Claim No: CFI-012-2016 

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

 

PETER MATTHEW JAMES GRAY

                                                                                                                    Claimant/Respondent

and

 

GIBSON, DUNN & CRUTCHER LLP

Defendant/Applicant 

                                                                                               

Hearing: 22 June 2016

Counsel: Patrick Hennessey as lead counsel for the Claimant, with Julian Critchlow assisting (Al Bawardi Advocates & Legal Consultants)

Graham Lovet as lead counsel for the Defendant, with Ryan Whelan assisting (Gibson Dunn & Crutcher LLP)

Judgment:        14 July 2016


JUDGMENT OF H.E. JUSTICE SHAMLAN AL SAWALEHI


Summary of Judgment

This Application arose out of a claim commenced by an employee (the “Claimant”) against his employer (the “Defendant”). In response, the Defendant subsequently brought this Application, relying on Article 13(1) of the DIFC Arbitration Law in submitting that the Claimant’s Claim relates to an employment dispute which is subject to an Arbitration Agreement and as such, the DIFC Court should declare it does not have jurisdiction to deal with the Claim, choose not to exercise its jurisdiction, dismiss the proceedings or stay them until it has been determined that the Arbitration Agreement is null and void, inoperative or incapable of being performed. The Claimant responded with Article 12(2) of DIFC Arbitration Law, contending that the Arbitration Agreement cannot be enforced against him as he has not provided his written consent after the dispute has arisen, nor has he submitted to arbitration proceedings.

The learned Judge was satisfied that the DIFC Courts would ordinarily have jurisdiction to deal with the claim under one or more of the jurisdictional gateways provided for under Article 5(A)(1) of Dubai Law No.12 of 2014, as the Claim arises out of a contract partly or wholly concluded, finalised or performed within the DIFC. He also determined that the provision for a phased alternative dispute resolution process within the arbitration agreement did not preclude it from being valid.

The arbitration agreement did not specify a Seat of Arbitration, rather, it allowed for the parties to agree upon an arbitrator and forum at the relevant time, with a direction for the arbitration to be referred to California in the event that there is no agreement between the parties. Counsel for both parties had also indicated that they had entertained the possibility of arbitration in Dubai or London as an alternative to California. The learned Judge found that the Seat of Arbitration had not yet been determined, although it was likely to be outside of the DIFC and this was definitive in considering the application of DIFC Arbitration Law.

The learned Judge found that due to the Seat of Arbitration being undetermined or likely to be outside of the DIFC and pursuant to Part 2(7) of DIFC Arbitration Law No. 1 of 2008, Article 13 applied to affording the parties an opportunity to arbitrate. It was decided that the proceedings would not be dismissed as the DIFC Courts would ordinarily have jurisdiction to deal with the claim, rather a stay was ordered in favour of arbitration in accordance with the terms of the arbitration agreement.

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

ORDER

UPON reviewing the Claimant’s Claim Form dated 22 March 2016

AND UPON reviewing the Defendant’s Application Notice CFI-012-2016/1 dated 20 April 2016 seeking an Order declaring that the DIFC Court does not have or shall not exercise its jurisdiction to deal with the Claimant’s case, further and in the alternative, that these proceedings should be dismissed or stayed pending a decision by this Court that the Arbitration Agreement is null and void, inoperative or incapable of being performed

AND UPON reviewing all correspondence and evidence on the Court file

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant on 22 June 2016

IT IS HEREBY ORDERED THAT:

1. The proceedings in CFI-012-2016 be stayed pending the outcome of arbitration proceedings.

2. The Claimant shall pay the Defendant’s costs, to be determined by the Registrar if not agreed.

 

Issued by:

Mark Beer

Registrar

Date of issue: 14 July 2016

At: 4pm 

 

JUDGMENT

Background

1.This application arises out of the Claimant’s claim for declarations, indemnities and monetary compensation arising out of the termination of the Claimant’s employment by the Defendant (the “Claim”).

2. The Claimant was a non-equity Special Partner employed by the Defendant from 26 April 2012 to 22 April 2015. The Claimant’s employment was terminated following The Hon. Mr. Justice Flaux’s criticism of the Claimant’s deliberate misleading of the Court, in his judgment for the London Commercial Court dated 23 March 2015 (the “Judgment”), which is currently under appeal.

3. The Defendant determined that the Claimant’s conduct, which gave rise to Justice Flaux’s findings, made his position as Special Partner untenable. Therefore, the Claimant’s employment was terminated with cause, for misconduct, on 22 April 2015.

4. In his Claim, the Claimant asserts that he was wrongly dismissed for cause and that the Defendant should provide written reasons for his dismissal in addition to indemnifying him for the costs of his appeal of the Judgment and related disciplinary proceedings and satisfying his employment-related monetary claims.

5. The Defendant subsequently applied to this Court seeking an Order that these proceedings be dismissed under Article 13(1) of the DIFC Arbitration Law, on the basis that the contract governing the employment relationship between the parties contained an agreement to arbitrate in Clause 13 (the “Arbitration Agreement”). Therefore, the Defendant submits that the dispute is the subject of a valid arbitration agreement which provides that parties shall first undertake informal negotiations, then if necessary non-binding mediation and finally, a binding arbitration in order to resolve their dispute. 

History of Proceedings

6. The Claimant’s initial action against the Defendant was issued in the DIFC Court’s Small Claims Tribunal (“SCT”) on 21 May 2015, under Claim No. SCT-088-2015. The Claimant sought an interim declaration that the arbitration clause in the Agreement was valid and for the proceedings to be stayed.

7. On 24 November 2015 the parties partook in a consultation with Judicial Officer Nassir Al Nasser. It was agreed that the Claimant would amend his Claim Form to reflect the actual value of the Claim. In light of the amended Claim Form being filed in the DIFC Court of First Instance, the SCT case was dismissed by an Order of Judicial Officer Maha Al Mehairi on 25 April 2016.

Defendant submissions

8. The Defendant applies to this Court seeking:

(a) An order pursuant to Rule 12.1 of the Rules of the DIFC Court (“RDC”) declaring that the Court has no jurisdiction over the Claimant’s Claim or alternatively, should not exercise any jurisdiction which it may have;

(b) Further and in the alternative, that pursuant to Article 13(1) of the Arbitration Law (DIFC Law No.1 of 2008), these proceedings be dismissed;

(c) Further and in the alternative, that pursuant to Article 13(1) of the Arbitration Law, these proceedings be stayed pending a decision by this Court that the Arbitration Agreement is null and void, inoperative or incapable of being performed. (The “Application”)

9. The Defendant acknowledges the territorial jurisdiction of the DIFC Court by virtue of this dispute arising from employment within the DIFC. However, it is submitted that DIFC Employment Law does not reserve employment disputes solely to the jurisdiction of the DIFC Courts and parties are entitled to agree that an arbitral body should determine any disputes.

10. It is the Defendant’s case that as the Arbitration Agreement is compliant with UAE Federal Law (Article 203(2) of Law No. 11 of 1992) and the DIFC Arbitration Law, it should be enforced in accordance with Article 13(1) of the DIFC Arbitration Law, which seeks to give effect to Article 11 of the New York Convention 1958.

11. Article 13(1) of the DIFC Arbitration Law states:

“If an action is brought before the DIFC Court in a matter which is the subject of an Arbitration Agreement, the DIFC Court shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, dismiss or stay such action unless it finds that the Arbitration Agreement is null and void, inoperative or incapable of being performed.”

12. The Defendant submits that the Claimant has acknowledged the Arbitration Agreement’s validity in submitting the present dispute to arbitration under Articles 13(c) and (d) of the Arbitration agreement; the Claimant commenced negotiations and a mediation.

13. Having established the Claimant’s claims are the subject of a valid arbitration agreement for the purposes of Article 13(1) of the DIFC Arbitration Law, the Defendant invites the DIFC Court to dismiss the Claimant’s action, or alternatively, stay the proceedings until it is found by a Tribunal convened under the Arbitration Agreement (or by this Court) that the Arbitration Agreement is null and void, inoperative or incapable of being performed.

Claimant’s submissions

14. The Claimant opposes the Defendant’s Application on the following grounds:

(i) The Defendant has misinterpreted the Agreement

The Arbitration Agreement is in fact an alternative dispute resolution clause which sets out a phased process for resolving controversy between the parties. The employment contract is a generic document which provides that its dispute resolution provisions are enforceable only insofar as they are compatible with local law. The Claimant submits that DIFC Arbitration Law has the effect of allowing parties discretion to negotiate and/or mediate a potential dispute but will intervene to prevent a binding arbitration being forced upon an employee.

(ii) The arbitration provision cannot be enforced against the Claimant;

The Claimant relies on Article 12(2) of DIFC Arbitration Law which provides that an arbitration agreement cannot be enforced against the employee except with his written consent given after the dispute has arisen, where he has submitted to arbitration proceedings commenced under the arbitration agreement or where the DIFC Court has made an order disapplying this Article, on the grounds that it is satisfied it is not detrimental to the interests of the employee for the dispute to be referred to arbitration instead of being determined by proceedings before a Court. The Claimant submits that as he has not provided written consent, nor has he submitted to arbitration proceedings, nor has this Court made an order disapplying Article 12(2), the Arbitration Agreement cannot be enforced against the Claimant. The Claimant notified the Defendant in December 2015 that he would only progress to the arbitration stage of the alternative dispute resolution procedure if certain preconditions were met.

(iii) The Claimant was given permission to bring the Claim at the SCT consultation of 24 November 2015 by agreement; the Defendant’s attempt to reopen this issue is an abuse of process;

The Claimant submits that these issues have previously been subject to consideration by these Courts at the SCT Consultation. Accordingly, notwithstanding the Claimant’s primary position that as a matter of law this Court is the appropriate forum, the Defendant has already had the opportunity to object to the Claimant’s proposed amendment of his Claim Form but failed to do so; therefore, this Application is a collateral attack on the agreed outcome of the SCT Consultation and is an abuse of process.

(iv) This Court is the appropriate forum and the interests of justice require trial in this Court.

The Claimant submits that there is no question that the Claim falls within the jurisdictional gateway provided under Article 5(A)(1) of Dubai Law No.12 of 2004 and that there is no forum more convenient to deal with these proceedings. Moreover, the parties and all potential witnesses are within this Court’s jurisdiction, the material events and meetings underlying the Claim occurred within this Court’s jurisdiction and much of the relief sought by the Claimant is unique to this jurisdiction.

15. The Claimant views the Application as an attempt by an employer to force an employee into a materially disadvantageous dispute resolution forum to make it more difficult for him to enforce rights unambiguously afforded to him by the DIFC Employment Law and, accordingly, invites this Court to dismiss the Application.

Analysis

16. In summary, and central to the Application before me is that the Defendant relies on Article 13(1) of the DIFC Arbitration Law in submitting that the Claimant’s Claim relates to an employment dispute which is subject to an Arbitration Agreement and as such, the DIFC Court should declare it does not have jurisdiction to deal with the Claim, choose not to exercise its jurisdiction, dismiss the proceedings or stay them until it has been determined that the Arbitration Agreement is null and void, inoperative or incapable of being performed. The Claimant responds with Article 12(2) of DIFC Arbitration Law in contending that the Arbitration Agreement cannot be enforced against him as he has not provided his written consent after the dispute has arisen, nor has he submitted to arbitration proceedings.

17. I am satisfied that the DIFC Courts would ordinarily have jurisdiction to deal with this Claim under one or more of the jurisdictional gateways provided for under Article 5(A)(1) of Dubai Law No.12 of 2014, particularly as the Claim arises out of a contract partly or wholly concluded, finalised or performed within the DIFC.

18. The question is therefore, whether there is a valid Arbitration Agreement and how the DIFC Arbitration Law should apply in these particular circumstances.

19. I accept the Claimant’s submission that Clause 13 of the employment contract provides for a phased alternative dispute resolution process to be followed by the parties in the event of any dispute or ‘controversy’ arising. However, the existence of an additional provision for informal negotiation and non-binding mediation prior to any binding arbitration does not, in my view, prevent Clause 13 from presenting as an effective Arbitration Agreement.

20. I am also satisfied that the Claimant has accepted the terms of the Arbitration Agreement by his following of its first and second steps for negotiation and mediation respectively and he has demonstrated to this Court a willingness to arbitrate by way of his initial SCT action seeking a declaration that the Arbitration Agreement was valid and his request to the Defendant for particular arbitration locations.

21. As the existence of an Arbitration Agreement has been established, I must turn my attention to the actual forum or venue of the Arbitration it provides for. Clause 13(e) of the contract of employment (the Arbitration Agreement) states:

“Third Step – Binding Arbitration. In the event the mediation process set forth above does not resolve the Controversy, the Controversy shall be determined by arbitration before a single arbitrator, utilizing an arbitration provider mutually acceptable to you and the Firm; provided, however, that in the event you and the Firm are unable to agree upon an arbitrator and forum within thirty (30) days of a demand by any party for arbitration, then the arbitration shall be referred to the Los Angeles, California office of JAMS for processing as a confidential, final and binding arbitration pursuant to its comprehensive Rules and Procedures then in effect.”

22. The Arbitration Agreement does not specify a Seat of Arbitration, rather, it allows for the parties to agree upon an arbitrator and forum at the relevant time and there is a clear direction for the arbitration to be referred to California in the event that there is no agreement between the parties. During the hearing, Counsel for both parties indicated that they had entertained the possibility of arbitration in Dubai or London as an alternative to California. However, there is no apparent reference whatsoever, either in the employment contract or discussions between the parties, to the potential for arbitration within the DIFC. Therefore, I am satisfied, on the basis of what I have heard from the parties and read in the documents submitted into Court, that the Seat of Arbitration is likely to be outside of the DIFC, although not yet determined.

23. The location of the Seat of Arbitration is crucial in determining the scope of the application of DIFC Arbitration Law and considering the parties submissions in relation to Articles 12 and 13 of said law. Part 2 of DIFC Arbitration Law No. 1 of 2008 states the following:

7. Scope of application of Law

(1) Subject to paragraphs (2) and (3) of this Article, this Law shall apply where the Seat of the Arbitration is the DIFC.

(2) Articles 13 14, 15, Part 4 and the Schedule of this Law shall apply where the Seat of Arbitration is one other than the DIFC.

(3) Article 13 shall also apply where no Seat has been designated or determined.”

24. In light of the afore-mentioned, it is clear to me that Article 13 applies in the circumstances as the Seat of Arbitration has not been designated or determined and even in the event that the Seat of Arbitration was one other than the DIFC (which I deemed to be likely from the evidence before me) Article 13 would still apply.

25. Article 13 of DIFC Arbitration Law operates to afford the parties an opportunity to arbitrate a dispute which is the subject of an Arbitration Agreement, provided that the party requesting this opportunity has done so ‘not later than when submitting his first statement on the substance of the dispute’. I am satisfied that the Defendant made this Application at the earliest opportunity as it was in response to the Claimant’s filing of his Claim Form No. CFI-012-2016 on 22 March 2016.

26. I shall not dismiss the proceedings as I am convinced that the DIFC Courts would ordinarily have jurisdiction to deal with the Claim, rather I am ordering a stay of the proceedings in favour of arbitration in accordance with the terms of the Arbitration Agreement. In the event that the nominated arbitrator does not find that he has adequate authority/jurisdiction to deal with the Claim, it shall return to the DIFC Courts for resolution.

Conclusion

27. I grant the Defendant’s Application for a stay in these proceedings pursuant to Article 13(1) of DIFC Arbitration Law.

28. Costs are awarded in favour of the Defendant.

 

Issued by:

Mark Beer

Registrar

Date of issue: 14 July 2016

At: 4pm