Claim No: CA-004-2015
THE DUBAI INTERNATIONAL FINANCIAL CENTRE
COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum,
Ruler
IN THE
COURT
BEFORE
CHIEF JUSTICE
BETWEEN
INVESTMENT GROUP PRIVATE LIMITED
Appellant/
Defendant
and
STANDARD CHARTERED BANK
Respondent/
Claimant
Hearing: 6 May 2015
Counsel: Michael Joyce Patchett of Outer Temple Chambers assisted by Ali Al Aidarous of Al Aidarous International Legal practice for the Appellant/Defendant
James Abbott of Clifford Chance LLP for the Respondent/Claimant
Submissions: 18 June, 19 August, 7 October and 22 October 2015
Judgment: 18 November 2015
JUDGMENT
| This dispute arose out of two loans advanced by the Respondent, Standard Chartered Bank (“SCB”) to the Appellant, Investment Group Private Limited (“IGPL”) in 2009 and 2010 respectively, as well as a Share Pledge Agreement. SCB commenced an action in the
DIFC Courts
DIFC Courts
The Court of First Instance (including any circuit or division), the Court of Appeal and Tribunals established in accordance Article 14(3) of the Court Law . DIFC
The Dubai International Financial Centre. Court
The courts established in the DIFC, that is the Court of First Instance and/or the Court of Appeal. On appeal, IGPL’s principal argument is that the DIFC Courts do not have competent jurisdiction to hear the present dispute and further argues that the parties had, in any event, opted-out of the DIFC Courts’ jurisdiction. IGPL also contends that the DIFC Courts should decline to exercise jurisdiction because a jurisdictional conflict has now emerged between it and the Courts of Sharjah, and that jurisdictional conflict should be referred to the
UAE
In response, SCB contends that the DIFC Courts do have competent jurisdiction to determine SCB’s claims in these proceedings and that even applying the relevant provisions of the CPC, the Courts of Dubai (including the DIFC Courts) would also have competent jurisdiction to hear the present dispute. SCB further submits that there is no jurisdictional conflict between the DIFC Courts and the Sharjah Courts which needs to be referred to the USC for resolution and that the FNC doctrine should not apply in cases such as these proceedings when the alternative forum is another court within the UAE. The issues to be addressed on appeal are whether the DIFC Courts have competent jurisdiction to hear SCB’s claims against IGPL under the Agreements and whether the DIFC Courts may apply the FNC doctrine and, if so, whether these proceedings should be stayed on the ground that the Sharjah Courts are the distinctly more appropriate forum. The judges unanimously rejected IGPL’s submission that the proceedings ought to be stayed on the basis that parallel proceedings in Sharjah are ongoing and also ruled that the CPC does not apply to the DIFC, and that the DIFC Courts’ jurisdiction is determined solely by the
judicial authority law
Chief Justice
|
Summary of Judgment
This summary is not part of the Judgment and should not be cited as such
ORDER
UPONhearing counsel for the Appellant and counsel for the Respondent on 6 May 2015
AND UPONreading the submissions and evidence filed and recorded on the Court file;
IT IS HEREBY ORDERED THAT:
- The Appellant’s appeal is dismissed.
- The Appellant shall pay the Respondent’s costs within 14 days of the date of this order, the amount of which shall be assessed, if not agreed, by the
Registrar
.RegistrarRegistrar appointed under Article 16 of the Court Law and includes, where the context requires, the Consultant, Deputy and Acting Registrars.
Issued by:
Mark Beer
Registrar
Date of Issue: 18 November 2015
At: 4pm
JUDGMENT
CHIEF JUSTICE MICHAEL HWANG SC
1. This judgment is the judgment of the court. Each member of the court has contributed to it.
2. This is an appeal from an order of Justice Sir David Steel dated 15 January 2015 (the “Order”) dismissing the Appellant’s application for an order that the DIFC Courts have no jurisdiction or, alternatively, that the DIFC Courts should decline to exercise its jurisdiction on the ground offorum non conveniens(“FNC”).
3. The Appellant, Investment Group Private Limited (“IGPL”), is a company incorporated in the Emirate of Sharjah, and conducts its business in and from its premises in Sharjah.
4. The Respondent, Standard Chartered Bank (“SCB”), is a company incorporated in the United Kingdom. It operates in the DIFC as a licensed entity and through a branch in the DIFC.
I. PROCEDURAL HISTORY & BACKGROUND FACTS
5. The dispute between the parties arose out of two loans advanced by SCB to IGPL in 2009 and 2010 respectively.
6. The parties’ transactions encompassed the following agreements entered into between them:
(a) a loan agreement entered into on 3 June 2009 in respect of the loan advanced by SCB to IGPL in 2009 (the “2009 Agreement”);
(b) A share pledge agreement entered into on 3 June 2009 under which IGPL pledged shares listed on the Dubai Financial Market as security for the loan advanced under the 2009 Agreement (the “Share Pledge Agreement”); and
(c) a loan agreement entered into on 10 May 2010 in respect of the loan advanced by SCB to IGPL in 2010 (the “2010 Agreement”).
(the 2009 Agreement, the 2010 Agreement, and the Share Pledge Agreement collectively are hereafter referred to as “theAgreements”)
7. The 2009 Agreement comprised:
(a) an Offer Letter – Multi Currency Term Loan Facility, dated 3 June 2009, incorporating the General Terms (for Multi-Currency/Multiple Borrowers Term Loan Facility, reference 100004395 (the “Loan Facility General Terms”); and
(b) a Banking Arrangements Letter dated 3 June 2009 (the “Banking Arrangements Letter”) which incorporated SCB’s General Terms and Conditions Covering Banking Arrangements, SCB/UAE/GC/1 (the “SCB General Terms and Conditions”)
8. The material terms of the 2009 Agreement are as follows.
(a) Clause 26 of the Loan Facility General Terms provides that the 2009 Agreement was to be governed by the “laws of United Arab Emirates”.
(b) Clause 27 of the Loan Facility General Terms provides that:
“(a) Subject to sub-clause (b) below, unless a Finance Document provides otherwise, each Borrower submits to the exclusive jurisdiction of the courts of United Arab Emirates to settle any dispute arising out of or in connection with any Finance Document (including a dispute regarding the existence, validity or termination of any Finance Document (a “Dispute”).
(b) Notwithstanding sub-clause (a) above, the Bank shall not be prevented from taking proceedings relating to a Dispute in the courts of any other jurisdiction where any asset of an Obligor may be located. To the extent allowed by law, the Bank may take concurrent proceedings in any number of jurisdictions.
(c) Schedule 1 to the Loan Facility General Terms defines a “Finance Document” as “this Facility Agreement, any Security Document, any documents identified as such in the Offer Letter and any other document designated as such by the Bank and the Principal Borrower from time to time”.
(d) Clause 11 of the SCB General Terms and Conditions provides that:
“The Bank and the Borrower agree to submitting to the jurisdiction of the courts of the U.A.E. [T]he Bank may, at its option, elect to commence proceedings in the courts of other jurisdictions and the Borrower hereby agrees, in such case, to submit to the jurisdiction of such courts.”
9. Clause 23 of the Share Pledge Agreement provides: “[t]his Pledge and all non-contractual obligations arising in any way out of or in connection with this Pledge are governed by the laws of the Emirate of [Dubai/Abu Dhabi] and the applicable federal laws of the U.A.E. and the Pledgor irrevocably submits to the non-exclusive jurisdiction of the
Dubai Courts
10. The material terms of the 2010 Agreement are as follows:
(a) Clause 36.1 of the 2010 Agreement provides that the agreement is governed by “the laws of England”.
(b) Clause 36.2 of the 2010 Agreement provides:
“(a) The Parties agree that the courts of England shall have jurisdiction to settle any disputes or proceedings which may arise in connection with any Finance Document (in this clause referred to as “Proceedings”)…This Clause 36.2(a)…shall not limit the right of any Finance Party to bring Proceedings against the Borrower in connection with any Finance Document in any other court of competent jurisdiction or concurrently in more that [sic] one jurisdiction”
11. SCB commenced an action in the Dubai International Financial Centre (“DIFC”) Courts on 6 August 2014 against IGPL for sums owed as a result of IGPL’s alleged defaults under the Agreements and to enforce the Share Pledge Agreement.
12. IGPL filed an application on 21 September 2014 seeking a declaration from the DIFC Courts that it lacked competent jurisdiction to hear the dispute and, alternatively, that the DIFC Courts should decline jurisdiction in favour of the Sharjah Courts on the ground of FNC (the “
Jurisdiction
13. On 12 January 2015, IGPL commenced an action against SCB in the Sharjah Civil Courts in Case No. 1243/2015 (the “Sharjah Action”), seeking judgment against SCB for damages arising from SCB’s alleged breaches of the Agreements.
14. On 15 January 2015, Justice Sir David Steel dismissed IGPL’s Application and ordered it to pay SCB’s costs of the Jurisdiction Application.
15. On 31 May 2015, a hearing for the Sharjah Action was held before the Sharjah Federal Court of First Instance (the “Sharjah CFI”). That day, the Sharjah CFI issued a judgment holding that it had no jurisdiction to hear the Sharjah Action because SCB was headquartered in Dubai and the relevant agreements were to be performed in Dubai (the “Sharjah Action Judgment”).
16. IGPL then filed an appeal against the Sharjah Action Judgment. On 15 September 2015, the Sharjah Court of Appeal issued a decision upholding the Sharjah Action Judgment (the “Sharjah Appeal Judgment”). On 7 October 2015, IGPL filed an appeal against the Sharjah Appeal Judgment, to be determined by the USC.
THE PARTIES’ ARGUMENTS IN THE COURT OF FIRST INSTANCE
A. IGPL’s arguments in the CFI
17. In the Jurisdiction Application, IGPL sought (1) an order that the DIFC Courts lacked competent jurisdiction to hear the dispute and (2) an order that the DIFC Courts should decline jurisdiction to hear the dispute on the ground of FNC. However, IGPL had made concessions which resulted in the abandonment of the first relief shortly before the CFI hearing (the “Concessions”). It pursued only the second relief to the end.
18. IGPL’s Concessions were expressed in the following terms in its Skeleton Argument for 27thNovember 2014:
“IGPL accepts that the DIFC Courts have jurisdiction to hear these claims, pursuant to Article 5A(1)(a) of Dubai Law 16 of 2011, as SCB has a branch registered in the DIFC. The issue is whether the Court should decline jurisdiction, based on the doctrine of FNC.”
19. There are two dimensions to the Concessions. The first dimension to the Concessions is that IGPL conceded that the DIFC Courts had competent jurisdiction to determine SCB’s claims pursuant to Article 5A(1)(a) of the Judicial Authority Law (the “Jurisdiction Concession”). The second dimension to the Concessions is that IGPL had conceded that the parties did not agree to opt-out of the DIFC Courts’ jurisdiction under the Agreements or the Share Pledge Agreement (the “Choice of Court Concession”).
20. IGPL’s submissions on the application of the FNC doctrine before the CFI were two-fold.
21. First, IGPL argued that the FNC doctrine was applicable as between the DIFC Courts and the Courts of Sharjah, and between courts of the United Arab Emirates (“UAE”) generally.
22. Second, IGPL argued that, applying the FNC doctrine, the DIFC Courts should decline jurisdiction on the ground of FNC because the Sharjah Courts was the clearly more appropriate forum to resolve this dispute.
23. In support of its argument that the FNC doctrine was applicable in the present case, IGPL relied on this Court’s decisions inCorinth Pipework v Barclays BankCA002/2011 (“Corinth”) andAl Khorafi v Bank SarasinCA003/2011 (“Al Khorafi”), where the Court acknowledged that it could exercise its discretion to stay proceedings, and could invoke the FNC doctrine in an appropriate case. IGPL recognized that the decision inAllianz v Al Ain AhliaCFI012/2012 (“Allianz”) qualified the scope of application of the FNC doctrine, where the Court held that the doctrine has no application to competing claims to jurisdiction by courts within the UAE. IGPL therefore argued thatAllianzwas wrongly decided.
24. IGPL’s argument was that the Court inAllianzhad erroneously assumed that the UAE’s Federal Civil Procedure Code (the “CPC”) was applicable to the DIFC and limited the DIFC Courts’ jurisdiction. IGPL contended before the CFI that this assumption was erroneous because the CPC did not apply to the DIFC Courts, which applied their own procedural rules to determine whether they had competent jurisdiction.
25. In the alternative, IGPL contended that, if the CPC were applicable, then the relevant provision (Article 31(3) of the CPC), when applied, would confer competent jurisdiction on the Courts of Sharjah (and not the DIFC Courts) because Sharjah was IGPL’s place of business and the Agreements were mainly performed in Sharjah.
26. IGPL further argued that application of the FNC doctrine would also point to the Courts of Sharjah as the distinctly more appropriate forum for resolving the present dispute for the following reasons. It denies that the parties had any agreement to confer jurisdiction on the DIFC Courts under either of the Agreements.
27. IGPL also denied that any of the connecting factors relied on by SCB pointed towards the DIFC as the distinctly more appropriate forum.
B. SCB’s arguments in the CFI
28. SCB argued that the jurisdiction of the DIFC Courts was delineated by Article 5 of Dubai Law No. 12 of 2004 as amended by Dubai Law No. 16 of 2011 (the “Judicial Authority Law”). In its submission, Article 5A(1)(a) of the Judicial Authority Law conferred jurisdiction on the DIFC Courts in relation to any claim or action involving, as a party, an entity licensed to carry on business or conduct activity within the DIFC (“Licensed DIFC Establishment”).
29. Relying on the wide interpretation adopted by this Court inCorinthof “Licensed DIFC Establishment” as including the full legal entity, whether registered in the DIFC or elsewhere in the UAE, SCB argued that it was a Licensed DIFC Establishment within the meaning of Article 5(A)(1)(a) of the Judicial Authority Law. Accordingly, SCB submitted that the DIFC Courts had jurisdiction over its claims.
30. Further, SCB contended that the parties hadnot, in the Agreements and Share Pledge Agreement, agreed to opt-out of the DIFC Courts’ jurisdiction, because the phrases “Courts of Dubai” and “Courts of the UAE”, as adopted in the Agreements’ and the Share Pledge Agreement’s choice of court provisions, included the DIFC Courts. In this regard, SCB relied on this Court’s decision inNational Bonds v TaaleemCA 001/2011 (“Taaleem”). SCB also pointed out that it had an option under the 2010 Agreement to commence proceedings against IGPL in any court of competent jurisdiction, and this agreement should be given effect.
31. Finally, SCB challenged IGPL’s application to stay SCB’s action on the ground of FNC, by arguing that the FNC doctrine had no application between courts of the UAE. In this regard, SCB relied on the DIFC Courts’ decisions inAllianz,Barclays Bank PLC v (1) Afras Limited and (2) Radhakrishnan Nanda Kumar CFI 008/2013, andMeydan Group LLC v Banyan Tree Corporate Pte LtdCA005/2014 (“Meydan”).
C. The decision of the CFI
32. Justice Sir David Steel dismissed the Jurisdiction Application. At the outset he expressed the view that IGPL had correctly made the Jurisdiction Concession and Choice of Court Concession. He went on to hold that the Jurisdiction Concession was correct, and explained that, so long as SCB fell within one of the categories set out at Article 5(A) of the Judicial Authority Law, the DIFC Courts would have exclusive jurisdiction to hear the dispute. Since SCB was a licensed entity within the DIFC, it would qualify as a “Licensed DIFC Establishment” within the meaning of Article 5(A)(1)(a) of the Judicial Authority Law, thereby conferring jurisdiction on the DIFC Courts to hear the dispute.
33. Justice Sir David Steel also held that the Choice of Court Concession was correctly made, and found that the parties did not opt-out of the DIFC Courts’ jurisdiction under Article 5(A)(2) of the Judicial Authority Law. The choice of court provisions in the Agreements and Share Pledge Agreement, which might have the effect of opting out of the DIFC Courts’ jurisdiction, included the DIFC Courts as a chosen court to which the parties had submitted their dispute.
34. In respect of the 2009 Agreement and the Share Pledge Agreement, which provided that IGPL submitted to “the exclusive jurisdiction of the courts of the United Arab Emirates”, Justice Sir David Steel held that the phrase “courts of the United Arab Emirates” would necessarily include the DIFC Courts, and he reasoned as follows at [4] of his judgment:
“The DIFC Courts is one of the courts of Dubai: see National Bonds Corp. v. Taaleem CA-001-2011. By extension it is a court of the UAE. Indeed within Dubai, it has exclusive jurisdiction. Accordingly, absent an agreement to accord exclusive jurisdiction to another court, there is no basis for excluding the DIFC Courts as a court of the UAE. It is thus a court of competent jurisdiction in respect of claims under the 2009 Agreement.”
35. In relation to the 2010 Agreement, Justice Sir David Steel relied on Clause 36.2, which permits SCB to “bring Proceedings against [IGPL]… in any other court of competent jurisdiction or concurrently in more than one jurisdiction.” Having found that the DIFC Courts had competent jurisdiction, he held that the scope of Clause 36.2 extended to include the DIFC Courts, and that IGPL had therefore agreed to submit to the DIFC Courts’ jurisdiction since SCB commenced an action in the DIFC.
36. In addressing IGPL’s primary argument that the DIFC Courts should decline jurisdiction on the ground ofFNC, Justice Sir David Steel’s analysis took the following course.
(a) First, he held that, on a proper understanding of the House of Lords’ decision inSpiliada Maritime Corp v. Cansulex Ltd[1987] AC 460, the FNC doctrine does not apply to resolve competing claims to jurisdiction by courts of the same state, such as where the competing claims to jurisdiction are made by courts within the UAE. Justice Sir David Steel endorsed the decision inAllianzwhere H.E. Justice Ali Al Madhani expressed a similar view.
(b) Second, Justice Sir David Steel held that it was not appropriate for a court within the UAE to apply the FNC doctrine, because the other courts of the UAE do not recognize or apply that doctrine. Several reasons further supported this view:
(i) The UAE Courts, in line with its civil law roots, would not regard jurisdiction and its exercise as a discretionary matter.
(ii) If the DIFC Courts applied the FNC doctrine and relinquished jurisdiction in favour of another UAE Court, the other UAE courts (including the distinctly more appropriate couirt) might not recognize that as a proper exercise of jurisdiction.
(c) Finally, Justice Steel held that the circumstances surrounding the dispute did not point to the Sharjah Courts as a distinctly more appropriate forum than the DIFC Courts to hear the dispute, even if the FNC doctrine were applicable.
(i) He found that the DIFC Courts were the only Courts which satisfactorily fell within the scope of all three jurisdiction clauses contained in the Agreements. This was an important factor pointing towards the DIFC Courts as the distinctly more appropriate forum, as it would allow the parties to resolve all disputes arising out of their relationship in a single forum.
(ii) The 2010 Agreement was governed by English law, which the DIFC Courts were better placed to apply than the Sharjah Courts.
(iii) As the Agreements were prepared in English, the DIFC Courts would be a more efficient adjudicative forum than the Sharjah Courts, which would require translations for all agreements and related documents authored in English.
(iv) No real difference in physical convenience would be felt between Dubai and Sharjah, since they were adjacent Emirates.
II. THE PARTIES’ ARGUMENTS ON APPEAL
37. IGPL bases its appeal on several grounds.
(a) As a preliminary point, IGPL seeks to withdraw both the Jurisdiction Concession and the Choice of Court Concession. The withdrawal is pursued on the basis that Justice Sir David Steel had erred in law by relying on these concessions in finding that the DIFC Courts had competent jurisdiction, because competent jurisdiction cannot be conferred by concession.
(b) IGPL’s principal argument is that the DIFC Courts do not have competent jurisdiction to hear the present dispute. It argues thatCorinthwas wrongly decided by this Court by adopting a wide interpretation of Article 5A of the Judicial Authority Law. That interpretation is incorrect because it would invest in the DIFC Courts an exorbitant jurisdiction, is inconsistent with the UAE’s constitutional and federal laws (which IGPL contends apply to the DIFC), and does not give effect to the special legal status held by an entity’s branch under UAE law.
(c) IGPL further argues that the parties had, in any event, opted-out of the DIFC Courts’ jurisdiction. On a proper construction of the choice of court provisions in the Agreements, the parties have agreed to confer jurisdiction on the UAE’s Federal Judicial Authority (to the exclusion of all other Emirate Courts) or the Dubai Courts (excluding the DIFC Courts).
(d) IGPL also contends that the DIFC Courts should decline to exercise jurisdiction because a jurisdictional conflict has now emerged between it and the Courts of Sharjah, and that jurisdictional conflict should be referred to the UAE’s Union Supreme Court (“USC”) for resolution as required by Article 121 of the UAE’s constitution.
(e) Alternatively, even if the DIFC Courts have competent jurisdiction to hear the present dispute, this Court should stay these proceedings on the ground of FNC. IGPL argues that the FNC doctrine is applicable to competing claims to jurisdiction by courts within the same state, and that the relevant connecting factors establish that the Courts of Sharjah are distinctly the more appropriate forum to resolve this dispute.
38. In response, SCB makes the following arguments.
(a) IGPL should not be permitted to withdraw the Jurisdiction Concession or the Choice of Court Concession. Their withdrawal would prejudice SCB, since SCB had relied on these concessions when formulating its arguments before Justice Sir David Steel and since the concessions had shaped the entire “legal landscape” of the parties’ dispute in the Jurisdiction Application.
(b) The DIFC Courts do have competent jurisdiction to determine SCB’s claims in these proceedings. To this end, SCB argues thatCorinthwas correctly decided and, applying the interpretation of Article 5A(1)(a) of the Judicial Authority Law adopted by this Court in that decision, the DIFC Courts have competent jurisdiction to hear the present dispute because SCB was a “Licensed DIFC Establishment” within the meaning of that provision. The CPC does not apply to circumscribe the scope of the DIFC Courts’ jurisdiction as established under the Judicial Authority Law. The DIFC Courts are exempt from the CPC by virtue of Article 3(2) of the UAE’s Federal Law No. 8 of 2004 (“Federal Law 8”).
(c) SCB’s alternative argument is that, even applying the relevant provisions of the CPC, the Courts of Dubai (including the DIFC Courts) would also have competent jurisdiction to hear the present dispute. Contrary to IGPL’s contention, the applicable provisions are Articles 31 and 33 of the CPC, which would confer jurisdiction on the DIFC Courts on any of the following bases:
(i) the Agreements were to be performed in Dubai
(ii) the losses allegedly suffered by SCB materialized in Dubai; or
(iii) the choice of court provisions in the Agreements amounted to an agreement between the parties to confer jurisdiction on the DIFC Courts to hear the present dispute.
(d) SCB further submits that there is no jurisdictional conflict between the DIFC Courts and the Sharjah Courts which needs to be referred to the USC for resolution. The Sharjah Courts’ jurisdiction has not been engaged, insofar that they have never made a positive ruling that they have jurisdiction over the present dispute. To the contrary, the Sharjah Action Judgment shows that the Sharjah CFI has held that it has no jurisdiction to hear the dispute and that it is the Courts of Dubai which have jurisdiction to hear it.
(e) In response to IGPL’s application to stay these proceedings on the ground of FNC, SCB contends that the FNC doctrine should not apply in cases such as these proceedings when the alternative forum is another court within the UAE. To this end, SCB relies on this Court’s holding inAllianz.
(f) In the alternative, SCB argues that the application of the FNC doctrine would point to the DIFC Courts as the distinctly more appropriate forum to determine this dispute, relative to the Sharjah Courts.
III. ISSUES BEFORE THIS COURT
39. The issues which this Court must decide are as follows.
40. First, whether IGPL should be permitted to withdraw the Choice of Court Concession and the Jurisdiction Concession.
41. Second, whether the DIFC Courts have competent jurisdiction to hear SCB’s claims against IGPL under the Agreements.
42. Third, whether the DIFC Courts may apply the FNC doctrine and, if so, whether these proceedings should be stayed on the ground that the Sharjah Courts are the distinctly more appropriate forum.
IV. ISSUE 1: IGPL’S APPLICATION TO WITHDRAW THE CONCESSIONS
A. The approach towards an application to withdraw a concession
43. The approach an appellate court should take when a party applies to be permitted to withdraw a concession has been considered in a number of cases in the English courts. InEx parte Firth, In re Cowburn(1882) 19 Ch D 419 at p. 429, the Court of Appeal said:
"…the rule is that, if a point is not taken before the tribunal which hears the evidence, and evidence could have been adduced which by any possibility would prevent the point from succeeding, it cannot be taken afterwards. You are bound to take the point in the first instance, so as to enable the other party to give evidence."
44. InPittalis v Grant[1989] 1 QB 605, when considering whether the appellant should be allowed to withdraw a concession on the meaning of a provision in the Rent Acts, Nourse LJ observed at p. 611:
“Even if the point is a pure point of law, the appellate court retains a discretion to exclude it. But where we can be confident, first, that the other party has had opportunity enough to meet it, secondly, that he has not acted to his detriment on the faith of the earlier omission to raise it and, thirdly, that he can be adequately protected in costs, our usual practice is to allow a pure point of law not raised below to be taken in this court. Otherwise, in the name of doing justice to the other party, we might, through visiting the sins of the adviser on the client, do an injustice to the party who seeks to raise it.”
45. InJones v MBNA[2000] EWCA Civ 514 (“Jones v MBNA”), the appellant sought leave to withdraw a concession made below that the implied term of mutual trust and confidence in an employment contract could only be breached by an employer if he had acted in bad faith. The Court of Appeal refused permission for this new case to be advanced on appeal. Peter Gibson LJ said at [38]:
“It is not in dispute that to withdraw a concession or take a point not argued in the lower court requires the leave of this court. In general the court expects each party to advance his whole case at the trial. In the interests of fairness to the other party this court should be slow to allow new points, which were available to be taken at the trial but were not taken, to be advanced for the first time in this court. That consideration is the weightier if further evidence might have been adduced at the trial, had the point been taken then, or if the decision on the point requires an evaluation of all the evidence and could be affected by the impression which the trial judge receives from seeing and hearing the witnesses. Indeed it is hard to see how, if those circumstances obtained, this court, having regard to the overriding objective of dealing with cases justly, could allow that new point to be taken.”
46. May LJ said at [52]:
“Civil trials are conducted on the basis that the court decides the factual and legal issues which the parties bring before the court. Normally each party should bring before the court the whole relevant case that he wishes to advance. He may choose to confine his claim or defence to some only of the theoretical ways in which the case might be put. If he does so, the court will decide the issues which are raised and normally will not decide issues which are not raised. Normally a party cannot raise in subsequent proceedings claims or issues which could and should have been raised in the first proceedings. Equally, a party cannot, in my judgment, normally seek to appeal a trial judge's decision on the basis that a claim, which could have been brought before the trial judge, but was not, would have succeeded if it had been so brought. The justice of this as a general principle is, in my view, obvious. It is not merely a matter of efficiency, expediency and cost, but of substantial justice. Parties to litigation are entitled to know where they stand. The parties are entitled, and the court requires, to know what the issues are. Upon this depends a variety of decisions, including, by the parties, what evidence to call, how much effort and money it is appropriate to invest in the case, and generally how to conduct the case; and, by the court, what case management and administrative decisions and directions to make and give, and the substantive decisions in the case itself. Litigation should be resolved once and for all, and it is not, generally speaking, just if a party who successfully contested a case advanced on one basis should be expected to face on appeal, not a challenge to the original decision, but a new case advanced on a different basis. There may be exceptional cases in which the court would not apply the general principle which I have expressed. But in my view this is not such a case.”
47. InNew Zealand Meat Board & Anor v Paramount Export Ltd & Anor (New Zealand)[2004] UKPC 45, the majority of the Privy Council permitted the appellant to advance a contract interpretation point that had not been advanced at trial or in the New Zealand Court of Appeal, the appellant having conceded that, if a provision in the contract in question (clause 8.3.2) had not been amended, that provision would have been breached. In fact, the provision had not been amended, and the majority was of the view that on its true construction, the appellant was not liable to the respondents. In giving the majority judgment of the Board, Lord Hoffmann said at [45] – [48]:
“45. In these circumstances the question is whether the Meat Board should be allowed to withdraw the concession. Mr Cooke [Counsel for the Respondents] says that this would be unjust. The case was fought on the assumption that if the Council had made a request for quota allocation in breach of Clause 8.3.2, the Meat Board would be liable for complying with it. If it had been known that this was in issue, the plaintiffs could have adduced evidence of surrounding circumstances to show that the agreement should be construed as having this meaning.
46. Their Lordships consider that the plaintiffs cannot complain of being misled about the evidence they would need to adduce at the trial. On the pleadings, the whole question of contractual liability and the construction of the agreement was in issue. It would have been open to the Meat Board, without any amendment of the pleadings, to put before Heron J the argument upon which it now relies. In any case, the surrounding circumstances were exhaustively explored at the trial and their Lordships are unable to imagine what facts could be unearthed which would lead to the conclusion that the Meat Board was assuming a contractual liability for the way it exercised its statutory power to allocate quota. Mr Cooke did not suggest any...
47. It therefore appears to their Lordships that despite the fact that the true construction of the contract was not argued before the judge, the plaintiffs could not have complained of prejudice if the point had been taken before the Court of Appeal. It was a question of law on which no further evidence could have been called. The position is the same before their Lordships' Board. It is no doubt very disappointing for the plaintiffs, having succeeded in the courts below, to lose on a new point in the final court. On the other hand, it would be a miscarriage of justice if the Meat Board were required to pay some $7m out of public funds when it had no legal liability to do so, merely on account of the way its advisers had conducted the litigation. Mr Cooke referred their Lordships to a recent observation of Lord Bingham of Cornhill in Grobbelaar v News Group Newspapers Ltd[2002] 1WLR 3024, 3034, para 21:
"Only rarely and with extreme caution will the House permit counsel to withdraw from a concession which has formed the basis of argument and judgment in the Court of Appeal."
48. That is a sound policy and in deciding to allow the concession to be withdrawn, their Lordships hope they have displayed the same caution as the House did in Grobbelaar's case. If there were any possibility that the outcome could have been affected if the point had been taken earlier, that would of course have been an entirely different matter. But their Lordships consider that in this case the plaintiffs can be adequately compensated by a suitable order for costs.”
49. InCrane T/A Indigital Satellite Services v Sky-In-Home Ltd[2008] EWCA 978 the question was whether the appellant should be permitted to advance an interpretation of the Commercial Agents (Council Directive) Regulation which had not been run at trial. The Court of Appeal refused to grant the permission sought. Arden LJ said that a new point would not be allowed to be taken if there was a risk of prejudice to the other party, which would be the case if, had the new case been raised at trial, the other party might have adduced other evidence or otherwise have conducted the case differently. She went on at [21]:
“If there is any area of doubt, the benefit of it must be given to the party against whom the amendment is sought. It is the party who should have raised the point at trial who should bear any risk of prejudice.”
49. Arden LJ also observed at [28] that where a party had expressly conceded a point, that would “be a strong indication that permission to raise a new point should not be given since a party cannot blow hot and cold and be enabled to act in a manner inconsistent with his express act.”
50. InSlack & Partners Ltd v Slack[2010] EWCA Civ 204, the Court of Appeal approached the question whether a concession could be withdrawn on appeal on the basis that the recanting party had to show that the case would not have been conducted differently if the concession had not been made below, or that there was no risk of prejudice arising from a difference, as to which the other party should have the benefit of the doubt.
51. The authorities cited above were considered by Mann J inBT Pension Scheme Trustees Limited v British Telecommunications Plc, Secretary of State for Business, Innovation and Skills[2011] EWHC 2071 (Ch) (“BT Pension Scheme”). There, in formulating preliminary issues to be decided by the court in a series of separate trials, the Secretary of State, having conceded that liabilities arising from fully funded bulk transfers into the scheme were within a guarantee, whether or not they arose from amendment, sought after a trial of some of the issues to argue that, if such liabilities arose from amendment, they were outside the guarantee. Mann J held that the situation was equivalent to a concession being withdrawn on appeal and went on in [44] of his judgment to extract the following propositions from the cases:
“i) The resiling party has the burden of establishing that the previously forgone point should be raised.
ii) It will be harder to raise a point which has been expressly conceded.
iii) If taking the point would risk causing prejudice to the other party, in the sense that it might have been deprived of the opportunity of dealing with the case differently in the court below, then it is unlikely that resiling will be allowed. The greater the risk, the less likely it is that it will be allowed.
iv) There is a low threshold of risk for these purposes …
v) The burden of establishing no risk is on the party who wishes to withdraw the concession, and the other party should have the benefit of any doubt in this area.”
52. Applying these propositions, Mann J held that the Trustee should not be permitted to withdraw the concession. Whilst the other parties could not show that they would be prejudiced from not having put in additional evidence at the first trial:
“… the whole legal landscape would have been different, and they would have been starting from a different point in argument. The questions might even have been ordered differently, and that too would have affected the argument. It is not possible to conclude that the non-Secretary of State parties would not have been able to do anything materially different, or to affect the debate on post-transfer date amendments generally. If I were to allow the Secretary of State to adopt his new position and resile from his concession the other parties might be starting the debate from now on in a different position to that which they would have been in had there been no concession in the first place. There is therefore a risk of prejudice, and it is significantly over the threshold which the above cases seem to set.”
53. Mann J also took into account,inter alia,the fact that: (i) the Secretary of State had not given any reason why he now wished to change his mind other than he wanted to run an important point; (ii) the concession had been an express concession; and (iii) the withdrawing party was not an underfunded, underrepresented individual but was a large government department with extremely able lawyers which had made the concession in the course of carefully conducted negotiations and with eyes wide open.
B. Whether IGPL should be permitted to withdraw the Concessions
54. Relying on the approach taken by Mann J in theBT Pension Schemecase, SCB submits that IGPL has not discharged the burden on it to show that there would be no risk of prejudice if withdrawal of the Concessions were permitted. On the contrary, withdrawal would radically change the “legal landscape”, with the parties starting from a different point in the argument, with the consequence that the order and emphasis given to the legal arguments would have been entirely different.
55. In reply to this submission, IGPL makes no attempt to deal with the considerations articulated in the above-cited cases. Instead, it simply contends that any concession as to the jurisdiction of the DIFC Courts can be withdrawn because jurisdiction cannot be grounded on concession but only on the applicable statutory grounds. In support of this contention, Mr Patchett Joyce for IGPL referred to the following authorities: (i) a decision of the USC (Appeal No.1 of Judicial Year No. 21) (“Appeal 1 of Judicial Year 21”); (ii)Hardy v Sefton Metropolitan Borough Council[2006] EWHC 1928 (Admin) (“Hardy”), a decision in the English Administrative Court; (iii)Hardt and Hardt Trading FZE v Damac (DIFC) Co Ltd et al(CFI 36/ 2009) (“Hardt”); and (iv)National Bonds Corporation PJSC v Taaleem PJSC and Deyaar Development PJSC(CFI 001/2011).
56. In the first of these authorities, it was held that the non-DIFC Dubai Courts had wrongly assumed jurisdiction on the basis of an agreement as to jurisdiction by the parties. Instead, by reason of Article (31)(3) of the CPC (which stipulates that it is the court in the territory where the defendant resides or where the subject agreement was executed which had jurisdiction), the courts with jurisdiction over the dispute were the courts of Abu Dhabi. The USC said:
“It is established in this court that each one of the Emirates in the United Arab Emirates has an independent jurisdiction concerning the legal matters which do not fall under the jurisdiction of the Federal Courts.
Dubai Emirate maintained the judicial power of its local courts. Therefore those courts have the jurisdiction concerning the lawsuits in the territory of the Emirate and in which the judiciary represents a judicial body independent of the federal judicial body. Thence, distribution of jurisdiction for hearing of the legal lawsuits among federal and local courts in Dubai is a territorial jurisdiction related to public order, necessitating for each court, whether affiliated to the association or to any judicial bodies in Dubai, to abide by the borders of its territory, without any negative or positive violation, where such court may not waive its jurisdiction or contend to the jurisdiction of another court according to the provisions of constitution and the laws issued in execution of the same.
The parties may not violate rules of such jurisdiction and the court shall proprio motu rule with the same since it is related to public order.”
57. TheHardycase was an appeal from the determination of the Merseyside Valuation
Tribunal
“I do not in any way underestimate the importance of the principles explained in these two cases. Those principles will often be applied to an appeal to this court. However, the present case is different in at least one crucial respect. The point at issue concerns the jurisdiction of the Tribunal. Jurisdiction cannot generally be acquired by concession. In essence, by paragraphs 12 and 13 of his skeleton argument the appellant asserts that the Tribunal had the jurisdiction not to make the order which would otherwise have been appropriate. If he wishes to advance that proposition, he cannot in my view complain if the respondent in this court questions the Tribunal's jurisdiction, even though the respondent did not do so below.”
58. InHardt, Justice Sir Anthony Colman considered the effect of Rule 12.5 of the Rules of the DIFC Courts where a party has failed to make an application disputing the court’s jurisdiction within the specified time. Citing Dicey, Morris & Collins, Conflicts of Law, 14th ed., para 11-138, Justice Colman held that the consensual submission to the court’s jurisdiction contemplated by the rule cannot extend the scope of that jurisdiction beyond that accorded under the national laws that confer jurisdiction on the court.
59. InTaaleem, the DIFC Courts of Appeal, having concluded that the parties intended in Clause 14.1 of the Murabaha Agreement to refer to the DIFC Courts and not to the non-DIFC Dubai Courts, went on to consider whether on the facts there was jurisdiction under the provisions of Article 5(A)(1) of the Judicial Authority Law. The Court said at [62] it was taking this course because “it is not open to the parties to a contract to contract into the DIFC Courts’ jurisdiction if the dispute in question falls outside the scope of the Court’s jurisdiction as delineated by the legislation.”
60. The law applicable to the withdrawal of concessions in the DIFC Courts is a matter for the procedural law of the DIFC Courts, and we are of the clear view that that law should be closely modelled on the principles articulated in the decisions cited above, including in particular the propositions formulated by Mann J in theBT Pension Scheme
61. The principle that parties cannot by agreement bring a dispute within the jurisdiction of a court where the case does not come within the delineated ambit of the court’s jurisdiction is well established. InEssex Incorporated Congregational Church Union v Essex County Council[1963] AC 808 at pp. 820-821, Lord Reid said:
“…it is a fundamental principle that no consent can confer on a court or tribunal with limited statutory jurisdiction any power to act beyond that jurisdiction, or can estop the consenting party from subsequently maintaining that such court or tribunal had acted without jurisdiction.”
62. The purpose of the principle is to give effect to the legislation or other instrument establishing the court’s jurisdiction, the delineation of which will have been responsive to a number of important considerations, including, in the case of a national court, the relationship between that court and other courts within the same polity and/or other external courts to whom principles of comity should be extended.
63. The question is whether this “non-facultative principle” applies to the concessions made in this case, so that IGPL is free to withdraw them without regard to the propositions articulated by Mann J in theBT Pension Scheme
64. In our judgment, the answer to this question is “yes” in regard to the Jurisdiction Concession. Although jurisdiction overall was not conceded, a ground of jurisdiction was, and consistently with the non-facultative principle, we find that IGPL must be permitted to withdraw this concession in this appeal. However, given the express nature of the concession and the resulting radical change to the “legal landscape”, which we find will result from permitting withdrawal, our grant of permission will be on terms that IGPL should pay the costs below on an indemnity basis and the costs of this appeal attributable to IGPL’s withdrawal of the Jurisdiction Concession on an indemnity basis.
65. Turning to the Choice of Court Concession, namely that the parties had not by the wording of the relevant agreements opted out of the DIFC Courts’s jurisdiction, we think that the non-facultative principle does not apply here. We are of this view because this second concession was not a concession that any of the delineated grounds of jurisdiction was applicable. Instead, it went to an issue of contractual interpretation which, whatever the decision, was going to leave open the question whether one of the specified grounds of jurisdiction had been made out.
66. As we have said, IGPL has not sought to engage with the propositions articulated by Mann J in theBT Pension SchemeThus, it has not attempted to discharge the burden on it of persuading this Court that there is no risk of prejudice to SCB if the second concession is allowed to be withdrawn. In these circumstances and in view, in particular, of: (i) the express nature of this concession; (ii) the fact that the concession was made with the benefit of competent and experienced legal advice; and (iii) the extent of the change to the legal landscape that would result from withdrawal, we are of the view that IGPL should not be permitted to withdraw the Choice of Court Concession.
67. In any event, for the reasons given at [123] to [154] below, we are entirely satisfied that the Choice of Court Concession was well made.
V. ISSUE 2: THE
JURISDICTION
A. Whether the DIFC Courts should stay these proceedings
68. Before considering whether the DIFC Courts have jurisdiction to determine the present dispute, we will first consider a preliminary issue arising from IGPL’s argument that these proceedings should be stayed in the light of parallel proceedings taking place in Sharjah.
69. While it is not entirely clear from IGPL’s submissions, we understand IGPL to be advancing two grounds in support of its argument.
70. IGPL’s first ground appears to be that, in the light of parallel proceedings between the parties in the DIFC and in Sharjah, there is a jurisdictional conflict which ought to be resolved by the USC and the DIFC Courts should not determine it now.
71. In our view, the point can be disposed of shortly. As was held by the USC in Case No [10/28 Jurisdictional Conflict], Hearing 5 May 2002 (“Case No 10/28”), a jurisdictional conflict that must be referred for resolution by the USC arises only when conflicting final judgments on jurisdiction have been issued by two or more courts of the UAE. The point was recognized inAllianzat [28]:
“Even though the rules of the Constitution and USC Law No. 10/1973 are silent about the timing of when the conflict can be brought before the USC, the Union Supreme Court with the authority to interpret the Constitution and its Laws given to it by the Constitution formulated a principle derived from the case no. [10/28 Jurisdictional Conflict. Hearing 5/5/2002], where it was held:
This principle states that the USC shall exercise its jurisdiction to determine the conflict of jurisdiction between two final judgments of a federal and local judicial authority or between two local judicial authorities in the UAE.”
72. Given that the Sharjah Court of Appeal had, on 15 September 2015, upheld the Sharjah Action Judgment, there does not presently exist any conflict between the judgments issued by the DIFC Courts and the Sharjah Courts in respect of the present dispute. We appreciate that the Sharjah Appeal Judgment is now the subject of an appeal before the USC. However, the resolution of a jurisdictional conflict pursuant to Article 99 of the UAE Constitution is not a pre-emptive mechanism, as is clear fromCase No 10/28, so until the USC issues a jurisdictional finding in favour of IGPL, a jurisdictional conflict has not arisen.
73. Accordingly, the only ground which IGPL may rely on to request a stay is that case management considerations warrant it. To this end, IGPL points out that , the outcome of the appeal against the Sharjah Appeal Judgment before the USC would decisively resolve the issue before this Court now. If the appeal were resolved in IGPL’s favour, the USC’s decision would preclude the DIFC Courts having jurisdiction over this dispute. Conversely, if the appeal is dismissed, then it would “pav[e] the way for resumption of the trial before the DIFC Courts”. We understand IGPL’s point to be that, substantial savings in costs might be achieved if the DIFC Courts were to await the USC’s decision on the Sharjah Appeal Judgment.
74. SCB contends that a proper application of case management principles militate against IGPL’s request for a stay of proceedings. Relying on the House of Lords’ decision inReichold Norway ASA v Goldman Sachs International[2000] 1 WLR 173 (“Reichold”), SCB submits that a stay on the grounds of case management considerations will be granted only in “rare and compelling cases”. The burden of proving this falls on IGPL, the party seeking a stay. SCB argues that the existence of parallel proceedings in Sharjah, which is the only factor which IGPL relies on, does not by itself establish a compelling need for a stay in the present case, and that the decisive consideration in that context is which set of proceedings was commenced first and was most mature. In its submission, this is evident from the English High Court’s decision inMacdermid Offshore Solutions LLC v Niche Products Limited[2013] EWHC 1493 (Ch). The following factors in totality point decisively against granting a stay of these proceedings:
(a) the DIFC proceedings were instituted 5 months before the Sharjah Court proceedings;
(b) the prospect of a “jurisdictional conflict” is unlikely to arise given that the Sharjah Courts have denied jurisdiction to date;
(c) the jurisdictional issue before this Court is likely to be resolved before the appeal against the Sharjah Appeal Judgment;
(d) the DIFC Courts are likely to determine the merits of this dispute before the Sharjah Courts would; and
(e) any incremental costs incurred as a result of a refusal to grant a stay are not sufficient justification to grant a stay;
(f) jurisdictional question is likely to be resolved by the DIFC Courts before the USC.
75. SCB also points out that it will be prejudiced if a stay were granted by the DIFC Courts, because any further delays could affect the value of the security it seeks to enforce in these proceedings, which has been and looks likely to continue fluctuating.
76. The Parties do not disagree that, as was held inReichold, a stay would be granted on case management grounds only in rare and compelling cases, and that the burden of proving that this is such a case falls on the party seeking a stay, IGPL. The only case management consideration which IGPL has pointed to is the existence of parallel proceedings in both the DIFC and Sharjah. In our judgment, that is only the starting point, and the question is why the DIFC Courts must grant a stay in deference to those proceedings.
77. We agree with SCB’s submissions that a stay is not appropriate in the present case for all the reasons that SCB has put forward. In particular, we emphasize that the relative maturity of the proceedings in question is a decisive consideration. As the learned authors of Collier’s Conflict of Laws (Cambridge University Press: 4thEdition, 2013) have explained at p. 170, “it is only when the foreign proceedings are well advanced that the [Courts] will refuse to take jurisdiction in proceedings here”. All of the factors which SCB has pointed to establish the opposite conclusion.
78. Accordingly, we reject IGPL’s submission that these proceedings ought to be stayed on the basis that parallel proceedings in Sharjah are ongoing.
B. Does the UAE Constitution and the CPC preclude the DIFC Courts from having competent jurisdiction over the present dispute?
79. The first question which arises for our consideration is whether the constitutional and federal provisions relied on by IGPL impose any limits on this Court’s jurisdiction. We accept that, as IGPL argues, the DIFC Courts cannot enforce any law which contradicts or subverts the UAE Constitution. Yet it is clear from IGPL’s submissions that it does not rely on any particular provision of the UAE Constitution as directly establishing that the DIFC Courts do not have competent jurisdiction to hear the present dispute. Mr Aidarous for IGPL confirmed this position at the oral hearing:
“Now what is the rule for each emirate claiming their own jurisdiction? The answer we will not find in constitution, I am afraid, you will find the answer in the Civil Procedure Code of the UAE, which is law number 11/92.”
80. IGPL’s case is that certain provisions of the CPC prescribe mandatory limits on jurisdiction for each Emirate, and that the application of those provisions will establish that the DIFC Courts do not have competent jurisdiction to hear the present dispute. IGPL’s conclusion is therefore that this Court’s decision inCorinthwas erroneous because it invested in the DIFC Courts a wider jurisdiction than permitted under the CPC.
81. SCB argues that the CPC is inapplicable and that, even if the CPC were applicable, the applicable provision is Article 31 of the CPC which would confer jurisdiction on the DIFC Courts. IGPL denies this, contending that Articles 20 to 24 are the applicable provisions, and that those provisions would establish that the DIFC Courts do not have jurisdiction.
82. Parenthetically, we make two observations at this juncture. First, IGPL has neglected to identify which of Articles 20 to 24 it specifically relies on or to explain how it establishes that the DIFC Courts do not have jurisdiction. Second, in Appeal 1 of Judicial Year 21 and Petition No. 36, decisions which IGPL has cited in its arguments, the USC and the Dubai Court of Cassation respectively applied Article 31 of the CPC to determine which of two alternative Emirate Courts had competent jurisdiction to hear a dispute. As will be explained at [83] to [99] below, the question of what provisions of the CPC delineate each Emirate’s jurisdictional limits may be left aside because, in our view, the CPC does not apply to the DIFC Courts at all.
83. The legal framework creating the DIFC and the DIFC Courts has been canvassed extensively by the DIFC Courts inMeydan. A proper understanding of this framework is pivotal to our decision, so we set this out below. The starting point must necessarily be the UAE Constitution and, in particular, the amendment to Article 121 of the UAE Constitution which deals with the division of powers between Federal and Emirati authorities, and which allows the Federation to enact laws relating to the establishment and regulation of financial free zones. Article 121 of the UAE Constitution, as amended, provides as follows (in an agreed or official translation):
“Without prejudice to the provision of the previous article constitution, the Union shall have exclusive legislative jurisdiction in respect of… organization and method of establishing financial free zones and scope of excluding the same from the implementation of the Federal legislative provisions.”
84. In line with this, Federal Law 8 was enacted to allow financial free zones to be established in any Emirate of the UAE by Federal Decree. Article 3(2) expressly exempts free zones from the application of Federal civil and commercial laws, and states (in an agreed or official translation):
“Further, these zones and Financial Activities are subject to all provisions of Federal Law with the exception of the Federal civil and commercial laws.”
85. Article 7(3) of Federal Law 8 further provides (in an agreed or official translation):
“Subject to the provisions of Article 3, for the purpose of establishing a Financial Free Zone, the relevant Emirate may issue regulations necessary for it to perform its activity.”
86. Subsequently, Federal Decree No. 35 of 2004 (“Federal Decree 35”) was enacted specifically to establish the DIFC as a financial free zone in the Emirate of Dubai and demarcate the territorial boundaries of the DIFC within Dubai. Article 1 states (in an agreed or official translation):
“The establishment of financial free zone in the Emirate of Dubai to be named (Dubai International Financial Centre).”
87. Thereafter, the Judicial Authority Law, as amended by Dubai Law No. 16 of 2011, was enacted to establish the DIFC CFI and the DIFC Courts of Appeal. It also defined the scope of this Court’s jurisdiction. The applicable article on jurisdiction, otherwise known as the “Gateways”, is Article 5(A), which provides (in an agreed or official translation):
“The Court of First Instance:
i. The Court of First Instance shall have exclusive jurisdiction to hear and determine:
1. Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;
2. Civil or commercial claims and actions arising out of or relating to a contract or promised contract, whether partly or wholly concluded, finalized or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract;
3. Civil or commercial claims and actions arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and is related to DIFC activities;
4. Appeals against decisions or procedures made by the DIFC Bodies where DIFC Laws and DIFC Regulations permit such appeals;
5. Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.
ii. 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.
iii. The Court of First Instance may hear and determine any civil or commercial claims or actions falling within its jurisdiction of the parties agree in writing to submit to the jurisdiction of another court over the claim or action but such court dismisses such claim or action for lack of jurisdiction.
iv. Notwithstanding Clause (2) of Paragraph (A) of this Article, the Court of First Instance may not hear or determine any civil or commercial claim or action in respect of which a final judgment is rendered by another court.”
88. Thereafter, DIFC Law No. 10 of 2004 was enacted to provide for the independent administration of justice in the DIFC in accordance with the Judicial Authority Law. Among other items,
the law
“19. Jurisdiction
(1) The DIFC Courts of First Instance has original jurisdiction pursuant to Article 5(A) of the Judicial Authority Law to hear any of the following:
(a) civil or commercial cases and disputes involving the Centre or any of the Centre’s Bodies or any of the Centre’s Establishments;
(b) civil or commercial cases and disputes arising from or related to a contract concluded or a transaction concluded by any of the Centre’s Establishments or the Centre’s Bodies;
(c) civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre; and
(d) any application over which the DIFC Courts has jurisdiction in accordance with DIFC Laws and Regulations;”
89. Notwithstanding this legislative framework, IGPL argues that the CPC provisions relating to jurisdiction concern a “a constitutional matter”, so they cannot be contracted out of and ought to be taken into account in determining the scope of the DIFC Courts’ jurisdiction under the Judicial Authority Law. IGPL contends that H.E. Justice Ali Al Madhani erred in law in ARB-001-2014,X1 and X2 v Y(“X1 and X2 v Y”) by holding:
“…by Federal law, the UAE has dis-applied the Civil and Commercial laws of the UAE within the DIFC and has conferred onto the Dubai authorities the power to enact legislation. There can be no conflict between DIFC Law and UAE Law with the CPC, which does not apply.”
90. IGPL submits that a distinction should be drawn between “allocation of jurisdiction between the various courts in the Emirates” on the one hand and “matters of ordinary civil procedure” on the other. It argues that the former is a constitutional matter that cannot be derogated from, and so the exemption of free-zones from Federal Civil and Commercial law should be construed narrowly to cover only the latter. In this regard, IGPL has referred us to Appeal 1 of Judicial Year 21 and Appeal No. 137 of Judicial Year 11 (21 January 1990) (“Appeal 137 of Judicial Year 11”). Further, IGPL also relies on H.E. Justice Ali Al Madhani’s judgment inAllianzat [61].
91. With respect, we do not think that any of the authorities which IGPL relies on supports the proposition it advances.
92. IGPL relies on the following passage in Appeal 1 of Judicial year 21, where it was held that (in an agreed or official translation):
“And whereas, the Emirate of Dubai has maintained its own judicial authority to its local courts. Therefore, this Court [the Court of Dubai] is the competent Court in respect of the cases falling within the territory of the Emirate where its judiciary is an independent jurisdiction from the Federal jurisdiction, and therefore,the distribution of jurisdiction between the Federal Court and the local Court of Dubai is a territorial/state jurisdiction[the Arabic word is "wala-ee"]involving public orderand each Court, whether it belongs to the federal or to one of the local judicial authorities in Dubai should adhere to the limitation of its territorial jurisdiction, and may not negatively or positively violate it.
Therefore,it may not relinquish its jurisdiction, nor may it deprive another Court of jurisdiction; this is pursuant to the provisions of the Constitution and the laws issued in implementation of the Constitution, and it is forbidden to the individual to conclude an agreement which is in violation of these jurisdictional rules, and the Court at its own initiative may implement these rules being a matterof public order. "
93. IGPL also refers to Appeal 137 of Judicial year 11, where the USC held as follows (in an agreed or official translation):
“Pursuant to Article 104 of the Constitution, the Emirate of Dubai has retained judicial authority over its local courts which are accordingly competent to hear cases within the territory of the Emirate of Dubai and their decisions would not be subject to any form of challenge before the Federal Courts.The allocation of competence on court cases between the federal courts and local courts in Dubai is an issue of functional state jurisdiction that defines the competence of the various judicial bodies of the UAE and as such is related to public policy.”
94. We understand the USC to be establishing in these two decisions an uncontroversial proposition, namely that where a UAE court is bound by the CPC, it must adhere to the jurisdictional allocation prescribed by the CPC and disputants cannot contract out of it. This proposition, we unreservedly accept. We also accept that the CPC provisions on jurisdiction concern a matter of public order. But these do not go far enough to support the wider proposition that IGPL now advances, namely that the financial free zones such as the DIFC Courtsmusttake into account the limits imposed by the CPC when determining questions of jurisdiction. The fact that the CPC provisions on jurisdiction are driven by considerations of public order is insufficient; IGPL mustalsodemonstrate that a failure to apply the CPC to free zones would offend public order. Having regard to the legislative history underpinning the establishment of UAE free zones set out above, such a conclusion is not sustainable. It is critical that the exemption of UAE free zones from the CPC is effected both at the constitutional level (Article 121 of the Constitution) and the federal level (Article 3(2) of Federal Law 8). Two conclusions flow from this. First, the UAE free zones’ exemption from the CPC (in its entirety) is consistent with and sanctioned by the UAE’s legislation. Second, far from subverting public goals pursued by
the state
95. Neither do we think that H.E. Justice Ali Al Madhani had intended to articulate any principle to that effect inAllianz. This is apparent when H.E. Justice Ali Al Madhani’s judgment is examined as a whole. The passage which IGPL relies on is set out at [61] ofAllianzand is reproduced below:
“ The DIFC Courts are a common law court. However,since they are subject to the Constitutional and Federal laws which are of a regulatory nature that does not set them apart from the rest of the UAE Courts. Therefore, the only way to apply the FNC doctrine is in circumstances in which the competent forum is outside the jurisdiction of the USC.”
(emphasis added)
96. IGPL submits that the “regulatory” Constitutional and Federal laws which the DIFC is subject to extends to cover “provisions as to jurisdiction”. This is a bare assertion which finds no support from H.E. Justice Ali Al Madhani’s judgment inAllianz. What IGPL ignores is that H.E. Justice Ali Al Madhani inAllianzdetermined the question of the DIFC’s jurisdiction by applying Article 5 of the Judicial Authority Law (Allianzat [36] to [41]). This clearly impugns IGPL’s suggestion that H.E. Justice Ali Al Madhani contemplated the CPC provisions on jurisdiction to be “regulatory” Federal laws which the DIFC could not derogate from. In our view, H.E. Justice Ali Al Madhani was acknowledging that, while free-zones were exempt from Federalcivil and commercial laws, they were still subject to Federal laws in other respects, such as UAE Federal Penal and Criminal Laws, Family Law and Immigration Laws. He was doing no more than articulate what was already provided for in Article 3(2) of Federal Law 8.
97. Accordingly, IGPL’s submission that H.E. Justice Ali Al Madhani erred in law inX1 and X2 v Yis incorrect. His decision is consistent with Article 3(2) of Federal Law 8, which provides that civil and commercial laws of the UAE shall not apply to the free zones. Additionally, pursuant to Article 7(3) of Federal Law 8, power was transferred by the Federal Government to the individual Emirates to issue the necessary legislation for the conduct of a free zone’s activities, within the limits of the goals of establishing the free zone. Accordingly, the Emirate of Dubai was expressly empowered to pass legislation for the conduct of the DIFC in a manner which allowed the DIFC to derogate from UAE civil and commercial laws, which includes the CPC.
98. Consequently, the argument put forth by IGPL that the conferral of jurisdiction on the DIFC Courts by Article 5(A)(1) of the Judicial Authority Law conflicts with the CPC, is misconceived and the argument that the CPC is somehow applicable to the DIFC Courts’ jurisdiction is plainly inconsistent with the express disapplication of UAE civil and commercial laws to free zones as set out in Article 3(2) of Federal Law 8. IGPL’s assertion that the CPC provisions on jurisdiction cannot be derogated from because it concerns a “constitutional matter” is a bare assertion that does not withstand scrutiny. We emphasize that the establishment of free zones and their exemption from the application of Federal Laws are constitutionally sanctioned by Article 121 of the UAE Constitution.
99. We therefore endorse H.E. Justice Ali Al Madhani’s decision inX1 and X2 v Ythat the CPC does not apply to the DIFC, and that the DIFC Courts’ jurisdiction is determined solely by the Judicial Authority Law Having so decided, we do not think it is necessary for us to resolve the parties’ dispute over which provisions of the CPC establish each Emirate’s jurisdictional limits.
C. Whether this Court has jurisdiction under the Judicial Authority Law
100. The relevant provision of the Judicial Authority Law which provides for non-consensual bases of the DIFC Courts’ jurisdiction is Article 5A(1):
“(1) The Court of First Instance shall have exclusive jurisdiction to hear and determine:
(a) Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;
(b) Civil or commercial claims and actions arising out of or relating to a contract or promised contract, whether partly or wholly concluded, finalised or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract;
(c) Civil or commercial claims and actions arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and is related to DIFC activities;
(d) Appeals against decisions or procedures made by the DIFC Bodies where DIFC Laws and DIFC Regulations permit such appeals;”
(e) Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.”
101. SCB argues that the DIFC Courts have jurisdiction under Article 5A(1)(a) of the Judicial Authority Law, because SCB is a Licensed DIFC Establishment. In this regard, SCB relies on the wide interpretation of “Licensed DIFC Establishment” adopted inCorinth, where this Court held at [59] that the term must refer to the whole legal entity and not merely the branch registered in the DIFC:
“Centre Establishment" must be a legal entity because that is the only way in which the term “entity” used in Article 2 of Law No. 12 can be understood. Where a bank is licensed to carry on business in a place outside its country of incorporation, it is necessary for that bank to carry on business either through an unincorporated branch of the bank or through a separate legal entity which is a subsidiary of the bank. Bank regulators frequently, if not typically, require foreign banks to carry on mainstream banking business through a branch rather than a local subsidiary. However, it would be uncommon for an unincorporated branch of a foreign bank to be treated under local law as a legal entity separate and distinct from its head office unless it has been separately incorporated as a subsidiary. I cannot therefore accept the proposition advanced by the Deputy Chief Justice that a “Centre Establishment” can be an entity which may be (to use the learned
Judge
102. It was further held inCorinthat [83] and [84] that, beyond the criterion set out above, there is no further transaction-based requirement, such as a requirement that the dispute must concern the activities or conduct of a disputant’s DIFC branch:
“(83) Adopting that approach in the present case, the determinative question becomes "whether access to the jurisdiction of the Court of First Instance through the gateway provided by paragraph (a) of Article 5(A)(1) of the Original Law is restricted … to cases where the civil or commercial claim is connected with (or perhaps, arose out of) the provision or conduct by the entity or enterprise identified as the relevant “Licensed DIFC Establishment” of financial services or other activities in accordance with the DIFC Laws which the entity or enterprise was licensed, registered or authorised by the Dubai Financial Services Authority (“the
DFSA
(84) In my view the answer to that question is “No”…Once it is shown that the party by or against whom the civil or commercial claim is brought is an entity or enterprise licensed, registered or authorized by the DFSA to provide financial services or to conduct any other activities in accordance with the DIFC Laws, the requirement under paragraph (a) is met. The jurisdiction exists ad hominem: there is no further “transaction-based” requirement comparable to those imposed under paragraphs (b) and (c) of Article 5(A)(1).”
103. Applying the approach adopted inCorinth, SCB would be correct in submitting that the DIFC Courts have jurisdiction pursuant to Article 5A(1)(a) of the Judicial Authority Law. SCB is a Licensed DIFC Establishment since it operates in the DIFC through a licensed branch. The fact that the transaction giving rise to the present dispute involves a non-DIFC branch of SCB does not deprive SCB of its status as a Licensed DIFC Establishment. Accordingly, the present dispute is one to which a Licensed DIFC Establishment is a party.
104. IGPL’s case is that this court’s decision inCorinthwas wrongly decided (in particular the holdings set out above), and that the phrase “Licensed DIFC Establishment” should be confined only to the particular branch registered in the DIFC, and not the whole legal entity. To this end, IGPL has advanced various arguments which we think may be understood in three categories, each of which we shall address in turn.
105. First,and in addition to submitting that the UAE Constitution and the CPC precludes the DIFC Courts from having jurisdiction in this case, IGFL argued that the Article 5(A)(1)(a) gateway should be held to be inapplicable and the decision inCorinthoverruled on the ground that otherwise the Court would be assuming an “exorbitant jurisdiction”.
106. As Lord Sumption observed inAbela & Ors v Baardarani[2013] UKSC44 at [53], the use of the expression “exorbitant jurisdiction” in English decisions reflects a concern that service on a party in a foreign state as a means of establishing jurisdiction would involve a breach of that foreign state’s sovereignty. In the light of this concern, the English courts adopted: (i) a cautious approach in deciding whether a party served abroad was within the court’s jurisdiction; and (ii) applied a rule of construction which gave a foreign party the benefit of any doubt there might be whether the postulated jurisdictional gateway applied to his case.
107. “Exorbitant jurisdiction” has more than one meaning. It can denote a situation where jurisdiction is assumed even though the connecting factors linking the forum to the dispute are few and unconvincing. It can also denote a jurisdiction which, under the applicable general conflict rules the forum would not recognize as possessed by a foreign court in the absence of some treaty providing for such recognition (see Lord Diplock inAmin Rasheed Shipping Corp v Kuwait Insurance Co[1984] AC 50 at p.65).
108. We understand IGFL intends to use the expression ‘exorbitant jurisdiction” in both of these senses in advancing its submission thatCorinthshould be overruled on the ground that Article 5(A)(1)(a) should be construed so as not to confer jurisdiction in this case, else the DIFC would be assuming an “exorbitant jurisdiction”. This submission we reject.
109. InCorinth,this Court took considerable pains to construe Article 5(A)(1)(a) in the light of a strongly advanced exorbitant jurisdiction submission and concluded nonetheless that jurisdiction was established if one of the parties, as here, was a Licensed DIFC Establishment. References in the judgments in that case to the role that FNC might play in conjunction with the Article 5(A)(1) (a) gateway contemplated an available forum in a state outside the UAE. In our judgment, the decision was correct and should be upheld.InCorinthat [67], it was held that there would not be “an exercise of exorbitant jurisdiction by the DIFC Courts over banks outside the DIFC because that universal jurisdiction over foreign banks with an unincorporated branch in the DIFC would be subject to the doctrine offorum non conveniens.” We think the point made is a broad one,vizso long assomemechanism exists to curtail the inappropriate exercise of jurisdiction, the DIFC Courts could not exercise exorbitant jurisdiction in the manner complained of by IGPL. Accordingly, the fact that there may be particular cases where the doctrine of FNC is inapplicable is not by itself a justification for departing from the definition of “Licensed DIFC Establishment” adopted inCorinth, if an alternative mechanism exists to perform a similar function as the FNC doctrine. As we shall explain below at [159] to [197], such cases arise when the alternative forum are all courts of the UAE, in which casethe UAE Constitution provides a different solution (in place of the FNC doctrine) by empowering the USC to resolve jurisdictional conflicts between the competing courts.
110. Second, IGPL argues that the concept of a “branch” has special significance under UAE law would only be recognized if its narrow interpretation were adopted. IGPL correctly accepts that (and as we have held above) the DIFC Courts are “not bound to the Federal laws and the legal concepts as prevailing in the UAE legal system”. Nevertheless, IGPL has pressed this Court to take into account the concept of a “branch” under UAE law when interpreting “Licensed DIFC Establishment”, because the concept will be applied by the USC should it be called upon to resolve any jurisdictional conflict between the DIFC Courts and any other court of the UAE.
111. As a matter of UAE procedural law, IGPL submits that the concept of a “branch” is afforded significant weight when determining (i) the applicable law to the dispute (ii) whether a foreign company is subject to UAE regulations and laws and (iii) which Court should have jurisdiction over a particular dispute. To this end, IGPL has referred us to Article 11.2 of the UAE Civil Code, Article 314 of the UAE Commercial Companies Law and Article 33 of the CPC. IGPL has also referred us to a decision of the Dubai Court of Cassation in Petition No. 36 of 2007 (“Petition No. 36”) where it was held that, applying UAE procedural law (namely Articles 31 and 33 of the CPC), a claim may only be brought against a defendant company in the jurisdiction where the particular branch of the defendant company which was involved in the dispute was located.
112. These authorities, which are the only authorities which IGPL has relied on, establish that UAE law attaches some significance to the location of a foreign company’s “branch”. But they do not support IGPL’s principal contention that, if a jurisdictional conflict arose between a CPC-exempt free zone such as the DIFC on the one hand and a UAE Court applying the CPC on the other, the USC would resolve the conflict by disregarding the free zone’s right to derogate from the CPC, and compel it to recognize the concept of a “branch” under UAE law for the purposes of jurisdiction. IGPL has provided no authority for such a proposition, and we are satisfied that no such authorities exist because IGPL’s argument would subvert an economic goal expressly sanctioned by Article 121 of the UAE Constitution.
113. Article 121 of the UAE Constitution envisions that UAE free zones may derogate from UAE federal laws. In our judgment, this feature is the defining quality of a free zone, because such derogations are conducive to and attract foreign investments. Giving effect to the free zones’ exemption from UAE federal laws, as provided for by Federal Law 8, is vital to achieving the economic object of free zones. However, IGPL is now inviting this Court to do the opposite. Taken to its logical conclusion, IGPL’s argument would mean that, notwithstanding the UAE free zones’ ostensible exemption from UAE federal laws by operation of Article 121 of the UAE Constitution and Federal Law 8, the DIFC (and indeed any other free zone) would nevertheless be bound indirectly by UAE federal laws because the USC would adhere to UAE law when a jurisdictional conflict arises between a free zone and another Court of the UAE. The absurdity of this result makes plain that IGPL’s second argument cannot be accepted.
114. IGPL’s third argument is that the wide interpretation of “Licensed DIFC Establishment” adopted inCorinthis wrong because it invests in the DIFC Courts a jurisdictional reach that is wider than the scope of the DIFC’s regulations. IGPL argues that this result is erroneous for several reasons, all of which we reject.
115. IGPL’s first relies on Articles 9 and 10 of Dubai Law No. 9 of 2004 (“Dubai Law No. 9”) which provide as follows:
“Article 9
“Licensed
Centre Establishments
…
Article 10:
“Centre Establishmentsshall carry out their activities in accordance with the Centre’s Laws, Centre’s Regulations and the licenses issued to them. Centre Establishments may be located in the Emirate outside the Centre for a period not exceeding four years from the date of the establishment of the Centre and in accordance with the conditions and restrictions determined by the
Centre Authority
(emphasis added)
116. IGPL contends that the term “Licensed DIFC Establishment” must be interpreted consistently with other similar references such as “Centre Establishments” in Dubai Law No. 9. It submits that the term “Centre Establishments” in Dubai Law No. 9 can only refer to theparticular branchin the DIFC and not the entire legal entity. In IGPL’s words:
“… it can only be the Branch of SCB in the DIFC which is caught by the definition because it is that Branch, not SCB elsewhere (or as a whole) that has been licensed/registered or otherwise authorised to carry on financial and banking business in the DIFC, or is carrying on business in the Centre. It would be nonsensical to regard SCB’s branch in (for example) Almaty, Kazakhstan (assuming it has one) as being either a Licensed Centre Establishment or a Centre Establishment, and an equal nonsense to regard any other SCB branch in any other jurisdiction as such, too; not least, because the co-relative of being licensed, registered or otherwise authorised is being regulated by the authority that has conferred the licence, registration or other authorisation. On that footing, every SCB branch globally would be subject to regulation by the DIFC competent authorities, and the DIFC’s expressed intention (see, ¶[52], below) to work with the “home regulator” of foreign recognised companies in the DIFC would be meaningless.”
117. It is plain from the highlighted section of the extract above that IGPL’s argument is circular and must therefore be rejected. In our view, interpreting “Centre Establishments” to mean the whole legal entity of a company operating in the DIFC does no violence to the language of Articles 9 and 10 of Dubai Law No. 9. Neither would it mean, contrary to what IGPL contends, that the activity of SCB’s (or any other Licensed DIFC Establishment’s) non-DIFC branches would be curtailed by DIFC regulations, since the DIFC’s regulations only apply to activities taking place in or having an effect on the DIFC. For example, Markets Law DIFC Law No. 1 of 2012 expressly provides that its provisions apply only in “the jurisdiction of the Dubai International Financial Centre”, and the general prohibition imposed by Article 11 against the making of security offers is confined to those made “to the Public in or from the DIFC”. Once it is appreciated that the DIFC’s regulations are not extra-territorial in their scope, it becomes clear that the scenario posited by IGPL can only be described as fanciful.
118. IGPL also argues that its narrow interpretation is justified because there must be unity between the territorial scope of the DIFC’s regulations and the DIFC Courts’ jurisdictional reach. IGPL put this argument in the following terms:
“92. In short, once a Branch has been established, licensing/regulation and the carrying on of business activity are co-relatives. Business can only be carried on pursuant to the relevant licence, which engages the relevant regulatory (and, jurisdictional) regime. SCB possessed licences to carry on business both in Dubai and the DIFC. The critical question must then become: pursuant to which licence was the business in question carried out? The business relevant to the present dispute was carried out in Sharjah and/or Dubai, but not in the DIFC. Hence, the applicable licensing, regulatory and, jurisdictional, regime cannot be the DIFC.
…
105. Thus, in order to carry on business activities in the DIFC law area, SCB needed separate and distinct licences from those that it needed to carry on business activities in the Dubai law area. The Commercial License issued by the Dubai Government Department of Economic Development did not cover SCB to carry on business activity in, or through, the DIFC, and SCB needed additionally to obtain a separate annual DIFC Commercial License (see, I3, at p.[146]).
106. Thus, the separate “law areas” of Dubai on the one hand, and of the DIFC on the other, are strictly maintained and observed. Clearly, the regulatory regime and jurisdictional reach of the DIFC law area can apply only to business activities carried on in the DIFC.”
119. Where IGPL’s argument has taken a leap of logic is in conflating the DIFC’ssubstantiveregulatory laws and the DIFC’sprocedural laws. In our view, and contrary to IGPL’s suggestion, there is no necessary connection between the two. A jurisdiction may enact extra-territorial statutes prohibiting certain conduct taking place abroad, even though its courts’ jurisdiction over an entity falling afoul of those prohibitions turns narrowly on proper and effective service on that entity. Equally, a jurisdiction may enact regulations which cover only activities taking place within its territory, but prescribe jurisdictional rules which permit its courts to hear disputes concerning conduct taking place abroad. No absurdity arises in either scenario. It seems elementary to us that substantive rules and procedural rules operate on different planes, so there is no merit to IGPL’s unsubstantiated suggestion that there must be unity between them as regards territorial scope.
120. IGPL further argues that the wide interpretation adopted inCorinthis illogical. IGPL points out that a foreign company may choose to operate in the DIFC in two ways. It could either incorporate a subsidiary in the DIFC or register a branch in the DIFC. In the former arrangement, the DIFC Courts would not have jurisdiction over a foreign (parent) company if the dispute only involved the DIFC-incorporated subsidiary, as IGPL correctly submits. IGPL then argues that “[i]t is quite illogical to contend that a less formal, branch-as-opposed-to-subsidiary, presence should invest the DIFC Courts with a broader, and exorbitant, jurisdiction.” Leaving aside the issue of exorbitant jurisdiction, which we have already addressed above, it is not self-evident to us where the illogicality perceived by IGPL lies.
121. In our view, IGPL’s confusion arises from the inappropriate manner in which it has framed the issue. It is not whether the DIFC Courts’ jurisdiction isexpandedby the mere fact that a company operates in the DIFC through a branch. Rather, it is whether it is appropriate for an entity tocircumscribeits obligations (including the extent to which it is bound by a court’s jurisdiction) and liability by operating through a subsidiary. InAdams v Cape Industries Plc[1990] Ch 433, CA, Slade LJ remarked at p.544 that “the right to use a corporate structure in this manner is inherent in our corporate law”. We agree, and see no merit in IGPL’s complaint against a trite principle of corporate law.
122. Accordingly, we are not persuaded by any of IGPL’s arguments that Corinth was wrongly decided. Applying the interpretation of “Licensed DIFC Establishment” in Corinth, we hold that SCB meets that definition, and that the DIFC Courts therefore have jurisdiction over the present dispute under Article 5A(1) of the Judicial Authority Law.
D. Whether the parties have opted out of the DIFC Courts’ jurisdiction
123. IGPL argues that, should this Court finds Article 5A(1) of the Judicial Authority Law is satisfied, the DIFC Courts would not have jurisdiction because the parties have opted-out of the DIFC Courts’ jurisdiction. As we have held above, IGPL cannot withdraw the Choice of Court Concession and is therefore bound by its earlier concession that the parties did not opt-out of the DIFC Courts’ jurisdiction by excluding the DIFC Courts from the Agreements’ and Share Pledge Agreement’s choice of court provisions. On this basis alone, IGPL’s second argument must fail.
124. In any event, we share Justice Sir David Steel’s view that the Choice of Court Concession was well-founded for the following reasons.
125. It was held inTaaleemthat: (i) the burden of establishing that the parties had agreed that the DIFC Courts should not have jurisdiction was on the party so contending; and (ii) the test to be applied was the ordinary and natural meaning of the words of the jurisdiction agreement as they would have been mutually understood by the parties having regard to the background circumstances and the nature of the agreement and the context in which the words are used. The same principle was expressed inDhir v Waterfront Property Investment LimitedCFI 011/2009 (“Dhir”) in relation to construing the meaning of expressions used in arbitration agreements. InDhir, it was stated at [81] that the question was one of:
“…contractual interpretation to determine what the Parties (objectively) intended by the arbitration agreement they entered into.”
126. Applying the broad approach set out inTaaleemandDhir, we do not accept IGPL’s submission that (1) the phrase “Dubai Courts” in the Share Pledge Agreement refers only to the non-DIFC Dubai Courts, (2) the phrase “Courts of the UAE” refers only to the UAE Federal Judicial Authority, or (3) that, on a proper construction, the choice of court clauses in the Agreements and Share Pledge Agreement did not give SCB an option to commence proceedings in the DIFC Courts. We now address each argument in turn.
127. The proposition put forward by IGPL, that the meaning of the phrase “Dubai Courts” encompasses only the non-DIFC Dubai Courts (established under Law No. (3) of 1992 and its amendments), does not comport with the reality of the relationship between the DIFC Courts and the non-DIFC Dubai Courts.
128. The DIFC Courts, established under the Judicial Authority Law, is an independent judicial authority in the Emirate of Dubai. However, it is nevertheless an integral part of the Emirate’s judicial system, a fact that was recognized by the DIFC Courts inTaaleem PJSC v National Bonds Corporation PJSC & Deyaar Development PJSCCFI 014/2010 at [6] to [10]. The judgments issued by the DIFC Courts are in the name of His Highness, the Ruler of Dubai. Within the Emirate of Dubai, these judgments are directly enforceable by the competent authority within Dubai Courts as if they were, for enforcement purposes, judgments of the non-DIFC Dubai Courts.
129. IGPL referred us to the decision inHardtwhere Justice Sir John Chadwick (as he then was) held that the phrase “Courts of Dubai” in a choice of court clause referred only to the non-DIFC Courts. IGPL argues that factors considered inHardtare of general applicability and, when applied to the present facts, would demonstrate why the parties could not have intended to choose the DIFC Courts. We fully endorse Justice Sir John Chadwick’s decision, but it is important to appreciate the special facts inHardtunderpinning it, special facts which are not present in this dispute.
130. InTaleem, the DIFC Courts of Appeal had occasion to consider whetherHardtwas correct in interpreting the phrase “Courts of Dubai” to mean only the non-DIFC Dubai Courts. Deputy Chief Justice Colman (as he then was) held thatHardtwas explainable on the basis that the parties had not put forward any arguments that the phrase ought to be construed in so wide a manner as to cover the DIFC Courts. Further, the claimant’s pleaded case inHardtwould not, in any event, have conferred jurisdiction on the DIFC Courts under the Judicial Authority Law as it stood whenHardtwas decided. Having regard to these two special circumstances inHardt, Justice Colman held thatHardtshould be confined to its facts
“It is right to emphasise that references in Hardt to the words in question, in their natural meaning, referring to the non-DIFC Courts of Dubai are to that meaning within the range of possible natural meanings which in the particular circumstances of that case the words must be taken to have. But those particular circumstances are not present in this case. This Court, therefore, has to arrive at that particular meaning of those words within the range of their natural and ordinary meaning which, having regard to all the material circumstances in this case, most closely reflects the mutual intention of the parties.”
131. In our view, the present case is factually distinct fromHardt. Here, SCBdoescontend that the phrase “Courts of Dubai” or “Dubai Courts” should be construed widely to include the DIFC Courts. Further, the DIFC Courts would have competent jurisdiction to hearanydispute between the parties, a possibility that would have been obvious to the parties at the outset of their relationship since SCB is a DIFC Licensed Entity within the meaning of Article 5A(1)(a) of the Judicial Authority Law.
132. IGPL has also referred us toDhir, where the DIFC Courts held that the phrase “Emirate of Dubai”, an indication of the arbitral seat in an arbitration agreement, was intended by the parties inDhirto mean only the non-DIFC Dubai Courts. The reasons which supported this conclusion are set out at [85] – [87] of the judgment inDhir:
“85. There is a close connection with Dubai in the present case (the property is in Dubai, the governing law is Dubai law and the agreement is expressed to be executed in Dubai). In contrast, there is no significant connection with the DIFC because the DIFC-LCIA Arbitration Centre can administer an arbitration with a seat outside of the DIFC. (see Paragraphs 89 to 91 below) i therefore find that the Parties intended Dubai to be the seat.
86. Additionally, the remainder of the MOA refers to Dubai in several places but makes specific reference to the DIFC in only one place, namely within Clause 10.2 of the MOA in selecting "the DIFC-LCIA rules of arbitration applicable to the Dubai International Financial Centre”. It is therefore difficult to accept the) Applicant’s argument that “Dubai” in Clause 10.3 of the MOA was intended by the Parties to mean the DIFC.
87. Furthermore, if the Parties had wanted to stipulate the seat as the DIFC, they could have said so expressly. The Parties are not strangers to the various autonomous zones within the Emirates. Mr Dhir was involved in the negotiations for the land transaction in the related case of CFI 012/2009, and one of the Applicants (Renaissance) in that case is incorporated in the Sharjah Airport International Free Zone. Linarus FZE (Respondent in both cases) is a Jebel Aii Free Zone Company.It would be surprising if the Parties did not know that different laws applied in the DlFC or that they were content to describe the DlFC as simply “the Emirate of Dubai”. The DIFC is within the Emirate of Dubai but the two terms are clearly not synonymous or interchangeable.”
(emphasis added)
133. IGPL argues thatDhiris analogous to the present case and supports its narrow interpretation of the phrase “Dubai Courts”. In its submission, the phrase “Dubai Courts” under the Share Pledge Agreement must have been intended by the parties to mean the non-DIFC Dubai Courts because (i) there is no connection with the DIFC (ii) the parties could not have intended to refer to the DIFC without doing so expressly and (iii) SCB was a sophisticated party which was fully aware of jurisdictional differences and could easily have provided for DIFC jurisdiction had it so desired.
134. In our view, and without detracting from our endorsement of the general approach to contractual construction set out inDhir, IGPL’s reliance onDhirshould be rejected because it fails to take into account the markedly different context in the present case.
135. InDhir, the CFI Court was seeking to ascertain the meaning which the parties inDhirintended the phrase “Emirate of Dubai” to have. It was not disputed that the phrase was intended to designate an arbitral seat. In that context, it was plain that the parties could not have intended the phrase to encompassbothnon-DIFC Dubai and the DIFC. Non-DIFC Dubai and the DIFC have each adopted different arbitration legislation, and each functions as a mutually-exclusive and independent arbitral seat. Accordingly, it seems to us that the question before the DIFC Courts inDhirwaswhichof the two alternative seats the parties inDhirintended to choose by the phrase “Emirate of Dubai”; a choice of either seat is necessarily an implied rejection of the other. It was for these reasons that the DIFC Courts inDhirdrew a sharp distinction between the “DIFC” and the “Emirate of Dubai” (as highlighted in the passage fromDhirset out above) and accorded significant weight to the fact that the dispute bore substantial connection to non-DIFC Dubai but not to the DIFC, in finding that the parties inDhirhad intended the phrase “Emirate of Dubai” to referonlyto non-DIFC Dubai.
136. We think that the analysis inDhiris inapposite because the question before us is a very different one. It falls on us to decide what the parties intended the phrase “Dubai Courts” in a jurisdiction agreement to encompass. With jurisdiction agreements, and in contrast with choosing arbitral seats, parties are free to (and often do) confer jurisdiction on more than one forum. In the present case, the parties could have intended the phrase “Dubai Courts” to mean (i) only the non-DIFC Dubai Courts (as IGPL contends), (ii) only the DIFC Courts, or (iii) both (as SCB contends). IGPL now seeks to persuade us that the parties have chosen to confer jurisdiction on only one forum, the non-DIFC Dubai Courts. The question before us is therefore this: was there any reason why the parties would wish to deprive themselves of the benefit of one of two closely-related and complementary forums in Dubai?In our view,Dhirprovides no answer to the question since it was unarguable there that the Parties could not have intended the phrase “Emirate of Dubai” to designatebothnon-DIFC Dubaiandthe DIFC as the arbitral seats. Here, where the meaning of “Dubai Courts” in a jurisdiction agreement is concerned, the choice of the non-DIFC Dubai Courts and the DIFC Courts arenotmutually exclusive, so the existence or even preponderance of connecting factors pointing towards the former does not evidence an intention by the parties to exclude the latter.We therefore find that the analysis inDhiris inapplicable to the present facts.
137. Neither are we moved to a different conclusion because the parties’ transaction bore no connection to the DIFC. The jurisdiction of the DIFC Courts covers disputes in which any of the DIFC’s entities, bodies or licensed establishments is a party, as was held inCorinth. It also extends to civil and commercial claims commenced in the DIFC Courts pursuant to a written agreement between the disputing parties, whether before or after the dispute arises, provided that such agreement is founded on specific, clear and express contractual provisions. In these situations, the DIFC Courts are not deprived of jurisdiction even if the claims and underlying facts do not have any connection the DIFC or do not originate from a contract that has been carried out in whole or in part in the DIFC. Bearing in mind that IGPL transacted with SCB with full knowledge that it was a Licensed Entity, we take the view that the parties must surely have contemplated the possibility that the DIFC Courts could assume jurisdiction over any action commenced against either party. In the circumstances, the onus must be on the parties to specifically exclude the DIFC Courts’ jurisdiction, if they so intended, by employing express language to that effect. They did not do so.
138. For the reasons set out at [125] to [137] above, we find that the ordinary meaning of the phrase “Dubai Courts” must include all the courts and judicial committees formed within the territory of Dubai and established by the Emirate’s legislation, regardless of whether these courts exercise separate jurisdictions.
139. We also do not accept IGPL’s argument that the phrase “Courts of the UAE” was intended to refer specifically to the UAE Federal Judicial Authority.
140. An essential plank to the argument is IGPL’s contention that the DIFC Courts is a “court of the UAE” for constitutional purposes, but is not necessarily a “court of the UAE” for jurisdictional purposes.
141. IGPL contends that a court is only a “court of the UAE” when exercising jurisdiction under the Federal Judicial Authority. On the basis that the DIFC Courts was created by Dubai law rather than UAE federal law, IGPL contends that it is not a “court of the UAE” and goes even further to contend that the DIFC Courts is not even a “court of Dubai” in jurisdictional terms because it exercises a specifically devolved jurisdiction. IGPL further claims that, “UAE Law only enacted enabling legislation, which was necessary but not sufficient to create the DIFC.” IGPL has offered no authority in support of this assertion. It relies only on the principle the DIFC Courts’ decision in ARB-002-2013, where it was stated at [34] – [37] that the jurisdictions of the Dubai Courts and the DIFC Courts are mutually exclusive and also complementary, a point which does not carry IGPL’s case any further.
142. The foundation of IGPL’s argument is fundamentally flawed. Notwithstanding (i) the analysis in the preceding paragraphs and (ii) the conclusion reached inHardtthat the DIFC Courts is an integral part of the Dubai legal system and is considered a “court of Dubai”, Article 1 of UAE Federal Decree 35, provided for the establishment of the DIFC within Dubai and directed the competent authorities to implement the Decree in Article 2. It did not simply enable legislation; it created the framework by which the competent authorities were allowed to execute the Decree. The fact that Dubai Laws were enacted to work in tandem with Federal Decree 35 does not negate the fact that the DIFC was a creation of Federal Law. As such, it cannot be maintained, as IGPL contends, that the DIFC Courts are “a creature of Dubai Law, not UAE Law” and thus not a “court of the UAE.” Neither do we see any force in IGPL’s submission that the Dubai Courts are not courts of the UAE because they “apply Dubai Law, not UAE Law”. The Dubai Courts, and indeed the DIFC Courts, are free to apply UAE law if, upon the proper application of the rules of private international law, that is the governing law of the dispute.
143. As a practical matter, it is more conceivable that the meaning of “courts of the UAE” under the Agreements was intended to cover all courts located within the territory of the UAE. This includes all courts within Dubai, which in turn includes the DIFC Courts.
144. The USC, as the highest judicial court in the UAE, has the authority to resolve any conflicts in jurisdiction between Sharjah, Dubai or the DIFC Courts. Surely, the USC has the jurisdiction to hear any jurisdictional or constitutional issues in all of the Emirates, including the DIFC. The establishment of the USC is laid out in Federal Law No 10. of 1973 as amended by Law No. 26 of 1992 and the DIFC is certainly not exempted from the jurisdiction of the USC. As H.E. Justice Ali Al Madhani held in ARB-001-2014,X1 and X2 v Yat [44]:
“I also agree with the Defendant’s submission that the DIFC regime is not exempted from the jurisdiction of the USC when it comes to the Constitutionality Examination, including the fact that the DIFC Courts is a UAE Court that can refer a matter to the USC if requested to do so, and then must comply with the decision of the USC rendered in that connection.”
For all intents and purposes, and contrary to IGPL’s assertion, the DIFC Courts are “court[s] of the UAE” for both constitutional and jurisdictional purposes.
145. Finally, and in any event, we also find that the choice of court clauses in the Agreements, properly construed, afford SCB the right to elect to sue in any court of its choice. For convenience, the relevant provisions under the Agreements are reproduced below.
146. The Offer Letter provided that “subject to the terms of this Offer Letter and the Loan Facility General Terms referred to below, we agree to make available to you the Facility described in the schedule hereto” and went on to specify when “[t]his Offer Letter and the General Terms (together referred to as the “Facility Agreement”) would take effect.
147. The Loan Facility General Terms provide:
“(i) by Clause 24.6 (b) that if there were an inconsistency between a Finance Document (other than the Offer Letter) and those of these General Terms, these General Terms shall take precedence
(ii) by Clause 26 that the Facility Agreement was governed by “the laws of the United Arab Emirates”;
(iii) by Clause 27.1(a) that, unless a Finance Document provided otherwise, IPLG submitted to the exclusive jurisdiction of the courts of the United Arab Emirates to settle any relevant any dispute arising out of or in connection with any Finance Document (including a dispute regarding the existence, validity or termination of any Finance Document) (a “Dispute”);
(iv) by Clause 27.1(b), that SCB should not be prevented from taking proceedings relating to a Dispute in the courts of any other jurisdiction where any asset of an Obligor might be located;
(v) by Schedule 1 that: (a) “Finance Document” meant, “this Facility Agreement, any Security Document, any documents identified as such in the Offer Letter and any other document designated as such by the Bank and the Principal Borrower from time to time; (b) “Facility Agreement meant, collectively, the Offer Letter, these General Terms and, if applicable, the General Terms for Financial Covenants.”
148. The SCB General Terms and Conditions provide in Clause 11 that :
“SCB and IGPL agreed “to submit to the jurisdiction of the courts of the U.A.E.” and that “SCB may, at its option, elect to commence proceedings in the courts of other jurisdictions” and IGPL agreed, “in such case, to submit to the jurisdiction of such courts”.
149. The 2010 Agreement consists of a Facility Agreement between IGPL and SCB which provide,inter alia:
“(i) by Clause 1.1 that: (1) “Finance Documents” means: (a) “this Agreement”; (2) “Finance Party” means “ … a Lender”; (3) “Lender” means (a) “any Original Lender…’
(ii) by Clause 36.1 that the agreement and all non-contractual obligations arising out of or in connection therewith shall be governed by and construed in accordance with the laws of England.
(iii) by Clause 36.2 (a) that the Parties agree that the courts of England shall have jurisdiction to settle any disputes or proceedings which may arise in connection with any Finance Document (“Proceedings”) and that Clause 36.2 (a) is for the benefit of the Finance Party only and shall not limit the right of any Finance Party to bring Proceedings against the Borrower in connection with any Finance Document in any other court of competent jurisdiction or concurrently in more than one jurisdiction.
(iv) by Clause 36.2 (b) that IGPL waives any objections which it may have to the English courts on the grounds of venue or forum non convenient or any similar grounds as regards any Proceedings.”
150. The Share Pledge Agreement provides, inter alia, by Clause 23, that:
“the Share Pledge Agreement was “governed by the laws of the Emirate of [Dubai/Abu Dhabi] and the applicable federal laws of the UAE and the Pledgor [IGPL] irrevocably submits to the non-exclusive jurisdiction of the Dubai courts”
151. Although the Offer Letter referred to the “Facility described in the schedule hereto”, there was no schedule as such. Instead, the Facility was described in the Banking Arrangements Letter which incorporated the SCB General Terms and Conditions, including Clause 11. The Banking Arrangements Letter is therefore to be read as the “schedule” to the Offer Letter and, as such, it is part of the Offer Letter and is a “Finance Document”. This means that, having regard to the carve-outs in Clause 24.6 (b) of the Loan Facility General Terms (“other than the Offer Letter”) and Clause 27.1 (a) (“unless a Finance Document provides as otherwise”), Clause 11 of the SCB General Terms and Conditions is not subservient to but has precedence over Clause 27.1 of the Loan Facility General Terms.
152. Thus, even if, as IGPL submits but SCB denies, the DIFC Courts are not courts of the UAE for the purposes of the 2009 Agreement, by virtue of Clause 11 of SCB General Terms and Conditions, SCB is nonetheless entitled to commence proceedings in the courts of other jurisdictions, including the DIFC Courts, for any claim arising out of or in connection with the 2009 Agreement, and the DIFC Courts would have jurisdiction under Article 5(A)(1)(a) of the Judicial Authority Law on the ground of SCB’s status as a DIFC Establishment (seeCorinth[100] to [122] above) and, under Article 8(2)(b) of DIFC Law No. 3 of 2004, the DIFC Courts would be empowered to give effect to the parties’ choice of governing law. It follows that it can be safely concluded that the parties have not agreed under the 2009 Agreement that the DIFC Courts should not have jurisdiction over SCB’s claim herein.
153. In the light of the second sentence of Clause 36.2 of the 2010 Agreement, it is also evident that the parties did not agree under the 2010 Agreement that the DIFC Courts should not have jurisdiction over SCB’s present claim. This is because: (i) SCB is plainly a “Finance Party”; (ii) the 2010 Agreement is equally plainly a “Finance Document”; and (iii) the DIFC Courts is indisputably a court of competent jurisdiction under Article 5(A)(1)(a) of the Judicial Authority Law and empowered to give effect to the parties’ choice of English law under Article 8(2)(b) of DIFC Law No. 3 of 2004.
154. Accordingly we conclude that the parties had not opted out of the DIFC Courts’ jurisdiction. To the contrary, the parties’ jurisdiction agreements cover the DIFC Courts and would also confer jurisdiction under Article 5A(2) of the Judicial Authority Law.
VI. ISSUE 3: IGPL’S
STAY
155. Although IGPL’s principal submission is that the DIFC Courts do not have competent jurisdiction, its alternative argument, if this Court finds that the DIFC Courts have jurisdiction, is that these proceedings should be stayed on the ground of FNC.
156. We have held that the DIFC Courts have competent jurisdiction to hear SCB’s claims, so it is necessary to address IGPL’s alternative FNC argument.
157. Based on the parties’ respective submissions, there are two questions on which the issue turns.
(a) First, whether the DIFC Courts may apply the FNC doctrine in the present case.
(b) Second, if the FNC doctrine were applicable, whether its application would point to the Sharjah Courts (as part of the Federal Judicial Authority) as the distinctly more appropriate forum to adjudicate this dispute.
158. We now consider each question in turn.
159. The general power of the DIFC Courts to apply the FNC doctrine was recognized inCorinth, where this Court held that a defendant could apply to stay DIFC Courts proceedings on the ground of FNC:
“(18) In contrast, in the DIFC Courts, service on a defendant outside the jurisdiction can be effected anywhere in the world provided that the claimant can bring himself within Article 5(A)(1) of Law No. 12. It is then open to a defendant to challenge the jurisdiction and apply to
set aside
…
(67) This is not an exercise of exorbitant jurisdiction by the DIFC Courts over banks outside the DIFC because that universal jurisdiction over foreign banks with an unincorporated branch in the DIFC would be subject to the doctrine of forum non conveniens. Indeed, in many jurisdictions, a local Court may assume prima facie jurisdiction over a foreign company which carries on business within its territory even if the matter complained of has limited or tenuous connections with the territory in question, and the principle of forum non conveniens will normally resolve competing jurisdictional claims over the same dispute. There is therefore nothing unusual about this Court having jurisdiction over aforeign company with a branch office in the DIFCin respect of a claim that has no immediate connection with the DIFC other than the presence of the branch office. Indeed, the experience in England, as shown in the cases of South India Shipping Corp v Expon‘—Import Bank of Korea [1985] 1 WLR 585 and Rome and Another v Punjab National Bank (No. 2) [1989] 1 WLR 1211, demonstrates that English Courts allow for service ofwrits on English branches of overseas companies in respect of claims that do not have a real nexus with England. The relevant English legislation is not identical to the equivalent DIFC legislation, but the point is that there is precedent in international practicefor a local court to exercise jurisdiction over a foreign company which is registered to carry on business in that local court’s territory.”
(emphasis added)
160. That the DIFC Courts have a discretionary power to stay its proceedings was also acknowledged by a differently constituted Court of Appeal inAl Khorafi v Bank Sarasin-AlpenCA-003-2011 (“Al Khorafi”), in a different context. In that case, the disputing parties had entered into a jurisdiction agreement conferring jurisdiction on the Swiss Courts over the dispute. The claimant commenced proceedings in the DIFC Courts, and the defendant applied to have the proceedings stayed on the ground that the DIFC Courts should give effect to the parties’ jurisdiction agreement. This Court recognized at [114] that it would ordinarily grant a stay in order to give effect to a foreign jurisdiction clause unless “strong cause” is shown.
161. In both these decisions, the only alternative forum which the defendant could point to was a court of a different state, outside the UAE. These were the English Courts of Appeal inCorinthand the Swiss Courts inAl Khorafi. With those contexts in mind, it seems to us that the Court was not deciding in either case that the FNC doctrine could similarly be invoked to resolve competing claims to jurisdiction by courts within the UAE. The question subsequently arose and was answered in the negative inAllianz, where H.E. Justice Ali Al Madhani held that the FNC doctrine did not apply when the alternative forum is a court of the UAE.
162. The scope of applicability of the FNC doctrine was therefore qualified byAllianz, and confined only to situations where a stay applicant pointed to a “foreign court” as a distinctly more appropriate forum than the DIFC Courts. In the words of H.E. Justice Ali Al Madhani inAllianzat [64]:
“In conclusion, in my opinion, the doctrine of FNC was introduced to give Judges the discretion to stay proceedings in favour of another foreign competent court to enhance justice at the international level. It is not applicable at a national level (inside one country) where the parameters of jurisdiction between the local courts are clearly defined and, more importantly, where there is a higher authority responsible to decide over jurisdictional conflicts. If the FNC doctrine is said to be applicable at national level, there would need to be clarity (through clear policy) and authority to determine the most appropriate court.”
163. What is clear from the holding above is that IGPL’s application to stay these proceedings in favour of the Sharjah Courts on the ground of FNC cannot succeed ifAllianzremains good law. IGPL now argues thatAllianzwas wrongly decided. WhetherAllianzwas correctly decided is therefore at the heart of the issue, since Justice Sir David Steel expressly relied on that decision in deciding that the FNC doctrine should not apply in the present case. SCB supports the decision inAllianz, and relies on the reasoning employed there by H.E. Justice Ali Al Madhani.
164. In IGPL’s submission, the FNC doctrine can apply when the competing courts are courts of the same state. CitingRoyal Bank of Scotland v Davidson[2009] CSOH 134, 2010 SLT 92 andLennon v Scottish Daily Record[2004] EWHC 369 (QB), IGPL argues that the doctrine has been applied by the English Courts when the alternative forum was the Scottish Courts, andvice versa. On that basis, IGPL argues that“[t]he CFI in Allianz however, fell into error in regarding it as necessary for the application of the FNC doctrine that “[t]he proposed forum or court would have to be a foreign court. In other words, the court of another country or state”..
165. SCB’s response is three-fold, and proceeds as follows.
166. SCB’s first objection is that the FNC doctrine should not apply when a state such as the UAE adopts a system of federal law applied throughout the country (save for commercial and civil laws in free zones in the UAE’s case). In contrast, when the same law is not applied in Scotland and in England and Wales, the application of the FNC doctrine is permissible.
167. In our view, the point made by SCB is one of general applicability, and may be directed at any state adopting a federal legal system or some equivalent of it. However, IGPL has correctly pointed to the United States as an example of a federal law system which applies the FNC doctrine when the competing courts belong to other states within the federation. The point is amply demonstrated by the United States decisions inGulf Oil Corp v Gilbert[1947] USSC 47 andKoster v Lumbermens Mutual Co[1947] USSC 47, which IGPL referred this Court to, and casts serious doubt on this particular argument advanced by SCB.
168. While it is not self-evident to us how a difference or similarity between the laws applied by the alternative forum and the DIFC Courts affects the applicability of the FNC doctrine, SCB’s argument has the same complexion as the highlighted section of the following passage in H.E. Justice Ali Al Madhani’s judgment inAllianzat [54]:
“In fact, Spiliada Maritime v Canulex Ltd introduced the FNC doctrine for international disputes where the Claimant often has a choice between two or more countries in which to bring an action against the Defendant, andwhere those countries have different systems of law and procedures which govern jurisdiction, therefore allowing for either double proceedings or conflicting decisions that might lead to injustice in one way or another. The basic rationale in applying the doctrine to cases which feature a conflict between international jurisdictions is that the equitable discretion given to a judge to grant or to reject a stay of the proceedings might be the only way to avoid conflict of forums, or injustice between national courts in one country, in another country or state, in the absence of binding international law (or policy) organising and regulating the issue of jurisdiction between different nations, and to protect parties’ interest in getting a fair trial in the most appropriate jurisdiction (forum).”
(emphasis added)
169. It would appear that the mischiefs which SCB has in mind, and described in the passage above, is the unfairness of compelling a defendant to defend himself in duplicate proceedings (which may be referred to as the problem oflis pendens) and the risk of conflicting judgments in the alternative forum as a result of legal differences between the competing courts. We understand SCB to be suggesting that, because the UAE’s federal laws are applied throughout the state (save the application of civil and commercial federal laws in free zones such as the DIFC), the problem oflis pendensand conflicting judgments fall away, along with any impetus for applying the FNC doctrine.
170. We do not accept this argument. It is apparent that, in this case, notwithstanding the consistent application of federal law throughout the UAE save in its free zones, conflicting judgments may still result from duplicate proceedings taking place in the two or more courts in the UAE. Substantial differences still exist between (1) the laws of each Emirate and (2) Emirate laws on the one hand and the laws applied by the UAE’s Federal Judicial Authority. Accordingly, the application of federal laws throughout the UAE does not insulate the parties from the problem oflis pendens. Further, and more fundamentally, the injustice which the FNC doctrine is intended to cure is of a very broad nature, and may arise even if there is no risk of conflicting judgments or the problem oflis pendens. The quintessential metric in any FNC analysis is “appropriateness” or “suitability” of the forum in question, and we can do no better at illustrating this than by referring to the following passage from Lord Goff’s judgment inThe Spiliada:
“I feel bound to say that I doubt whether the Latin tag forum non conveniens is apt to describe this principle.For the question is not one of convenience, but of the suitability or appropriateness of the relevant jurisdiction. However the Latin tag (sometimes expressed as forum non conveniens and sometimes as forum conveniens) is so widely used to describe the principle, not only in England and Scotland, but in other Commonwealth jurisdictions and in the United States, that it is probably sensible to retain it. But it is most important not to allow it to mislead us into thinking that the question at issue is one of "mere practical convenience." Such a suggestion was emphatically rejected by Lord Kinnear in Sim v. Robinow, 19 R. 665 , 668, and by Lord Dunedin, Lord Shaw of Dunfermline and Lord Sumner in the Société du Gaz case, 1926 S.C.(H.L.) 13 , 18, 19, and 22 respectively. Lord Dunedin, with reference to the expressions forum non competens and forum non conveniens, said, at p. 18:
"In my view, 'competent' is just as bad a translation for 'competens' as 'convenient' is for 'conveniens.' The proper translation for these Latin words, so far as this plea is concerned, is 'appropriate.'"
Lord Sumner referred to a phrase used by Lord Cowan in Clements v. Macaulay (1866) 4 Macph. 583, 594, viz. "more convenient and preferable for securing the ends of justice," and said, at p. 22:
"one cannot think of convenience apart from the convenience of the pursuer or the defender or the court, and the convenience of all these three, as the cases show, is of little, if any, importance. If you read it as 'more convenient, that is to say, preferable, for securing the ends of justice’”
I think the true meaning of the doctrine is arrived at.The object, under the words ‘forum non conveniens’ is to find that forum which is the more suitable for the ends of justice, and is preferable because pursuit of the litigation in that forum is more likely to secure those ends."
(emphasis added)
171. Lis pendensand the risk of conflicting judgments are but two of many factors which determine the suitability of permitting an action to subsist in a particular forum. Other weighty factors which may affect the appropriateness of that action include witness convenience, the type of law to be applied, as well as the connections between the underlying dispute and the competing fora. Differences in respect of these factors may exist even as between courts within the UAE, and one may find a distinct disparity between them in terms of appropriateness for determining a particular dispute.
172. Accordingly, we do not accept SCB’s first objection as a basis for the inapplicability of the FNC doctrine in the present case.
173. SCB’s second objection is more specific to the characteristics of the UAE’s legal anatomy. In SCB’s submission, UAE’s predominant composition of civil law courts (with the DIFC Courts being the only common law court) is fatal to the application of the FNC doctrine when the alternative forum is a court of the UAE. This is because, SCB argues, the application of the doctrine would introduce “incoherence into the UAE’s legal order” if the UAE’s other courts did not themselves apply the doctrine. In similar vein, SCB relies on Justice Sir David Steel’s statement during hearing in the CFI:
“…[FNC] will only work if there is some commonality of approach amongst all the members of that federal state...”
174. It is not clear what SCB had in mind when it referred to “incoherence”. If SCB meant “incoherence” in the purely empirical sense of there being different rules being applied and different results reached by various courts within the UAE then, in our view, this does not provide any principled ground for precluding the operation of the FNC doctrine. Preserving the autonomy of each the UAE’s constituent Emirate to apply different procedural rules and to reach different results on a particular issue is the veryraison d’êtreof the UAE’s federal structure.
175. SCB might also be suggesting that there must be some reciprocity in the application of FNC doctrine, so that the alternative forum must also recognize or apply a general FNC doctrine, in order for FNC to be applicable by the DIFC Courts. If that is indeed SCB’s suggestion, we must reject it.
176. It is not unusual for common law jurisdictions to apply the FNC doctrine and decline jurisdiction in favour of civil law jurisdictions, which courts may not recognize or apply the doctrine. InThe Xin Yang[1996] 2 Lloyd’s Rep 217, the English High Court granted a stay of the action commenced in England on the basis that the Netherlands, a civil law jurisdiction which does not adopt a general FNC doctrine, was a distinctly more appropriate forum for determining the dispute. InThe Al Battani[1993] 2 Lloyd's Rep 219, where the defendant applied to stay English Court proceedings in favour of Egypt, the English High Court did not refuse to apply the FNC doctrine on the basis that Egypt, like most civil law jurisdiction, would in all likelihood not recognize or apply a general FNC doctrine. Instead, the English High Court applied the FNC doctrine and found that Egypt was the most appropriate forum. It refused a stay only because the plaintiff had showed strong cause in the form of inordinate delays that were likely to impede proceedings in Egypt. InJIO Minerals FZC v Mineral Enterprises Ltd[2011] 1 SLR 391, the Singapore Court of Appeal granted a stay of proceedings on the ground that Indonesia was the distinctly more appropriate forum for determining the dispute. This was notwithstanding that Indonesia was a civil law jurisdiction which does not appear to apply any general doctrine of FNC either. The preponderance of case law in Commonwealth jurisdictions amply rebuts any argument that there must be reciprocity in the application of the FNC doctrine before it is applicable. We are satisfied that no such threshold requirement exists at law. IGPL has also referred this Court to the example of Canada and the state of Québec, which further reinforces our view. It is apparent that Canada’s constituent provinces and territories saw no reason to refrain from applying the FNC doctrine before 1 January 1994, notwithstanding that Québec did not apply the doctrine during that period of time. Furthermore, there is no reported decision from Canada that has ever suggested that its approach to FNC as between provinces was anything other than an adaptation of theSpiliada
177. A slightly different concern was articulated by H.E. Justice Ali Al Madhani inAllianzat [62]:
“Another difficulty arises if one is to assume that the DIFC Courts apply the FNC doctrine and relinquish jurisdiction in favour of another UAE Court, such as a Dubai Court or an Abu Dhabi Court. The rest of the UAE Courts do not recognise by definition or apply the FNC doctrine,which means that the local court in its usual application might still decline to deal with the said case just because there is a jurisdictional link with the other court, which might even be the court which just relinquished the exercise over its jurisdiction.”
(emphasis added)
178. E. Justice Ali Al Madhani’s concern was that the application of the FNC doctrine could lead to a jurisdictional void, when a UAE court in which favour a stay is granted rules that it does not have competent jurisdiction (upon applying the relevant provisions in CPC) to hear the dispute. Justice Sir David Steel also adopted this as a reason in support of his conclusion that the FNC doctrine should not apply. In our view, this problem is more apparent than real, because a proper application of the FNC doctrine would prevent such a jurisdictional void from ever materializing.
179. In order for a stay to be granted on the ground of FNC, the alternative forum must first be one that is “available”. A court will not be regarded as an “available forum” if it does not have competent jurisdiction to hear the dispute, and the point was made in the Privy Council’s decision inHindocha v Gheewala[2003] UKPC 77 (“Hindocha”) where Lord Walker explained at [22]:
“22 This is potentially a point of some importance, since it is clear that an alternative forum is not available (in the relevant sense)unless it is open to the plaintiff to institute proceedings as of right in that forum(for the law as it stood in 1999 see Dicey and Morris, The conflict of Laws 13th (2000) edition, para. 12–023). But this topic has recently been reviewed (as noted in the second supplement to Dicey and Morris, para. 12–023) by the House of Lords in Lubbe v Cape plc [2000] 1 WLR 1545; [2003] 1 CLC 655. The House upheld the general principle that an available forum must be one in which the plaintiff can sue as of right, but treated an undertaking to submit to the alternative jurisdiction (in that case, an undertaking by the English holding company to submit to the jurisdiction of the South African court) as sufficient to show that the forum is available even though given after the application for a stay.”
(emphasis added)
180. The relevance ofHindochato this appeal is that a stay on the ground of FNC would never be granted in favour of an alternative forum which does not have jurisdiction to hear the dispute.
181. It is SCB’s third objection which satisfies us of the correctness of H.E. Justice Ali Al Madhani’s decision inAllianzand Justice Sir David Steel’s decision not to apply the FNC doctrine when the alternative forum is a court of the UAE. SCB’s third objection is premised on the fact that the power to decide which of several UAE courts is most appropriate to hear a dispute resides with the USC, by operation of Article 99 of the UAE Constitution. SCB argues that applying the FNC doctrine in the present context would be manifestly incompatible with the constitutional allocation to the USC of the power to resolve jurisdictional conflicts between different courts of the UAE.
182. The same point was made inAllianz, where it was observed at [58] that the USC is empowered to resolve which of several UAE courts is most appropriate for determining a dispute:
“58. …in the case of any conflict over jurisdiction at both local level (inside one Emirate) or at a federal level (between federal and local, or two local courts in two different Emirates) the USC is vested with the power to make binding rulings over the conflictand to allocate what would be the appropriate court to deal with the substantial claim under Article 99 of the Constitution of the UAEand Article 33 (9) and (10) of the Law established the USC in 1973.”
(emphasis added)
183. That this factor was decisive for H.E. Justice Ali Al Madhani inAllianzis apparent from the following extract of his judgment at [64]:
“64. In conclusion, in my opinion, the doctrine of FNC was introduced to give Judge the discretion to stay proceedings in favour of another foreign competent court to enhance justice at the international level. It is not applicable at a national level (inside one country) where the parameters of jurisdiction between the local courts are clearly defined and,more importantly, where there is a higher authority responsible to decide over jurisdictional conflicts. If the FNC doctrine is said to be applicable at national level, there would need to be clarity (through clear policy) and authority to determine the most appropriate court.”
(emphasis added)
184. The same is true of Justice Sir David Steel’s decision, as is evident from the following extract of his judgment:
“13. The judgment of H.E. Justice Ali Al Madhani placed great emphasis on the UAE federal constitutional and statutory provisions which restricted if not eliminated the room for conflict between courts,with any residual dispute as to jurisdiction at federal or local level being resolved by the Union Supreme Court under the UAE Constitution; see Article 99 of the Constitution of the UAE and Article 33 of the Supreme Court Establishment Law No. 10 of 1973.
…
15. The judge formulated his conclusion on the issue at paragraph 64:
“64. in conclusion, in my opinion, the doctrine of FNC was introduced to give Judges the discretion to stay proceedings in favour of another foreign competent court to enhance justice at the international level. It is not applicable at a national level (inside one country) where the parameters of jurisdiction between the local courts are clearly defined and, more importantly, where there is a higher authority responsible to decide over jurisdictional conflicts. if the FNC doctrine is said to be applicable at national level, there would need to be clarity (through clear policy) and authority to determine the most appropriate court."
…
17. Having now had the benefit of full argument,I fully endorse H.E. Justice Al Madhani's conclusion. It follows that this application must be dismissed. However in case I am wrong I go on to consider the outcome on the basis that the principles of FNC apply.”
(emphasis added)
185. We agree with SCB’s submissions, H.E. Justice Ali Al Madhani’s conclusion inAllianzset out above and, by extension, Justice Sir David Steel’s decision.
186. It is not disputed by the parties that the power to determine jurisdictional conflicts is vested in the USC under Article 99(8) and 99(9) of the UAE Constitution, which provide as follows:
“Article 99
The Union Supreme Court shall have jurisdiction in the following matters:
…
8. Conflicts of jurisdiction between the Union judicial authorities and the local judicial authorities in the Emirates.
9. Conflicts of jurisdictions between the judicial authority in one Emirate and judicial authority in another Emirate. The rules relating thereof shall be regulated by a Union law.”
187. Although Article 99 does not adopt the language of “exclusive jurisdiction”, it cannot be understood as conferring on the USC anything less than exclusive jurisdiction over the matters set out in that provision. Any other interpretation would make a nonsense of the USC’s primacy in the UAE’s judicial hierarchy, by permitting other UAE courts to pre-empt or supplant the USC’s decision on matters it is charged with hearing.
188. As against this, IGPL’s reliance on the example of England & Wales and Scotland provides no answer. That example is an inappropriate comparator, because the United Kingdom does not adopt an overarching mechanism, constitutional or otherwise, to resolve jurisdictional conflicts between England & Wales on the one hand, and Scotland on the other.
189. Once it is appreciated that the power to determine the appropriateness of a UAE court’s assumption of jurisdiction, relative to other UAE courts, rests exclusively with the USC, it cannot be persuasively argued that the DIFC Courts have any power to determine the same question by applying the FNC doctrine. Doing so would amount to a usurpation of the USC’s constitutional function.
190. It is true that a jurisdictional conflict crystallizes, and the USC intervenes, only after the competing UAE courts issue conflicting and final judgments on jurisdiction, as was held by the USC in Case 10/28. But that fact does not mean that the DIFC can apply the FNC doctrine before a jurisdictional conflict crystallizes, such as in the present case. The power to resolve jurisdictional conflicts under Article 99(8) and 99(9) of the UAE Constitution is vested in the USC absolutely. It is not conditional on the occurrence of an event such as the crystallization of a jurisdictional conflict between two UAE courts. This is unlike the USC’s jurisdiction over inter-Emirate disputes as provided for in Article 99(1) of the UAE Constitution, a jurisdiction which is engaged only when the dispute is submitted to the USC on the request of an interested party:
“1. Various disputes between member Emirates in the Union, or between any Emirate and the Union Government,whenever such disputes are submitted to the Union Supreme Court on the request of any of the interested parties.”
(emphasis added)
191. The point is that the power to determine jurisdictional conflicts is absolutely and exclusively vested in the USC under the UAE’s Constitution, and is therefore removed from this Court’s power under all circumstances.
192. IGPL argues that the application of the FNC doctrine is necessary to curtail any potential exercise by the DIFC Courts of exorbitant jurisdiction. The thrust of IGPL’s case is that the wide interpretation of Article 5A of the Judicial Authority Law would permit the DIFC Courts to assume jurisdiction over matters which do not bear even the slightest connection to Dubai or the DIFC. Such an exercise of jurisdiction would not be in accordance with the principles of comity, fairness and order. The only means to avoid this result, IGPL argues, is to apply the FNC doctrine.
193. As we have stated above at [109], it is neither correct that the DIFC Courts can exercise ‘exorbitant’ jurisdiction without restraint, nor that the FNC doctrine is the only means to ensure that the DIFC Courts hear only disputes which bear some real and substantial connection to Dubai or the DIFC. Our reasons for so concluding are set out below.
194. The starting point is that, as was held inCorinth, the FNC doctrine will be applied by the DIFC Courts to curtail any inappropriate exercise of jurisdiction. We have held above that the application of the FNC doctrine is subject to one exception,vizit does not apply when the alternative forum is a court of the UAE. Accordingly, it is only in this category of cases where the problem of the DIFC Courts exercising ‘exorbitant’ jurisdiction is, IGPL argues, ostensibly left unchecked.
195. In our view, the manner in which IGPL has framed the problem is apt to mislead, and distracts us from its true complaint. It is incorrect that the DIFC Courts can, with abandon, exercise exorbitant jurisdiction. The reason why the FNC doctrine does not apply in such cases is precisely because the UAE has already instated a solution (albeit a different one from applying the FNC doctrine) to the problem, by empowering the USC to resolve jurisdictional conflicts pursuant to Article 99 of the UAE Constitution. IGPL’s real difficulty therefore lies with its inability to invoke the USC’s jurisdiction to resolve a jurisdictional conflict before one has crystallized. Yet a defendant in IGPL’s shoes is not without a remedy. Such a defendant could commence an action in the alternative UAE Court, seeking from that Court a judgment or declaration that it has jurisdiction to hear the dispute. Once a judgment or declaration to that effect is obtained from the alternative UAE Court, the USC would be empowered to resolve the jurisdictional conflict. This is a slightly more tortuous route than the immediate application of the FNC doctrine by the DIFC Courts, but the resulting inconvenience does not rise to the level of injustice so that a defendant cannot be expected to pursue that route. That is in fact what IGPL has done, although the Sharjah Action Judgment now makes clear that IGPL’s efforts have not yielded any results in its favour.
196. The necessity of pursuing the course of action I have just described is not peculiar to situations where jurisdiction is assumed by the DIFC Courts. It is inherent in the UAE’s legal system, and can arise whenever several of the UAE’s courts are concurrently seized of a matter under the applicable provisions of the CPC. Accordingly, any inconvenience that a defendant is put to by the inappropriate exercise of jurisdiction by one UAE Court relative to another UAE Court is, in the words of H.E. Justice Ali Al Madhani inAllianzat [32], a “risk both parties have brought onto themselves when failing to agree on a jurisdiction clause in their sophisticated contract, or even to reach an agreement at any stage after the dispute had arisen knowing full well the legal system in place in the UAE.”
197. In conclusion, the DIFC Courts cannot apply the FNC doctrine if the alternative forum is another court of the UAE. In the circumstances, the question of what result would be reached by the application of the FNC doctrine is moot, and we see no utility in taking our inquiry beyond this. For these reason, IGPL’s application to stay these proceedings on the ground of FNC must failin limine.
IV. CONCLUSION
198. For the foregoing reasons, we dismiss IGPL’s appeal on all grounds.
JUSTICE SIR RICHARD FIELD:
1. I agree with the Judgment of Justice Sir David Steel and have nothing further to add.
H.E. JUSTICE OMAR AL MUHAIRI:
2. I agree with the Judgment of Justice Sir David Steel and have nothing to add.
Issued by:
Mark Beer
Registrar
Date of Issue: 18 November 2015
At: 4pm