Claim No: CFI 026/2014

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 THE DEPUTY CHIEF JUSTICE SIR DAVID STEEL

 

BETWEEN

STANDARD CHARTERED BANK 

                                                                                                                            Claimant

And

INVESTMENT GROUP PRIVATE LIMITED 

Defendant

Hearing: 28 July 2016

Counsel: Mr James Barratt and Mr Alain Farhad, instructed by Squire Patton Boggs for the Claimant

Mr James Abbot and Mr Shane Jury, instructed by Clifford Chance LLP for the Defendant

Judgment: 28 July 2016

Issued on: 1 August 2016


JUDGMENT OF THE DEPUTY CHIEF JUSTICE SIR DAVID STEEL


 

1.This is an application for a stay by the Defendants, Investment Group Private Limited. The application is pursuant to Article 60 of Federal Law 10 of 1973, which might be called, for short, the Union Supreme Court Law.

2. The Federal Law 10 sets out in Article 33 the jurisdiction of the Union Supreme Court. One of the matters for which jurisdiction had been allocated to the Supreme Court is set out in sub-article 10:  a jurisdiction dispute between a judicial authority in an emirate and a judicial authority in another emirate, or among judicial authorities in one emirate.  It is perhaps worth noting in passing that what are being focused upon are disputes between judicial authorities.

3. There is no issue that the present potential dispute as the judicial authority known as the Dubai International Financial Centre Court (DIFCC) and the Dubai Courts falls within the sub-article. There is no requirement for the dispute to be between judicial authorities of two different emirates.

4. Article 60 reads as follows:

“In the event of a conflict of jurisdiction between two or more of the judicial authorities referred to in article 33(9) and (10), that these authorities would not abandon the hearing of the action, that all of these authorities have abandoned the hearing the same, or issued contradictory judgments thereon, the petition for designation of the competent court shall be submitted to the Supreme Court by virtue of a petition based on the demand of one of the litigants or the public prosecutor.”

5. It then goes on to deal with the form of the petition and also to deal with the outcome in the event that there is a stay of execution of contradictory judgments until an enforceable judgment is determined.

6. The focus of the submissions made on behalf of the Defendants, who are the applicants in the present proceedings, is that there is a conflict of jurisdiction between two or more judicial authorities because proceedings have been issued in the DIFC and parallel proceedings have been issued in the Dubai courts, and the Claimants have not abandoned the hearing of those claims.

7. The principal response of the Claimants is that that constitutes a wholly unreal construction of the Federal Law. It is submitted that any purposive construction of Article 60 requires the identification of a conflicting stance adopted by two or more judicial authorities, and not a reliance upon the conflicting stance adopted by the parties to the proceedings brought before those judicial authorities.

8. The chronology of these proceedings is somewhat instructive. It is a very substantial claim: a claim on two loan agreements totalling US$184 million.  There is a cross-claim which is fairly minor in comparison, whereby the Defendants assert there has been a miscalculation of the interest due on the loans and that a sum of something in the region of AED 200 million is owed by way of damages.

9. The claim was issued in the DIFCC on 6 August 2014, and that prompted a challenge to the jurisdiction of the DIFCC by the Defendant on 21 September. A few months later on 12 January 2015, the Defendants issued proceedings in Sharjah, pursuing what I have indicated to be their primary case, namely a miscalculation of interest and a claim in respect of damages.  A few days later, the application made to the DIFCC by way of challenge to its jurisdiction failed at first instance.

10. On 31 May 2015, the Sharjah Court rejected jurisdiction. That decision was approved by the Sharjah Court of Appeal on 15 September.  In turn an appeal to the DIFC Court of Appeal was dismissed on 19 November.  The Defendants went to the Court of Cassation in Sharjah.  That appeal failed on 29 December.

11. At last, substantive proceedings in the DIFC got underway. On 10 February 2016 the points of claim were served, on 6 April there was a defence, and on 18 May a reply, together with an application by the Claimants for immediate judgment.

12. In the meantime, the Defendants instituted proceedings before the Amicable Dispute Centre in Dubai. This in fact was then transferred to the Dubai Courts on 30 May 2016. The claim advanced was precisely the same as that which had been pursued in Sharjah but which the Sharjah Court at all three levels had refused to entertain.

13. On 6 June 2016 the Defendants made an application to the Union Supreme Court for the determination of the alleged conflict of jurisdiction and for a stay. On 9 June the Defendants issued the present application in the DIFCC, this time for a stay under Article 60.  Coincident with that application, Decree 19 of 2016 was issued in Dubai, which constituted a judicial authority to which I must return.

14. On 24 July 2016 an application under Article 60 was also preferred in Dubai. Today is 28 July.  The hearing is being undertaken before me by way of video link with Dubai.  This was also anticipated by the Defendants to be the day on which the Dubai Courts would rule on jurisdiction.  But there has apparently been an adjournment of that ruling until at least 18 August.  I say “at least” because it appears that the adjournment was prompted by an application by the Defendants to allow them to re- open the pleadings in order to put forward what is described as an essential (and presumably new) defence.

15. The first issue that arises before me is the question whether the effect of the new Decree is to eliminate the jurisdiction of the USC to determine conflicts of jurisdiction between the judicial authorities of Dubai. What the Claimants say is that it does and that it has retroactive effect, and that accordingly this Court has in effect no jurisdiction to entertain this application under Article 60; the Court should refuse to entertain the application and leave matters to be decided by the committee.

16. The Defendants agree, as I understand it, that the effect of the Decree is to effectively amend the jurisdiction of the USC, but they say that is of no immediate consequence because the Decree does not have retroactive effect, and accordingly matters have to be considered by reference to Article 60 and not by reference to the Decree.

17. The Decree does indeed afford to the judicial authority – the formation and constitution of which is set out in Article 1 – responsibility and jurisdiction to determine conflicts of jurisdiction between the Dubai Courts and the DIFC Courts. Once its competence is engaged, then the conflicting claims will be stayed until the judicial authority issues a resolution that has to be produced very promptly.  As I have indicated from the chronology, the Decree was issued on 9 June 2016, that is to say three days after the application to the Union Supreme Court was made and on the same day as the present application.

18. As regards the issues in regard to the effect of the Decree and its retroactive effect, I have had the particular advantage of assistance from two very distinguished jurists from Dubai who have prepared extensive reports. Dr Ahmed bin Hazeem has filed a report and opinion on behalf of the Defendants, and Dr Habib Al Mulla likewise for the Claimants.  I must express grateful thanks for the clarity and quality of the reports that have been produced.

19. As I have indicated, as regards the first point, ie the impact of the Decree on the USC law, they are in fact agreed, namely that the impact of the Decree is to eliminate the jurisdiction of the Union Supreme Court in respect of conflicts of jurisdiction between the courts of Dubai.  I hope they will allow me to approach that agreement with some degree of caution.  This is a very new decree which is not without controversy.  It has attracted a fair bit of academic discussion, including on the very topic that we are considering at this moment, namely the relationship between the Decree and the USC law.

20. The issue is, it seems to me, of some high level of importance from the perspective of both the Dubai Courts and the DIFC on the one hand and the judicial authority on the other. One cannot help expecting that issues may arise as to whether, as a matter of constitutionality, a decree of the Emirates of Dubai can override, indeed amend, a federal law.  If I can, I would be minded to reserve my view on this topic, not least because it no doubt arises in a number of other cases.  I accordingly will only return to it if I conclude that the issue arises in the present case i.e. if there is indeed a conflict of jurisdiction.

21. As to the issue of retroactive effect, there is a dispute between the experts. Dr Mulla relies upon the federal CPC in support of his opinion that it is retroactive being a procedural matter.  Dr Hazeem prefers the view that it is not a procedural matter and the federal CPC is of no application.  Furthermore it is contended that even if the federal CPC was pertinent, there is an exception in respect of permitting procedural matters to have retroactive effect where the pleadings are closed, as indeed they are, in the DIFCC action.

22. Again, I hope the experts will forgive me if I exercise caution and seek to reserve my view on this dispute, which again arises in a number of cases. I am not sure the point is entirely easy.  Again I consider the appropriate way forward is for me to consider whether there is in fact a conflict of jurisdiction and, only if I was to conclude there was, return to the issues of the retroactivity and the impact of the Decree.

23. Accordingly, I turn to the principal issue in this case as to whether Article 60 is engaged. The Claimants assert that absent any inconsistent positive decisions by both the Dubai Courts and the DIFC Courts adopting, confirming or rejecting jurisdiction, there is no relevant conflict.  The Defendants contend that it is sufficient for jurisdiction to have been invoked by each party and not abandoned, and, once that invocation in two different jurisdictions is established, there is a conflict.

24. I have already drawn attention to the terms of Article 60, which seems to me to provide a strong measure of support for the Claimant’s position, given that it is directed at conflicts between two judicial authorities and not conflicts between parties as to which of the jurisdictions they prefer. In short, at first blush, the article does require more than invocation of jurisdiction.  Furthermore I would shy away from allowing such to create a conflict of jurisdiction.  It would occur without any input from the relevant judicial authority and would allow a reluctant defendant to dispatch into the long grass a good, valid claim by the simple device of issuing proceedings in another emirate and then claiming that there is a conflict of jurisdiction.  This on the Defendants’ case would create the need for a stay so as to await a decision of the Supreme Court, which no doubt would take a considerable period of time to emerge.

25. The starting point in considering whether these first impressions are correct is to look at the decisions of the Supreme Court itself. Two decisions have been brought to my attention.  First, an unnamed decision called Challenge No. 10 of the Year 28, a hearing which took place on 5 May 2002 before the Supreme Federal Court.  The headnote to the decision is of some interest.  Against, “International jurisdiction” it reads:

“Disputed jurisdiction, Supreme Court.  Jurisdiction of the Supreme Federal Court to decide in the disputed jurisdiction between two final judgments shall be restricted to the disputed jurisdiction between federal judicial authority and the judicial authorities in the emirates, or between judicial authority in an emirate and judicial authority in another emirate.  It shall not be expanded to include dispute foreign judgment and a judgment issued by the national judicial authority.  It is based, its effect, judgment should be passed not to accept the case.”

26. That reference to two final judgments re-emerged in due course in two decisions of the DIFCC which I will come to in a moment, but in the body of the judgment – I am reading from page 134 of the translation – there is this passage. Having referred to Article 60 and to Article 33, the court went on:

“The meaning of these texts is that the state of the disputed jurisdiction does not exist, unless jurisdiction is disputed between a federal judicial authority and the judicial authority in another emirate, or between the judicial authority in an emirate between them, where each of them claims its jurisdiction to hear the case or give up its hearing or each of them issues judgment in the case that contradicts the other.”

27. At the heart of the Defendant’s submissions to me, the emphasis is placed upon what is said to constitute three separate circumstances in which a conflict of jurisdiction may emerge: (1) that the authorities have not abandoned the hearing; (2) that the authorities have abandoned the hearing; or (3) the authorities have issued contradictory judgments. As I read the decision in Challenge No. 10 of the Year 28, the emphasis is upon what the judicial authority in the individual emirate is claiming.  The judicial authority claims jurisdiction or gives up jurisdiction or issues a judgment.  There is no indication whatsoever that it is sufficient simply for a party to invoke jurisdiction and thus effectively preclude the need for any decision by the judicial authority.

28. It may be surprising that there could be an insistence on an assertion or decision by the relevant judicial authority not to abandon the hearing of an action, a decision that might usually form a judgment, when there is already reference to a situation in which there are contradictory judgments. I am minded to accept the submission made on behalf of the Claimants that, be that as it may, that does not detract from the requirement for a positive assertion or abandonment by the relevant judicial authority.  It may be that the reference to contradictory judgments in contrast to decisions not to abandon jurisdiction is designed to deal with a circumstance in which an issue of jurisdiction is dealt with in the course of a judgment on the merits rather than at an interlocutory stage.

29. The other decision of the Supreme Court is in Meydan v Banyan, a decision dated 23 December 2015. There are in fact two translations of the relevant passage in the judgment.  I am not sure that the difference between them is particularly significant.  The passage in the agreed bundle reads as follows:

“Turning to the merits of the challenge action, the Federal Supreme Court has held that a negative conflict of jurisdiction would arise when two judicial bodies before whom the claim is brought in respect of same such a matter decide that the matter falls outside their remit and accordingly decline jurisdiction.”

That is not this case, but one has to emphasise the verb “decide”.  The passage goes on:

“A positive conflict of jurisdiction arises when two judicial authorities before whom a dispute is brought in respect to the same subject matter assert jurisdiction based on their remit.  Neither body gives up jurisdiction, which justifies recourse to the Challenge Court to determine the matter by designating the competent court.  This requires that a case be simultaneously pending before both disputed bodies where they are both asserting their jurisdiction over the matter and did not decline jurisdiction when the matter was referred to the authority entrusted with designating the court competent to hear and decide it.”

30. The present case is a good example of an alleged positive conflict of interest, but in my judgment this requires that both disputant bodies, ie the DIFCC and the Dubai Courts, both assert – and I emphasise that verb – their jurisdiction over the matter and do not decline jurisdiction when the matter is referred to it. This seems to me to confirm the requirement that there be a positive assertion or decision by the relevant authorities to exercise jurisdiction.

31. The alternative translation to that passage separates out the last phrase, and that reads:

“Thus justifying an application to a court on matters of conflict of jurisdiction for determining the competent forum.”

That is not this case.  The only court that has asserted jurisdiction to exercise jurisdiction is the DIFCC.  The Dubai Courts have made no observation on the topic at all.

32. In those circumstances, I am unable to accept the proposition advanced on behalf of the Defendants, which is set out in their skeleton as follows:

“What is required is that there be simultaneous proceedings where jurisdiction has been asserted in each.  Given that article 60 can be engaged if the disputed judicial authorities have not issued judgments because of the not-abandoned hearing of the action, then the question is what does asserting jurisdiction mean if, as it is, it must be something other than rendering a judgment on jurisdiction?  The defendant submits that this must mean the court’s jurisdiction has been invoked and the case had not been abandoned.  This argument is consistent with the fact that the way in which the court gives effect to a positive decision to assert jurisdiction is to pass a judgment.  Accordingly, to give meaning to the third limb of article 60, it must refer to something other than passing a judgment.  The plain and ordinary meaning is that the jurisdiction has been invoked and has not been abandoned.”

33. I regret I am quite unable to accept that on the plain and ordinary meaning of the Article it is sufficient for the jurisdiction to be invoked, leaving aside the rather remarkable implications that would bring in its train if it was right. Even the expert called who attended on behalf of the Defendants falls shy of proposing that the invocation of jurisdiction by itself is sufficient.  He identifies the requirement of a “clear indication” from the court.  But here the Dubai Courts have given no indication whatsoever, let alone a clear one.

34. The Claimants also relied upon two decisions of the DIFCC. Firstly Allianz, in which His Excellency Judge Al Madhani gave the judgment of the Court.  He made reference to the decision of No. 10 of 28, where his interpretation of the decision was to the effect:

“This principle states the USC shall exercise its jurisdiction to determine a conflict of jurisdiction between two final judgments of a federal and local judicial authority or between two local judicial authorities in the UAE.”

35. That passage was adopted by the Court of Appeal in the present proceedings. It is not easy, I confess, to identify precisely from where that quote is derived, given the translations that are before the Court, but the principle that there has to be a decision, an assertion by each individual authority, and a final one, seems to me to be entirely correct.  Otherwise, there is nothing to require the invocation of assistance from the Supreme Court in order to resolve the conflict.

36. Furthermore, it strikes me that, regardless of the accuracy or otherwise of that citation, I am bound by the decision in IGPL v Standard Chartered Bank, the alleged distinction as a matter of fact between that case and the present case, namely that in the present case a petition to the USC has actually been issued is not in my view a material distinction.

37. Accordingly, I have reached the firm view that this application must be refused on the grounds that there is no conflict of jurisdiction engaging Article 60. I reach that conclusion with some relief because it renders it unnecessary for me to determine the issues of the impact of the Decree on the federal law and the issue as to the retroactivity or otherwise of the Decree.  By the same token, I reach this conclusion willingly.  The Defendants have pursued almost every avenue to avoid the jurisdiction of this Court and the determination of this very substantial claim.  They have expended substantial costs in three courts in Sharjah, two courts in the DIFC and two courts in Dubai to no avail.  Now the Union Supreme Court is invoked on grounds which appear hopeless.  This application is refused.

 

Issued by:

Natasha Bakirci

Assistant Registrar

Date of issue: 1 August 2016

At: 2pm