jurisdiction agreements were signed. Given those similarities, Justice Martin was bound to apply the reasoning in IGPL to conclude that clause 17.1 of the Guarantee Agreements indicates the mutual intention of the parties at the time that the agreements were signed. He highlighted that Credit Suisse AG was a DIFC Establishment at the time the guarantee agreements were signed. This constitutes a strong indication that the mutual intention of the parties was to include DIFC Courts within the meaning of the words “Courts of Dubai”. There was no indication of mutual intention of the parties to exclude DIFC Courts jurisdiction.

The judge stated the following circumstances which support the proposition that the words ‘Courts of Dubai’ should hold ordinary meaning to include DIFC Courts: “(a) the agreements are all in English language (the DIFC Courts operate in English); (b) Credit Suisse AG is a Foreign Company, incorporated in Switzerland; (c) a number of the borrowers under the Credit Facility Agreement were incorporated in foreign jurisdictions; (d) the Guarantors are all Indian nationals with Indian passports; and (e) clause 17.3 of each Guarantee expressly recognises the prospect of enforcement proceedings in foreign jurisdictions. These circumstances support the proposition that the parties have intended to refer to a court within the Emirate of Dubai which has an international characteristic as well as an onshore court of Dubai.

  • DIFC CA Decision. The Appellants challenged the CFI decision after the permission of appeal has been granted and provided that the CFI does not have jurisdiction to determine the substantive claim against the Appellants including the WTO application. The appeal was unsuccessful. The CA upheld that the jurisdiction clause used in the contract was a solid agreement to opt-in to the DIFC Courts’ jurisdiction in accordance with article 5 (A)(2) of the JAL. The CA added that when the term “the courts of Dubai” is used in an agreement, it has an ordinary meaning that refers to all courts incorporated within the Emirate of Dubai, including DIFC’s and non-DIFC’s Courts. Furthermore, the CA confirmed that the intention of the parties when they signed the agreement with a DIFC Establishment did not change the obligations on the Appellants when the Guarantee Transfer Agreements are signed in favour of a non DIFC Establishment. The CA then looked at the question of whether the clarity of the term “the courts of Dubai” is enough for the purposes of the gateway to jurisdiction within Article 5(A) (2) of the JAL.  The CA added that if as a matter of contractual construction, the parties had intended to agree that the DIFC Courts should have jurisdiction over their disputes, it would be a triumph of form over substance to hold that they failed because they did not use the term “DIFC Courts. On that note, the CA ruled that the parties’ contract was “specific, clear and express” enough to opt-in to the jurisdiction of the DIFC Court.

The CA highlighted in its conclusion that the construction of terms such as “courts of Dubai” will rely upon their context. Moreover, the transactions’ history matter in this case is significant to the constructional conclusion.

  • Conclusion. This case points out that the parties wishing to include or exclude DIFC jurisdiction should use a clear and express language in their contract to minimise jurisdictional disputes risk and avoid any ambiguity.
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Dhir v Flutter. How choice of law takes you via Rome, to DIFC and Dubai.

A quick note on Dhir v Flutter Entertainment Plc (Rev 2) [2021] EWHC 1510 (QB), in which Griffiths J had to consider ia whether choice of law had been made at all and if so (or also if no choice of law had been made), whether this was for the onshore law of the Emirate of Dubai – onshore Dubai law, or for the law of the Dubai International Financial Centre – DIFC.

Claimant (Amarjeet Dhir) is a Dubai-based businessman who advanced money to another businessman in Dubai which he thought would be invested in the local property market. Unknown to him, the man taking his money (Tony Parente) was a gambling addict. As Mr Parente now admits, he applied money he had been given by Mr Dhir (and, it seems, others) to fund his gambling habit. One of the gambling businesses with which he lost a lot of money in a short space of time was the defendant, through that part of its operations branded as Paddy Power. Mr Dhir now seeks to recover from Paddy Power money in its hands which he says represents the money he is entitled to recover from Mr Parente.

The relevant agreement includes express choice of law as follows: 

“This agreement is signed in Dubai and shall be governed and construed in accordance with the laws of Dubai”.

Claimant says that it meant DIFC laws, while defendant says that it means onshore Dubai law). All experts agreed that it had to be one or the other: it could not be both.

[116] jurisdiction before the E&W Courts is by prorogation (A26 Brussels Ia). Both parties agree [129] that the Rome I Regulation guides the search for the lex contractus. The agreement is silent on choice of court: otherwise that could certainly have been a factor in determining choice of law (recital 12 Rome I). In general [118] the judge is cautious in ‘letting the jurisdiction dog wagging the choice of law tail’, and held the many ties of parties and contract with Dubai (including signature at Dubai and not DIFC: a geographically distinct location) pointed to onshore Dubai law as  lex contractus.

Choice of law therefore made not verbatim, yet ‘clearly demonstrated’ (A3(1) Rome I).

Geert.

EU Private International Law, 3rd ed. 2021, Heading 3.2.4.

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Lenkor Energy: Textbook application of the (common law of) recognition and assessment of ordre public. (Re: Dubai judgment).

Update 4 June 2020 decision upheld on appeal, [2020] EWHC 1432 (QB).

In [2020] EWHC 75 (QB) Lenkor Energy Trading v Irfan Iqbal Puri, Davison M rejected the ordre public arguments made by claimant against recognition of a money judgment of the Dubai First Instance Court.

Reflecting global understanding of ordre public, it is the judgment and not the underlying transaction upon which the judgment is based which must offend (here: English) public policy. That English law would or might have arrived at a different conclusion is not the point (Walker J in Omnium De Traitement Et De Valorisation v Hilmarton [1999] 2 Lloyd’s Rep 222).

The ordre public arguments made, were (1) illegality, (2) impermissible piercing of the corporate veil and (3) penalty.

Re (1), the argument is that the underlying transaction is illegal. Master Davison acknowledged there are circumstances where an English court might enquire into the underlying transactions which gave rise to the judgment. However such court must do so with extreme caution and in the case at issue, defendant’s familiarity with Dubai and its laws argued against much intervention by the English courts.

On (2), the veil issue, submission was that defendant was being made personally liable for the debts of IPC Dubai, which was the relevant party (as guarantor) to the Tripartite Agreement and the holder of the account upon which the cheques were drawn. The cheques had not been presented or had been presented out of time – or there was at least an issue about that. The combination of these matters was, it was suggested, to impose an exorbitant liability on Mr Puri for sums which he had not agreed to guarantee – in contravention of established principles of English law.

Here, too, Davison M emphasised defendant’s familiarity with Dubai law. The case against Mr Puri in Dubai was resolved according to the rules which the laws of Dubai apply to Dubai companies and to individuals who write cheques on Dubai accounts. Dubai law may be different than English law on this point, but not repugnantly so.

Finally on (3) the sums in particular the interest charged were suggested to be exorbitant hence a form of unenforceable punitive damages. However, 9% interest is only 1% higher than the judgment debt rate in England and only ¼% higher than the current rate under the Late Payment of Commercial Debts (Interest) Act 1998. (At 31) ‘In the light of this, to characterise the interest rate of 9% as amounting to a penalty is unrealistic.’

Geert.

 

 

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Pearl v Kurdistan. The DIFC on waivers of sovereign immunity.

Update 17 November 2017 For discussions in Dutch case-law (including re contractual waiver) with respect to SHAPE, see here.

Thank you Peter Smith over at Tamimi for flagging [2017] DIFC ARB 003 Pearl v Kurdistan. Peter summarises as follows:

‘In 2007, Crescent Petroleum, the oldest privately-owned oil and gas company in the Middle East, agreed with Dana Gas, one the leading publicly-listed natural gas companies in the region, to create a joint venture called Pearl Petroleum (together, “the Consortium”). The Consortium entered into an agreement with the Kurdistan Regional Government (“KRG”) for the development of the Khor Mor and Chemchemal petrochemical fields in the Kurdistan region of Iraq. The KRG were and remain engaged in a political dispute with the Federal Government of Iraq, meaning that the Consortium were unable to export gas produced by the developed fields. As a result, the KRG became liable under its contract with the Consortium to pay a minimum guaranteed price, but it failed to make the required payments in full.’

Arbitration in London under LCIA rules ensued. The contract between the Consortium and the KRG was governed by English law and provided explicitly that “the KRG waives on its own behalf and that of [The Kurdistan Region of Iraq] any claim to immunity for itself and its assets”.

Cooke J held that whilst the UAE’s recognition of other states was a matter of foreign policy which the DIFC Courts could not rule on, construing the KRG’s waiver of immunity was a question of law and not public policy. In agreeing to arbitrate, a party agrees that the arbitration shall be effective in determining the rights of the parties (at 26). The waiver of any claim to immunity for itself and its assets must mean waiver of immunity from execution (at 28): any argument on that is blocked by issue estoppel (at 36).

Sovereign immunity therefore was not a trump which could be played at the time of enforcement: whatever immunity there might or might not have been had been contractually signed away.

An interesting and well argued judgment.

Geert.

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Place of habitual employment and the alternative findings of corporate ‘domicile’- The Employment Appeal Tribunal in Powell

In David Powell v OMV Exploration and production limited, the Employment Appeal Tribunal ruled on the (absence of) jurisdiction for UK courts in the case of a UK domiciled employee, employed originally to work from Yemen but in reality working from Dubai, hired by a Manx incorporated company run from Austria. The employment contract was subject to Manx law and to a choice of court agreement in favour of the courts of the Isle of Man. The Tribunal however ruled that the case was within the scope of the Brussels I Regulation – albeit like the tribunal itself, the Appeal tribunal does not systematically review the three alternative grounds for domicile of Article 60 of the Jurisdiction Regulation.

Domicile was found to be in Austria, for this is the place where the company was effectively managed from. The UK could claim jurisdiction on the basis of Article 19, were the employee found to habitually work in the UK – quod non.

A classic example of the employment chapter of the JR, with a bit of exotic flavouring (Manx) and, even if not altogether tidy, a correct conclusion on Austrian domicile.

Geert.