July 07, 2022 Arbitration - Orders
Claim No: ARB 011/2022
IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
LUFTO
Claimant / Respondent
and
LINIDE
Defendant / Applicant
REASONS FOR ORDER OF H.E. JUSTICE SHAMLAN AL SAWALEHI DATED 5 JULY 2022
Introduction
1. The Defendant applied for an extension of time (the “Application”). Both the grounds upon which the Application was made and the period of time which the Defendant sought to be extended were unclear. To the extent that there was any clarity, in my judgment it suggested that the Application was somewhere between unsubstantiated and misconceived. Unsurprisingly, I dismissed the Application. These are my reasons for doing so.
Background
2. On 15 June 2022, the Claimant issued proceedings for the recognition and enforcement in the DIFC of an award made in an ICC arbitration against the Defendant for USD 80,000,000 plus interest (totalling c. USD 68,100,000) and costs (the “Award”), a world-wide freezing order against the Defendant in support of the enforcement of the Award and an order for alternative service. The applications were heard, ex parte, and granted the next day. Pursuant to paragraph 3 of the freezing order, a return date was to be listed by the Registry within 14 days of service of the order.
3. The Defendant was served with the orders on 17 June i.e. the day after they were made, according to a certificate of service issued on 28 June.
4. On 23 June, an acknowledgement of service was filed on the Defendant’s behalf by Mr LaktfLaktfLaktf, managing partner of Lufin.
5. That same day, the Defendant filed the application for an extension of time, being the Application. It was made, it was explained in the application notice, because the Defendant’s legal representative, Mr Laktf, would travel immediately for a family emergency and would return in the month of September. A document entitled “Request for extension of time” was uploaded with the application notice. Within the document appear the words “Request for extension of time” and nothing else. In fact, that document was uploaded three times with the application notice. Nor was it explained anywhere in or alongside the Application what period of time the Defendant wished to be extended.
6. On 24 June, an important deadline arrived. Paragraph 7 of the freezing order required the Defendant to provide information about his assets and copies of his passports within seven days of service of the order. So far as the Court is aware, this deadline was missed.
7. On 28 June, Ms Litni, partner at Letein., the Claimant’s legal representatives, filed a witness statement in answer to the Application, which was opposed on several grounds. The crux of the Claimant’s position was that, to paraphrase, the Application was hopelessly vague and to the extent that it was clear it was without merit and to the extent it had merit that was eclipsed by the fact that the Defendant had not complied with paragraph 7 of the freezing order. Ms Litni also noted that the Claimant had invited the Registry to list the return date on 4, 7, 13 or 14 July.
8. That same day, the Defendant filed an Emirates ticket and receipt. The passenger is identified in that document as being Mr Laktf. The outbound flight is from Dubai to Beirut on 7 July. The return flight is from Beirut to Dubai four days later on 11 July. No explanation was offered at that time regarding the relevance of the ticket.
9. On 1 July 2022, Mr Laktf filed further documents. In the cover form, ‘Other Documents,’ Mr Laktf stated:
Respondent's reply to the Claimant and Claimant's legal representative's Witness Statement along with the Respondent's legal representative's Statement of Truth. In addition, the Respondent is replying to the Court Order 000 dated 16 June 2022 requesting to squash the Court Order. Furthermore, flight ticket with details showing that the Respondent's legal representative is not available for court hearing at dates requested by the Claimant and its legal representatives.
10. Amongst the further documents is one entitled “Initial Witness Statement of [the Defendant] for Case ARB-011-2022” and dated 30 June 2022 (the “Defendant’s Statement”). It is not supported by a statement of truth. Instead, in another document, ‘Statement of Truth_LaktfLaktfLaktf,’ also dated 30 June 2022, the Defendant’s lawyer confirmed that he believes the facts stated by the Defendant in the Defendant’s Statement are true and that he understood that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth. I will return to the Defendant’s Statement.
11. Amongst the further documents is also a document, signed by Mr Laktf, which begins with the words: “We appeal for dismiss of Application by applying to the Court to discharge the Order by virtue of paragraph 2 of the Order with reference to case no. ARB-011-2022…” I understand this document to be part of a potential future application—most of its content speaks to the merits of the Claimant’s claim for recognition and enforcement of the Award—but there is brief discussion of the Defendant’s purported need for an extension of time which I will cite:
… case Application has been the request and decision of the Application and DIFC Courts enforce their request in the absence of the Respondent and or the Respondent’s legal representatives. Now, that is has preceded in this direction it is only fair and without prejudice that we should be allowed to lead in the direction by granting some time hereafter in order to prepare the defense statement. It is only fair, just and reasonable on the Respondent and the law is meant to favor both the parties.
12. I return to the Defendant’s Statement. I will not say much about it but I think it is fair to say that its contents are generally typical of applications to set aside an arbitral award or for the Court to refuse to recognise and enforce one. For example, the Defendant states that:
The accusations made by the Claimant are in addition deliberately ignoring the issues related to the agreement [under which the Claimant issued arbitral proceedings against the Defendant] and the circumstances of the Award.
… I was prevented from defending myself and from raising all causes available to challenge the said agreement. I consider that the Arbitration Award is unfair, it failed to apply due process and it did breach public laws without waiving any rights…
13. Another discussion in the Defendant’s Statement worth highlighting concerns the freezing order and its effect:
I have asked my assistants to check the list of assets that were included in the DIFC Court Order for Freeze of Assets, but I can confirm by having quickly scanned the list of assets included therein that I have no ownership interest whatsoever in the vast majority of the assets listed therein, which in my view renders the aforementioned freezing order abusive towards me and prejudicial to the real owners of said assets listed in the DIFC Court Order for Freeze of Assets.
… it is unfair that the DIFC Court has passed an Order without checking the assets true ownership or without checking if these assets are under the Respondent’s ownership. The DIFC Court should have in the first instance ordered for an evaluation of the ownership of the assets prior to passing an Order to Freeze the Assets which could have implications to the business and ownership of those owning and running the business and assets…
14. After Mr Laktf filed the further documents, Mr lafit, senior associate at Letein., wrote to the Registry, amongst other things objecting to the filing of the Defendant’s Statement on the basis that “there was no permission for such evidence and it is not properly reply evidence in response to the witness statement filed by the Claimant.”
15. On 1 July—that is, the same day that the Defendant’s lawyer filed the further documents—another deadline arrived. Pursuant to RDC r. 43.70(1) in combination with paragraph 4 of the recognition and enforcement order, the Defendant was entitled to ask the Court to set aside the recognition and enforcement order within 14 days of service of it i.e. by 1 July. No such application has been made.
16. On 5 July, I dismissed the Application with reasons to follow.
Reasons for dismissing the Application
17. These are the main reasons.
18. Mr Laktf objects to the fact that the Claimant’s applications were made and decided in the Defendant’s absence. But applications for the recognition and enforcement of arbitral awards and for freezing orders are invariably applied for without notice to defendants. In the case of recognition and enforcement proceedings, RDC r. 43.17(2) provides that “Where a party makes an Arbitration Claim for recognition or enforcement of an award under Part 4 of the Arbitration Law … the Arbitration Claim may be made without notice.” In the case of applications for freezing orders, RDC r. 25.8 provides that “The Court may grant an interim remedy on an application made without notice if it appears to the Court that there are good reasons for not giving notice.” The “good reason” in the context of freezing orders usually relates to the risk of assets being dissipated if notice is given of the application.
19. Does a defendant have no opportunity to challenge orders made against him without notice to him? Of course not. In the cases of applications for the recognition and enforcement of arbitral awards and for freezing orders, the proceedings are for all intends and purposes divided into two phases: a without notice phase followed promptly by a with notice phase.
20. The recognition and enforcement order provides as follows:
4. Pursuant to RDC 43.70(1) the Defendant may apply to set this Order aside within 14 days of being served with the Order.
5. Pursuant to RDC 43.70(2) this Order may not be enforced until after:
(1) the end of the period set out in paragraph 4 above, or
(2) the final disposal of any application made within that period by the Defendant to set aside this Order.
In other words, the Defendant had 14 days from service of the order to ask the Court to set aside the order i.e. to refuse recognition and enforcement of the Award. And only after this period expired without any such application being made or, if one was made, after it was finally disposed of could the order be enforced. Until then the order would be dormant, while the Defendant challenged enforcement on the merits.
21. The freezing order similarly provides:
2. This order was made at a hearing without notice to the Respondent. The Respondent has a right to apply to the Court to vary or discharge the order – see paragraph 11 below…
11. Anyone served with or notified of this order may apply to the Court at any time to vary or discharge this order (or so much of it as affects that person), but they must first inform the Applicant’s legal representatives. If any evidence is to be relied upon in support of the application, the substance of it must be communicated in writing to the Applicant’s legal representatives in advance.
And so the Defendant was given a right to challenge the freezing order in the freezing order itself. Moreover, paragraph 3 of the freezing order offers further protection to the Defendant. The return date provision guaranteed the Defendant a prompt opportunity to be heard in opposition to the order. In theory, the freezing order could have been discharged within a matter of days if it was not justified or necessary.
22. In short, and with respect, I think Mr Laktf’s objection is baseless. On the one hand recognition and enforcement and freezing order applications are routinely made without notice. On the other there was no question that the Defendant would be heard, only that part of the proceedings was deferred for practical and permissible purposes.
23. The second reason is present in the first. If the Defendant wanted the Court to refuse to recognise and enforce the Award, he should have made an application under RDC r. 43.70(1). This could not really have been made any clearer. Paragraph 4 of the recognition and enforcement order itself stated this. No such application was made, however. And if the freezing order should not have been made, the Defendant should explain that to the Court so that the order can be discharged. But the Defendant instead wants an “extension of time.”
24. The third reason is connected to the second. If, as the Defendant has stated, the Defendant has no interests whatsoever in the vast majority of the assets affected by the freezing order, this, in my view, is a reason to bring forward, not push back, the return date. The Defendant should supply the Court and the Claimant with this information, I would have thought.
25. Fourthly, Mr Laktf will, on his own evidence, be returning to Dubai on 11 July. He will presumably be available, therefore, for a return date on the third and fourth of the Claimant’s listing suggestions, namely 13 or 14 July. Even if he was not available, it has not been explained why no other lawyer in the world will do.
26. Sixthly, insofar as the Application is made so that the Defendant can prepare a statement of defence, an extension of time is not necessary because, if I understand Mr Laktf correctly, no “statement of defence” is necessary. If the Defendant believed that the Award should not be recognised and enforced, the Defendant should have made a Part 23 application under Article 44 of DIFC Law No. 1 of 2008, being the DIFC Arbitration Law, in accordance with RDC r. 43.70(1) and paragraph 4 of the recognition and enforcement order. Indeed, I do not think it would have taken the Defendant and his lawyers much more time than it took them to make the Application to make such an application. The core elements of an application opposing recognition and enforcement of the Award may well already be present in the various documents filed by the Defendant, particularly the Defendant’s Statement.
27. Seventhly, the Claimant has stated and the Defendant has not denied that the latter is in breach of paragraph 7 of the freezing order. This strikes me as being a good reason to have an earlier return date.
28. Seventhly, and perhaps most importantly, and as I stated at this start of these reasons, I do not know exactly what the Defendant seeks an extension of.
29. Out of an abundance of caution, I directed the Registry to list a return date on 14 July, the furthest away of the Claimant’s preferred dates, so that the Defendant and his representatives have as much time as possible to prepare for it.
Issued by:
Nour Hineidi
Registrar
Date of Issue: 7 July 2022
Time: 10am
