October 07, 2022 Arbitration - Orders
Claim No: ARB 016/2022
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
LEDGER
Applicant/Claimant
and
LEEOR
Respondent/Defendant
ORDER WITH REASONS OF JUSTICE MICHAEL BLACK
UPON the ex parte Urgent Application filed by the Claimant on 3 October 2022 seeking an Interim Anti-Suit Injunction (the “Urgent Application”)
AND UPON hearing Counsel for the Claimant at the Urgent Application Hearing held on 6 October 2022 (the “Hearing”)
AND UPON the Claimant’s oral application for seeking permission to appeal this Order made at the Hearing in accordance with Rule 44.6 of the Rules of the DIFC Courts
IT IS HEREBY ORDERED THAT:
1. The Urgent Application is refused.
2. The Claimant is granted permission to appeal against this Order on the grounds that there is another compelling reason for the appeal to be heard.
3. Costs shall be reserved.
Issued by:
Ayesha Bin Kalban
Acting Registrar
Date of issue: 7 October 2022
At: 3pm
SCHEDULE OF REASONS
Introduction
1. This is a claim made on 3 October 2022 without notice for an interim anti-suit injunction by the claimant Ledger (“Ledger”) against Leeor (“Leeor”) until the return date or further order of the Court, that the Respondent must not take any further steps or continue the proceedings in the Dubai Courts of First Instance in Case Number 001 of 2022, any expert process thereto, or any part thereof. The hearing of this Urgent Application has taken place on 6 October 2022. Mr. Lind, instructed by Mr. Liqn appears for Ledger, and he suggests that the order sought will be until determination of the Part 8 application described below, but I observe that any order today would be made solely until the return date.
Factual Background
2. The material facts are set out in the affidavit of Leilani the CEO of Ledger sworn on 3 October 22022.
3. Ledger is the developer of Tower in the Dubai comprising the construction of 123 residential building in Dubai. Leeor is a construction contractor and is based in Dubai.
4. In or around September 2015, the parties entered into an agreement wherein the Claimant agreed to pay the Defendant AED 348,000,000 for the Defendant to execute and complete the Project and the remedying of defects.
5. At Clauses 67.3 and 67.5 of the Particular Conditions of Contract there were provisions for the resolution of disputes by arbitration – (the “Arbitration Agreement”)
“Clause 67.3: Arbitration
Any dispute in respect of which:
a) the decision, if any, of the Engineer has not become final and binding pursuant to Sub-Clause 67.1, and
b) amicable settlement has not been reached within the period stated in Sub Clause 67.2 shall be finally settled, under the current Rules of Arbitration and Conciliation of the DIFC-LCIA by an Arbitral Tribunal which shall consist of three members …
Clause 67.5 Settlement of Disputes and Arbitration
The law governing the procedure and administration of any arbitration instituted pursuant to Sub-Clause 67.3 shall be the law of United Arab Emirates and of Dubai. The language of the arbitration shall be English and the place of arbitration shall be Dubai." [emphasis added]
6. A dispute arose between the parties leading to Leeor issuing correspondence on 18 January 2022 in which Leeor both requested an amicable settlement meeting and gave notice of an intent to commence arbitration thereby giving the impression that settlement meeting was merely going through the motions in order to satisfy the contractual precognitions to arbitration.
7. In fact, Leeor did not commence arbitration, instead on 14 June 2022 it started proceedings before the Dubai Court of First Instance, Case Number 255 of 2022. Ledger submitted its defence in those proceedings on 29 June 2022 raising a jurisdictional challenge invoking the Arbitration Agreement. On 6 July 2022, Ledger further submitted an additional memorandum with supporting documentation. A first hearing was held on 27 July 2022 at which Leeor submitted a memorandum.
8. On 14 September 2021 His Highness Sheikh Mohammed bin Rashid Al Maktoum Ruler of Dubai had issued Decree 34 of 2021.
9. By Article 4 the Decree abolished the DIFC LCIA Arbitration Centre and by Article 5 its functions were transferred to the Dubai International Arbitration Centre (DIAC). By Article 6 DIAC replaced the Abolished Arbitration Centres in considering and determining all disputes arising out of the Arbitration Agreements concluded before the Decree unless otherwise agreed by the parties.
10. The Decree included a new DIAC Statute. Article 4(b) of the statute stated:
“In the event that the arbitration parties do not agree on the seat or legal place of arbitration, the DIFC shall be considered the seat or legal place of arbitration, and the Arbitration Agreement and procedures shall be governed by the DIFC Arbitration Law”
11. Ledger now asserts that the Arbitration Agreement is silent as to the seat of the arbitration and consequently Article 4(b) of the DIAC statute means that the DIFC is the seat. Ledger issued a Part 8 claim this Court on 29 July 2022. In that claim, Ledger stated that Article 4(b) was its alternative position, its main position being that reference to the DIFC LCIA necessarily meant that the seat was the DIFC. It is now not pressing that point.
12. The Part 8 claim seeks Declarations that:
a) The Arbitration Agreement (Clauses 67.3 and 67.5 of the Particulars Conditions of Contract) are binding on the Claimant and on the Defendant.
b) Clause 6.2 of the Addendum is binding on the Claimant and on the Defendant (Clause 6.2 of the Addendum nearly refers back to Clauses 67.3 to 67.5 of the Conditions of Contract).
c) The reference to the DIFC-LCIA Arbitration Centre under the Arbitration Agreement shall be a reference to DIAC.
d) The seat of arbitration under the Arbitration Agreement is DIFC.
e) The language of the arbitration under the Arbitration Agreement is English; and
f) The place or venue of arbitration under the Arbitration Agreement shall be the Emirate of Dubai.
13. It is of critical importance to the outcome of this application that the distinction is borne in mind between place of arbitration meaning juridical seat which will determine the identity of the supervising Court amongst other things and place of arbitration meaning the venue of the hearings which is usually decided by the tribunal in conjunction with the parties on the grounds of procedural efficiency.
14. Leeor contests the Court’s jurisdiction albeit there is an issue about the timing of its Part 12 application. The grounds are that there is no personal jurisdiction over Leeor and the seat of the arbitration is Dubai outside the DIFC.
15. The Dubai Court of First Instance was due to give judgment on jurisdiction on 19 Sept 2022, but instead directed the instruction of an expert which Ms. Leilani is advised indicates that the Dubai Court of First Instance will find it has jurisdiction.
16. Ledger made an application to the Joint Judicial Committee on 1 September 2022 but no stay has yet been ordered, and it tried to adjourn the expert process but this was unsuccessful.
17. Apparently on 3 October 2022 Leeor applied to widen the expert’s mandate to consider prolongation costs as part of its claim. Ms Leilani states that the Dubai Court of First Instance is likely to issue judgment in or around mid-October making this application for an injunction urgent. Ledger does not want to be bound into the merits of the dispute in the wrong forum in breach of the Arbitration Agreement. Ledger submits that the most appropriate way forward is for the DIFC Courts, being the supervisory court under the Arbitration Agreement, to intervene and issue an interim anti-suit injunction until the determination of the Defendant's Part 12 jurisdictional challenge and make any further order at that time if appropriate to do so.
18. Ledger argues by way of justification for seeking relief without notice that the local courts proceedings have now reached a stage where expert evidence is being sought and Ledger is required to state its claims and defences in the dispute on or before 10 October 2022. Ledger fears that there is a real risk that Leeor, may accelerate the expert process or the proceedings in the Dubai Courts if it is put on notice of a pending injunction application and a pending hearing to decide the injunction request in order to frustrate the application. Also, it is said that if notice were to be given of this application, Leeor will likely challenge Ledger’s application and reject this Court's jurisdiction and tactically prolong the hearing or scheduling of the hearing of the application until after the 10 October 2022 deadline.
LEDGER’s Legal Submissions
19. I accept Ledger’s submission that this Court has the power to grant interim anti suit injunctions under Articles 10 and 32 of the DIFC Court Law 10 of 2004 in particular in aid of arbitration as contemplated by Article 15 of the DIFC Arbitration Law 1 of 2008.
20. No statutory guidance is given on the criteria for making such an order and the DIFC Courts have followed the English common law.
21. Ledger draws may attention to Brookfield Multiplex v DIFC Investments [2016] DIFC CFI-020 where Justice Sir Jeremy Cooke stated the rationale for making anti-suit injunctions in arbitration cases at para 41:
“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.”
22. Ledger submits that the default seat of the arbitration agreement is the DIFC, as per the analysis above, and accordingly the DIFC Courts has jurisdiction to grant the interim injunction.
23. Alternatively, if the DIFC is not the default seat because the reference to “place” in Clause 67.5 is a reference to the location or venue of arbitration, Ledger submits that the reference in the Arbitration Agreement to the place of arbitration as Dubai necessarily includes the DIFC, and contextually it is to be concluded that the reference is the DIFC, on a prima facie basis.
24. Ledger relies on Goel and Others v Credit Suisse (Switzerland) Limited [2021] DIFC CA-002 in which the CA held that reference to “Courts of Dubai” or “Dubai Courts” refers to all Courts in the Emirate of Dubai which includes the DIFC, subject to context or intention demonstrating a different outcome. Ledger also relies on Liman and Ludi v Layli and Luni [2020] DIFC ARB-030
25. I do not think these cases help Ledger – Goel was about jurisdiction not arbitral seat and it is quite possible to have more than one jurisdiction but not possible to have more than one seat. Insofar as Liman is relevant it merely warns against ambiguity in the drafting of arbitrational agreements.
26. Ledger refer me to another decision of Sir Jeremy: Hayri International LLC v Hazim Telecom Private Ltd [2016] DIFC ARB-010 (28 February 2017). In that case, he found that the Claimant could show a high degree of probability that DIFC is the seat of the arbitration. Each case is fact specific but he pointed to:
a) reference to the “rules of arbitration of DIFC”; and
b) reference to the selection of an arbitrator which suggested that the ordinary and natural meaning of the rules in fact refers to the DIFC-LCIA.
He found that the DIFC was the seat and granted an interim anti-suit injunction. He also noted “this court has a supportive jurisdiction in relation to the grant of interim anti-suit injunctions even if the seat were to be said to be non-DIFC Dubai, although it would be rare for such a jurisdiction to be exercised.”
27. On the return of the application in that case, he reiterated that the Claimant could show to a high degree of probability that DIFC was the seat of arbitration and that that there was a good arguable case, a strongly arguable case, a high probability of succeeding in showing not only that DIFC was the seat of the arbitration but also that the rules to be applied were those of the DIFC-LCIA. He found that reference to “Rules of Arbitration of the DIFC” is a much more appropriate way of describing the DIFC-LCIA rules than it is of referring to the law of the DIFC as a general body of law.
28. During argument, I took Counsel to Volume 2, section 15, Interim-Remedies, Anti-Suit Injunctions, of the 2022 White Book where it is stated at paragraph 15-96:
“in order for the court to make an anti-suit injunction on the grounds that there is, or arguably is a binding agreement to have disputes determined by arbitration in England, the applicant has to show on the material adduced at the interlocutory hearing a high degree of probability that there was such an agreement, which on an interlocutory basis can be seen to be highly likely to be established (Transfield Shipping Inc v. Chiping Xinfa Huayu Alumina Co Ltd [2009] EWHC 3629 (QB), per Clarke J).”
29. It was this test that Sir Jeremy Cooke applied in Hayri International and Ledger accepts today that is the test that I should apply.
30. Ledger also submits that that the familiar three-stage test of the House of Lords decision of American Cyanamid Co v Ethicon Ltd [1996] AC 396 is applicable:
a) the court must be satisfied that there is a serious question to be tried, i.e. the claim must not be frivolous or vexatious;
b) the court must consider the adequacy of damages. This involves two steps:
i. the court must consider whether, if the plaintiff were to succeed at trial, damages would be an adequate remedy. If damages would be an adequate remedy and the defendant would be in a financial position to pay them, no interim injunction should normally be granted; and
ii. the court must consider whether, if the defendant were to succeed at trial, he would be adequately compensated by the plaintiff's undertaking in damages for the loss caused by being prevented from carrying out the work between the time of the application for the interim injunction and the trial. If he would be adequately compensated, then an interim injunction should be granted.
c) if there is doubt as to the adequacy of damages to the claimant or the defendant, the court must consider the 'balance of convenience'. In doing this, it will take into account any factors relevant to the facts of the case. If other factors are evenly balanced, then the court should preserve the status quo.
31. Ledger submits
a) It has shown with a high degree of probability that the DIFC is the seat of arbitration;
b) the proceedings were brought in breach of the Arbitration Agreement;
c) damages would not be an adequate remedy to the Claimant;
d) damages would be an adequate remedy to the Defendant;
e) the balance of convenience falls in favour of granting the interim injunction.
32. As to the last three points, Ledger contends that the prejudice that will be caused to it cannot be understated. Leeor’s claim in the local Dubai Courts is for AED 84,080,856.83 plus interest, Leeor’s conduct in bringing and pursuing its claim before the local Dubai Courts in flagrant breach of the Arbitration Agreement has reached a stage where Ledger is being put in a position where it has to either engage in the proceedings to defend the claim for the significant sum claimed by Leeor, including filing a potential counterclaim for at least AED 34,800,000 by way of liquidated damages or to forego defending the claim and filing the counterclaim to maintain its jurisdictional challenge in circumstances where the local Dubai Courts has already engaged an expert to consider the merits of the claim.
33. Alternatively if DIFC is not the seat Ledger submits that it would still be entitled to anti-suit injunction.
34. Ledger refers to Brookfield at para 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.”
35. I think it is also important to read para 39 and 40:
“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 Courts 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.”
36. Ledger also, relies on the words from Hayri International I have already cited.
37. Ledger draws my attention to Emirates NBD Bank & ors v KBBO CPG Investment LLC & ors [2020] CFI-045 (9 August 2021) where Justice Wayne Martin granted an anti-suit injunction demonstrating the DIFC Courts’ willingness to grant anti-suit injunctions against Defendants who have brought proceedings in the local Dubai Courts. I note that was an exclusive jurisdiction clause case and the Defendants were found to guilty of vexatious, oppressive or unconscionable conduct. Ledger says the present situation is analogous.
38. Ledger submits that this is a rare occasion or exceptional case in that the local Dubai Courts have not stayed proceedings pending the JJC application, and the local Dubai Courts do not grant anti-suit injunctions. Ledger says that this is not a power that is available to the local Dubai Courts; had the potential seat been, for example London, then the DIFC Courts would not likely grant an anti-suit injunction as it is potentially open to the Courts of England & Wales to grant that injunction.
Discussion & Conclusions
39. I accept that where there is no issue that that the parties are bound to an arbitration agreement and that DIFC is the seat of the arbitration, the Court would readily grant an injunction restraining the continuation proceedings brought in breach of the Arbitration Agreement.
40. Where there is an issue as to whether there is a binding agreement to have disputes determined by arbitration in the DIFC, the applicant has to show on the material adduced at the interlocutory hearing a high degree of probability that there was such an agreement, which on an interlocutory basis can be seen highly likely to be established – this is the test applied by Justice Sir Jeremy Cooke in Hayri International.
41. The question for me therefore is whether I am satisfied that there is a high degree of probability that there is a binding Arbitration Agreement with DIFC as its seat or if the seat is not DIFC whether this is one of those exceptional cases where the Court will nevertheless grant an anti-suit injunction.
42. If I am satisfied on either basis, I accept for the purposes of this interim interlocutory injunction that there is a serious issue to be tried whether Leeor is in breach of the Arbitration Agreement and that the balance of convenience would favour the grant of an interim injunction for a short period to enable full argument to be presented to the Court - all in accordance with the American Cyanamid guidelines.
43. Ledger’s case simply put is that in Clause 67.5 of the Contract the words “the place of arbitration shall be Dubai" refer to venue not to seat. If so, the contract is silent as to seat and Article 4(b) of the DIAC statute applies to designate DIFC as the seat.
44. I regret that I cannot see that there is a high degree of probability that those words referred to venue rather than the seat. It is clear that Clause 67.5, as a Condition of Particular Application, was a bespoke provision. It specified the law of the Arbitration of Agreement as the law of United Arab Emirates and of Dubai and that could not realistically be interpreted as anything other than UAE Federal Law as modified or applied in Dubai. It is unnecessary for me to come to a concluded view but I would provisionally regard the clause as a carefully drafted clause seeking to provide the essential elements necessary for an effective arbitration agreement. Lex arbitri, language and seat are all matters it is desirable to specify – venue is much less important and will in any event be determined by the arbitral tribunal once it is constituted.
45. Mr. Letik raised a number of arguments to suggest that “place” must mean venue, they are issues of construction and I accept that they may well have some merit.
46. But as I say I need not decide the point because I am of the firm view that as a minimum it is at least as likely that “place” refers as to seat as it is does to venue. If that is so, then it cannot be said that there is a high degree of probability that there is a binding arbitration agreement with DIFC as its seat, and I cannot therefore grant an anti-suit injunction on that basis even assuming I am satisfied that Leeor is in breach of the Arbitration Agreement.
47. But if Leeor is in breach of the Arbitration Agreement, and the seat is Dubai outside the DIFC, should the court nevertheless grant an anti-suit injunction? In my judgment the answer is in the negative – I can see nothing exceptional about this case.
48. Mr. Letik argued that the DIFC Courts are effectively a life-line. Ledger finds itself before the Dubai Courts, having made a jurisdictional challenge which is not yet been determined, it is made an application to the JJC, which has not granted a stay and meanwhile Leeor is proceeding with all dispatch with the merits. I do not consider that to be a principled argument, the DIFC Courts cannot interfere simply because a party is dissatisfied with the procedures in Dubai Courts. On the hypothesis that the seat is Dubai, then that would have been the parties’ choice, and if that has been the parties’ choice, they cannot complain that the procedures of the supervisory courts in the chosen jurisdiction have not turned out to their satisfaction.
49. There are also positive reasons what I would not exercise my discretion to grant an anti-suit injunction if the DIFC were not the seat. First, absent being a party to a DIFC seated arbitration it seems unlikely that the DIFC Court has jurisdiction over Leeor. Secondly, there are no DIFC links in relation to applicable law or subject matter – it is a domestic non-DIFC Dubai case. Thirdly, the Courts of Dubai are seized of the case, and it is not for this court to interfere with their procedures by injuncting a litigant; rather their procedures are to be treated with comity and respect, as Sir Jeremy stated in Brookfield. Fourthly, specifically the issue of jurisdiction is pending before the Dubai Court, I consider it inappropriate for this Court to second guess that decision. If Ledger is dissatisfied with the decision, it has rights of appeal. Finally, if as appears to be the case, the meaning of the Arbitration Agreement is to be determined under Federal Law and Dubai law, the Dubai Courts are the more appropriate and natural forum to interpret the clause as the court of the seat, especially when considering jurisdiction.
50. For all these reasons the application fails.
Application for permission to appeal
51. Ledger has applied for permission to appeal my decision. I am minded to grant permission, not because I consider that the appeal has a realistic prospect of success – I do not – but I consider that there are other compelling reasons for the appeal to be heard, namely to enable the Court of appeal to give guidance on the interpretation of Decree 34 and on the test to be applied in granting anti-suit injunctions in arbitration matters where there is a dispute as to the identity of the seat.
