YYY Limited v ZZZ Limited [2017] DIFC ARB 005

November 17, 2019 Arbitration - Judgments

Claims No. ARB-005-2017 and ENF-073-2017

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

BETWEEN:

YYY LIMITED

Applicant

and

ZZZ LIMITED

(Formerly known as ZZZ LIMITED (CAYMAN ISLANDS)

Respondent

AND

BETWEEN:

ZZZ LIMITED

(Formerly known as ZZZ (CAYMAN ISLANDS)

Applicant

and

YYY LIMITED

Respondent

Hearing: 12 and 13 May 2019

Appearances:

Mr Edward Harrison instructed by Amal Advocates & Legal Consultants for YYY

Mr Rupert Reed QC and Ms Zoë O’Sullivan QC instructed by Norton Rose Fulbright for ZZZ

Date of Judgment: 17 November 2019

JUDGMENT

JUSTICE SIR RICHARD FIELD:

Introduction

1. There are two related applications before the Court. The first is an application issued on 10 February 2019 by YYY Ltd (“YYY”) for an order to discharge an ex parte injunction (the “Injunction”) made on 22 June 2017 with a return date of 11 July 2017. The order was obtained by ZZZ Ltd (“ZZZ”)in support of an anticipated arbitration stipulated for in Clause XVIII of a 30 year Hotel Management Agreement (the “HMA”), executed by ZZZ and YYY on 8 September 2013. The application is based on the decision of the Dubai Cassation Court given on 7 October 2018 wherein it was held that the Clause XVIII (the “Arbitration Clause”) was null and void on the ground that the director of YYY who signed the HMA on behalf of YYY, Mr PPP, lacked the necessary authority to bind YYY to the arbitration clause.

2. The second application is dated 11 February 2019 and is made by ZZZ to set aside the order of Judicial Officer Maha Al Mehairi dated 3 February 2019 (“the Enforcement Order”), whereby it was ordered that the judgment of the Dubai Cassation Court of 7 October 2018 be recognised and enforced within the DIFC as an order of the DIFC Courts.

3. The decision of the Cassation Court dated 7 October 2018 is hereafter referred to as the “CC Decision”.

The background to the first application

4. The HMA was governed by English law. The Injunction was granted pursuant to Article 24 (3) of the DIFC Arbitration Law which provides that the DIFC Courts shall have the same power of issuing interim measures in relation to arbitration proceedings, irrespective of whether or not the place of those proceedings is the DIFC, as it has in relation to proceedings in courts.

5. ZZZ’s application for the Injunction was made on the basis that YYY had unlawfully terminated the HMA and was refusing the access to the Hotel that ZZZ required in order to perform its side of the HMA. The Injunction restrained YYY from acting in breach of the HMA and also required YYY to take certain positive steps to perform parts of the agreement.

6. On 29 June 2017, during an adjournment over to 11 July 2017 of a part-heard application by YYY to discharge the Injunction, the proceedings were made the subject of an administrative stay consequent on an application by YYY to the Joint Judicial Committee (the “JJC”) under Decree 19 of 2016 (“Decree 19”). On the same day, but prior to the filing of the application to the JJC, YYY filed a claim in the Dubai Courts seeking, inter alia, to have the HMA declared illegal and void.

7. At the time YYY filed their application with the JJC, the Injunction was suspended pursuant to an interim order pending final determination of YYY’s discharge application that began on 24 June 2017. On 2 July 2017, this Court issued a Ruling and Declaration declaring that the first order was no longer suspended because the interim order suspending the first order had lapsed.

8. In its decision on YYY’s cassation claim the JJC held that the proceedings in this Court and in the Dubai Court could continue. The Dubai Court could make its decision on the merits of the case raised before it, regardless of the Injunction. If later on, both courts endeavoured to hear and try the case, a conflict of jurisdiction would then arise and would be resolved by interpreting the Arbitration Clause and considering its application in light of the challenge posed by YYY to its validity.

9. The key events that then followed were set out in a judgment of the Court from which, subject to some minor editorial changes, paragraphs 11 to 15 below are taken.

10. On 7 November 2017, YYY issued a second claim in the Dubai Courts seeking an urgent interim order to prevent ZZZ from interfering with the possession of the Hotel until judgment in further proceedings in the Dubai Courts had been determined. YYY also issued a second application to the JJC seeking an order that the Dubai Courts had jurisdiction over the dispute between the parties on the ground that the dispute related to the possession of land, namely the Hotel, which was located in onshore Dubai.

11. On 29 November 2017, the Dubai Summary Court held that it did not have jurisdiction to determine the second case brought by YYY in the Dubai Courts.

12. On 28 January 2018, YYY brought on three applications before this Court. The first was an application issued on 7 November 2017 seeking, inter alia, a declaration that the injunction and the ruling and declaration were of no effect due to lack of jurisdiction and/or were stayed by reason of Article 5 of Decree 19 and/or were nullities because they could not be enforced. The second application sought an order that an Execution Request in respect of the Injunction issued to the Dubai Courts at the behest of ZZZ be set aside and stayed. The third application sought, without prejudice to the contention that the Court lacked jurisdiction to order interlocutory relief, to have the injunction set aside on the grounds, inter alia, that there was no basis for making an ex parte order, that the HMA had been validly terminated by YYY, there had been material non-disclosure and the order was illegal in that ZZZ did not have the necessary licenses to perform the HMA.

13. These applications were adjourned, effectively at the instance of the Court, because, at the same time it was advancing the applications, YYY was contending that the proceedings before the DIFC Court remained stayed by virtue of YYY’s second cassation filed with the JJC.

14. On 29 January 2018, the Dubai Court of First Instance issued its judgment, holding that ZZZ did not require a licence to perform the HMA but declaring that the Arbitration Clause was a nullity on the ground that Mr PPP lacked the necessary authority to agree to it on behalf of YYY. On 30 January 2018, YYY withdrew its second JJC cassation with the permission of the JJC and then proceeded to take the position that: (i) the effect of the Dubai Court’s decision was to render the Injunction and the Ruling and Declaration null and void; (ii) accordingly, YYY no longer intended to continue with its three applications.

15. On 5 June 2018, ZZZ issued an application contending that YYY and certain other parties were in contempt of court for having breached the Injunction; or for having assisted in a breach of the injunction; or for having acted adversely to the interests of the administration of justice in respect of the injunction.

16. On 27 June 2018, the Dubai Court of Appeal overturned the decision of the Dubai Court of First Instance holding that the Arbitration Clause in the HMA was valid and effective.

17. In the aforementioned judgment handed down on 25 December 2018, this Court dismissed ZZZ’s contempt of court application. The essential reason for this was that ZZZ had conceded in the course of the hearing that, in face of evidence to the contrary, it could not prove to the requisite criminal standard that the original lease of the land on which the Hotel stood made between YYY Investments Ltd (as lessor) and YYY (as lessee) had not been terminated and replaced by a lease made between YYY Investments (as lessor) and XXX Hotel FZCO (as lessee) on 20 June 2017, before the first order was issued. In consequence of this concession, it followed that ZZZ were unable to rebut one of the principal defences of the Respondents -- that it was impossible to comply with the injunction since the right to possess the hotel and determine who should have access thereto lay, not with YYY, but with the company that had been appointed to replace ZZZ as manager, XXX Hotel FZCO.

18. The Respondents also sought to argue in the contempt of court proceedings that the Court had no jurisdiction to issue the Injunction because the Arbitration Clause was null and void by reason of the CC Decision. Having held that the contempt application was to be dismissed on other grounds, the Court declined to deal with this defence, expressing the view that in order to decide the point, additional full oral argument would be necessary and this would significantly delay the handing down of the judgment.

The CC Decision

19. The CC Decision has been necessarily translated into English by a sworn legal translator and, perhaps inevitably, parts of the translation are somewhat difficult to follow.

20. The decision begins by reciting the Dubai Courts’ decisions both at first instance and on appeal, the rival contentions of the parties as to breach of the HMA and as to the validity of the Arbitration Clause. The judgment then refers to Article 203 of the Code of Civil Procedure as amended by Federal Law No. 3 of 2015 by which an arbitration agreement can be enforced by a party to prevent a dispute covered by the clause being heard in a UAE court. The CC Decision goes on:

“However it is held as per practice of this court, that an agreement to arbitrate only will be valid if executed with a special authorization, and that an agreement to arbitrate will only be valid if made by the person who has the legal capacity to dispose of the right comprising the subject matter of the dispute, not the capacity to go to court, and the agreement to arbitrate equates a waiver to file a case before the court which provides all necessary safeguards, and it is proven as per the documents that the person who signed the hotel management agreement date 8/9/2013 on behalf of the petitioner is Mr PPP, under the authorisation issued by the Board of Directors of the Petitioner on 7/9/2013, and since this authorisation empowered him to carry out all the affairs of the company and to sign, execute all business matters, but this authorization did not mention entering into an agreement to arbitrate …”

21. The judgment then goes on to deal with the extent of Mr PPP’s authority stating that, whilst under the Rules of the Jebel Ali Free Zone and the Articles of Association and Memorandum of Association of YYY, the management of the company is to be run by at least two directors and the holders of powers of attorney that set out the donee’s powers, Mr PPP was not authorized to agree to the Arbitration Clause on the company’s behalf. Thus, although he had authority to enter into the HMA, minus the arbitration clause, in agreeing to the Arbitration Clause Mr PPP acted beyond his powers.

22. The final paragraph of the judgment reads:

“Since the Petitioner insisted that the agreement to arbitrate is null and void as the signatory lacks legal capacity to arbitrate in the Hotel Management Agreement and, consequently, violation of such condition will be null and void. As such, Dubai Courts as a general rule will have jurisdiction to hear the case, and since the challenged judgment [i.e. the judgment of the Court of Appeal] violated this principle, it is defective and should be overruled and it is ordered that the case is to be referred to the Dubai Courts of First Instance to decide the merits of the case.”

23. The Dubai Cassation Court was not referred to the UAE Arbitration Law 2018 or the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the “NYC”) which was ratified by the UAE in 2006.

24. The UAE Arbitration Law is modelled on the UNCITRAL Model Law. It came into force on 3 June 2018, 4 months before the CC Decision was handed down. Articles 6, 8, 18, 19 and 53. 1 (a) of that law, as translated by a leading Dubai law firm, read:

“Article 6

1. An arbitration clause shall be treated as an agreement independent from the other terms of the contract. Nullity, rescission or termination of the contract shall not affect the arbitration clause if it is valid per se, unless the matter relates to an incapacity among the Parties.

2. A plea that a contract containing an arbitration clause is null or has been rescinded or terminated shall not stay the arbitration proceedings and the Arbitral Tribunal may rule on the validity of such contract.

Article 8

1. The court before which a dispute is brought that is subject to an Arbitration Agreement shall decline to entertain the action if the defendant has so pleaded before submitting any request or plea on the merits, unless the court is satisfied that the Arbitration Agreement is void or incapable of being performed.

2. The filing of the action referred to in the preceding section shall not preclude the commencement or continuance of arbitration proceedings or the issuance of an arbitral award.

Article 18

1. The Competent Court (i.e. the court of the seat) shall have jurisdiction to consider arbitration issues referred hereunder in accordance with the procedural laws of the State. The Competent Court shall exercise exclusive jurisdiction until the conclusion of all arbitral proceedings.

Article 19

1. The Arbitral Tribunal may rule on its own jurisdiction, including any objections with respect to the existence of validity of the arbitration agreement or its inclusion of the subject matter of the dispute. The Arbitral Tribunal shall rule on the plea either as a preliminary question or in a final arbitral award on the merits.

2. If the Arbitral Tribunal rules as a preliminary question that it has jurisdiction, a party may, within 15 days after receiving notice of that ruling, request the Court to decide that matter. The Court shall then decide the request within thirty days of being filed with the Court and its decision shall be subject to no appeal; while such a request is pending, the arbitral proceedings shall be stayed unless the Arbitral Tribunal decides to continue the arbitral proceedings at the request of a party.

Article 53

1. An arbitral award can only be challenged by an action for setting aside before the Court or during the pendency of an application to confirm the award. The party seeking to set aside the award must establish any of the following circumstances:

(a) that no Arbitration Agreement exists or such agreement is void or has lapsed under the law to which the parties have subjected it or, failing any indication thereon, under this Law.”

25. Article II and Article V 1.(a) of the NYC provide:

“Article II

1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.

2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.

3. The Court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, in operative or incapable of being performed.

Article V

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

(a) the parties to the agreement referred to in Article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made."

26. Mr Edward Harrison who appeared for YYY submitted that Article 8 of the UAE Arbitration Law reflects previous legal practice in the Dubai Courts and that ZZZ’s averment that the Dubai Court lacked jurisdiction on account of the arbitration clause was regarded as raising a question of Dubai law.

27. In the course of the proceedings in the Dubai Court, YYY pleaded out its case that it was entitled to terminate the HMA and that ZZZ is liable in damages for having acted in breach of the agreement. In reply, ZZZ averred that the Court lacked jurisdiction by reason of the Arbitration Clause and without prejudice to that contention pleaded out its defence to YYY’s claim on the merits. Following the CC Decision, ZZZ filed a Counterclaim against YYY and several other named parties claiming, inter alia, specific performance of the HMA and, alternatively, damages. On page 2 of the counterclaim, ZZZ pleads:

“And whereas the original Defendant [ZZZ] had previously refrained from submitting its counterclaim and its detailed substantive defence so that it … does not contradict its plea that the courts did not have jurisdiction to consider the present case due to the fact that the parties had agreed to arbitration, which is the plea that has been finally decided pursuant to the judgment of the honourable Court of Cassation issued on 7/10/2018 to confirm the competence of the honourable Court to consider the present case and that the Arbitration Clause signed between the parties to the dispute is null and void. This leaves the Original Defendant no option but to submit all its grounds of defence, pleas and interlocutory requests vis-à-vis the Original Plaintiff and the joined litigants referred to above.”

The background to the second application

28. YYY applied for the enforcement order by issuing an application under RDC 45.12, which is designed to apply where a money judgment is being enforced. The recitals to the order relate that the requirements of Article 7 (4) of the JAL have been met and then at paragraph 3 of the order itself, it is provided that upon the Claimant complying with paragraphs 1 and 2 of the order (service of the application and accompanying documents) and the filing of a certificate of service, the CC Decision (the Judgment) shall be recognized and enforceable within the DIFC, as an order of the DIFC Courts.

The case advanced by YYY in the first application

29. The primary case advanced by Mr Harrison, on behalf of YYY, was that the CC Decision was a judgment that, by virtue of Articles 7 (4) and 7(5) of the judicial authority law (Law No. 12 of 2004) (as amended) (the “JAL”), the DIFC Court is bound to recognize and enforce, with the consequence that this Court never had jurisdiction to issue the Injunction under Article 24 (3) of the Arbitration Law. It was submitted that the Court never had jurisdiction because the expression “arbitration proceedings” in Article 24 (3) connotes proceedings in which there is a binding agreement that a dispute should be determined by Arbitration rather than by a Court.

30. Article 7 of the JAL reads:

“Article 7 - Execution

(1) The execution judge assigned pursuant to Paragraph (D) of Article (5) of this Law shall have jurisdiction over execution of the judgments, decisions and orders rendered by the Courts and the arbitral awards ratified by the Courts if the subject matter of execution is situated within DIFC, and such execution shall be in accordance with the Rules of the Courts.

(2) Where the subject matter of execution is situated outside the DIFC, the judgments, decisions and orders rendered by the Courts and the arbitral awards ratified by the Courts shall be executed by the competent entity having jurisdiction outside DIFC in accordance with the procedure and rules adopted by such entities in this regard, as well as with any agreements or memoranda of understanding between the Courts and these entities. Such execution shall be subject to the following conditions:

(a) The judgment, decision, order or ratified arbitral award to be executed is final and executory;

(b) The judgment, decision, order or ratified arbitral award is translated into the official language of the entity through which execution is carried out;

(3) In addition to Paragraphs (a), (b) and (c) of Clause (2) of this Article, when executing the judgments, decisions and orders issued by the Courts or arbitral awards ratified by the Courts through Dubai Courts, the following must be observed:

(a) The Courts shall issue an execution letter to the Chief Justice of the Court of First Instance of Dubai Courts stating the procedure to be carried out;

(b) The person requesting execution shall submit to the execution judge of Dubai Courts an application accompanied by a copy of the judgment, decision or order, legal translation of the same, and the execution letter;

(c) The execution judge of Dubai Courts shall apply the execution procedure and rules stipulated in the aforementioned Federal Civil Procedure Code, including any objections to the execution; the execution judge may not reconsider the merits of the judgment, decision or order;

(d) Dubai Courts shall collect the execution fees for each execution request submitted to them in accordance with the aforementioned Dubai Courts Fees Law.

(4) Where the subject matter of execution is situated in DIFC, the judgments, decisions and orders rendered by Dubai Courts or arbitral awards ratified by Dubai Courts shall be executed by the execution judge of the Courts subject to the following conditions:

(a) The judgment, decision or order to be executed is final and executory;

(b) The judgment, decision or order is translated into English by the person requesting execution;

(5) In addition to Paragraphs (a), (b) and (c) of Clause (4) of this Article, when executing, through the Courts, the judgments, decisions or orders issued by Dubai Courts and arbitral awards ratified by Dubai Courts, the following must be observed:

(a) the Dubai Courts shall issue an execution letter to the Chief Justice of the Courts stating the procedure to be carried out;

(b) the person requesting execution shall submit to the execution judge of the Courts an application accompanied by a copy of the judgment, decision or order, legal translation of the same, and the execution letter;

(c) the execution judge of the Courts shall apply the execution procedure and rules stipulated in the Rules of the Courts, including any objections to execution. The execution judge may not reconsider the merits of the judgment, decision or order;

(d) the Courts shall collect the execution fees for each execution request submitted to them in accordance with their applicable fees law.

(6) The judgments, decisions, orders and ratified arbitral awards rendered outside DIFC by any court other than Dubai Courts shall be executed within DIFC in accordance with the procedure prescribed in the Rules of the Courts.”

31. Under Article 2 of the JAL, the “Dubai Courts” are defined as “Courts of the Emirate established pursuant to the aforementioned Law No. (3) of 1992”; and “Courts” are defined as “the Court of First Instance and the Court of Appeal established pursuant to this Law, and any tribunals established by the Chief Justice of the Courts pursuant to the DIFC Laws.”

32. In Mr Harrison’s submission, paragraphs (4) and (5) of Article 7 constitute bespoke provisions for the execution in the DIFC of the judgments, decisions and orders rendered by Dubai Courts or arbitral awards ratified by Dubai Courts. Under these paragraphs, there is no requirement for the DIFC Courts to recognise the judgments, decisions and orders of the Dubai Courts before straightaway proceeding to execute them. Instead, recognition is automatic and execution takes place forthwith if the requirements in sub-paragraphs (a), (b) and (c) of Article 7 (4) are satisfied.

33. Referring to the decision of the Court of Appeal of England and Wales in The Wadi Sudr [2009] EWCA Civ 1397, Mr Harrison suggested that there was a broad analogy between the JAL Article 7 regime and that established by Article 33 of the European Council Regulation (EC) 44/2001 (the “Brussels Regulation”). In this case, a Spanish Court had held that an arbitration agreement contained in a charterparty, that was expressly referred to in a bill of lading, had not been incorporated into the contract of carriage evidenced by the bill of lading. Despite the fact the English Court might well have decided that the arbitration agreement had been incorporated into the contract of carriage, the Court of Appeal held that the English Court was constrained by the Brussels Regulation to recognise the Spanish judgment, and as a result there was an issue estoppel in respect of the non-incorporation of the arbitration agreement into the bill of lading. The arbitration exception provided for in s. 32 of the Civil Jurisdiction and Judgments Act 1982 did not apply.

34. When considering whether it would be contrary to the public policy of England and Wales to enforce the foreign judgment, Moore-Bick LJ said this in [125]:

“In my view the question whether the courts of this country should recognise a foreign judgment given in proceedings taken in breach of an arbitration agreement is also essentially one of jurisdiction. There is apparently no common law authority on the point (see Dicey, Morris and Collins, paragraph 14-091), but if the court in question is regarded as being of competent jurisdiction (for example, because both parties were resident within the territorial area of its jurisdiction) I do not think that it would be contrary to public policy to recognise the judgment, even if an English court would have held that the parties had agreed to refer the dispute to arbitration. Different considerations might arise if the judgment had been obtained through conscious wrongdoing, for example by pursuing proceedings in defiance of an injunction, but that is not this case.”

35. Mr Harrison’s alternative case was that the CC Decision is res judicata giving rise to a cause of action estoppel or an issue estoppel, the effect of each of which is to prevent ZZZ from contesting YYY’s claim that this Court never had jurisdiction to issue the Injunction.

36. Mr Harrison cited Rule 42 (2) and paragraph 14-030 of Dicey, Morris and Collins On the Conflict of Laws 15 ed which read:

“Rule 42 (2)

A foreign judgment given by the court of a foreign country with jurisdiction to give that judgment in accordance with the principles set out Rules 43 to 46, which is not impeachable under any of Rules 49 to 54 and which is final and conclusive on the merits, “is entitled to recognition at common law and may be relied in proceedings in England.”

Rule 48

A foreign judgment which is final and conclusive on the merits and not impeachable under any of Rules 49 to 52 is conclusive as to any matter thereby adjudicated upon, and cannot be impeached for any error either (1) of fact, or (2) law.

Para 14-030

A foreign judgment may be relied on in English proceedings otherwise than for the purpose of its enforcement. A claimant who has brought proceedings abroad and lost may seek to bring a similar claim in England; or in proceedings on a different claim an issue may be raised which has been decided abroad. In such cases a foreign judgment entitled to recognition may give rise to res judicata, i.e. to a cause of action estoppel, which prevents a party to proceedings from asserting or denying, as against the other party, the existence of a cause of action, the non-existence or existence of which has been determined by the foreign court, or to an issue estoppel, which will prevent a matter of fact or law necessarily decided by a foreign court from being re-litigated in England.”

37. Rule 43 provides:

“Subject to rules 44 to 46, a court of a foreign country outside the United Kingdom has jurisdiction to give a judgment in personam capable of enforcement or recognition as against the person against whom it was given in the following cases:

First Case -- If the person against whom the judgment was given was, at the time the proceedings were instituted, present in the foreign country.

Second Case -- If the person against whom the judgment was given was the claimant, or counterclaimant, in the proceedings in the foreign court.

Third Case -- If the person against whom the judgment was given submitted to the jurisdiction of that court by voluntarily appearing in the proceedings.

Fourth Case -- If the person against whom the judgment was given, had before the commencement of the proceedings agreed, in respect of the subject matter of the proceedings, to submit to the jurisdiction of that court or of the courts of that country.”

38. Mr Harrison argued that when deciding that the Arbitration Clause was null and void the Dubai Court of Cassation had jurisdiction in accordance with Rule 43. Further, the CC Decision was final, conclusive, unimpeachable and bound the same parties before the DIFC Court. It followed that that decision gave rise to a cause of action estoppel in respect of the Arbitration Clause because the non-existence of an alleged contract to arbitrate was the sole matter decided by the Dubai Cassation Court.

39. The issue estoppel contended for by Mr Harrison included the Henderson v Henderson type. His principal purpose in advancing this alternative case appeared to be to meet any contention that might be advanced by ZZZ that the Dubai Court of Cassation had failed to take into account relevant considerations when it made its decision.

40. Mr Harrison cited the following well-known passage in Virgin Atlantic Airways Ltd v Zodiac Seats UK [2013] UKSC 46 at [47] where Lord Sumption identified the different principles that are comprehended by the term “res judicata”. It was the first, fourth and fifth of these principles that Mr Harrison drew to the Court’s attention:

“The first principle is that once a cause of action has been held to exist or not to exist, that outcome may not be challenged by either party in subsequent proceedings. This is “cause of action estoppel”. It is properly described as a form of estoppel precluding a party from challenging the same cause of action in subsequent proceedings… Fourth, there is the principle that even where the cause of action is not the same in the later action as it was in the earlier one, some issue which is necessarily common to both was decided on the earlier occasion and is binding on the parties … “Issue estoppel” was the expression devised to describe this principle by Higgins J … and adopted by Lord Diplock… Fifth, there is the principle first formulated by Wigram VC in Henderson v Henderson (1843) 3 Hare 100, 115, which precludes a party from raising in subsequent proceedings matters which were not, but could and should have been raised in the earlier ones…”

The case advanced by ZZZ in the first application

41. I heard argument on behalf of ZZZ from both Ms Zoe O’Sullivan QC and Mr Rupert Reed QC.

42. Citing the decision of the DIFC Court of Appeal in Rafed Abdel Mohsen Bader Al Khorafi v Bank Sarasin Alpen (ME) Ltd [2018] DIFC CA 010 and the English case of Aldi Stores Ltd v WSP Group plc [2008] 1 WLR 748, it was submitted by Mr Reed that YYY was prevented by res judicata of the Henderson v Henderson type from applying to discharge the Injunction on the ground now relied upon i.e. that the Arbitration Clause was null and void. This was so, argued Mr Reed, because YYY had failed to advance in these DIFC Court proceedings the invalidity contention now relied on when it had had ample opportunity to do so. This failure was the more culpable, it was argued, given: (a) the concession made by Mr Alec Emmerson of Clyde & Co, representing YYY on the application made on 24 June 2017 to discharge or suspend the injunction, that he could not disagree that this Court had jurisdiction because the HMA contained a DIFC/LCIA Arbitration Clause with the consequence that the Court was the curial court; and (ii) YYY’s failure to acknowledge service, as it ought to have done. Mr Reed also laid stress on the fact that when the question of jurisdiction was raised by YYY in its discharge application made in January 2018, the contention advanced was not that the arbitration clause was invalid for lack of authority but the fanciful argument that the only court with jurisdiction to issue an injunction dealing with access to the Hotel was the Court in whose territorial jurisdiction was situated the land in question, the Dubai Court.

43. It was further submitted that YYY had cynically opted to raise the validity of the arbitration agreement in the Dubai Court, rather than the DIFC Court, in full knowledge of the DIFC Court of Appeal’s decision in Ginette Pjsc v Geary Middle East FZE et al [2016] DIFC CA-005 in which short shrift was given to the contention that an arbitration clause in an agreement signed by a Managing Director and subject to UAE law was invalid for want of authority.

44. Ms O’Sullivan argued that YYY’s application to discharge the Injunction was contrary to the prevailing international arbitration regime. She referred to Article 5 of the Model Law that prohibits a court from intervening in matters covered by the Law except where express provision is made. She pointed out that Article 10 of the DIFC Arbitration Law replicates this provision. She also referred to Article 16 (1) of the Model Law which confers on an Arbitral Tribunal the power to rule on its own jurisdiction (Kompetenz-Kompentenz) noting that Article 23 of the DIFC Arbitration Law and Article 19 of the UAE Arbitration Law are to like effect with the stipulation that a challenge to the tribunal’s ruling may be made to the competent court within a specified period of time. In her submission, the regime established by these provisions contemplates that a challenge to a tribunal’s jurisdiction should first be made to the tribunal with recourse to the competent court only after the tribunal has ruled on the question.

45. Ms O’Sullivan argued that YYY’s contention that the CC Decision was in conformity with the NYC was ill-founded. She submitted that Article II(3) was to be construed in conformity with Article V 1 (a), with the result that in determining whether an arbitration agreement is null and void under the former Article, the Court is to apply the law to which the parties have subjected the arbitration agreement. It followed that, in failing to determine whether the arbitration agreement was binding in accordance with English law, the Dubai Cassation Court had acted in breach of Article II 3. She cited the view expressed by Gary Born in International Commercial Arbitration 2nd ed at 3783 that; “national court decisions violating the Convention are illegitimate and not entitled to recognition, whether issued in an annulment or otherwise.”

46. Ms O’Sullivan further submitted that, even if YYY’s failure to bring its jurisdiction challenge before the tribunal rather than a court did not qualify as a ground for the non-recognition of the CC Decision, YYY’s failure to bring its challenge in the court of the seat, the DIFC Court, should certainly have this consequence.

47. Mr Reed submitted that Article 7 (4) of the amended JAL did not bring about the automatic recognition of declaratory judgments, such as the CC Decision, but only applied to judgments that were susceptible to the processes of execution against assets available in the DIFC, namely, money judgments or orders equivalent to common law injunctions enforceable by attachment of assets. In making this submission, Mr Reed laid stress on the fact that the word “execution” is the heading given to Article 7 and appears time and time again throughout the whole Article. He also drew support from the phrase; “where the subject matter of the execution is situated” , which he argued connotes enforcement through existing execution processes against assets.

48. In addition, Mr Reed relied on Article 3.2 (a) of the 2009 Protocol of Jurisdiction between the DIFC Courts and the Dubai Courts (the “2009 Protocol”) which provides that one of the requirements where the subject matter of execution falls within or without the DIFC is: “The Judgment, Award or Order is final and is appropriate for enforcement.” Mr Reed submitted that the last four words of this sentence were an accurate translation of the Arabic text of the Protocol. The Protocol was executed five years after the enactment of the unamended JAL, Article 7 (1) of which -- execution within the Centre -- did not include the requirement found in Article 3.2 (a) of the Protocol, whereas Article 7 (2) (a) – execution outside the Centre – did. In Mr Reed’s submission, the word “executory” in Article 7 (4) (a) of the amended JAL is a mistranslation of the Arabic text of this Law, which uses the same wording as is used in the Protocol, which means “appropriate for enforcement”. Thus, “executory” in Article 7 (4) (a) ought to be construed as meaning “appropriate for enforcement” and it followed that Article 7 (4) (a) of JAL requires the execution judge to ask himself whether the judgment, award or order is appropriate for execution, viz is it an unexecuted money judgment or in the nature of an injunction involving the attachment of assets?

49. Mr Reed also drew the Court’s attention to Article 7 (3) (c) and Article 7 (5) (c) of the JAL, arguing that the requirement in the former that the Dubai execution judge apply the execution procedure and rules stipulated in the Federal Civil Code and the requirement in the latter that the DIFC Execution Judge shall apply the execution procedures and rules stipulated in the Rules of the Courts, pointed strongly to Article 7 being concerned only with the enforcement of money judgments and orders equivalent to injunctions. He developed this submission by reference to the provisions in Chapter 4 of Federal Civil Code “Enforcement of Foreign Judgments”, all of which contemplate execution against the assets or the person of a party to the judgment; and by reference to RDC Part 45 (General Rules of Enforcement of Judgments and Orders) which specifies the following methods of enforcement; a charge over property (a charging order); attachment of assets (whether present or future); execution against assets; and the appointment of a receiver.

50. Following on from the argument that the CC Decision was not automatically recognised pursuant to Article 7 (4) of the amended JAL, it was submitted that for a number of reasons the Court should not recognise the CC Decision at common law. First, it was argued by Ms O’Sullivan that YYY had failed to establish that the Dubai Cassation Court had jurisdiction in accordance with the DIFC Court’s conflicts of laws rules in two respects. Firstly, ZZZ being a corporation, the burden was on YYY to show that, in accordance with test formulated in Adams v Cape Industries Plc [1990] Ch 433, ZZZ was carrying on business at a fixed and definite place within Dubai at the time of the Dubai Court proceedings, and YYY had failed to establish this.

51. Second, ZZZ had not submitted to the jurisdiction of the Dubai Courts whether by bringing its counterclaim or otherwise because, until the CC Decision, ZZZ had vigorously contested the court’s jurisdiction by reference to the Arbitration Clause and it was only after the CC Decision that it filed its counterclaim and this it did in circumstances where it had no realistic choice to do otherwise, whilst at the same time strenuously seeking a ruling from the Arbitral Tribunal that it had jurisdiction over the reference. Thus, following the CC Decision, ZZZ’s solicitors (“NRF”) had written to the Arbitral Tribunal on 17 October 2018 asserting that the decision was erroneous and the Tribunal should assume jurisdiction. NRF had also written on behalf of ZZZ to the DIFC Court Registry by letter dated 8 November 2018, stating that ZZZ was left with no choice but to protect its position and to consider seeking the relief it would otherwise be entitled to under the HMA. Any counterclaim that ZZZ might bring would be strictly without prejudice to its primary position that the dispute ought to be adjudicated on and resolved by way of DIFC-LCIA Arbitration and not before the Dubai Courts.

52. Ms O’Sullivan relied on the judgment of Rix LJ in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust Kamenogorsk Hydropower Plant JSC [2012] 1 All E R (Comm) 845. Here, following a finding on a mistaken basis by the Kazakhstan Supreme Court that an arbitration clause in a concession agreement governed by Kazakhstan law was invalid, the losing party was sued on the concession agreement in Kazakhstan by the counterparty. In this suit the losing party filed a defence on the merits whilst maintaining its challenge to the jurisdiction of the Kazakhstan courts. Rejecting the contention that the trial judge should have held that the losing party had submitted to the jurisdiction of the Kazakhstan court, Rix LJ, with the agreement of the other two members of the Court, upheld the decision of the trial judge that there had been no submission to the jurisdiction. In his view it was obvious from the beginning to end that the counterparty was presenting and preserving its challenge to the foreign court’s jurisdiction on the ground of the arbitration clause.

53. Mr Reed went on to refer the Court to the following passages in the judgment of Clarke LJ in The Good Challenger [2003] EWCA Civ 1668 at [50] and [54]:

“[50] The authorities show that in order to establish an issue estoppel four conditions must be satisfied, namely (1) that the judgment must be given by a foreign court of competent jurisdiction; (2) that the judgment must be final and conclusive and on the merits; (3) that there must be identity of parties; and (4) that there must be identity of subject matter, which means that the issue decided by the foreign court must be the same as that arising in the English proceedings: see, in particular Carl Zeiss Stiftung v Rayner C Keeler Ltd (No 2) [1967] 1 AC 853 ("the Carl Zeiss" case), The Sennar (No 2) [1985] 1 WLR 490, especially per Lord Brandon at p 499, and Desert Sun Loan Corporation v Hill [1996] 2 All ER 847.

[54] The authorities establish that there must be "a full contestation and a clear decision" on the issue in question. That is made clear in the speech of Lord Wilberforce in the Carl Zeiss case and (as the judge observed in paragraph 36) was echoed by Lord Brandon in The Sennar (No 2). The cases also underline four further important features of the approach of the courts to issue estoppel, which I will consider in turn. They are as follows:

(i) It is irrelevant that the English court may form the view that the decision of the foreign court was wrong either on the facts or as a matter of English law.

(ii) The courts must be cautious before concluding that the foreign court made a clear decision on the relevant issue because the procedures of the court may be different and it may not be easy to determine the precise identity of the issues being determined.

(iii) The decision of the court must be necessary for its decision.

(iv) The application of the principles of issue estoppel is subject to the overriding consideration that it must work justice and not injustice.”

54. Mr Reed contended that condition (4) in paragraph [50] of The Good Challenger was not satisfied in the instant case because: (i) there are issues in the proceedings in this Court arising out of the fact that the Court was ordering interim measures under Article 24 (3) of the DIFC Arbitration Law, in respect of a prospective arbitration, that were not in issue in the Dubai Cassation Court proceedings. And (ii) the Dubai Cassation Court had reached its decision applying UAE law, whereas the law applicable to the validity of the Arbitration Clause was English law, including the doctrine of apparent authority. In support of proposition (ii), Mr Reed cited Joseph, Jurisdiction and Arbitration Agreements and their Enforcement, 3rd ed, para 16.73 which reads in part:

“… assuming parties have expressed an implied choice of law for their arbitration agreement in accordance with English conflicts of law rules and that the choice of law is the law of State X, then for a decision of a foreign court on validity to create an estoppel, the decision not only needs to be final but it also must be a decision applying the law of State X. Should a foreign court, let’s say, apply the lex mercatoria and not the governing law of State X in order to determine substantive jurisdiction then there would not be an identity of the issues between the foreign court and the English courts and now question of issue estoppel ought to arise”.

55. Referring to condition (iv) of paragraph [54] of Clarke LJ’s judgment in The Good Challenger , Mr Reed further argued that it would be contrary to justice for the CC Decision to be held to give rise to an issue estoppel given the steps that YYY had taken to frustrate the proceedings in this Court and to circumvent the international arbitral regime.

56. Mr Reed also argued that it would be contrary to the public policy of the DIFC for it to be held that the CC Decision gave rise to an issue estoppel in respect of the invalidity of the arbitration agreement. He cited the approval given by the English and Wales Court of Appeal in the Brussels Convention case Philip Alexander Securities & Futures Ltd v Bamberger & Ors [1999] CLC 1787 to the view expressed by the judge below (Waller J) that prima facie if someone proceeds in breach of, and with notice of, an injunction granted by the English Court to obtain judgments abroad, those judgments should not as a matter of public policy, be recognized in the UK.

57. Earlier in his judgment at paragraph 21 Waller J said:

“I have to say that in the instant cases where at least in part one is dealing with the invalidity of an arbitration clause as found by the local law, I have a strong inclination to feel that such a ruling should not have to be recognised by the English court whether ruled on at a preliminary stage or whether ruled on together with a judgment on the substance of the dispute. First, it would still be open to the English court, even though there had been a ruling on validity in the court of another member state, to grant an injunction restraining continuation of the proceedings and/or to grant a declaration that the proceedings were one covered by the arbitration clause. If that occurred, then a judgement on the substance of the dispute, albeit a [Brussels] convention judgement, would not, it seems to me, have to be recognised either on the basis that such recognition would be contrary to public policy in the UK or on the basis that the judgment was irreconcilable with the judgment given in a dispute between the same parties in the UK …”

58. Mr Reed also drew the Court’s attention to the observation of Lord Collins in AK Investments CJSC v Kirgyz Mobil Tel Ltd et al [UKPC] 7 at [121] that it was arguable that two judgments of the Kyrgystan Bishkek Interdisctrict Court should not be recognized on public policy grounds in light of the way in which those judgments were obtained, inter alia, in breach of an English arbitration agreement and of orders of the English and BVI courts.

59. In addition, Mr Reed cited the decision of Judicial Commissioner Lee Seiu Kin in the High Court of Singapore in WSG Nimbus Pte Ltd v Board of Control for Cricket in Sri Lanka [2002] SGHC 104 where it was held that the decision of a Sri Lankan Court, holding that an arbitration agreement was not a compulsory agreement within the meaning of section 5 of the Sri Lankan Arbitration Act, would not be recognised by the Singapore Court on the ground that, inter alia, the judgment had been obtained in breach of and with notice of an anti-suit injunction issued by the Singapore Court. Having decided that the arbitration agreement was an agreement within the relevant definition in section 2 of the Singapore International Arbitration Act that adopted the Model Law definition, Lee JC also held at [86] that the anti-suit injunction would be continued on the ground, inter alia, that the continuation of the proceedings in the Sri Lankan Court would constitute a breach by Sri Lanka of its obligations under Article II of the NYC.

ZZZ’s case in the second application

60. ZZZ submitted that pursuant to DIFC Courts Practice Direction No. 3 of 2015: Review of DIFC Courts Officer and Registrar Decisions, it is entitled to a de novo consideration of the Enforcement Order. ZZZ accepted that no application was filed within 3 days of the issuing of the order, as required by the Practice Direction, and asked the Court to extend time under RDC 4.2. ZZZ submitted that upon a de novo consideration of the order, for the reasons it resists the first application, the Enforcement Order ought to be set aside.

61. ZZZ also submitted that YYY’s application pursuant to RDC 45.12 was misconceived. An application for the enforcement of the CC Decision as if it were an order of the DIFC Courts should have been made pursuant to RDC 45.16 and RDC 45.17 and a copy of the application notice should have been served pursuant to RDC 23.4. The enforcement order ought also to have contained a statement declaring the right to make an application to set aside or vary the order under Rule 23.94.

62. ZZZ further submitted that YYY failed to disclose to the Judicial Officer, as it was bound to do on making an ex parte application, that: (i) ZZZ opposed the whole basis of the application; and (ii) in the judgment dated 25 December 2018 given on ZZZ’s contempt application the Court had stated that YYY’s contention that the injunction had been issued without jurisdiction in light of the CC Decision raised difficult issues on which full oral argument was required.

63. Finally, ZZZ argued that orders made pursuant to Article 7 (4) of the JAL must be made by an “Execution Judge”, and the judicial officer who made the enforcement order was not such a judge because she was not appointed by decree of the Ruler as required by Article 3 (4) of the JAL, but was appointed by the Chief Justice. In the result, therefore, the enforcement order was a nullity.

YYY’s case in the second application

64. YYY repeated its submissions that the CC Decision was enforceable in accordance with Article 7 (4) & (5) of the JAL. It denied that it had been guilty of a failure to make full and frank disclosure by omitting to disclose in its application that: (i) ZZZ contested the recognition of the CC Decision: and (ii) this Court had noted in its judgment on the contempt application that the argument that this Court had had no jurisdiction to issue the Injunction by reason of the CC Decision raised difficult issues on which full oral argument was required.

65. Mr Harrison also submitted that, having failed to apply for a de novo consideration of the order within the stipulated 3 days, it was incumbent on ZZZ to apply for relief from sanctions, supported by evidence, and this it had not done.

66. Finally, it was contended that under the RDC, a party seeking an enforcement order had the option of applying to a judicial officer or to an execution judge, and if a judicial officer was applied to any resulting order, would be validly made.

The first application -- discussion and decision

67. I accept the entirety of Mr Reed’s submission that enforcement of a judgment or order made by a Dubai Court through the machinery of Article 7 (4) & (5) of the JAL is limited to enforcement by the execution processes operated within the DIFC, as provided for in Part 45 RDC. As is noted in Dicey, Morris and Collins at 14-002 and 14-003, while a court must recognise every foreign judgment which it enforces, it need not enforce every foreign judgment which it recognises. This is because not every type of judgment is capable of enforcement by having it executed against the party against whom it is given. “A judgment dismissing a claim or a counterclaim is obviously not capable of enforcement, unless it orders the unsuccessful party to pay costs … ; nor is a declaratory judgment, eg one declaring the status of a person or the title to a thing ; nor is a decree of divorce.”

68. As recorded above, in the course of developing his submissions Mr Reed informed the Court that the Arabic word translated as “executory” in Article 7 (2) (a) and Article 7 (4) (a) of the JAL should be translated as “appropriate for enforcement” in the same way that that Arabic word was translated in the 2009 Protocol. This statement was not challenged on the part of YYY. I accordingly regard myself as entitled to accept that the Arabic word translated as “executory” ought, for consistency’s sake, if for no other reason, to be translated as “appropriate for enforcement”.

69. In response to Mr Reed’s reliance on the words “the subject of execution is situated…”, Mr Harrison cited DNB Bank v Gulf Eyadah Corporation [2015] DIFC CA 007 at [125] where Chief Justice Hwang observed: “The presence of assets is not a pre-condition stated in Article 24 (1) of the DIFC Court Law, Article 7(6) of the JAL and Article 42 of the DIFC Arbitration Law. There is nothing in the JAL, the DIFC Court Law and the RDC that prevents the entering of a judgment if there is no evidence which proves that there are no assets in this jurisdiction.”

70. In my judgment, this authority is no answer to the point made by Mr Reed because there the relevant provision in Article 7 of the JAL was Article 7 (6) which applies generally in the case of foreign judgments and is not dependent on whether the subject matter of execution is inside or outside the DIFC. It is also the case that the judgment for enforcement in DNB Bank was a money judgment, not a declaration as to the status of a putative agreement.

71. Mr Harrison also cited Egan v Eava [2013] DIFC ARB 002, where Sir Anthony Colman said:

“In Article 7 (2) of the JAL the words “should be the subject of execution outside the Centre” do not import a requirement that it has to be proved to the executive judge that any particular asset of the arbitration debtor is located in non-DIFC Dubai; they merely identify the circumstance that the arbitration creditor requires an order for execution to be made and available upon some (undefined) subject matter in non-DIFC Dubai … If the arbitration creditor has chosen to obtain an order for enforcement in a state where no assets turn out to be currently available for execution, that is his misfortune and not the concern of the judge making the order for recognition.”

72. In my view, these observations of Sir Anthony Colman do not in the least neutralise the point made by Mr Reed because it is clear that Sir Anthony regarded the words “subject of execution outside the Centre” as relating to execution to enforce a judgment against a judgment debtor by deployment of the execution processes available in the execution jurisdiction in question.

73. I recognise that the terms of Article 7 (6) of the JAL suggest that the enforcement and recognition of Dubai judgments was intended to be exclusively comprehended by Article 7 (4) & (5) of the JAL. However, I find the linguistic features of Article 7 identified by Mr Reed in his submissions on Article 7 to be so compelling that they make it impossible to construe Article 7 as applying to all Dubai Court judgments, whether or not they are appropriate to be enforced by the methods of execution specified in RDC Part 45.

74. I accordingly find that the CC Decision has not been automatically recognised by the Enforcement Order made by the judicial officer.

75. In deciding that enforcement of a judgment or order made by a Dubai Court, through the machinery of Article 7 (4) & (5) of the JAL, is limited to enforcement by the execution processes operated within the DIFC as provided for in Part 45 RDC, I am differing from the approach Chief Justice Hwang took when giving his reasons in Oger Dubai LLC v Daman Real Estate Capital Partners Ltd [CFI-013-2016 & ARB -002-2015 for the orders he made discharging orders that had been issued in connection with an application to enforce an arbitration award made by a Dubai seated arbitral tribunal. The discharged orders included a freezing order, enforcement of the award and a winding up order. The Chief Justice’s Reasons were issued by the Registry on 7 November 2018 and I only became aware of them some time after the hearing of the applications before the Court.

76. The Chief Justice discharged the above orders in light of the Dubai Cassation Court’s judgment, upholding the Dubai Court of Appeal’s decision that the arbitral award was null and void. The Dubai Court was the court of the seat.

77. In paragraph 66 of his Reasons, the Chief Justice said that he had to consider the effect of an award and a judgment from a court of co-ordinate jurisdiction within the same Emirate. He considered paragraph 2 of the 2009 Protocol and Article 7 of the JAL, and in paragraph 67 he said:

“Under Article 7(5), I have no power to review the merits of any judgment of Dubai courts, except as to form, but I have to recognise and enforce it. Although, strictly speaking, there is no application before me for such recognition and enforcement, the practical consequences of the legal position of Dubai Courts judgments in the DIFC Courts are that we have to take them as binding without further query except as to form or (possibly) meaning in case of ambiguity. I do not want to commit the DIFC Court to the proposition that we could never decline to enforce any part of any Dubai Courts judgment, but it is sufficient for present purposes to adopt the words of Captain Corcoran in the opera HMS Pinafore by Gilbert and Sullivan (when refuting suggestions from his crew of suffering from seasickness or uttering profanity):

“No, never!”

“What, never?”

“Well, hardly ever!”

(Act 1 Scene 1)”

78. So far as I can see, the Chief Justice received no argument to the effect that only judgments susceptible to enforcement by execution against the assets of the judgment debtor, or his person, can be enforced under Article 7 of the JAL. Having heard sustained argument on the point, I respectfully decline to adopt the approach taken by the Chief Justice.

79. If the CC Decision is not automatically recognised by virtue of Article 7 (4) & (5), the question arises whether this Court should recognise it at common law.

80. In my judgment, given that enforcement by way of execution of Dubai judgments under Article 7 (4) & (5) of the JAL is not dependent on whether the Dubai Cassation Court had jurisdiction in accordance with the principles of the DIFC’s conflict of laws rules, a Dubai judgment ought generally to be recognized by the DIFC Courts if the judgment is final and conclusive on the merits and unimpeachable on the ground of fraud or public policy.

81. The conflicts of laws rules applied in the DIFC Courts are founded in general on the English conflicts of laws rules which are authoritatively expounded in Dicey, Morris and Collins. Rule 51 in that work reads:

“A foreign judgment is impeachable on the ground that its enforcement or, as the case may be, recognition, would be contrary to public policy.”

82. Since the Dubai Courts and the DIFC courts co-exist in the same Emirate, it will be very rare indeed for recognition of a Dubai Court judgment to be refused by a DIFC Court on the ground of public policy. However, I have come to the view in this case, relying on the observations (respectively) of Waller J in Bamberger and Lord Collins in AK Investments CJSC v Kirgyz Mobil Tel Ltd et al recorded at paragraphs 57 and 58 above, that the CC Decision ought not to be recognized because to do so would be contrary to the public policy of the DIFC. My reasons are as follows. The NYC requires the courts of the contracting states to uphold arbitration agreements and I regard it as plain that when a domestic court is asked to find that an arbitration agreement is null and void in the circumstances contemplated in Article II.3, it should make that decision, as implicitly required by Article V 1. (a), on the basis of the law to which the parties have subjected the arbitration agreement. The HMA is expressly governed by English law and it is difficult to see any reason why it is not to be inferred that the parties’ choice of English law was also to govern the formal validity of arbitration agreement contained within the HMA. Whilst it would seem that Article II (3) and Article V(1)(a) were not drawn to the attention of the Dubai Court of Cassation, that court was urged by ZZZ to apply English law to the question whether the Arbitration Clause was valid as having been agreed to on behalf of YYY by one of its directors, but the Dubai Cassation Court declined to so. The Dubai Court of Cassation also took no account of the fact that YYY had applied to the Dubai courts for a declaration of nullity instead of raising this issue in the DIFC Court, the court of the seat, in which proceedings were on-going. With very great respect, it therefore appears to me that, in deciding as it did, the Dubai Court of Cassation was in breach of the NYC. It was suggested in argument that the Dubai law as to the authority necessary for an arbitration agreement to be binding through the consent of an agent is in the nature of ordre public and cannot be contracted out of. Even if this be so, I respectfully still take the view that the CC Decision was made in breach of the NYC and for this reason that decision should not be recognized by this Court. The NYC compelled the Dubai Cassation Court to apply English law in determining the validity of the arbitration agreement.

83. Even if the CC Decision was not made in breach of the NYC, there are two further reasons why, in my opinion, it would be contrary to the public policy for the DIFC to recognise the decision. First, recognition of the CC Decision would put the DIFC Court itself in breach of the NYC for failing to uphold the validity of the arbitration agreement, there being nothing in the English law of agency, the applicable law, which is of the nature of ordre public. Second, the DIFC Court is the court of the seat and therefore the supervisory court whilst the arbitration is in progress and recognition of the CC Decision would disable this Court from carrying out this very important function.

84. Even if the correct view is that the CC Decision falls within Article 7 (4) and (5) of the JAL, notwithstanding that it is a declaratory judgment, I would still hold that the DIFC Court has a residual discretion in very exceptional circumstances not to recognise Dubai judgments covered by those provisions. And for the reasons given in paragraphs 82 and 83 above, I would still decline to recognise the CC Decision. This Court is not bound by the decision of the Court of Appeal of England and Wales in The Wadi Sudr [2009] (above) which, in any event, is distinguishable in that: (a) it involved the Brussels Regulation and not Article 7 of the JAL; (b) it was held by the Spanish Court that there had been no incorporation of the putative arbitration clause into the contract of carriage (a far from unreasonable decision); and (c) the party who later sought to uphold the arbitration clause had itself begun court proceedings in England without reference to any arbitration clause.

85. The conclusions expressed above in paragraph 67 and following render it strictly unnecessary to deal with ZZZ’s case that the CC Decision should not be recognized because the Dubai Cassation Court did not have jurisdiction according to the conflict of laws rules in play in the DIFC. However, since the point was fully argued, I propose briefly to deal with this issue.

86. In my judgment, by filing its counterclaim in case 1478/2017 seeking to enforce the HMA, ZZZ submitted to the jurisdiction of the Dubai Court of First Instance, notwithstanding its protestations that the Arbitral Tribunal had jurisdiction to decide the reference regardless of the CC Decision. This is because ZZZ cannot be allowed at one and the same time to say that it will accept a decision on the merits of its counterclaim if it is favourable to it but will not submit to the court’s jurisdiction if the judgment on the counterclaim is unfavourable, see Re Dulles Settlement (No.2) [1951] Ch 842 at 850 (per Denning LJ).

87. In my view, the judgment of Rix LJ in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust Kamenogorsk Hydropower Plant JSC [2012] 1 All E R (Comm) 845 is inapplicable because no counterclaim had been filed in that case, only a defence with the defendant at the same time vigorously contesting the jurisdiction of the court.

88. Notwithstanding that the Dubai courts had jurisdiction in accordance with the DIFC’s conflicts of laws rules, the CC Decision would nonetheless be impeachable on grounds of public policy for the reasons given in paragraphs 82 and 83 above.

89. For the avoidance of doubt I make it clear that I can see nothing in the decision of the JJC in Cassation No.8/2017 that precludes this Court from finding that it should not recognise the CC Decision for the reasons I have given. Whether my decision results in a conflict of jurisdiction between the DIFC Courts and the Dubai Courts and, if so, whether the decision of each court should nonetheless stand, given the difference in their function – the DIFC Court being the court of the seat - will be for later determination.

The second application -- discussion and decision

90. I propose to extend the time under RDC 4.2 for ZZZ’s application for a de novo review of the enforcement order pursuant to DIFC Courts Practice Direction No. 3 of 2015. I also dispense with the need for an application by ZZZ for relief from sanctions for having failed to comply with the 3 day time limit prescribed by the Practice Direction.

91. In my judgment, it inevitably follows from my decision that the CC Decision should not be recognized on public policy grounds, that the Enforcement Order must be set aside. That said, I am bound to observe that I think it most regrettable that those acting for YYY did not inform the judicial officer that I had said in my judgment on ZZZ’s contempt application that YYY’s contention that, due to the CC Decision, the Court lacked jurisdiction to issue the Injunction raised difficult issues on which I required full oral argument. This in my view was information extremely pertinent to YYY’s application which might well have led the judicial officer to direct that the application should be heard by myself or some other Justice of the DIFC Court.

Conclusions

92. For the reasons given above:

(a) YYY’s application to discharge the injunction on the ground that, in light of the CC Decision, this Court lacked jurisdiction to grant the injunction in the first place, is dismissed.

(b) ZZZ’s application to set aside the enforcement order is granted.

93. Unless YYY serves submissions to the contrary within 14 days of the issuance of this judgment, YYY should pay the costs of both applications, to be assessed by the Registrar on the standard basis, unless otherwise agreed.

94. Notwithstanding the conclusions expressed in paragraph 92 above, it seems to me that there now exist at least two other strongly arguable grounds for the discharge of the injunction. Firstly, the Arbitral Tribunal has ruled that it has jurisdiction and thus it can itself issue interim measures if it finds it appropriate to do so. Secondly, the Injunction has effectively withered on the vine since the failure of ZZZ’s contempt application and the stay of enforcement of the Injunction that has now been implemented by the Dubai enforcement authorities for many months. I therefore direct that, if either of the parties wishes to keep the Injunction alive, or there is a dispute as to the terms on which the Injunction should be discharged, there should be a determination on written submissions of the issues arising. Accordingly, the parties should inform the Court within 14 days of the issue of this judgment whether there is a need for a determination as to the future of the injunction and the Court will issue appropriate directions.

Issued by:
Nour Hineidi
Deputy Registrar
Date of issue: 17 November 2019
Time: 4pm

YYY Limited v ZZZ Limited [2017] DIFC ARB 005

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