Privacy Settings

Claim No: ARB 020/2022

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE
ARBITRATION DIVISION

BETWEEN

NOVAK

Claimant/Respondent

and

NEWLAND

Defendant/Applicant

ORDER WITH REASONS OF H. E. JUSTICE SHAMLAN AL SAWALEHI

UPON the Order of H.E Justice Shamlan Al Sawalehi dated 30 October 2023 recognising the Arbitration Award to be binding and enforceable within the DIFC (the “Recognition and Enforcement Order”)

AND UPON Defendant’s Application Notice No. ARB-020-2022/3 dated 14 November 2023 to set aside the Recognition and Enforcement Order (the “Set Aside Application”)

AND UPON the Order with Reasons of H.E Justice Shamlan Al Sawalehi dated 1 August 2024 dismissing the Set Aside Application (the “Order”)

AND UPON the Defendant’s Appeal Notice dated 22 August 2024 seeking permission to appeal and an extension to serve the grounds of appeal and the skeleton argument (the “Application”)

AND UPON the Applicant’s skeleton argument and grounds of appeal dated 12 September 2024

AND UPON the Respondent’s submissions in opposition dated 3 October 2024

AND UPON review of the filings submitted on the court file

AND PURSUANT to RDC 44.19

IT IS HEREBY ORDERED THAT:

1. The Application for permission to appeal is permitted on all grounds.

2. The matter shall be referred to the Court of Appeal for determination.

3. The Parties shall consent to a range of dates to set a hearing, in accordance with judicial availability as advised by the Registry.

4. The costs shall be the costs in the case.

Issued by
Hayley Norton
Assistant Registrar
Date of issue: 25 October 2024
At: 10am

SCHEDULE OF REASONS

1. The Defendant brings this Application to grant permission to appeal the Order of 1 August 2024 and permit the Defendant’s appeal against the Order.

2. Permission to appeal will be dealt with on the papers. I do not deem it necessary to repeat the factual and procedural backgrounds in this order, as the case is familiar with the Courts and this order will only address the permission to appeal submission in the Application.

Housekeeping

3. Before I address the content of the Application and make my determination, there is a housekeeping issue regarding the Applicant’s filing of their skeleton argument. In this case, the Applicants seek protection under DIFC Courts Rule 44.30, which permit a party to file its grounds of appeal and skeleton argument within 21 days of filing notice where it is “impracticable” to comply with the general rule at RDC 44.29 that the statements of case are filed together.

4. To summarise the Applicant’s justification, several key players in the case proceedings were on leave in the month of August 2024, and relevant documents to the case had to be legally translated in late August 2024.

5. The Respondent rejects this justification as insufficient to validly non-comply with RDC 44.29, as the doctrine requires performance of an obligation to be an unforeseen excessive burden, as opposed to inconvenient.

6. Both parties rely on case precedent as explanatory material to determine what is an acceptable interpretation of the relevant rules. In this instance, it is more appropriate to grant the Applicant’s submission in the interest of giving this Application, and the relevant submissions within, the stage necessary to address questions of law put to the Court. In my view, the overriding objective falls in the Applicant’s favour when considering the Application as a whole, and not the justifications set forth for RDC 44.30 in isolation.

Permission to Appeal

7. The Order contended in this Application rejected the original Set-Aside Application put forward by the Defendant against the Recognition and Enforcement Order for the Arbitrable Award, dated 18 July 2022, made in favour of the Claimant. The grounds to set aside the Award were pursuant to Article 44(1)(b)(vii) of the DIFC Arbitration Award – that enforcement would be contrary to the public policy of the UAE.

8. The public policy defence in this instance relies heavily on an order from the Dubai Courts, which prohibited the liquidation of the guarantees underpinning the award.

9. RDC 44.117 and RDC 44.19 provide that appeals will be permitted where the decision was wrong, and that permission may be granted if there is a real prospect of success or other compelling reason to give permission respectively. RDC 44.19 will shape my determination of whether to grant permission to appeal on the papers.

10. The Applicant submits that this case gives rise to a point of general importance in the DIFC law, and substantial public importance to the DIFC Courts due to the public policy defence engaged. Two grounds of appeal are presented to issue this position.

Obligations Conferred on the Defendant

11. In its first ground, the Applicant submits that I erred in law by holding that the obligations imposed on it were not inconsistent between the Dubai Courts Order (“DCO”) and the Recognition and Enforcement Order. In particular, I erred in holding that the defendant to a DIFC enforcement claim could not even in principle rely on Article 44(1)(b)(vii) of the Arbitration Law as a defence in circumstances where the obligations were inconsistent between orders.

12. The Applicant first addresses the public policy grounds for refusal of recognition and enforcement under Article 44 – first is the avoidance of conflicting judgements within the same State, particularly where there are contradicting obligations, in order to avoid unfairness and protect the integrity of the system.

13. The Applicant presents precedent from the DIFC where Justice Wayne Martin held that “[i]nconsistent or contradictory judgments by the same or different Courts in a single jurisdiction create uncertainty and bring the system of justice in that jurisdiction into disrepute. The existence of inconsistent or contradictory judgments is one of the triggers of a conflict of jurisdiction”. The Applicant also provided supplementary precedent and explanatory material to justify the interpretation that the public policy defence could be relied on – theoretically and practically – in these circumstances.

14. The Applicant also admitted that expert evidence is normally required in such cases to prove that UAE public policy has been offended. However, they assert that no such evidence is necessary on the facts as the public policy that has been offended was a general principle of public policy.

15. The Respondent rejects the Applicant’s position on the basis of irrelevancy. By the time of the Dubai Bankruptcy Court’s first order on 21 July 2022, the obligation of the Applicant to pay the guarantees to the Respondent already existed. The 21 July order did not attempt to reverse this obligation, nor act retrospectively. The guarantees that had already been adjudicated conferred a liability on the Applicant in the amount of AED 160,722,046.

16. The language of the Award is unambiguous:

17. This is a direction to pay, not a direction to liquidate the guarantees. Therefore, the obligations do not contradict, and the Award (and therefore the Recognition and Enforcement Order) are distinct and separate.

18. The Respondent asserts that these proceedings are the Applicant’s method to avoid their obligation.

19. I concur that public policy can and has given rise as a defence to inconsistent judgements, however, in my view both grounds are intrinsically linked and rely on one another to create a real prospect of success at the appellate level; I cannot dismiss one and accept another, either both grounds are dismissed or both grounds are accepted. Therefore, I shall revert to the second ground of appeal to weigh my decision.

The Dubai Courts Order

20. In their second ground, the Applicant submits that I erred in law in holding that the DCO dated 15 December 2023 did not give rise to a defence to the Recognition and Enforcement Order under Article 44(1)(b)(vii).

21. At first instance, the DCO prohibited the liquidation of the relevant guarantees; this order expired after 6 months but has been consistently renewed up until the most recent renewal dated 20 May 2024, again valid for 6 months.

22. What is meant by “prohibition of liquidation” is essentially that the letters of guarantee by Newland are suspended, therefore cannot be paid, until there is a determination entitling the beneficiary to liquidate the guarantees.

23. An expert committee appointed by the Dubai Court concluded in their report that a debt was owed by the Claimant to Newton as the project had been completed by Newton.

24. The DCO and expert report therefore conflict with the Recognition and Enforcement Order, creating two opposing orders in the same jurisdiction. It therefore goes against public policy for the DIFC Courts to insist jurisdiction and enforce the Award, when the DCO was already in existence.

25. This was already submitted in the Set-Aside Application, and so the Applicant submits I erred in law by stating in paragraphs 25 and 26 of the Judgement that the DCO “does not impact the enforcement of the Award” and that the matter of inconsistent judgements “does not apply here as Newton is not a party to the Award”.

26. The Respondent to this Application rejects entirely the concept of a public policy defence being relevant to the facts, and therefore rejects that the Applicant exclusively relies on the contention that the Judgement directly conflicts with the DCO.

27. On the merit of the public policy defence, the Respondent repeats the previous submission formed in response to the set-aside application by stating that the Applicant has a fundamental misunderstanding of the nature of arbitrable awards, and the issue presented to the DIFC Courts.

28. The Respondent’s position was reinstated, in that in their view the public policy of the UAE is not relevant to the facts of the case, but in the alternative even if public policy was relevant the Applicant has failed to reach the high standard threshold to trigger the defence. Further, the DCO is a temporary order, not full and final such as the Recognition and Enforcement Order of the DIFC, and therefore cannot be held to the same standard.

29. To repeat and summarise the previous sub-section of this order, on the nature of arbitrable awards the Respondent puts forward that the Applicant’s obligation to pay the relevant debt to the Respondent was established prior to the first DCO. The DCO could not alter, nullify or discredit that obligation, nor did it attempt to do so in its content. The DCO suspension is specific to the liquidation of the guarantees but does not reverse the mandate for the debt to be paid as per the Award. The obligation has not changed and remains independent.

30. The Respondent is also not a creditor to Newton in its insolvency proceedings and has no involvement in the Dubai Bankruptcy Courts proceedings, and so the Recognition and Enforcement Order exclusively affects the Applicant and Respondent. The Applicant’s attempt to entangle Newton is only to mislead the court and avoid payment, rather than flag a legitimate legal or procedural error. Therefore, the DCO cannot impact the enforcement of the Award, which undermines the Applicant’s position that the orders conflict.

31. The guarantees at issue are independent from Newton and the construction contract and executed solely between the Applicant and Respondent. Therefore, enforcement of the Award is only against the Applicant and Respondent; the DCO cannot be in conflict with this as the Award does not concern an action against Newton. The DIFC and Arbitration proceedings are entirely separate from the proceedings in Dubai Courts involving Newton .

32. The Respondent advances their position by highlighting that the DCO is a time-bound temporary order and cannot be held to the same status as a full and final judgement, particularly a judgement in a separate jurisdiction like the DIFC. Additionally, the DCO has not been ratified or authorised for enforcement by the DIFC Courts in accordance with RDC 45.2(3) and 45.2(4). Further, there is an existing legal mechanism in force to address actual conflict between two enforceable orders (if they are to be considered enforceable); Decree No. 29 of 2024 which established the Judicial Committee for Resolving Conflicts of Jurisdiction. For them to determine whether orders are contradictory, both orders/judgements must be considered final and enforceable and concern the same litigants with the same dispute concern. None of this applies to the Judgement and DCO, therefore, there cannot be a conflict.

33. Finally, the Respondent stresses that this is an attempt of the Applicant to relitigate rejected submissions for a different outcome as evidenced by the repetition in their submissions, rather than address a legitimate error in judgement.

Finality of the Judgement

34. This point was not presented as a ground of appeal, however, was addressed by the Respondent and Applicant respectively and so I see it as important to address and give the necessary weight at the permission stage.

35. The Respondent submits that the Judgement is final and not subject to appeal. This is because the Judgement has been rendered in accordance with Articles 42(1) and 43 of DIFC Law No. 1 of 2008 (the Arbitration Law).

36. Additionally, the legislative intent of RDC 43.71 is to restrict challenges to a Recognition and Enforcement Award to be in the form of a set-aside application. This was already exhausted by the Applicant on 14 November 2023, and subsequently rejected.

37. RDC 43.70 adds a supplementary time constraint to submit a set-aside application, which is 14 days after service of an order, and the award must not be enforced until after any application made by the Applicant has been disposed of. Finally, RDC 43.75 confirms that an award may be enforced following the disposal of a set-aside application (or period, in the alternative) in the same way as any other judgement or order.

38. It is clear then, from the RDC, that the Recognition and Enforcement Award is enforceable as the route to challenge has been exhausted, and the set-aside application rejected. There is nothing else that can be done by the Applicant to prevent the enforceability of the Award. Therefore, it is full and final and cannot be appealed.

39. On this merit, the Respondent insists that this Application should be rejected.

40. The Applicant highlights that as the DCO is binding on Newland, this is sufficient to engage the public policy defence which overrides the “finality” of the judgement. Additionally, the Applicant submits that there is no requirement for the DCO to be ratified to a DIFC Court order to trigger the public policy defence. At the time of the Order and up to the present, there is a DCO preventing Newland from making payment under the guarantees, which conflicts with the order of the DIFC Courts. This is the exact issue that the public policy defence is designed to address.

41. In my view, this matter requires further investigation and clarification at a hearing.

Discussion

42. In my judgement, this case raises a number of points of contention best dealt with in the Court of Appeal due to the nature of the questions raised and the potential impact on the interpretation of the DIFC Law and its rules.

43. There is sufficient complexity in the submissions that may cast doubt on the jurisdiction of the DIFC Courts to grant a Recognition and Enforcement Award, and therefore a fresh consideration of the facts and law may result in a different outcome.

44. The grounds of appeal presented are intrinsically intertwined; if the obligations are found to contradict, and both the DIFC and onshore Dubai Courts orders are found to be valid and enforceable, then the public policy defence could be triggered, and one order must then be favoured. Which order ought to be favoured then opens another lane of discussion that would normally be conferred to the Judicial Committee. What makes an order more valid and enforceable over another need also be determined; this brings into question interpretation of various DIFC Law and relevant rules and practice directions that could fall either way. For these reasons, it is necessary to grant permission to appeal as both sides have presented submissions that have a real prospect of success and compelling reason to reconsider.

Conclusion

45. I deem it fair and reasonable to grant permission to appeal on all grounds pursuant to 44.19. The case shall be referred to the Court of Appeal for determination.

46. Costs shall the costs in the case.