Privacy Settings

Claim No. CFI 006/2012

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

ON APPEAL FROM THE FINANCIAL MARKETS TRIBUNAL (FMT11001 and 11002)

BEFORE JUSTICE SIR JOHN CHADWICK

BETWEEN

ARQAAM CAPITAL LIMITED

Appellant

and

DUBAI FINANCIAL SERVICES AUTHORITY

Respondent

Hearing: 23 May 2012

Mr Charles Flint QC and Mr Tom Cleaver instructed by the Dubai Financial Services Authority for the Respondent.

JUDGMENT

3. The appeal is brought, pursuant to Article 28(1) of the DIFC Courts Law 2004 (DIFC Law No. 10 of 2004), with permission granted by this Court on 8 February 2012. Appeals lie from the Tribunal under Article 28(1) if, and only if, they relate to (a) a question of law, (b) an allegation of a miscarriage of justice, (c) an issue of procedural fairness or (d) a matter provide for in or under DIFC Law. In the present case, it is said on behalf of the appellant, Arqaam, that the Hearing Panel erred in law in deciding to give the directions which it did in relation to issues (1) and (3).

The circumstances leading to proceedings before the Financial Markets Tribunal

4. The circumstances leading to the proceedings before the Tribunal are not in dispute. They are summarised at paragraph 10 of the Hearing Panel's decision:

5. It is common ground that Arqaam is an Authorised Firm for the purposes of the DFSA Rulebook. Rule GEN 8.2.1 requires (so far as material in the present context) that an Authorised Firm must prepare and maintain all financial accounts and statements in accordance with the International Financial Reporting Standards (IFRS). The DFSA has taken the view that in treating the revaluation of the Artworks in the 2009 Accounts in way that it has, Arqaam has failed to comply with IFRS standards; and that, accordingly, has been in breach of that Rule. Article 33 of the Regulatory Law provides that "if it appears reasonably likely to the Chief Executive or the DFSA Board of Directors that there has been a breach of ... any Rules ... the Chief Executive may ... by notice commence proceedings before the Financial Markets Tribunal in relation to such breach". These proceedings were commenced under Article 33 by Notices filed on 3 August 2011.

The relief sought in the proceedings

The applications for directions

The privacy application

The relevant provisions of the Regulatory Law and the FMT Rules

The approach adopted by the Hearing Panel

11. At paragraphs 49 to 52 of its Decision the Hearing Panel summarised the two grounds - (1) significant harm and (2) protection of confidential information - under which arguments had been advanced on behalf of Arqaam; and, in particular, the factors under Rule 18 of the FMT Rules on which Arqaam relied in seeking confidential treatment for information and documents disclosed in the proceedings. At paragraph 54 the Panel recorded that Ernst & Young supported the applications by Arqaam for the proceedings to be heard in private and for the confidential treatment of material disclosed in the course of the proceedings.

12. At paragraphs 55 to 58 of its Decision the Hearing Panel directed itself as to the approach which it should adopt to the applications before it:

13. The "Complaints", to which the Hearing Panel made reference in paragraph 57, were described at paragraph 84 of the Decision: they are "complaints made by Arqaam against a senior official of the DFSA in May 2010 and November 2010". As indicated at paragraph 57, the Hearing Panel ruled that the Complaints were irrelevant to the allegations which are the subject of the proceedings brought by the DFSA against Arqaam. The Panel reached that conclusion in the course of addressing the disclosure application; and it will be necessary to consider, in that context, whether it was correct to do so.

14. Given the Hearing Panel's view that the question whether disclosure of information in this case would be contrary to the public interest would arise only in relation to disclosure of information in relation to the Complaints and its ruling that the Complaints were of no relevance in relation to the allegations which were the subject of the proceedings brought against Arqaam, the Panel did not find it necessary, in reaching its conclusion on the privacy application, to consider whether disclosure would be contrary to the public interest.

15. The Hearing Panel took the view, at paragraph 59 of its Decision, that the main thrust of Arqaam's case on significant harm was Arqaam's concern that the DFSA's Statement of Case was couched in terms which suggested (i) that Arqaam had intentionally and dishonestly manipulated its Financial Statements in order to create a misleading picture of the state of its financial affairs and (ii) that the valuation of the Artworks was erroneous. But, at the hearing before the Panel, counsel for the DFSA had stated (transcript, 12 December 2011, page 18, lines 5-7) that it was not its intention to make allegations to that effect. As counsel put it (ibid): "... there's no allegation of deceit or dishonesty in this claim. It all concerns proper accounting standards".

16. Following the hearing, the DFSA amended its Statement of Case to include statements that "for the avoidance of doubt" it was not alleged either that the valuation was not genuine (or that the gallery could not reasonably have valued the Artworks as it did) or that Arqaam had acted dishonestly in adopting the accounting treatment that it did. The Hearing Panel was satisfied that, with that clarification, the risk to Arqaam if the proceedings were heard in public was "not of significant or disproportionate harm".

17. The Panel went on to say this:

The grounds of appeal

18. The grounds advanced in support of the appeal from the decision on the privacy application, (as they appear in the Appeal Notice dated 25 January 2012) are these:

Ground (1)

20. The Hearing Panel appreciated, correctly, that (as I have already pointed out) Rule 16 confers two distinct powers: first the power to order that part or all of a proceeding is non-public; and, second, the power to order "that information is treated confidentially and not disclosed publicly". It appreciated, also correctly, that the remaining Rules in the section headed "Confidential Treatment" (Rules 17, 18 and 19) are directed to the exercise of the second of those powers (the power to order that information is treated confidentially); and are not directed to the exercise of the first of the two powers (the power to order that part or all of a proceeding is non-public). For whatever reason, the FMT Rules do distinguish in this respect between the two powers conferred by Rule 16. In particular, Rule 18 of the FMT Rules, which sets out four factors which the Tribunal shall consider in determining an application for confidential treatment, has no direct application to an application for a non-public hearing. The Tribunal's statement, in paragraph 55 of its Decision, that "the Rules do not give any direct guidance as to how the discretion [in relation to the power to order a non-public hearing] is to be exercised" was a correct statement of the position.

21. But, of course, the Tribunal's self-direction as to the approach to be adopted did not stop at paragraph 55 of its Decision, It went to explain in paragraph 56 that Rule 18 did set out guidelines in relation to the exercise of its power to order confidential treatment. And it recognised that the factors set out in Rule 18 did give "some indirect guidance as to matters which may be taken into account in deciding whether proceedings should be heard in private". Again, that seems to me a correct statement of the position.

22. Accordingly, I reject the criticism that the Hearing Panel erred in failing properly to articulate the correct legal test when considering whether orders for non-public hearings and confidential treatment of information should be made. But, further, it is said that the Hearing Panel failed to apply that test: in that, pursuant to Rule 18, it should have weighed the harm that would be caused to Arqaam's legitimate business interests if the proceedings were heard in public against the public interest in publicity. Again, I find no substance in that criticism. As I have explained, Rule 18 had no direct application to the question whether the hearings should be non-public. But, in reaching its conclusion to refuse an order for non-public hearings, the Hearing Panel did ask itself whether hearings in public would give rise to significant or disproportionate harm to Arqaam's legitimate business interests. At paragraph 63 of its Decision, the Panel concluded that public hearings would not have that effect. As the Hearing Panel put it; "the only risk of harm that can be identified is..."the prospect of unfairness or prejudice arising simply through knowledge of the action or decision taken by [the regulator]'". The Panel concluded that "that is not, on its own, the kind of risk which would justify not holding the proceedings in public".

Ground (2)

23. Ground (2) in the grounds of appeal may, I think, be seen (in part, at least) as providing particulars of the further criticism, under Ground (1), to which I have just referred. It is said, in effect, that the Hearing Panel could not apply the correct legal test - that, is to say, could not properly weigh the harm that would be caused to Arqaam's legitimate business interests if the proceedings were heard in public against the public interest in publicity - because it failed to undertake any or adequate analysis of what that harm would be. In particular, it is said that the Panel failed to give any consideration to undisputed evidence that:

(1) Arqaam was a young start-up company that had only been in existence for a short time.

(2) Arqaam's key competitors were companies with well-established reputation and in many cases a much longer history in the market; and that Arqaam's reputation was much more susceptible to damage from a one-off regulatory investigation than those firms with longer standing in the market.

(3) Arqaam provides investment banking services, specialising in an emerging market which is considered relatively high risk. Building Arqaam's reputation and attracting new clients was a long, slow and expensive process. Clients were extremely sensitive to information suggesting that their business partners might be under regulatory investigation and avoid being associated with other firms on that basis.

(4) Arqaam is presently under merger discussions with another financial service firm in the Middle East. Any publicity surrounding these proceedings would be highly prejudicial to those negotiations which were expected to take place over the next seven months or so.

(5) Research had shown that the stock-price impact of regulatory penalties, which might be used as a proxy for reputational effects was, on average, nine times larger than the financial penalties for misconduct affecting customers and investors.

24. The evidence relied upon includes (i) a Witness Statement dated 22 November 2011 made by Dennis David Wijsmuller, a Director and the Chief Operating Officer of Arqaam, and (ii) a Witness Statement dated 27 November 2011 made by Riad Meliti, a Director and the Chief Executive Officer of Arqaam. Those Witness Statements contain statements of fact which - in the circumstances that they were not contradicted - the Hearing Panel had no reason to reject, and did not reject; and statements of opinion and belief by persons who were, plainly, not independent of Arqaam and to which the Hearing Panel could give such weight as it thought appropriate.

25. Examples of the latter in Mr Wijsmuller's witness statement include the following:

27. Arqaam had relied, also, on a letter dated 26 October 2011 from Brunswick Gulf Ltd. The letter stated that Brunswick was an international corporate communications firm specialising in reputation management. It was written by a partner in that firm who, it was said, was Arqaam's external corporate communications advisor. He expressed the views that, "regardless of the outcome of the hearings Arqaam should be afforded the right to challenge the DFSA's allegations in the FMT without being subject to risk of damage to its reputation arising from the legal proceedings themselves" and that "It seems iniquitous for Arqaam to face the increased risk of reputational loss purely by virtue of this being the FMT's first case to be heard". After stating that the case involved "complex technical issues in respect of IFRS, which is a highly-specialised area of accountancy, and revolves around the opinions of IFRS experts", he went on to say that "The complex nature of the case increases the risk of inaccurate reporting with ensuing reputational damage to Arqaam if the case is heard in public". And he expressed the opinion that "if the FMT proceedings are made public, Arqaam would inevitably suffer reputational loss which is likely to have a considerable detrimental effect on its business as a financial institution" and that "This would be the case irrespective of whether the FMT find for or against Arqaam in the proceedings".

28. It is submitted that, in failing to mention or discuss the matters set out in the preceding paragraphs, the Hearing Panel erred in law: in that it left out of account factors which it should have taken into account in the exercise of its discretion. Further, it is submitted, the Panel erred in law in taking into account the amendment of the DFSA's Statement of Case. In concluding that the only risk of harm to Arqaam was the prospect of unfairness and prejudice arising through knowledge of the action or decision taken by the regulator, it is said that the Panel failed to weigh evidence of other harm in reaching its decision.

29. In my view, there is no substance in the submission that the Hearing Panel failed to take account of the matters set out in the preceding paragraphs. The Panel referred (at paragraph 50(3) of its Decision) to the evidence of Mr Wijsmuller and Mr Meliti. In particular, it noted (ibid) that they had stated that "the reaction to a public hearing would be an immediate lack of confidence in Arqaam and all the Arqaam group companies" and that "The group is relatively small and in its early years of operation, so damage to any part of the group would impact unfairly on other parts". At paragraph 50(4) the Panel set out Arqaam's submissions that the significant harm which it would be suffer included: "(i) destruction of Arqaam's good reputation in the market place, including its reputation for adhering to the best international standards; (ii) destruction of Arqaam's business as clients will withdraw funds or close accounts or stop engaging with Arqaam; (iii) termination of current merger negotiations or a significant decrease in Arqaam's value in such discussions; (iv) removal of any perception of reliability in any figures quoted by Arqaam in relation to services such as brokerage, credit trading, treasury. Research, etc; (v) Impaired credit facilities". At paragraph 50(5) the Panel recorded the submission that "Such harm would be disproportionate and unfair having regard to the technical nature of the contraventions alleged by the DFSA, the narrow range of disagreement between the accounting expert, and the fact that the reputational damage would far exceed the amount of the fine sought by the DFSA".

30. In paragraph 58 of its Decision (in a passage which I have set out earlier in this judgment) the Hearing Panel accepted that significant harm - in the sense of harm which would or might be greater than any penalty which might be imposed and would be out of proportion to the contravention which was alleged - was a factor which it should take into account in deciding whether the hearings should be non-public In reaching the conclusion (at paragraph 61) that the only risk of harm to Arqaam - if the proceedings were heard in public - which could be identified was "the prospect of unfairness or prejudice arising simply through knowledge of the action or decision taken by the [regulator]", the Panel must be taken to have had in mind the matters upon which Arqaam relied and which it had, itself, set out under paragraph 50 of its Decision. But, plainly, the Panel also had in mind that the context in which those matters had been advanced - and the context in which evidence had been filed in support of those matters - was Arqaam's concern that the DFSA's Statement of Case was couched in terms which suggested (i) that Arqaam had intentionally and dishonestly manipulated its Financial Statements in order to create a misleading picture of the state of its financial affairs and (ii) that the valuation of the Artworks was erroneous, That concern was, as the Panel observed at paragraph 59 of its Decision, the main thrust of Arqaam's case on significant harm.

31. In the course of the hearing (transcript, 12 December 2011, page 16, line 22 to page 17, line 2) - and at paragraph 60 of its Decision - the Hearing Panel had indicated that it had not understood the DFSA's case to include either of the two allegations just mentioned. Nor did leading counsel for Arqaam, himself, read the statement of case in that sense (transcript, 12 December 2011, page 18, lines 8-12). And counsel for the DFSA stated, unequivocally, that neither of those allegations were intended. But it was said on behalf of Arqaam that, nevertheless, the Statement of Case in its original form would or might lend itself to inaccurate and harmful reporting. The Hearing Panel recognised that concern (at paragraph 60); and, as I have said, invited the DFSA to amend its Statement of Case "to make it clear that neither of these allegations was part of the DFSA's case. Following the hearing an amendment was made which satisfied the Hearing Panel that Arqaam's expressed concerns had been met. It said this (at paragraph 62 of its Decision):

32. The Panel's conclusion that Arqaam's concern that publication of the DFSA's Statement of Case would or might lend itself to inaccurate and harmful reporting - and so might lead sophisticated or lay readers to think that the DFSA was alleging dishonesty or was challenging the valuation of the Artworks - had been met by the amendment to that Statement of Case is challenged on this appeal, under Ground (4). It will be necessary to address that challenge later in this judgment. At this stage, it is sufficient to say that unless that challenge is made good - which, in my view and for the reasons which I set out in the course of addressing Ground (4), it is not - the challenge to the Hearing Panel's Decision under Ground (2) must be rejected. If the Panel were entitled to take the view that the case against Arqaam should properly be seen as an allegation of a contravention of the applicable accounting rules which was not dishonest - in that, in the context in which it is made, the allegation that Arqaam acted intentionally does not carry with it any allegation of dishonesty - and as containing no challenge to the valuation of the Artworks, the Panel did not need to address, point by point, the matters raised in the witness statements of Mr Wijsmuller and Mr Meliti and in the letter of 26 October from Brunswick Gulf Ltd. There was nothing in either of those witness statements which suggested that the maker had had experience or expertise in relation to the effect which knowledge of a difference of view between the DFSA, on the one hand, and Arqaam and Ernst & Young, on the other hand, as to the accounting treatment required by IFRSs in relation to the transactions which (it is common ground) Arqaam chose to carry out in the present case would have on the reputation or business of Arqaam. In particular, it was impossible to determine from Mr Meliti's witness statement whether the unidentified cases to which he referred were cases in which the matter disclosed was solely a difference of view between the regulator and the body subject to regulation as to the proper accounting treatment in relation to the transactions which the body subject to regulation had chosen to carry out. Nor was there anything in the letter from Brunswick which addressed the effect of a public hearing of the allegations which the Hearing Panel understood it would be required to determine.

Ground (3)

34. It is said on behalf of the DFSA, correctly in my view, that the contention that all disclosed material will become public immediately in the absence of a stay of the Decision does not properly reflect the Hearing Panel's direction. At paragraph 67 of its Decision the Panel had indicated its intention to publish the Decision on the DFSA website, "but to give the parties advance notice of the date at which that will take place". Until publication of the Decision, the Registrar would be given instructions to inform members of the public who requested access to the disclosed material that St would not be publicly available until the Decision was published. The DFSA does not urge immediate publication of all material. At paragraph 45 of the Skeleton Argument filed on this appeal its preference is stated to be for "an arrangement analogous to that under Rules 6.11 to 6.16 of the DIFC Courts Rules, under which statements of case and judgments are available on request, but other documents are not, in both cases subject to orders to the contrary".

35. Arqaam points out that amongst the documentation disclosed in advance of the directions hearing was much that was clearly confidential; including the whole of Ernst & Young's audit file, which includes "detailed non-public information about [Arqaam's] financial position and business activities". That degree of disclosure, it is said, is unnecessary in the interests of justice: it goes beyond what it is necessary for an informed understanding of the Panel's decision: it goes beyond what is necessary in order for the public to see that justice has been done.

36. As I have said, the Hearing Panel took the view (expressed at paragraph 65 of its Decision) that the application for confidential treatment was a live issue only as regards the Financial Statements of Arqaam; that those Financial Statements would "no doubt" be available to any client who asked to see them; that they would, inevitably, form a central part of the enquiry during the proceedings; and that it could not accept that it would be possible to explain its decision without reference to the Financial Statements and to the detailed figures referred to in the DFSA's Statement of Case. But there is force, as it seems to me, in the criticism, made under Ground (3), that the Panel did not ask itself whether public disclosure of all disclosed material in advance of the public hearing - and, in particular, disclosure of confidential material which, in the event, was not referred to at the hearing - goes beyond what is necessary to ensure that justice is seen to be done.

37. I am satisfied that, in failing to address that question, the Hearing Panel erred in law. Rule 18 of the FMT Rules required the Panel to ask itself whether Arqaam would, or might, suffer harm to its legitimate business interests by the disclosure of confidential information as to its financial position and business activities in advance of a public hearing; and, if so, whether (and to what extent) disclosure of that information in advance of a public hearing was necessary. If the Hearing Panel had addressed that question, it would, as it seems to me, have concluded that it was not necessary - in order that justice be seen to be done - that information beyond that set out in the DFSA's Statement of Case (and, so far as material, in the statements filed by Arqaam and by Ernst & Young in response to that Statement of Case) be made public in advance of the trial hearing. Whether, following that hearing, further disclosed information needs to made public is a matter for further consideration by the Panel in the light of the material which is deployed at the hearing and is relevant to an understanding of its decision.

38. Accordingly, I would allow the appeal in relation to the confidential treatment of disclosed material to the extent which I have indicated.

Ground (4)

41. Arqaam filed an Answer to the Amended Statement of Case; and, on 26 April 2012, the DFSA filed a Reply to that Answer. The Answer challenges some of the statements of fact in the Amended Statement of Case. In so far as the facts in relation to the valuation remain in issue in the light of the Reply, it will be for the Hearing Panel to determine whether it is necessary to determine that issue and, if so, to do so. In substance, however, the issue between the parties is whether, as put at paragraph 9A of the Amended Statement of Case, "the Valuation ...could properly be relied upon for accounting or audit purposes"; or (so far as material in the present context) whether, as put at paragraph 18(b) of the DFSA's Reply, "Arqaam had [any] proper basis for estimating fair value [of the Artworks] at USD 2,450,000, whether in reliance on the Valuation or otherwise". For my part, I can see no reason why the Hearing Panel should not have taken the view that the Amended Statement of Case identified the issue in relation to the Valuation in terms which were unambiguous, which did not lend themselves to inaccurate and harmful reporting and which were not open to misinterpretation by lay or sophisticated readers.

42. The allegations of fact made by the DFSA in relation to the treatment of the Artworks or Arqaam's financial statements for the year ended 30 June 2009 are found at paragraphs 10 to 15 of the Amended Statement of Case. It is, I think, sufficient, in the present context, to note the allegations in paragraphs 11 and 12:

43. The allegations in paragraphs 11 and 12(a), (b) and (c) of the Amended Statement of Case are not in issue: see paragraphs 26, 27 and 28 of the Answer. It is said (at paragraph 28 of the Answer) that "It has always been clear that the sale and purchase transaction was a transaction of no economic substance" and that "Arqaam did not need to rely on the transaction to account for its Artworks", The issue is whether Arqaam entered into the September Agreements "solely for the purpose of retrospectively generating an accounting treatment of the Artworks for the purposes of the 2009 Accounts"; or for some other purpose. Again, I can see no reason why the Hearing Panel should not have taken the view that the Amended Statement of Case identified the facts in relation to the September Agreements - and the issue arising from those facts - in terms which were unambiguous, which did not lend themselves to inaccurate and harmful reporting and which were not open to misinterpretation by lay or sophisticated readers: a fortiori in the circumstances that those facts are not in dispute.

44. At paragraph 15 of the Amended Statement of Case it is alleged that "The 2009 Accounts were prepared so as to reflect the sale and repurchase of the Artworks at a price of USD 2,450,000 in the year ending 2009". Particulars of the matters relied upon in support of that allegation - taken from the DFSA's Expert Reports - are then set out. The allegation is denied at paragraph 32 of the Answer; although it is admitted that the entries on which the DFSA relies - under Statement of Income, Statement of Cash Flows and in the Balance Sheet - were, in fact, made. It is said that "The 2009 Accounts were prepared so as to reflect the increase in value of the Artworks to USD 2.45 million in the year ending 30 June 2009". That suggests that it will be Arqaam's case that the 2009 Accounts took no account of the September Agreements. In those circumstances it is clear that there will be an issue at trial whether the entries in the 2009 Accounts on which the DFSA relies were prepared on the basis that they reflected the September Agreements; or whether the September Agreements were treated as having no relevance to those entries. That will be an issue for the Hearing Panel to resolve after a trial. But the issue itself is identified in terms which are unambiguous and easy to understand. There was no reason why the Hearing Pane! should not have taken the view that there was little or no scope for inaccurate reporting in relation to that issue; or that the issue was open to misinterpretation by lay or sophisticated readers. Arqaam cannot be heard to complain of the potential for harm consequent upon accurate reporting of an issue which is central to the proceedings which have been brought against it by the DFSA.

45. At paragraph 26 of the Amended Statement of Case it is alleged that the 2009 Accounts did not comply with the relevant International Financial Reporting Standards and associated International Accounting Standards (IASs). The breaches of the IFRS alleged are summarised under three heads: (a) contravention of IAS 1.15 and IAS 1.8, in that the treatment of the September Agreements reflected their legal form and not their substance and economic reality; (b) contravention of IAS 7, in that the Statement of Cash Flows records a cash inflow and outflow of USD 2,450,000 from the September Agreements notwithstanding that no actual cash or cash-equivalent transactions took place; (c) contravention of IAS 16, in that the Artworks were purchased for USD 200,000 and that their purported acquisition at USD 2,452,971 had been a transaction of no economic substance. It is said, at paragraph 26(d), that the effect of those contraventions was to overstate Arqaam's operating income by 42% and to understate Arqaam's loss for the year by 21%.

46. Paragraph 26(e) is in these terms:

47. At paragraph 28(a) of the Amended Statement of Case it is alleged that "by virtue of the above" Arqaam contravened Rule (GEN) 8.2.1. In my view it is clear that the DFSA's case, in relation to the accounting treatment which has been set out in the earlier paragraphs of the Statement of Case, is that that treatment was adopted with the intention of achieving a particular presentation of Arqaam's financial position; that that treatment was not permitted by the relevant IFRSs and lASs, and that, accordingly -notwithstanding Arqaam's honest belief that the presentation of Arqaam's financial position in the manner achieved was not misleading - there was a breach of the Rule, I reject the submission that it was not open to the Hearing Panel to conclude that there was little or no scope for inaccurate reporting of the case which the DFSA is seeking to establish in these proceedings; or that that case was open to misinterpretation by lay or sophisticated readers.

48. Whether or not the DFSA will establish at trial the case which it seeks to make is, of course, as both the lay and the sophisticated reader would appreciate, a question for the Hearing Panel to determine in due course. For the present, the question is whether the Hearing Panel erred in law in concluding that Arqaam was not at risk of significant or disproportionate harm if the proceedings were heard in public. In my view that was a conclusion which the Panel was entitled to reach on the material before it; including the material to which I have referred under Ground (2). I have explained why I am satisfied that the Hearing Panel was entitled to take the view that the Amended Statement of Case does not lend itself to inaccurate and harmful reporting; but it is pertinent to keep in mind, also, that at a public hearing (at which Arqaam would be represented) the Amended Statement of Case would not be read in isolation. It would be read and understood with the benefit of whatever explanation of the issues counsel for the parties thought it appropriate to give. In so far as he thought that there was risk that a reporter (or any other member of the public) present at the hearing might fail to understand the issues which were before the Hearing Panel, counsel for Arqaam would have the opportunity to emphasise that the allegations which are said to have given rise to concern were no part of the case against his client.

The disclosure application

The Hearing Panel's decision

50. The Hearing Panel declined to make the order sought for the reasons which it set out at paragraphs 86 to 88 of its Decision:

"86. The Hearing Panel is, however, unable to accept that the motives of the DFSA in bringing these proceedings are in any way relevant to the correctness or otherwise of the allegations made against Arqaam. Whether or not those allegations are made good at the hearing on the merits will be entirety unaffected by any consideration of whether or not the allegations were made for a proper or improper motive.

87. Arqaam considers that the Complaints raise serious conflict of interest issues within the DFSA and whether due process was followed by the DFSA. As to that ground of relevance the Hearing Panel accepts the submission of the DFSA that these proceedings are not for judicial review of the decision of the DFSA to launch an investigation or to commence these proceedings. Questions of conflict of interest and due process in regard to investigations and the commencement of proceedings before the FMT are outside the jurisdiction [of] the FMT, which for present purposes has jurisdiction only "to hear and determine proceedings which are commenced under Article 33 of the Regulatory Law and relate to an alleged breach of the Law or of the Rules or of any other legislation administered by the DFSA: Regulatory Law section 32(1)(a).

88. Arqaam also maintains that it has a counterclaim against the DFSA for damages substantially exceeding the amount claimed by the DFSA. Here also, the Hearing Panel accepts the submission on behalf of the DFSA that any such claim lies outside the jurisdiction of the FMT."

The ground of appeal

51. Arqaam appeals from the Hearing Panel's refusal to order disclosure of the Schedule B documents on the ground that the Panel erred in concluding that the DFSA's motives in bringing the proceedings are irrelevant to the issues in these proceedings. It is said, in the grounds of appeal endorsed on the Appeal Notice that:

52. In the submissions made in the Skeleton Argument filed on its behalf on this appeal - and in oral submissions made at the hearing of the appeal - Arqaam accepted that a challenge by way of judicial review to the DFSA's decision to commence an investigation into the treatment of the Artworks in Arqaam's 2009 Accounts - or to the decision of the Chief Executive to commence proceedings under article 33 of the Regulatory Law - should be brought (if at all) in the DIFC Courts; a challenge by way of judicial review was not within the jurisdiction of the FMT under the Regulatory Law. It accepted, also, that the FMT had no jurisdiction to entertain a counterclaim for damages in proceedings commenced under article 33. But it is said, first (at paragraph 79 of the Skeleton Argument), that the DFSA's conduct and motives "will be relevant in the Hearing Panel's assessment whether to accord weight to judgment issues in [the DFSA's] determination that the relevant regulations have been breached; and, second (at paragraph 80), that the Tribunal has - and, in the circumstances of this case, should exercise - an inherent jurisdiction to stay proceedings in order to prevent an abuse of process".

53. In my view there is no substance in the first of those points. It is important to keep in mind the relevant provisions of the Regulatory Law. Article 36(g) empowers the Chief Executive of the DFSA "to investigate or cause to be investigated matters capable of being investigated under any legislation administered by the DFSA and, where appropriate, commence proceedings before the Financial Markets Tribunal ...". Article 33 provides that "If it appears reasonably likely to the Chief Executive or the DFSA Board of Directors that there has been a breach of the Law or of any Rules...the Chief Executive may...commence proceedings before the Financial Markets Tribunal in relation to such breach". Article 32(1)(a) confers on the FMT jurisdiction to hear and determine proceedings which are commenced under Article 33 and which relate to an alleged breach of any provision of the Law or of the Rules ...". Article 34(3) provides that the FMT may, for the purposes of any proceedings commenced under Article 33 (inter alia) " ... (a) receive and consider any material by way of oral evidence, written statements or documents ...". Article 34(4) sets out the powers which the FMT may exercise "At the conclusion of any proceedings commenced under Article 33 in which an alleged breach is proven to the satisfaction of the Financial Markets Tribunal ...". Article 32{4) provides that proceedings before the Financial Markets Tribunal shall be determined on a balance of probabilities. The proceedings are, in no sense, a review of a judgment reached by the DFSA or by its Chief Executive that a breach has been committed. Their judgment is limited to the question whether "it appears reasonably likely ... that there has been a breach of... any Rules". That is not the issue before the Hearing Panel: it is concerned to determine whether, on the balance of probabilities, "an alleged breach is proven to [its] satisfaction". In determining that question it makes findings of fact (on the basis of evidence) and, in the light of those findings of fact, makes a determination, as a matter of law, whether there has been a breach of the Rules. The Hearing Panel is not concerned to "accord weight to judgment issues in [the DFSA's] determination that the relevant regulations have been breached". Its own determination is independent of any views which the DFSA may have reached.

54. Nor, in my view, is there substance in the second point. It can be said that Article 34(3)(g) of the Regulatory Law gives the FMT power to "stay the proceedings on such grounds and on such terms and conditions as it considers appropriate having regard to the interests of justice"; and I would accept that it would be open to the FMT to stay proceedings commenced under Article 33 of the Regulatory Law in order to prevent an abuse of process and that that power could be exercised in a case where the Hearing Panel's "sense of justice and propriety" was offended by the circumstances in which the proceedings had been brought. But the decision in Bennett v Horsefeny Road Magistrates' Court [1994] 1 AC 42; [1993] 3 All E R 138, on which Arqaam seeks to rely by analogy, was reached on facts which are very far removed from those in the present case; and, importantly, provides no authority for the proposition that is open to a Tribunal exercising regulatory powers conferred by statute to conduct satellite proceedings in order to determine whether it is offended by the motives of the regulatory authority in bringing the proceedings which (prima facie) are properly before it. In my view the Hearing Panel was correct in its view that, if Arqaam wished to challenge the DFSA's decision to commence proceedings - on the grounds that that decision was flawed on the grounds of improper motive - that forum for that challenge was the DIFC Courts. It was not a challenge which the Hearing Panel itself should entertain.

56. The effect of the order made by the Hearing Panel, as I have indicated, is that its Decision, and the disclosed material, is not to be made public until (after notice to the parties) it so directs. This judgment, and any transcript of the appeal proceedings before this Court, may be made available to the public when (but not before) the Decision of the Hearing Panel is published.