Claim No: CFI-007-2016

 

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

 

IN THE COURT OF FIRST INSTANCE

BEFORE  H.E. JUSTICE SHAMLAN AL SAWALEHI

BETWEEN

 

SKY NEWS ARABIA FZ-LLC

                                                                                                                    Claimant / Respondent

and

KASSAB MEDIA FZ (LLC)

Defendant / Applicant 

                                                                                               

Hearing: 13 June 2016

Counsel: Sanjay Patel instructed by Clyde & Co for the Claimant.

Nizam Nseir assisted by Yulia Charniauskaya of Abdelrahman Almaazmi Advocates and Legal Consultants for the Defendant.

Judgment: 20 June 2016


JUDGMENT OF H.E. JUSTICE SHAMLAN AL SAWALEHI


Summary of Judgment

This case arises out of the Claimant Company’s Claim (Claim Form No. CFI-007-2016) against the Defendant Company for breach of contract. In reply, the Defendant contested the jurisdiction of the DIFC Courts to deal with the Claim and argued that the agreement between the parties formed a commercial agency relationship and, therefore, Federal Laws should apply and the Federal Court should hear the case. In response, the Claimant submitted two witness statements into evidence to support the arguments that the parties intended for the DIFC Courts to have jurisdiction, one being made by an employee of the Claimant and the other by one of the lawyers representing the Claimant in the proceedings. The Defendant subsequently made a second application to exclude the witness statements from evidence due to lack of independence, erroneous statements of truth and for advocating opinions rather than providing observations as witnesses.

The learned Judge first dealt with the evidence application, determining that the witness statement of the Claimant’s legal representative should be excluded pursuant to DIFC Courts’ Practice Direction 1 of 2016 which established a general rule that law firms should not file witness statements in their client’s proceedings unless the contents of the statement are formal, uncontroversial or used only to introduce documents. The witness statement of the Claimant’s employee was allowed into evidence.

The jurisdiction application was rejected and it was determined that although the DIFC Courts did not have original jurisdiction, the parties clearly ‘opted in’ to the jurisdiction of the DIFC Courts by virtue of Clause 38 of the agreement. Adopting the approach taken in Gavin v Gaynor 22 October 2016, the learned Judge found that any reference to the laws of the United Arab Emirates as applicable in the Emirate of Abu Dhabi must be a reference to UAE Laws applicable within the DIFC.

The Defendant submitted that even if the DIFC Courts decided that it did have jurisdiction to deal with this case, it should not exercise that jurisdiction and the case should instead be referred to the competent Federal Court. However, the learned judge commented that the DIFC Court is, in fact, the only Court competent to deal with this case as there is no registered agency contract with the commercial agents register and therefore, the nominated Federal Court would not accept the case in any event.

This summary is not part of the Judgment and should not be cited as such 

ORDER

UPON reviewing the Defendant’s Application Notices CFI-007-2016/1 and CFI-007-2016/2 dated 20 March 2016 and 10 April 2016, seeking an Order that the DIFC Courts do not have or shall not exercise jurisdiction to deal with the Claimant’s CFI-007-2016 application filed on 16 February 2016, and seeking an Order for the exclusion of evidence submitted by the Claimant in the form of witness statements by Ms. Susie Abdel-Nabi and Mr. Kelvin Barker, respectively (“the Applications”)

AND UPON reviewing all witness statements, correspondence and evidence on the Court file

AND UPON Hearing Counsel for the Claimant and Defendant at a hearing on 13 June 2016

IT IS HEREBY ORDERED THAT:

1.The Defendant’s Application Notice CFI-007-2016/2 to exclude the witness statement of Ms. Susie Abdel-Nabi is granted.

2. The Defendant’s Application Notice CFI-007-2016/2 to exclude the witness statement of Mr. Kelvin Barker is denied

3. The Defendant’s Application Notice CFI-007-2016/1 challenging the jurisdiction of the DIFC Courts is denied.

4. Costs shall be awarded in the case.

 

Issued by:

Natasha Bakirci

Assistant Registrar

Date of Issue: 20 June 2016

At:  1pm

 

JUDGMENT

Background

1.The Claimant is a company established under the laws of the Media Free Zone in Abu Dhabi, performing television production activities at its principal address in Abu Dhabi. The Defendant is a company established under the laws of the Dubai Media Free Zone, with its principal address in Dubai Media City, performing media business and representation activities.

2. This dispute arises out of an agreement for the supply of advertising and sponsorship sales representation entered into by the parties on 1 July 2013 and effective until 31 December 2018 (the “Agreement”).

3. The Claimant filed Claim Form No. CFI-007-2016 on 16 February 2016, asserting that the Defendant failed to meet its obligations under the terms of the Agreement on several occasions, constituting a material breach of the Agreement and entitling the Claimant to terminate it (the “Claim”). The Claimant gave notice of termination, whereby the Agreement would terminate on 11 February 2016 if the material breach had not been remedied by such date. The Claimant thereafter confirmed to the Defendant in writing that termination was effective on 11 February 2016 and demanded the outstanding payments to be made within 14 days. It is the Claimant’s case that no remedy or payment was received and the Claimant therefore seeks a declaration from the DIFC Courts that the Agreement was terminated effectively on 11 February 2016.

4. The Defendant subsequently applied to this Court on 20 March 2016 [CFI-007-2016/1], contesting the Courts’ jurisdiction and seeking an Order that:

(1) The DIFC Courts do not have jurisdiction to try the Claimant’s claim; or

(2) Should the DIFC Courts have jurisdiction to try the claim, they shall not exercise jurisdiction and shall not hear the case (the “Jurisdiction Application”).

5. The Claimant’s response to the Defendant’s Jurisdiction Application was contained within the witness statements of Ms. Susie Abdel-Nabi and Mr. Kelvin Barker and the Defendant applied to this Court on 10 April 2016 [CFI-007-2016/2] to exclude the evidence of these witnesses (the “Evidence Application”).

6. The submissions of both parties were heard before this Court on 13 June 2016, I will address each application in turn.

Evidence Application

Defendant submissions

7. The Defendant sought to exclude the witness statements filed by the Claimant, on the grounds that:

(1) They do not comply with the mandatory formal requirements set out in the relevant evidence law, Rules of the DIFC Courts and Civil Procedure Rules of England and Wales and are therefore inadmissible;

(2) The witness statement of Ms. Abdel-Nabi lacks legitimacy;

(3) The witness statement of Mr. Barker contains inadmissible parts which should be struck out by the Court if not found inadmissible in full.

8. In particular, the Defendant submitted that the witness statements were not in the witnesses’ own words, engaged in advocating an opinion rather than making observations and that the statements of truth were not in the proper form.

9. With respect to Ms. Abdel-Nabi’s witness statement, the Defendant submitted that as she was one of the lawyers involved in the proceedings on behalf of the Claimant she was not able to maintain professional independence in her statement and it should be disregarded by the Court. Practice Direction 1 of 2016 was cited in support of the exclusion of Ms. Abdel-Nabi’s witness statement from evidence as it precludes law firms representing a party in DIFC Courts proceedings from permitting lawyers employed by them to file witness statements in such proceedings unless the contents of that statement are formal and uncontroversial.

Claimant submissions

10. The Claimant submitted that the use of such statements in this manner was common practice and certainly not out of the ordinary. Originally the Jurisdiction Application was to be dealt with without a hearing which is why the Claimant felt it necessary to enter the witness statements into evidence. It was accepted that the statements of truth in each witness statement were slightly erroneous in that they referred to the ‘Claimant’ rather than the individuals but it was asserted that this alone should not cause the statements to be invalid or inadmissible.

Analysis

11. Practice Direction 1 of 2016 (PD 1/2016) sets out the practitioners’ duties to the Court in light of the Mandatory Code of Conduct for Legal Practitioners in the DIFC Courts. PD 1/2016 provides:

“2.1 As a general rule, law firms which are representing a party through Part I of the Register of Practitioners in proceedings before the DIFC Courts should not permit lawyers who are employed by them (“lawyers”) to file witness statements in such proceedings unless:

(1) The contents of that statement are formal or uncontroversial; or

(2) The witness statement has been submitted solely for the purposes of introducing documents, without any factual evidence being given with regard to the merits of the case…

3. Where any lawyer files a factual witness statement which does not conform with 2.1 above, the Court may discount the evidentiary weight of that witness statement for lack of first-hand knowledge.

4. Where a lawyer purports to give an expert opinion in support of the case of his/her firm’s client’s case, the Court will consider that opinion to constitute part of Counsel’s arguments and may likewise discount the opinion as expert evidence for lack of independence. However, the Court may still take the opinion into account in arriving at its decision, but relying on that opinion only as a submission.”

12. It is clear in my opinion that Ms. Susie Abdel-Nabi’s witness statement falls into the remit of PD 1/2016 and as it is not submitted solely for the purpose of introducing documents, nor are its contents formal or controversial, I feel it appropriate to discount this witness statement in the circumstances. However, I reserve the right to take the opinions contained within Ms. Abdel-Nabi’s witness statement into account pursuant to paragraph 4 of the Practice Direction.

13. Kelvin Barker is the Head of Legal of the Claimant and I find no legal grounds to exclude his evidence from these proceedings. His statement goes towards providing insight into his personal knowledge of events surrounding the Agreement and is accepted into evidence.

Jurisdiction Application

14. Clause 38.1 of the Agreement sets out that it is to be governed by the laws of the UAE, with the DIFC Courts having exclusive jurisdiction:

“This Agreement and any issues or disputes arising out of or in connection with it (whether contractual or non-contractual, such as claims in tort, breach of statute or regulation, or otherwise) will be governed by and construed in accordance with the laws of the United Arab Emirates as applicable in the Emirate of Abu Dhabi and subject to the exclusive jurisdiction of the Dubai International Financial Centre Courts.”

Defendant submissions

15. The Defendant first seeks to establish that the DIFC Courts do not have original jurisdiction in this case; the Agreement was not concluded, finalised or performed within the DIFC, nor does the Claim arise out of or relate to any incident or transaction performed within the DIFC. As the Claim does not fall into any of the jurisdictional gateways specified in Article 5A(1) of Dubai Law No.12 of 2004, as amended, there can be no exclusive or original jurisdiction in this case; there is only the potential for optional jurisdiction pursuant to the parties’ agreement, under Article 31(5) of the Civil Procedures Law.

16. The Defendant submits that although parties may agree on the jurisdiction of a specific court, ‘the validity of such jurisdiction agreement/clause is subject to limitations by the mandatory requirements of the jurisdiction rules primarily applicable to a certain type of dispute/case and regulating the original case jurisdiction’. It is the Defendant’s case that, as the Agreement created a principal-agent relationship between the parties, clause 38 is void, pursuant to Article 226 of the Commercial Transactions Law, Federal Law No. 18 of 1993, which provides:

“As an exception to the rules of jurisdiction provided for in the Civil Procedure Code, the Court within which jurisdiction lies the place of implementation of the contract, shall be competent to look into any conflicts arising from the contracts proxy contract.”

17. It is asserted that this Article applies in the circumstances as the Defendant was appointed under the Agreement as an exclusive media representative / agent of the Claimant in the UAE and other territories, carrying out its proxy and managing its commercial agency independently. Accordingly and pursuant to Article 226 of the Commercial Transactions Law, as the Agreement was implemented by the Defendant within the jurisdiction of the UAE Federal Court of First Instance, it is the Federal Court which is competent to try the Claim arising out of the Agreement.

18. The Defendant submits that Article 226 of the Commercial Transactions Law sets out a mandatory rule providing an exception and superseding the general jurisdiction rule of Article 31 of the Civil Procedures Law. In light of this, it is contended that Clause 38 of the Agreement must be void and of no effect and therefore, the DIFC Courts have no jurisdiction to try the Claim.

19. The Defendant suggests that even if the DIFC Courts do have jurisdiction to deal with the Claim they should not exercise jurisdiction and should not hear the case pursuant to Article 3 of the Commercial Agency Law, Federal Law No. 18 of 1981, as amended, which regulates commercial agencies within the state. It is argued that Article 3 prohibits the hearing of any claim arising out of a commercial agency agreement which is not carried out by UAE Nationals registered for that purpose.

Claimant submissions

20. The Claimant submits that the Jurisdiction Application is without merit and should be rejected in full, as the parties expressly agreed to the exclusive jurisdiction of the DIFC Courts in Clause 38 of the Agreement, which the Claimant says should be found to be an effective jurisdiction clause.

21. Pursuant to the Article 5A(2) of the Judicial Authority Law, DIFC Law No.12 of 2004, as amended, the Claimant submits that the parties effectively opted into the jurisdiction of the DIFC Courts.

22. The DIFC Court of Appeal case of Investment Group Private Limited v Standard Chartered Bank CA-004-2015 was cited in support of the Claimant’s submission that Federal civil and commercial laws do not apply within the DIFC. It was also suggested that the approach taken in Gavin v Gaynor 22 October 2015 should be adopted in the circumstances, whereby any reference to the governing law being that of the UAE should be deemed to be a reference only to UAE laws applicable in the DIFC. The case of National Bonds Corporation PJSC v (1) Taaleem PJSC (2) Deyaar Development PJSC CA-001-2011 was cited in support of the contention that onshore law should not be applicable in an offshore jurisdiction such as the DIFC.

Analysis

23. Article (5)2 of the Judicial Authority Law provides:

“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.”

24. I am satisfied that although the DIFC Courts do not have original jurisdiction in this case, the conditions for opting into the DIFC Courts’ jurisdiction have been satisfied; Clause 38 demonstrates that the parties agreed to be subject to the exclusive jurisdiction of the Dubai International Financial Centre Courts in specific, clear and express terms.

25. I am also satisfied that the DIFC Courts’ jurisdiction is determined solely by the Judicial Authority Law, as established in the case of Investment Group Private Limited v Standard Chartered Bank CA-004-2015, which has been relied upon by the Claimant in its submissions. In that case the implications of Federal Law 8 were considered, Article 3(2) of which states:

“These Zones and Financial Activities are subject to all provisions of Federal Law with the exception of Federal civil and commercial laws.”

26. It was determined that as Federal Law 8 provides for the express disapplication of UAE civil and commercial laws to free zones it was therefore unnecessary to resolve the parties’ disagreements regarding provisions of Federal Law and each Emirate’s jurisdictional limits. Although that case can be distinguished from the present one as it involved original jurisdiction rather than opt-in, I feel it appropriate to apply the same principle to the current circumstances.

27. I also adopt the approach taken in Gavin v Gaynor, 22 October 2016 by H.E. Justice Ali Al Madhani:

“Since this Court has found that the contract or the transaction has crossed the line and become subject to the jurisdiction of the DIFC Courts, any reference to UAE Law must be a reference to UAE Laws applicable within the DIFC”

28. Accordingly, as this Court has found that the Agreement has successfully opted into and is subject to the jurisdiction of the DIFC Courts, any reference to the laws of the United Arab Emirates as applicable in the Emirate of Abu Dhabi must be a reference to UAE Laws applicable within the DIFC. During the course of the hearing the parties accepted that the Federal Laws applicable in Abu Dhabi would appear to be the same Federal Laws applicable across the whole of the UAE and therefore, in the circumstances, the Agreement’s reference to ‘the laws of the United Arab Emirates as applicable in the Emirate of Abu Dhabi’ is considered to be a reference to the laws of the UAE generally, as applicable within the DIFC.

29. For the sake of argument, even if the UAE Commercial Agency Law was to apply in this case, as it is a non-DIFC law it would have been for an expert to determine whether in the circumstances, this case is within its remit. The Defendant has failed to provide sufficient evidence to satisfy this Court that UAE Commercial Agency Law should apply.

30. The Federal Supreme Court made interesting observations regarding the Commercial Agency Law in its judgment issued on 16 June 1996 in Case No. 357/15. It commented that if an agency agreement is not registered with the commercial agents register it will not be deemed valid and therefore, will not be heard pursuant to Article 3 of the Commercial Agency Law. Accordingly, even if UAE Law was to govern the Agreement, the Defendant has failed to prove that there was any registered commercial agency contract and accordingly, the case cannot go to the nominated Federal Court.

31. The Defendant submits that if this Court finds it has jurisdiction to deal with this case, it should not exercise that jurisdiction and the case should instead be referred to the competent Federal Court. However, in light of the above I find that the DIFC Courts, are in fact, the only Court competent to deal with this case as there is no registered agency contract.

Conclusion

32. The witness statement of Ms. Susie Abdel-Nabi is rejected pursuant to PD 1/2016.

33. The witness statement of Mr. Kelvin Barker is accepted into evidence.

34. The DIFC Courts have jurisdiction to deal with the Claimant’s case, applying UAE Laws as applicable within the DIFC.

35. Costs shall be awarded in the case.