Claim No: CFI 020/2016

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 JUSTICE SIR JEREMY COOKE

BETWEEN

 

BROOKFIELD MULTIPLEX CONSTRUCTIONS LLC 

                                                                                                                            Claimant

and

 

(1) DIFC INVESTMENTS LLC

(2) DUBAI INTERNATIONAL FINANCIAL CENTRE AUTHORITY 

Defendants

Hearing: 22 June 2016

Counsel: Steven Thompson QC instructed by Addleshaw Goddard (Middle East) LLP for the Claimant

Tom Montagu-Smith instructed by Al Tamimi & Company for the Defendants

Judgment: 28 July 2016


JUDGMENT OF JUSTICE SIR JEREMY COOKE


Introduction

1.The Claimant (“Brookfield”) brought Part 8 proceedings in the DIFC Courts on 31 May 2016 against DIFC Investments LLC (“DIFCI”) and Dubai International Financial Centre Authority (“DIFCA”) seeking two declarations. Brookfield sought first a declaration that there is a binding arbitration agreement between Brookfield and DIFCA and/or DIFCI. Secondly it sought a declaration that, subject to the arbitration agreement, the DIFC Courts have exclusive jurisdiction over the dispute between it and the two Defendants and that the non-DIFC Courts of Dubai have no such jurisdiction. Brookfield further sought an order that the Defendants be restrained from pursuing proceedings begun in the non-DIFC Court of Dubai of First Instance, namely Lawsuit No. 9/2016/65 (the Lawsuit), in which an order was sought and obtained for the appointment of an expert to investigate and report back on the condition of the building known as The Gate.

2. There is no dispute between the parties as to the existence of a binding arbitration agreement in the construction contract executed on 22 May 2003, under which it is said that Brookfield is liable to DIFCI as the assignee of DIFCA and the Owner of The Gate. That contract was, by Clause 5.1.4, “governed by and construed according to the laws of and applicable in the Emirate of Dubai”. Clause 67.3.1 provided that if there was any dispute or difference between the parties arising out of or in connection with the contract, it should be “submitted to arbitration in the Emirate of Dubai…”. Brookfield’s case is that the pursuit of the Lawsuit in the non-DIFC Court in Dubai constitutes a breach of the arbitration agreement, largely by reason of the terms of the application made to the court and the form of the order made, which went beyond assessing the condition of the building.

3. At the hearing before me, DIFCI offered undertakings not to pursue substantive proceedings in relation to the building contract or in respect of alleged defects in the construction of The Gate. Subject to the Court being satisfied as to the terms of those undertakings, some of the immediate heat has gone out of the dispute. In consequence there should be no need for the first declaration and it is the issue of jurisdiction which is the primary area of dispute between the parties. In the absence of satisfactory undertakings however, I would be prepared to make the first declaration.

4. It is self-evident that this Court should not interfere with the decisions of other courts of competent jurisdiction, particularly those of the non-DIFC courts of Dubai and should not impugn the contents of their judgements. It is only where there is an absence of jurisdiction or where proceedings are vexatious and oppressive that a court is ordinarily prepared to grant an anti-suit injunction. The classic example is where there is an agreement between the parties which excludes the jurisdiction of the court in question from considering or making the decision or order in question. This Court must therefore grapple with issues of jurisdiction and its exercise, particularly where it is asserted that this Court has exclusive jurisdiction in respect of the parties and/or the subject matter of the dispute, which can here now be characterised as the granting of interim relief in relation to an arbitration, since it has now become clear that DIFCI does not intend to pursue substantive proceedings in the Lawsuit but only to preserve evidence and avoid the loss of its rights/remedies by the obtaining of an engineer’s report.

5. On 14 June 2016 the Defendants filed an Acknowledgement of Service in which they stated that they intended to contest the jurisdiction of this Court.

6. On 16 June both Brookfield and the DIFCA issued rival applications. Brookfield applied for an interim injunction “until the conclusion of the trial of this action or until further order” seeking to restrain the Defendants from prosecuting the Lawsuit in the non-DIFC Dubai Courts or commencing any other proceedings before those courts against Brookfield arising out of or in connection with the construction contract, any alleged defects in the Gate Building or the appointment of an engineering expert to investigate such alleged defects or confirm damage caused by Brookfield. That same day DIFCI applied for an order that this Court should declare that it had no jurisdiction to make the orders sought by Brookfield and/or should not exercise any such jurisdiction, and for an order that the claim form or service of it be set aside.

The factual background

7. I can take the facts from the skeleton argument of the Defendants because there is, in reality, little material dispute about them for the purpose of these proceedings. Such factual disputes that arise do not fall for determination at this stage. Brookfield is a Dubai-based construction company. DIFCA is the body which oversees the development, management and administration of the DIFCI. DIFCI is a subsidiary of DIFCA which was established under Dubai Law by Law No. 3 of 2002, which was the law which also established the free zone of the Dubai International Financial Centre. In 2003, DIFCA and Brookfield entered into the Contract for the construction of the Gate Building, DIFC. The architect for the project was Gensler and Associates International Ltd (Dubai Branch) (“Gensler”). The DIFC Courts were established by Law No. 9 of 2004 which repealed and replaced Law No. 3 of 2002, although Article 30 of that 2002 Law had made provision for the Ruler to establish a court and/or arbitration panel to determine lawsuits resulting from and relating to the activities of the Centre’s corporations, including claims between such corporations and claims between them and outside parties.

8. The Defendants asserted that, in 2005, DIFCA’s rights and liabilities were transferred to DIFCI, including those arising under the Contract. This was accepted by Brookfield, at least for the purposes of the hearing, albeit the scope of the transfer is said not to be known. Brookfield’s case, with which the Defendants agreed, was that DIFCI was bound by the arbitration agreement in the construction contract. There is an issue as to the date of handover of the completed building and the exact period when decennial liability ceased thereunder, but it was on 21 October 2015 that a stone slab fell from cladding on the south side of the Gate Building. Subsequent investigation by the Defendants using the engineers ARUP led to the allegation that the incident was caused by defective workmanship which was “common and widespread”. Brookfield denies liability. The Defendants express concern that further stone slabs could fall from the building, constituting a danger to life. The area around the building has been cordoned off.

9. On 11 February 2016, DIFCI wrote to Brookfield and Gensler, attaching the ARUP report and setting out the results of their investigations. On 29 February 2016, DIFCI wrote again, seeking an acknowledgment of liability, proposals for remedying the alleged defects and stating that it intended to apply to the Dubai Courts for the appointment of an expert to inspect and report on the affected parts of the Gate Building. Brookfield’s lawyers say that there followed discussions between the parties as to the appointment of a joint expert. This is disputed but, in any event, no agreement was reached between the parties as to the appointment of such a joint expert.

10. On 8 May 2016, DIFCI commenced the Lawsuit in the non-DIFC Court of Dubai against Brookfield and Gensler. The remedy sought by DIFCI was the appointment of an expert to investigate and report on the defects in the Gate Building. Both Brookfield and Gensler resisted the claim and a hearing took place on 7 June 2016. The Dubai Court granted the relief sought and appointed an expert who was due to inspect on 22 June and to report back on 28 June, although he could seek an extension of time from the Court, if he so chose. The evidence before this Court is that, once the report is issued, the parties will be granted an opportunity to comment on its contents. The Dubai Court will then declare the proceedings concluded. Brookfield has sought to appeal the Dubai Court judgment. DIFCI’s position is that it is out of time to do. Gensler has not appealed.

Overview

11. The parties’ arguments revolved around a number of different elements. The first was the question of the jurisdiction of this Court to grant an anti-suit injunction against the Defendants in respect of the Lawsuit and the obtaining of the expert report which has been ordered by the non-DIFC Court in the Lawsuit. That in turn raised the question of the jurisdiction of the non-DIFC Dubai Court and the location of the seat of the arbitration, namely whether it was in DIFC or in non-DIFC Dubai. Connected with that was the question as to whether the court of the seat of arbitration had exclusive or merely primary jurisdiction to issue supportive orders of the arbitration (as opposed to supervisory orders). Assuming that this Court has the jurisdiction to grant anti-suit injunctions, questions arise as to whether it should do so as a matter of discretion, particularly bearing in mind the unusual relationship between DIFC and the non-DIFC courts, both being separate jurisdictions within the Emirate of Dubai. More fundamentally, however, the question arises as to whether or not the injunctions sought are required to protect Brookfield’s rights in arbitration and whether or not the Lawsuit is inconsistent with the parties’ agreement to arbitrate.

12. As I have come to clear conclusions in relation to the latter points, which are determinative of the need for an interim and final injunction, I need not grapple with the more complicated issues of jurisdiction, nor determine the seat of the arbitration. The matter came before me as a matter of urgency in relation to the grant of the interim injunction but I indicated that I would decide as much as could properly be decided at this stage of the proceedings in relation to the issues which the court might finally have to decide.

The Remedy sought and obtained from the Non-DIFC Dubai Court in the Lawsuit

13. In its claim form in Lawsuit 9/2016/65, DIFCI pleaded the construction contract and the collapse of marble cladding on the south side of the Gate Building, “endangering the safety and lives of workers and visitors. This was due to various material defects in the works performed by the first defendant [Brookfield] and furthermore constitutes negligence and error on the part of the second defendant [Gensler] hired to design and oversee the project”. Furthermore, DIFCI alleged that “the defendants committed irregularities in technical and engineering works which caused substantial damage to the building and endangered the safety of the building and its workers”. These allegations, in my judgment, were part of the narrative giving rise to the claim for relief and do not really affect any issue which arises.

14. DIFC relied on Article 68 of the Law of Proof in Civil and Commercial Transactions which provides that where a person fears that evidence may be lost, he can apply, on notice to other parties, for an inspection by an expert appointed by the court. The Judge of Summary Matters can appoint an expert to inspect and hear witnesses but not on oath. The judge is to then schedule a hearing to allow the parties to comment on the report given by the expert.  It was said that there was an impending risk and urgency in the application because of the effect of delay in repairing the defects and the continued endangerment of the life of DIFC workers and visitors. It was said further that the defects and faults committed by the defendants had to be determined before any new contractor could proceed with repairing the defects. The application concluded in this way:

“…the plaintiff prays the court rule, summarily, that an engineering expert be appointed to review the case documents, inspect and determine the defects and errors committed by the defendants in the Dubai International Financial Centre Gate Building Project, determine the material damage caused by the defendants to the plaintiff, and perform any other tasks the court may consider necessary for the expert to carry out his mandate.”

15. At the hearing on 7 June, Brookfield invoked the arbitration clause, submitted that the court lacked jurisdiction to hear the substantive dispute between the parties, contended that the jurisdiction belonged to the DIFC Courts in relation to the arbitration agreement and submitted that there was no requirement of urgency which necessitated the exercise of the Court’s powers and it has submitted to this Court, that the request was for the expert to determine defects and faults committed by the Defendants and to determine the material damage caused by the Defendants, which went beyond any report that the expert might make in relation to the condition of the building itself and preservation of evidence with regard thereto.

16. Brookfield appeared to recognise that the parties’ agreement to arbitrate did not in principle preclude a Judge of Summary Matters from hearing a request for the preservation of evidence unless the parties had agreed to refer such summary request to arbitration but relied upon Article 5(A)(1) of Law No. 12 of 2004 as giving the DIFC exclusive jurisdiction. In other words, Brookfield submitted that this Court was the proper Court to make any order under Article 68 or its equivalent and that what was ordered went beyond what should have been ordered in the light of the Arbitration clause which required matters of liability, causation and damage to be determined in arbitration and not in court or by a court appointed expert.

17. The non-DIFC Dubai Court’s decision was that an expert should be appointed, despite the arbitration clause. The court considered that the appointment of an expert did not affect the substance of the dispute. “The court has rendered a summary judgement, in the presence of litigants, disregarding the pre-calling upon case dismissal in the presence of an arbitration clause, considering that the case appointing the expert does not affect the origin of the dispute.” It appointed an expert to “perform a field inspection of the project, object of the case as referred to in the statement of the case, under its current form in order to prove any such flaws and errors committed by the defendants with respect to the project of DIFC Gate, as well as assess any damages thereto, including value thereof.”  The decision made no reference to the jurisdictional argument put forward by Brookfield.

18. It is not for this Court to impugn the reasoning behind the decision of the non-DIFC Dubai Court nor the substance of the decision itself but if the Court had no jurisdiction to make the order or the pursuit of the proceedings and application for the order amounted to a breach of the arbitration agreement, this Court would be bound to consider whether or not the grant of an injunction was appropriate in accordance with settled authority constituted by the well-known line of cases commencing with the Angelic Grace [1995] 1 Lloyds Rep 87.

Breach of the Arbitration Agreement and the need for an anti-suit injunction

19. Article 68 of Federal Law No. 10 of 1992 concerning Law of Evidence in Civil and Commercial Transactions provides as follows:

“(1) It shall be permissible for a person who fears the loss of factual signs which may become the subject of a dispute before the law, in the presence of the parties concerned and in the normal way, to request the Summary Judge to move in order to observe them.  In this case the preceding rulings shall be abided by.

(2)  The Summary Judge shall be permitted in the aforementioned situation to appoint an expert to move in order to observe and to hear witnesses not under oath.  The judge shall then specify a session for hearing the remarks of the adversaries on the report of the expert and his actions.  The principles stipulated in the Chapter on Expertise shall be applied.”

20. Federal Law No. 11 of 1992 – the Law of Civil Procedures, provides in Article 28 as follows:

“1 – One of the judges of the seat of the court of first instance  shall be deputed to make provisional rulings without prejudice to the [substantive] right in expedited matters where it is feared [that a right will be lost] by the passing of time.

2 – The trial court shall have jurisdiction to hear those matters if they are raised before it as consequential issues.”

21. It is clear that these Articles provide for a procedural remedy in order to avoid the loss of relevant evidence. It is also clear from their terms and from the matters recited earlier as to the procedure adopted, that the substantive rights of the parties are to be unaffected by the provision of the report. Whilst, in many countries, the report of a court-appointed expert can be determinative of the issues in dispute between the parties, this is not the case in non-DIFC Dubai, as decided authorities in that jurisdiction make clear.

22. Two decisions of the Dubai Court of Cassation were cited to me, namely Civil Appeal No. 274-1993 of 29 January 1994 and Civil Appeals 340, 343 of 2009, Principle No. (54) of 25 April 2010. In the first of these decisions, it was decided that a receivership action which is the domain of “summary jurisdiction” by the Summary Judge was not a substantive action which enquired into the merits of the dispute but an action to avert an impending risk to the disputed property remaining in the hands of the possessor. The relief took the form of an interim provisional measure to protect the property whilst leaving those in dispute to fight out the case and the fundamental issues between them before the trial court. In the second decision, the first instance court appointed an engineering expert and the Court of Cassation decided that such an action for determination of facts, whether a summary or substantive action, was a precautionary action which anticipated a dispute with respect to material facts whose features might be lost, or for which evidence might be lost, or where reasons would be incapable of being identified at a later stage. It highlighted the fact that the court’s role in an action for determination of facts ended once an expert was appointed and filed a report and the parties had filed comments on that report. The parties were then left to fight out the fundamental issues during the course of the substantive action filed by those concerned as the ruling made in the action for determination of facts did not determine the controversy or touch the merits.

23. Despite therefore the terms of the order made which, on its face, requires the expert to determine issues of liability, causation and damage, none of such findings are binding for the purpose of determining the substantive dispute. If the matter came before a court subsequently, no doubt the court would have regard to the findings and weigh them against other evidence in the case. So far as arbitrators are concerned, it would be a matter for them as to whether or not all of the report was properly admissible or whether it usurped their functions in some respects and required redaction.

24. It is worth drawing attention to the terms of the arbitration agreement contained in the construction contract. Under Article 67.3.2, it was provided that “the arbitration shall be conducted in the English language and in accordance with such procedures as the arbitrator agrees provided that no such procedures shall be contrary to any laws (as the latter are described in Clause 5 above) [the laws of and applicable in the Emirate of Dubai] for the time being in force or applicable in the Emirate of Dubai”. It is thus plain that the arbitrators can control their own procedures but could not view the expert’s findings as being determinative of the issues which fell to them for decision, because the law of Dubai provides that such expert determination is not to affect the substantive rights of the parties.

25. DIFC Law No. 1 of 2008, the Arbitration Law, contains provisions relating to interim measures. Article 33 provides that, unless otherwise agreed by the parties, the Arbitral Tribunal may appoint one or more experts to report to it on specific issues to be determined by the tribunal and may require a party to give the expert any relevant information or to produce relevant documents or property for inspection by that expert. The expert may also, in such circumstances, participate in a hearing where the parties have the opportunity to put questions to him and to present expert witnesses in relation to points at issue. If arbitrators were appointed under the arbitration agreement in the construction contract, they would have such powers but at the time when the non-DIFC Court appointed an expert, there had been no reference to arbitration by either party, although the existence of the dispute was clear. Article 15 provides that “it is not incompatible within the Arbitration Agreement for a party to request, before or during arbitral proceedings, from a Court an interim measure of protection and for a Court to grant such measures”. By the terms of Article 7, this provision applies whether the Seat of the Arbitration is in the DIFC or outside it. Article 24(3), as construed by the DIFC Courts give power to the Court to issue interim measures in relation to arbitration proceedings, in the same way as it could for court proceedings, but only where the seat of the arbitration is in the DIFC

26. The DIFC Court’s power to grant interim remedies arises primarily under Article 22 of the DIFC Court Law No. 10 of 2004 which provides that “The Court of First Instance may order an injunction restraining a person from engaging in conduct or requiring a person to do an act or thing or other order the court considers appropriate” and Article 32 of the same Law which also grants the DIFC Court the power to make injunctions. Particular provision for interim remedies is given in Article 36 of DIFC Law No. 7 of 2005, the Law of Damages and Remedies, which provides that interim injunctions and declarations may be given and an order made for the detention, custody or preservation of relevant property and that the Court may make other orders of a like nature.

27. It is clear from the above that there is no inconsistency in seeking an order from the Court for the appointment of an expert to inspect the property where there is an agreement to arbitrate any dispute which relates to the condition of that property. No substantive determination is made by the Court or the expert and there is therefore no impingement on the functions of the arbitrators. Brookfield’s concern however is that the expert’s remit is not simply to report on the condition of the property and thus preserve the evidence but is also to “prove any such flaws and errors committed by the defendants with respect to the project, as well as assess any damages thereto including value thereof.” The expert, if following this remit, will express his conclusions as to the deficiencies in the work of Brookfield and the loss and damage attributable thereto. This, it is said, impinges upon the functions of the arbitrators. Furthermore, the Court chose an expert from its roster of expert engineers, without regard to any particular expertise required in relation to the cladding which is the subject of dispute and the parties had no say in the choice of the expert at all.

28. It does not seem to me that any of these matters individually or taken together cumulatively can result in the pursuit of the proceedings before the non-DIFC Dubai Court for the appointment of an expert being seen as a breach of the arbitration agreement.

(a) The arbitrators have the power to control their own procedures and are in a position to admit the evidence of the court-appointed expert, in part or in whole. If there are conclusions of the expert which usurp the functions of the arbitrators, they can rule such parts inadmissible and admit into evidence only a redacted report.

(b) Because, under Article 67.3.2 of the construction contract, the procedures adopted by the arbitrators cannot be contrary to the laws of the Emirate of Dubai, the report cannot have substantive effect, even if the conclusions about fault, causation and damages are admitted. These merely form part of the evidence for consideration by the arbitrators and the parties will doubtless be free to produce their own expert evidence on the subject matter.

(c) It is often the case that experts opine on issues of fault and negligence and stray into areas which are the province of the ultimate decision making body, whether it be arbitrator or judge. The line between the giving of expert evidence, on the one hand, as to the deficiencies in a building and the cause thereof, and issues of law, on the other, in relation to the establishment of negligence, breach of contract and the like is not always easy to draw and often boils down to little more than the form in which the opinions are expressed.

(d) It is now clear, even if it was not necessarily the case beforehand, that DIFCI will not pursue court proceedings to determine substantive liability unless the arbitration agreement should subsequently prove to be void or inoperative. If the dispute cannot be resolved, it will go to arbitration and the arbitrators will have to determine the matters on the basis of all the evidence available, including, to the extent that they admit it, any report from the court-appointed expert.

29. Counsel for DIFCI pointed out that the report would inevitably be made in any event since Gensler, although objecting on 7 June to the appointment of an expert by the Court, has accepted that decision and has not appealed against it. Furthermore, it appears that some of the features of the report to which Brookfield take exception will not form part of the report in fact. Whilst maintaining that DIFCI had no control over the contents of the report, counsel for DIFCI informed this Court, at the hearing, that the report would not deal with quantum and, at least as it appeared to me, implied that the report would do no more than deal with the deficiencies in the cladding arrangement without apportioning blame to Brookfield or Gensler, or apportioning any liability for the deficiencies as between them.

30. The only injunction that this Court might therefore be able to make in support of the arbitration agreement between Brookfield and DIFCI, would not prevent the report being made, but would prevent the pursuit of the Lawsuit against Brookfield. An injunction which in some way sought to prevent the report being used in the context of the dispute between Brookfield and DIFCI would be beyond the scope of any order this Court could properly make. The use of the report is a matter for the arbitrators, not a matter for this Court because of the arbitration agreement itself. It will be for the arbitrators to decide the extent to which any of the report is admissible in any arbitration between Brookfield and DIFCI and this would be the position if I granted an injunction to prevent the pursuit of the non-DIFC Lawsuit against Brookfield, since the report would be in existence as between Gensler and DIFCI in any event and it would be open to DIFCI to seek to adduce it in evidence in the arbitration.

31. I have therefore come to the clear conclusion that it cannot be said that DIFCI are in breach of the arbitration agreement in the construction contract and in those circumstances there is not only no need, but no basis for any anti-suit injunction to be granted preventing the pursuit of the Lawsuit.

The Issue of Jurisdiction

32. DIFCA is a DIFC Body, as defined by the Judicial Authority Law (No 12 of 2004).  It was established by Dubai law No. 3 of 2002 with its existence confirmed by Article 3 of the Dubai Law No. 9 of 2004, which repealed the earlier law.  DIFCI is a DIFC entity, as defined by the Judicial Authority Law and was established in May 2006.  These matters were undisputed.  Under Article 5(A)(1) of the Judicial Authority Law this Court, the DIFC Court of First Instance “shall have exclusive jurisdiction to hear and determine, in so far as relevant:

“(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…Whether partly or wholly concluded, finalised or performed within DIFC.

(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…”

33. In consequence, there can be no doubt that this Court has jurisdiction in respect of the parties and the subject matter of their dispute, subject to the arbitration agreement contained in the construction contract. The Court has therefore jurisdiction to make the declarations and injunction sought, should it consider it just and convenient to do so. The decisions in Dhir v Waterfront Property Investment Ltd [CFI 011/2009] and Corinth Pipeworks v Barclays Bank [CA 002/2011] put beyond argument the proposition that this Court has jurisdiction in any civil or commercial claim to which a DIFC Body or Entity is a party.  Given the contents of the construction contract, the Court is also given jurisdiction by Article 5 (A)(1)(b) and (c). The Protocol of 7/12/09 signed between the DIFC Courts and Dubai Courts is wholly consistent with this.

34. The DIFC Arbitration Law No 1 of 2008 provides that the court should not intervene in arbitration except to the extent provided by the statute itself, but gives powers to the DIFC Court. I have already referred to Article 15, which provides “that it is not incompatible with an Arbitration Agreement for a party to request, before or during arbitral proceedings, from a court, an interim measure of protection and for a court to grant such measure”. Although the Law gives wide powers to the Arbitrators to make interim orders, no Arbitrators have yet been appointed. Article 24 gives power to the Arbitral Tribunal to order interim measures including orders to preserve evidence that may be relevant and material to the resolution of the dispute and Article 33 provides that an expert can be appointed by the Arbitral Tribunal to report to it on specific issues as determined by the tribunal.

35. So far as concerns the Courts, Article 24 (3) provides that the DIFC Court “shall have the same power of issuing an interim measure in relation to arbitration proceedings…as it has in relation to proceedings in courts. The DIFC Court shall exercise such power in accordance with its own procedures. As construed by these Courts, the DIFC Court could therefore have granted an order for the preservation of evidence if an application had been made to it, instead of the non-DIFC Dubai Court where DIFCI filed the Lawsuit, if the DIFC was the seat of the arbitration, but not where the seat was non-DIFC Dubai.

36. What is sought here is however an injunction to protect Brookfield’s negative right – its right not to be sued in a Court because of the agreement to arbitrate. It was contended by DIFCI that such an injunction could only be granted by the court of the seat of the arbitration and not by the court of any other seat. In reliance on the English Court’s decision in Nomihold Securities Inc v Mobile Telesystems Finance SA [2012] 1 Lloyd’s Rep 442 at paragraphs 44-52 (Andrew Smith J), it was submitted that an anti-suit injunction was only issued as part of the Court’s supervisory jurisdiction and thus was only granted when the seat of the Arbitration was in the jurisdiction of the court.  I do not accept this submission in the light of the decision of Blair J in U&M Mining Zambia Ltd v Konkola Copper Mines PLC [2013] 2 Lloyds Rep 218, and the decision of the Supreme Court in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] 1 WLR 1889.

37. The effect of those decisions is that the power of the English court to grant such injunctions derives from Section 37 of the Supreme Court Act 1981 (the equivalent of Article 32 of the DIFC Court Law No. 10 of 2004), rather than the powers given by the Arbitration Act and that the negative aspect of an arbitration agreement is a right enforceable independently of the existence of any arbitral proceedings. An anti-suit injunction is not “for the purposes of and in relation to arbitral proceedings”, but for the purposes of and in relation to the negative promise contained in the arbitration agreement not to bring foreign proceedings. There is a distinction to be drawn, therefore between orders made by the court in exercise of its supervisory jurisdiction, on the one hand, and orders made, on the other hand, in support of the right of a party to insist on arbitration rather than litigation where that has been agreed (see the judgment of Lord Mance at paragraphs 25-28 and 48 in particular). The decision of Blair J, which preceded the decision of the Supreme Court in 2013 drew a distinction between a supportive jurisdiction and a supervisory jurisdiction. He considered that, where the seat of the arbitration is abroad, the court was in a position to grant an anti-suit injunction but would need a very good reason to do so, such as the inability of the court of the seat to grant such an injunction or the practical ineffectiveness of any such remedy.

38. I do not therefore accept that, even if the seat of the arbitration is non-DIFC Dubai, the Court has no jurisdiction to grant an anti-suit injunction but it would be an unusual and exceptional case where the Court did so, particularly bearing in mind the appropriate respect that the courts of the two different systems in the Emirate of Dubai must have for each other. This is a point which has been emphasised in the past by Justice Sir John Chadwick in Taaleem v National Bonds Corporation [CFI-014-2010] at paragraph 18 and by Justice Omar Al Muhairi in Azzam v Deyaar Developments [CFI-024-2015] at paragraph 26.

39. It is clear to me that, if non-DIFC Dubai is the seat of the arbitration, this Court would not interfere with an order made by that court because of the existence of an arbitration agreement. When making the order that it did on 7 June, the non-DIFC Dubai Court was fully aware of the arbitration agreement and decided that it did not prevent the Court from making the order it did. If that court had jurisdiction to make the order which it did, this Court could not and would not impugn it.

40. Although the DIFC Courts are given exclusive jurisdiction over DIFC Bodies and Entities both generally and in relation to transactions of the character of the construction contract between the parties so that it has jurisdiction, in its own eyes, to enforce the arbitration agreement in that contract, regardless of the seat of the arbitration and the implied choice of the parties of the courts of the seat as the supervisory courts, the DIFC Court would not in practice do so, save in exceptional circumstances. Its jurisdiction cannot be ousted by the parties’ choice of the seat and supervisory jurisdiction, but comity would militate against the exercise of that jurisdiction when the courts of the seat can not only supervise the arbitration but are in a position to grant any injunction necessary and to ensure that the arbitration agreement is not breached by pursuit of remedies in that court.

41. If the seat of the Arbitration is DIFC however, the position is different, because the primary responsibility for the enforcement of the arbitration agreement would lie on the courts of the seat, if relief was sought. This Court would then be concerned, first, to protect its own exclusive jurisdiction under the Judicial Authority Law and, secondly, as the Court of the seat, to protect the agreement of the parties to refer their disputes to the determination of arbitrators, if there was some infringement of the parties right to arbitrate their disputes.

The Seat of the Arbitration

42. A novel point arises here because of the terms of the choice of law and arbitration clause in the construction contract. The applicable law was that of the Emirate of Dubai and Article 5.1.4 went on to say that “such laws include, without limitation, any ordinance, rule, decree, regulation or order of any governmental authority or agency of the Government of Dubai or the United Arab Emirates”. Article 67.3.1 provided that disputes or differences should be “submitted to arbitration in the Emirate of Dubai as set forth below”. Article 67.3.1.1 provided for each party to appoint an arbitrator and for the two so appointed to appoint a third arbitrator but if any party failed to appoint an arbitrator or the two appointed could not agree upon the appointment of the third, the appointment was to be made on application by a party to the Committee for Conciliation and Arbitration of the Dubai Chamber of Commerce and Industry, which I was told no longer exists.

43. At the time when the construction contract was concluded in May 2003, the DIFC Courts did not exist, although the DIFC had been set up in 2002 as a free zone and Article 30 anticipated the possibility of the establishment of a court to regulate the activities of corporations set up within the zone. DIFCI submitted that, in such circumstances, there was no DIFC Court, no DIFC law and no possibility therefore of the parties’ choice of law and seat of the arbitration being anything other than that of non-DIFC Dubai. The simplicity of that argument is attractive but not, in my judgment conclusive. Although I have been referred to various authorities where the DIFC Courts have grappled with similar wording, with no distinction being drawn in the wording between the DIFC and non-DIFC Dubai, in each case the contract in question was concluded when both court systems were in existence. DIFCI placed reliance upon the decision in Dhir v Waterfront Properties [CFI-011-2009] at paragraphs 85-87, 90 and 92 and the approval of that decision in IGPL v Standard Chartered Bank [CA-004-2015] at paragraphs 132-136. An arbitration agreement cannot designate both the DIFC and non-DIFC Dubai as the seat of the arbitration. It must refer to one seat or the other. That seat then has exclusive supervisory jurisdiction.

44. Particular reliance was placed by DIFCI on the judgment of the Court of Appeal in the Taaleem case to which I have earlier referred [CA 001/2011]. At paragraph 39 the following appears:

“It can, therefore, be inferred with reasonable confidence that where at the moment of contracting the parties select the Laws of Dubai as the governing law they intend to select either Civil Law Dubai Law, as applied in the non-DIFC Courts, or Common Law Dubai Law, as applied in the DIFC Courts.  The one selection which, in our judgment, it can confidently be asserted would not have been made by either party would have been such body of law as was applied in such Court as was accorded jurisdiction over a given future dispute by the general laws of the Emirate of Dubai, depending on whether the dispute fell inside or outside Article 5(A)(1) of Law No. 12 of 2004.  The assumption that in a clause such as this the parties could have mutually intended to disassociate the body of law governing the contract from the court upon which they conferred jurisdiction is, in our view, although theoretically possible, distinctly implausible.  Their selection of one body of law can thus be assumed to reflect their agreement to confer jurisdiction on the Courts of that one place where that body of law will be applied.  Since their selection of a body of law must be immutable unless the contract is subsequently varied, there must be the very strongest inference that their selection of a Court applying that body of law is also intended to be immutable.”

45. This does not seem to me however to conclude the argument. Whilst at the time of concluding the contract, there was only one system of law and courts in existence, namely non-DIFC Dubai, it was the law of the Emirate of Dubai which was chosen as the governing law. Under the terms of that law, jurisdiction was then parcelled out between the DIFC and the non-DIFC Courts in 2004. From that point on, particular types of case were allocated to the DIFC and fell within the jurisdiction of that system, as opposed to that of the non-DIFC Courts. From that point on therefore, where, subject to the arbitration agreement, the DIFC Court had jurisdiction over the parties and/or contract in question, by reason of the terms of Article 5(A) of the Judicial Authority Law of 2004, the logic of the position would dictate that DIFC became the seat of the arbitration.

46. Inexact analogies can be drawn with cases where the law and jurisdiction of a particular country is chosen by the parties but that country subsequently fragments into two different states, which may either be known by different names or where one retains the same name as the original state whose jurisdiction was chosen by the parties. Which country’s law then applies to the contract and which country is then the seat of the arbitration? Here there is no fragmentation of a state but a deliberate decision on the part of the state to allocate jurisdiction between two different systems within it. The application of that state’s law to the question of jurisdiction would result in DIFC becoming the seat of the arbitration from the point at which the Judicial Authority Law came into force, even though prior to that time non-DIFC Dubai would inevitably constitute the seat of the arbitration with its applicable law.

47. I do not need to decide this point because there is no basis for the anti-suit injunction, but I reach this provisional conclusion even without the benefit of any evidence of matrix surrounding the conclusion of the construction contract in 2003, when it may well be the position that the parties anticipated the establishment of the DIFC Courts and legal system. I was in fact urged by Brookfield not to decide the question of seat of the arbitration because of the need for such matrix evidence. It is unnecessary that I should do so and I reach no final conclusion on the point.

Conclusion

48. There is a binding arbitration agreement between Brookfield and DIFCI and this is not disputed. If appropriate undertakings are not given, I will make a declaration to that effect. I refuse the interim anti-suit injunction sought by Brookfield for the reasons which I have given. Such reasons would apply with even greater force to the claim for a permanent injunction.

49. This Court does have jurisdiction to grant an anti-suit injunction, even if the seat of the arbitration is not in the DIFC. It would require an exceptional case for the Court to exercise it in those circumstances and in this case it would refuse to do so, whether or not the seat was in the DIFC, for the reasons which appear earlier in this judgment. The seat of the arbitration will have exclusive jurisdiction to supervise the arbitration itself but the powers of the court to make an anti-suit injunction exist where the courts are not the Courts of the seat, albeit that the exercise of those powers would be exceptional. In consequence there is however no exclusive jurisdiction for the making of an anti-suit injunction.

50. The parties may be able to agree upon the orders which should be made in consequence of my decision in relation to the various orders sought. In essence DIFCI have successfully resisted the granting of an interim anti-suit injunction but did not succeed on all the points it argued and Brookfield has succeeded in establishing that there is a binding arbitration agreement to which DIFCI will adhere, which only became clear in the run up to the hearing and at the hearing itself.

51. There is, in reality, nothing further to be argued about because a final injunction would in these circumstances never be granted so that the points which I have not finally decided at this stage will never fall for decision in this case. The issue of the seat of the arbitration will await another day. The lion’s share of costs should, in my judgment, subject to any peculiarities of which I am not aware, fall to be paid by Brookfield.

52. Having heard the parties’ submissions on the consequences of my findings, my decision thereon is reflected in the order made.

 

Issued by:

Natasha Bakirci

Assistant Registrar

Date of issue: 28 July 2016

At: 9am