November 07, 2018 COURT OF FIRST INSTANCE - ORDERS
Claim No: CFI-013-2016
ARB-002-2015
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BEFORE CHIEF JUSTICE MICHAEL HWANG
BETWEEN
IVAEN
Claimant/Respondent
and
IVIT
Defendant/Applicant
REASONS FOR THE ORDER OF CHIEF JUSTICE MICHAEL HWANG DATED 17 OCTOBER 2018
BACKGROUND
1. On 17 October 2018 I issued the following orders:-
“1. Save for the undertakings given by the Respondent / Claimant in ARB-002-2015 and CFI-013-2016 to compensate the Applicant / Defendant for such damage as the Court may consider appropriate, the following orders are discharged :-
a) The Freezing Order of Justice Sir David Steel, dated 30 December 2015 (made in ARB-002-2015);
b) The Order of Justice Sir David Steel, dated 30 December 2015, permitting the Respondent/Claimant to seek enforcement of the arbitral award (made in ARB-002-2015);
c) The Order of Justice Sir Richard Field, dated 16 June 2016, ordering the winding up of the Applicant/Defendant (made in CFI-013-2016); and
d) The Judgment and Order of Justice Sir Richard Field ordering the Applicant/Defendant’s Cessation of Trading (as amended, including the judgment of 28 July 2016) (made in CFI-013-2016).
2. The Applicant/Defendant is at liberty to file further proceedings seeking an inquiry as to what damage (if any) the Applicant/Defendant has suffered as a result of the various orders described in Order (1) above and whether the Respondent/Claimant is liable to compensate the Applicant/Defendant for such damage pursuant to the various undertakings as to compensation for possible damage given by the Respondent in ARB-002-2015 and CFI-013-2016 respectively.
3. The parties shall make written submissions on the costs of and incidental to the Application. The Applicant/Claimant shall submit its submissions within 14 days of the receipt of the Reasons for this Order (to be issued), and the Respondent/Defendant shall submit its responsive submissions within 14 days after service of the Claimant’s submissions.
4. Parties are at liberty to apply. “
I now give my reasons for these orders.
2. The procedural background to this case is a protracted and untidy affair, and it is against this very same procedural background that IvitIvit (“Ivit” or “the Defendant”) frames its current Application for relief. I have largely adopted the summary of the procedural history as set out in the Defendant’s Skeleton Argument dated 12 July 2018 as this has not been seriously challenged by the Claimant.
3. These proceedings originally arose out of a request by Ivaen Dubai LLC (“Ivaen” or “the Claimant”) seeking recognition and enforcement of a Dubai-seated arbitral award dated 19 July 2015 (the “Award”). The Award was issued by a tribunal constituted pursuant to the Rules of the Dubai International Arbitration Centre (“DIAC”), and was amended as to quantum on 20 September 2015.
4. On 29 July 2015, Ivit filed an application in the Dubai Courts to set aside the Award, challenging it on jurisdictional grounds.
5. On 13 August 2015, Ivaen filed a Claim Form numbered ARB-002-2015 in the DIFC Courts for recognition and enforcement of the Award under Article 42(1) of the Arbitration Law, DIFC Law No 1 of 2098 (the “Recognition and Enforcement Proceedings”).
6. On 6 September 2015, Ivaen issued an application in ARB-002-2015 for a world-wide freezing injunction against Ivit’s assets in the DIFC Courts, which was heard and granted by Deputy Chief Justice Sir John Chadwick (as he then was) in an ex parte hearing on 9 September 2015.
7. From 6 to 7 December 2015, Ivit contested the imposition of the freezing injunction as well as Ivaen’s application to enforce the award at a hearing in the DIFC Courts before Justice Sir David Steel.
8. On 30 December 2015, two orders were issued by Justice Steel: first, an order maintaining the freezing injunction upon the usual cross-undertaking in damages given by Ivaen (the “Freezing Order”) and second, an order permitting Ivaen to seek enforcement of the Award (unless security for the full sum of the Award was posted by 29 December 2015) (the “Enforcement Order”).
9. On 22 February 2016 HE Justice Omar Al Muhairi, sitting as a single Judge of the DIFC Court of Appeal in ARB-002-2015 , denied permission to Ivit to appeal against Justice Steel’s two orders of 30 December 2015.
10. On 29 March 2016, Ivaen filed a winding-up petition against Ivit by way of a Part 8 Claim Form in CFI-013-2016. This petition was based on Article 50(b) of the Insolvency Law, DIFC Law No 7 of 2004, and read with Article 51(1)(a): namely, Ivit’s inability to pay the debt arising under the Award and its failure to pay that debt following two written demands for payment dated 3 August 2015 and 5 October 2015 respectively.
11. On 16 May 2016, a hearing was held before Justice Sir Richard Field to determine Ivaen’s winding-up petition.
12. On 9 June 2016, Decree No. 19 of 2016, concerning the establishment of a Joint Judicial Committee for the Dubai Courts and DIFC Courts, was issued by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai.
13. On 14 June 2016, sitting as a single Judge of the Court of Appeal in ARB-002-2015, I issued an order refusing Ivit permission to reopen the Order of Justice Al-Muhairi dated 22 February 2016, on the basis that the elements of RDC 44.179 had not been met.
14. On 16 June 2016, the DIFC Courts Registry issued an Order of Justice Field in CFI-013-2016, directing that Ivit be wound-up (subject to a stay for a seven-day period to allow for an appeal) (the “Winding-Up Order”), and ordering Ivit to cease trading (the “Cessation of Trading Order”).
15. On 23 June 2016, Ivit filed a request before the Joint Judicial Committee established pursuant to Decree 19 of 2016. At the same time, Ivit issued an urgent stay request to the DIFC Courts concerning the 16 June 2016 Order of Justice Field, in light of its application to theJoint Judicial Committee and pursuant to the terms of Decree 19 of 2016.
16. On 29 June 2016, there was a further hearing before Justice Field in CFI-013-2016. Subsequently, the DIFC Courts Registry issued a further Order of Justice Field dated 30 June 2016, staying the Winding-Up Order but continuing the Cessation of Trading Order subject to certain conditions, including Ivaen’s provision of a cross-undertaking in damages upon the same terms as set out in the cross-undertaking given in the Freezing Order in ARB-002-2015.
17. On 6 July 2016, a further hearing in CFI-013-2016 was held before Justice Field to determine the continuation of Ivaen’s application for a cessation of trading order with respect to Ivit. By order dated 28 July 2016, Justice Field permitted the cessation of trading order to continue, subject to Ivaen continuing its cross-undertaking in damages.
18. On 19 December 2016, pursuant to Decree 19 of 2016, the Joint Judicial Committee issued its decision in Cassation No. 1 of 2016 (the “Committee Decision”). The Committee Decision (by a majority) ordered the DIFC Courts to “cease from entertaining the case”, since the Dubai Courts were “the competent courts to entertain the case”.
19. On 16 January 2017, Ivit requested the DIFC Courts that, in accordance with the Committee’s Decision, the DIFC Courts vacate all its orders issued in the DIFC proceedings to date. Ivaen opposed this request in a letter to the Court dated 19 January 2017.
20. On 30 January 2017, I issued an administrative ruling to the effect that, in light of the Committee’s Decision:
“any further proceedings in this matter in the DIFC Courts are put on hold”.
21. On 19 February 2017, Justice Field issued an order, holding that “the position remains as stated in the Administrative Ruling which continues to apply.
22. On 29 March 2017, the Dubai Courts Court of First Instance dismissed Ivit’s application to set aside the Award. This decision was appealed by both parties.
23. On 11 October 2017, the Dubai Courts Court of Appeal upheld Ivit’s application to set aside the Award, resulting in it becoming null and void as a matter of Dubai law (“Annulment Decision”). In setting aside the Award, the Dubai Courts Court of Appeal found that the arbitral tribunal which had rendered the Award lacked jurisdiction over the dispute.
24. On 20 November 2017, Ivit wrote to the DIFC Courts requesting that, in light of the Dubai Court of Appeal’s decision, the DIFC Courts fully vacate all of its previous orders in these proceedings. This request was opposed by Ivaen.
25. On 12 and 18 December 2017 and again on 3 January 2018, Ivit sought an update from the DIFC Courts as to its request.
26. On 4 January 2018, the DIFC Registry directed the parties as follows:
The DIFC Courts cannot alter the status quo without (a) a formal application in the usual way specifying the exact relief claimed (b) supporting witness statement with the relevant grounds for the application; and (c) a draft Order for the Courts consideration. However the DIFC Courts will in any event revisit this matter after the setting aside application has been finally disposed of by the Court of Cassation in the Dubai Court.
27. On 10 January 2018, Judge Abdulrahman Nasser Alamadi of the Dubai Courts issued a “letter of delegation to execute” to the Chief Justice of the DIFC Courts, directing the following:
“The Dubai Commercial Courts of First Instance decided on 08/01/2018 in the above mentioned execution to delegate your honorable court so as to execute the appeal judgment (attached copy of the same) which rendered the arbitration award as null and void.
We are attaching to you herewith the requirements of Article 221 of the UAE Federal Civil Procedures Law No. 11 of 1992.
Therefore you are requested to instruct whoever is concerned to execute the above decision and inform us with the reply.”
No action on this letter was taken by the DIFC Courts as the appeal judgment of the Dubai Courts was not an order capable of direct execution by the DIFC Courts, since it said nothing about the existing Orders of Court already made by the DIFC Courts prior to the Committee’s Decision. The DIFC Courts’ position was subsequently explained to the parties on 7 May 2018 (see paragraph 30 below).
28. On 4 February 2018, the Dubai Court of Cassation rejected Ivaen’s application to stay execution of the Dubai Court of Appeal’s decision.
29. On 8 April 2018, the Dubai Court of Cassation rejected Ivaen’s appeal against the Court of Appeal’s decision and upheld it. Accordingly, the decision that the Award is null and void is final as a matter of Dubai law.
30. Following Ivit’s requests for the DIFC Courts to act to vacate its orders, on 7 May 2018 the DIFC Registry directed the parties as follows:
“The DIFC Courts must act in accordance with their own laws in matters of civil procedure. The Joint Judicial Council is not an executory body and its function is to rule on disputes as to jurisdiction but cannot directly issue orders to either Dubai Courts or DIFC Courts, each of which will have to act in accordance with their own procedural rules for rescinding or varying their existing orders.
The DIFC Courts cannot alter the status quo without (a) a formal application in the usual way specifying the exact relief claimed (b) supporting witness statement(s) with the relevant grounds for the application (including supporting documents); and (c) a draft Order for the Court’s consideration.”
31. Accordingly, on 9 May 2018, Ivit filed its present Application to rescind the Enforcement Order, the Freezing Order, the Winding-Up Order and the Cessation of Trading Order (the “Four Orders”).
The Parties’ Arguments
32. The above narrative might be thought to lead inexorably to the conclusion that, if the Award on which the various Orders of the DIFC Courts were made were set aside, then the setting aside would, as it were, sweep away all the previous Orders in its wake. In other words, since, at first sight, the various orders had been founded on the bedrock of the Award, the setting aside of the Award should mean that their foundation has disappeared. It is therefore Ivit’s view that the Orders cannot survive the setting aside by the Court of the seat.1
33. However, Counsel for Ivaen QC, Mr. Ifain, submits that the Orders were by their terms final, subject only to appeal. They were not made conditional upon future events, and especially not upon the Award remaining in force in its supervisory seat. His arguments can be summarised as follows.
33.1 The Enforcement Order was made in the full knowledge that the Court of the seat might set aside the Award. It therefore could not have been made on a temporal or temporary basis, i.e. that it would automatically be rescinded if the Court of the seat were in fact to set aside the Award.
33.2 Under Articles 41 and 42 of the Arbitration Law, DIFC Law No.1 of 2008, the DIFC Courts have no jurisdiction to make temporary orders. Article 44(2) only expressly allows the court to adjourn enforcement proceedings pending an application for nullity in another jurisdiction, which application had been successful.
33.3 According to Mr. Ifain, Ivit’s position amounts to claiming that the Orders were of a temporary nature, i.e. the Orders of the DIFC Courts were valid only until the Court of the seat decided that the Award should be set aside. Thereafter they would fall away or be rescinded.
33.4 Mr. Ifain concludes that Justice Steel was not making any orders subject to what the Dubai Courts would do, but a permanent Order for postponement on the condition that security would be provided, which was still valid in the DIFC Courts. When I asked Mr. Ifain where else he thought the Award might be enforced, he stated that it could not be enforced in the Dubai Courts or even the Courts of England and Wales as the case law stood. However, in the DIFC Courts, it would still be possible to treat the Enforcement Order as valid and to enforce it in accordance with its terms.
33.5 Mr. Ifain contends that the Committee Decision and Annulment Decision were made after the Enforcement Order. It would be unconstitutional for the Court to retroactively give them effect over the Enforcement Order, which had been made after a review of all the evidence and arguments on merits2. The Orders should be respected as they were made after hearing all arguments from both parties as to fact and law by international law firms and Queen’s Counsel.
33.6 Notably, Mr. Ifain has not addressed the issue of winding-up, and he has not argued for the maintenance of Justice Field’s Winding-Up Order.
34. In response, Counsel for Ivit, Mr. Charles Buderi, draws the Court’s attention to Ifan Shipping and Trading SA v Sino Channel Asia Ltd [2016] HKCFI 12233 , a Hong Kong Court of First Instance judgment by Mimmie Chan J, where she held that the setting aside of an Award at its seat “constitutes a material change of circumstance and/or new evidence which seriously justifies reconsideration of the Enforcement Decision” at [33].4
35. In the alternative, to set aside the various Orders, Ivit invokes RDC 44.154, which provides for the reopening of final appeals where (1) it is necessary to do so to avoid real injustice, (2) the circumstances are exceptional and make it appropriate to reopen the appeal, and (3) there is no alternative effective remedy.5
36. In his oral submissions, Mr. Ifain has suggested that Ifan Shipping, as an authority from Hong Kong, had limited value in the DIFC Courts, having come from a different jurisdiction. Greater weight ought to be given to DIFC provisions, such as Articles 42 to 44 of the Arbitration Law. Mr. Ifain also urges that RDC 44.154, being extremely confined, is not a “catch-all allowing an appeal out of time in many circumstances” and deals only with corruption in the integrity of the previous decision-making.
37. In terms of an inquiry as to damages against Ivaen in the event the Enforcement Order is set-aside, Mr. Ifain submits that it is unfair and wrong in the unusual circumstances of the case to enforce Ivaen’s undertakings simply because another jurisdiction has arrived at a different view.
Discussion
38. The starting point should be a careful study of the case of Ifan Shipping as its facts are (with one important exception) remarkably similar to the facts of this case and Justice Chan’s judgment contains some valuable expositions of principle in the field of international arbitration. Special respect is due because Hong Kong was one of the first countries in the Asia Pacific region to adopt the Model Law in 1990, and many of the Hong Kong Courts’ decisions on international arbitration have been followed elsewhere in the Model Law world (and DIFC is a Model Law jurisdiction). The DIFC Courts pay high regard to the decisions of the Hong Kong Courts on Arbitration Law despite Mr. Ifain’s suggestion that Hong Kong authority has limited value as it comes from a different class of jurisdiction.
Discussion of Ifan Shipping
39. The procedural background to Ifan Shipping was that an enforcement order was made and the losing party under the Award, Sino Channel Asia Ltd (“Sino”), applied to set aside the enforcement order. The court adjourned the enforcement proceedings on the condition that Sino provide security. Since it failed to do so, Sino’s application to set aside the Enforcement Order was dismissed. Later, the Award was set aside by an English Judgment. Sino then applied to set aside the Enforcement Order in the Hong Kong Court of First Instance before Justice Chan.
40. Justice Chan’s reasoning can be summarised as follows:
40.1 [13] ‘Sino had no automatic right to resist enforcement of the Award, merely by virtue of the fact that the Award has, since the Enforcement Order, been set aside by the English Court’. At [14], ‘the enforcing court has a residual discretion to permit enforcement, although such discretion has to be exercised on recognised legal principles (Hebei Import & Export Corp v Polytek Engineering Co Ltd (1999) 2 HKCFAR 111)”.
40.2 [19] “In Yukos,6 the English court pointed out that the key question was whether a foreign decision setting aside an award should be recognised in accordance with ordinary principles applying to the recognition of foreign judgments”.
40.3 [27] “There is no evidence or suggestion that the setting aside proceedings in the English court were in any way procedurally unfair, or irregular, or that the decision maker was not impartial, or that it would in any way be contrary to the court’s sense of justice or public policy to recognise the English Judgment, which should be given recognition.”
40.4 [33] “…In any event, I accept that the English Judgment constitutes a material change of circumstance and/or new evidence which seriously justifies reconsideration of the Enforcement Decision by the Hong Kong court”.
40.5 [41] ”I am unable to say that Sino’s conduct in these proceedings is sufficiently egregious to demonstrate bad faith, to justify the court’s exercise of its discretion to enforce the Award notwithstanding the English Judgment (which I have concluded is one to which this court should give effect)”.
41. I will now examine the appropriate approach to take in the present case.
No automatic invalidity of the Orders
42. Following the judgment in Ifan Shipping at [13], I find that Ivit has no automatic right to resist enforcement of the Award by virtue of the Annulment Decision in the Dubai Courts. The DIFC Courts ordinarily retain a discretion under Article 44 of the Arbitration Law to enforce the Award notwithstanding its setting aside in the Court of the seat:
“44. Grounds for refusing recognition and enforcement.
(1) Recognition or enforcement of an arbitral award, irrespective of the State or jurisdiction in which it was made, may be refused by the DIFC Court only (emphasis added):
(a) at the request of the party against whom it is invoked, if that party furnishes to the DIFC Court proof that:
i) a party to the Arbitration Agreement as defined at Article 12 of this Law was under some incapacity; or the said Arbitration Agreement is not valid under the law to which the parties have subjected it or, in the absence of any indication thereon, under the law of the State or jurisdiction where the award was made;
ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to Arbitration, or it contains decisions on matters beyond the scope of the submission to Arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to Arbitration may be recognised and enforced;
iv) the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, in the absence of such agreement, was not in accordance with the law of the State or jurisdiction where the arbitration took place; or
v) the award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.” (emphasis added)
43. Further support for this proposition can be taken from Hebei Import & Export Corp v Polytek Engineering Co Ltd [1999] HKCFA 40: “Section 44 of course uses the word ‘may’ which indicates that the court has a discretion when deciding whether to order or refuse to order enforcement even if a Convention ground is proved”.
44. Justice Chan also cited [at 15] Yukos Capital Sarl v OJSC Oil Co Rosneft [2014] 2 CLC 162 at [22] as authority that there is no principle of ex nihilo nil fit under English law (‘nothing comes of nothing’). She pointed out that in Yukos, the English Court of Appeal rejected the defendant’s argument that the setting aside of the awards by the Russian supervisory court meant that the awards no longer existed in a legal sense to be enforced. In my judgment, therefore, Ivit’s argument to the effect that the Annulment Decision sweeps away the entire underlying basis for the Orders is based upon the ex nihilo nil fit principle, and is untenable after Yukos. The Four Orders therefore do not automatically fall away as contended, and this Court retains a discretion to uphold and enforce the Orders notwithstanding the Annulment Decision.
The alleged finality of the Orders
45. I turn now to Ivaen’s contention that the Enforcement Order made by Justice Steel was final and permanent, subject only to appeal. To this end, Ivit’s invocation of RDC 44.154 (previously RDC 44.179) providing for the re-opening of final appeals will be considered:
“44.154
The Court of Appeal or the Court of First Instance will not reopen a final determination of any appeal unless:
(1) it is necessary to do so to avoid real injustice,
(2) the circumstances are exceptional and make it appropriate to reopen the appeal; and
(3) there is no alternative effective remedy.”
46. Mr. Ifain was right to refer to my Order dated 14 June 2016 refusing Ivit permission to reopen the order of Justice Al Muhairi (see paragraph 13 above). My analysis of RDC 44.179 (in its updated form 44.154) from [13] onwards continues to be applicable in the present proceedings for the following reasons:
46.1 RDC 44.154 is based on r. 52.30(1) of the English Civil Procedure Rules (the “CPR”), which is expressed in identical terms.
46.2 R. 52.30(1) of the CPR, in turn, finds its origins in the decision of the English Court of Appeal in Taylor v Lawrence [2002] EWCA Civ 90 at [55], allowing the court to reopen an appeal where a “significant justice has occurred and there is no alternative remedy”.
46.3 Any attempt to reopen a final determination is “truly exceptional” (The White Book 2017, at [52.30.(1)(b)]). It must be a “recourse that relegates the high importance of finality in litigation to second place” (Re Uddin (A Child) [2005] 1 WLR 2398 (“Re Uddin”) at [18]).
46.4 The process itself must have been corrupted, for instance by “fraud… bias; the eccentric case where the judge had read the wrong papers; the vice in all these cases is not, or not necessarily, that the decision was factually incorrect but that it was arrived at by a corrupted process. Such instances are so far from the norm that they will inevitably be exceptional.” (Re Uddin [18]). This analysis is followed more recently by Lawal v Circle 33 Housing Trust [2014] EWCA Civ 1514 at [65], which holds that “the jurisdiction under r. 52.30(1) can only be invoked where the integrity of the earlier litigation process has been critically undermined”.
46.5 At [37] of my Order, I refused the Appellant permission to reopen the order in the absence of “defects or complaints that come close to being of such a nature and severity as may properly be regarded as exceptional. In fact, the Appellant itself does not go as far as to suggest that there has been a corruption of the process or an undermining of its integrity”.
47. As I mentioned during the hearing, the present proceedings give rise to a different factual position given the setting aside of the Award in the Dubai Courts. In my judgment, however, the Annulment Decision itself would fall short of the second limb of RDC 44.154 that “the circumstances are exceptional and make it appropriate to reopen the appeal”. As Mr. Ifain argues, Justice Steel made the Enforcement Order with the knowledge that it was possible for the Award to be set aside by the Court of its seat. Neither can the setting aside of the Award amount to a corruption of the proceedings giving rise to the Enforcement Order. Accordingly, Ivit’s invocation on RDC 44.154 is unsuccessful.
48. In my judgment, the answer lies not in RDC 44.154, but RDC 4.7, which confers upon the DIFC Courts the power to revoke any order it makes. Mr. Ifain has argued that the Orders made by Justice Steel were final orders with no provision for review. However, I take the view that the scope of RDC 4.7 extends to orders of the nature made by the Justice Steel. My preliminary observations of RDC 4.7 are as follows:
48.1 RDC 4.7 finds its English CPR counterpart at r. 3.1(7), in identical terms:
“a power of the court under these Rules to make an order includes the power to vary or revoke an order”.
48.2 Patten J in Lloyds Investment (Scandinavia) v Ager-Hanssen [2003] EWHC 1740 (Ch) at [7] provides guidance as to the circumstances in which the Court’s discretion under r. 3.1(7) can be exercised: “the Applicant must either show some material change of circumstances or that the judge who made the earlier order was misled in some way, whether innocently or otherwise, as to the correct factual position before him”. This set of criteria has been later affirmed by the Court of Appeal in Tibbles v SIG plc [2012] EWCA Civ 518 at 28 and the Supreme Court in Thevarajah v Riordan [2015] UKSC 78.
48.3 A further question arises as to the operation of r. 3.1(7) with regards to final orders, such as the Enforcement Order in the present case. As Patten J in Lloyds Investment prefaced his observations, “Rule 3.1(7) is not confined to purely procedural orders and there is no real guidance in the White Book as to the possible limits of jurisdiction”.
49. Regard must be had to the valuable observations of Peter Smith J in Cole v Howlett [2015] EWHC 1697 (Ch) on the operation of r. 3.1(7).
1) The power to vary or revoke an order is entirely discretionary and is not prescribed by any rules or restrictions.
2) The court nevertheless will generally not allow a party to treat a review application as if it were an appeal or a simple attempt to re-run the previous hearing on precisely the same material.
3) The court will generally be less favourably inclined to consider a review of a final decision.
4) The court will generally require either a change of circumstances or a misleading of the Judge in the first decision.
5) The court nevertheless must consider all the circumstances of the case and none of the above is a requirement for the court to consider varying or revoking a previous order.
50. In his view, “no court has for example said it is never appropriate to revisit a final order” (at [44]), pointing to the flexible approach taken in Roult v Northwest Strategic Health Authority [2010] 1 WLR 487, where Hughes LJ “would not attempt any exhaustive classification which it may be proper to invoke it in the case of a final order”. Peter Smith J also emphasized the breadth of the discretion under r. 3.1(7):
“[I]t is absolutely essential in the case of a discretionary power (which the rule clearly is) that no attempt is made to fetter the basis for the Judge’s exercise of his discretion by attempting to provide quasi rules or observations in other cases and elevate them to the status of a rule or condition precedent to the exercise of the power.”
51. Justice Peter Smith’s decision was overturned in the Court of Appeal (see Cole v Howlett [2018] BPIR 49) based on Lord Justice Lewison’s view of the facts which can be summarized in the passages set out below:
51.1 “[16] the jurisdiction under order 3.1(7) is not a substitute for an appeal. There must be additional material before the court in the form of evidence or, possibly, argument.
51.2 [17] there was no new relevant material before the judge. In one sense, the assignment was new because it had come into existence after the judge’s April judgment, but the possibility was clearly in everyone’s mind in April because that was the whole purpose of the application for the adjournment which the judge refused.
51.3 [18] Can CPR Part 3.1(7) be invoked where a judge has simply changed his mind? Thus far, the jurisprudence of the court applying the CPR would appear to answer that question with a resounding ‘No’.
51.4 [19] While he would lose his rights to claim damages for some past infringement, this was not an all-or-nothing case. He will have the right to have at least some of the issues ventilated in court.”
52. It is significant that Lord Justice Lewison did not disagree with Justice Peter Smith’s statements of principle, including the rule’s applicability to final orders and its invocation where there has been a material change of circumstances.
53. Mr. Ifain has argued that Justice Steel would have contemplated the possibility of the Award being set aside after the Enforcement Order. In my view, Lord Justice Lewison meant that Justice Peter Smith ought to have anticipated that assignment was a possibility and factored that in. The present situation is different as Justice Steel, in making the Enforcement Order, had a specific discretion vested in him under Article 44 of the Arbitration Law to postpone the hearing upon receiving security. While that was the correct decision at the time, the Award has now been set aside by the Dubai Courts, with the result that this Court is now bound to recognise and enforce the Annulment Decision of the Dubai Courts7. It would therefore be wrong to characterize the present Application as involving any judge’s change of mind.
54. On 26 August 2018, on my instructions, the DIFC Courts Registry sent the parties an email requesting further Submissions on:-
a) Whether this is an appropriate case for the application of RDC 4.7; and
b) What are the principles from Cole v Howlett that the Court should consider if RDC 4.7 should be found to be the basis for revocation of the orders which are the subject of Ivit’s current application?
55. Ivit filed its Submissions on 5 September 2018, generally agreeing with the exercise of the Court’s power under RDC 4.7 (or under the inherent jurisdiction of the Court) and submitting that Cole v Howlett was applicable to the current case because the requirements for the application principle of material change of circumstances have been fulfilled in the present case.
56. Ivaen also filed its Submissions on 5 September 2018, contending that RDC 4.7 does not apply to a final order disposing of a case because the interests of justice, and of litigants generally, require that a final order remain such unless proper grounds for appeal existed (which they did not in the present case). All the orders challenged in this application finally determined the application to which it related. There was therefore no basis for any of those orders to be varied or revoked and RDC 4.7.
57. In my judgment, the DIFC Courts have jurisdiction under RDC 4.7 to revoke any order made by the Courts if there has been a material change of circumstances or a misleading of the judge. While Mr. Ifain has argued that the Orders made by Justice Steel were final orders with no provision for review, I take the view that, following Justice Peter Smith in Cole v Howlett, the scope of RDC 4.7 extends to orders of the nature made by the Justice Steel. I have the power to set those orders aside if I find a material change of circumstances.
58. The Annulment Decision in the Dubai Courts setting aside the Award would qualify as a material change of circumstances. Ivit in the Respondent’s Skeleton Argument8 has pointed me to Justice Chan’s similar conclusion in Ifan Shipping at [33], where the English setting aside decision “constitutes a material change of circumstance and/or new evidence which seriously justifies reconsideration of the Enforcement Decision by the Hong Kong court”. Her conclusion was made in relation to issue estoppel or res judicata in Ifan Shipping, though she had not examined any specific provision of the civil procedure rules. RDC 4.7 therefore allows me to set aside the earlier Enforcement Order on the basis that the Award was set aside, and there has therefore been a material change of circumstances.
59. I comment briefly on Ivaen’s suggestion that it is unconstitutional for the Annulment Decision to operate retroactively to set aside the Enforcement Order, contrary to Article 112 of the Constitution of the UAE.9 Ivit’s response is that
‘the Application is not premised on the direct effect of the Committee Decision; rather, it is expressly based on the decision of the Dubai Courts to definitively set aside the Award, which underpins all of the Orders’.10
60. I agree with Ivit insofar as it observes that its Application does not depend on the direct effect of the Committee’s Decision. However, as discussed, the argument that the Annulment Decision has swept away the foundation of the Orders is wrong. Instead, the above invocation of RDC 4.7 takes into account the Annulment Decision as a material change of circumstances sufficient to revoke the Orders, which is hardly retroactive or unconstitutional.
The exercise of the Article 44 discretion
61. Having decided that the Court retains a discretion as to whether or not the Award should be enforced, and that the Court has the power to revoke its otherwise final Enforcement Order, I must now consider if this Court should exercise its discretion to enforce the Award.
62. Ivaen claims that
‘this Court cannot and should not now rescind its previous validly made decisions and orders simply because a different jurisdiction has reached a different view on enforceability’.11
63. Ivit meanwhile refers to the principles of comity existing between Dubai Courts as well as the DIFC, including the terms of the 2009 Protocol of Enforcement between the Dubai Courts and the DIFC Courts.12
64. Again, I refer to the authority of Ifan Shipping. There is a significant difference between the approach adopted by Justice Chan in Ifan Shipping and the situation in this case. In Ifan Shipping, Chan J was acting as the enforcing court of an award as well as a judgment from a different country, viz England and Wales.13
65. In Ifan Shipping, Justice Chan applied the following guidelines set out in Gary Born’s International Commercial Arbitration (2nd edition) p 3638:
“Under this approach, Contracting States should deny effect to annulment decisions in the arbitral seat: (a) which are based on local public policies or non- arbitrability rules in the annulment forum, (b) which are based on judicial review of the merits of the arbitrators’ substantive decision or on other grounds not included in Articles V (1) (a) to (d) of the Convention, or (c) which failed to satisfy generally-applicable standards for recognition of foreign judgments (eg procedurally-fair, regular procedures before an impartial decision-maker).”
66. It will be seen that Justice Chan was therefore applying principles of private international law as well as the principles governing the application of the New York Convention. In contrast, this case is one where I have to consider the effect of an award and a judgment from a court of co-ordinate jurisdiction within the same Emirate. The relationship that our DIFC Courts has with Dubai Courts is not governed by principles of private international law or the New York Convention, but by the provisions of applicable Dubai and DIFC Laws. The relevant law I have to consider is the 2009 Protocol of Enforcement between Dubai Courts and DIFC Courts (as amended by Law No. 16 of 2011):
“2009 Protocol of Enforcement between Dubai Courts and DIFC Courts
2. Procedures where a judgment, award or order of the Dubai Courts (including an arbitral award ratified by the Dubai Courts) falls for enforcement within the Dubai International Financial Centre Court’s jurisdiction.
a. It must be final and appropriate for enforcement.
b. It must be translated into English by a legal translator6 and ratified7 by the Dubai Courts’ Registry.
c. Accompanying the judgment, award or order there must be a letter from the Dubai Courts’ Registry to the Chief Justice of the DIFC Courts requesting enforcement of the judgment, award or order.
d. The documents must be submitted to one of the nominated Execution Judges from time to time in the DIFC Courts8. The DIFC Courts’ Execution Judge will apply the rules of the DIFC Courts (“RDC”) and has no jurisdiction to review the merits of a judgment, award or order of the Dubai Courts.
e. The applicable enforcement fee shall be paid by the applicant to the DIFC Courts. Enforcement fee will be paid by the applicant to the DIFC Courts according to the fee.
Law No. 16 of 2011
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;
c) The Courts affix the executory formula on the judgment, decision, order or ratified Arbitral Award.
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;
c) Dubai Courts affix the executory formula on the judgment, decision or order.
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. (emphasis added)
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.”
67. Under Article 7(5)(c), I have no power to review the merits of any judgment of Dubai Courts except as to form, but 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 DIFC Courts 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 sea-sickness or uttering profanity):
“No, never!
“What, never?”
“Well, hardly ever!”
(Act 1, Scene 1)
68. Let me return to the situation in the present case. The existing authorities show that any order of the DIFC Courts can be revoked by reason of change of material circumstances. It is clear that the decision of Dubai Courts in setting aside the Award which is the foundation of the orders made by Justice Steel is a change of material circumstances of the most serious order. This change justifies a discharge of the orders made, and I so ordered.
69. A short note on language. In the Four Orders, I have used the term “discharge” as it seems a more appropriate word in the context of Freezing Orders and Winding Up Orders. The Four Orders will take effect prospectively with effect from the date that they were made, i.e. 17 October 2018.
70. In this case, the question of the full legal effect on the DIFC Courts of orders made by the Joint Judicial Committee in relation to pending cases in the DIFC Courts does not arise, and I will leave this issue to be explored on a future occasion
71. Ivit may now proceed with its application pursuant to Order 2 of the Four Orders.
72. Time will now run for the submission on the questions of costs as set out in Order 3(c).
Issued by:
Ayesha Bin Kalban
Assistant Registrar
Date: 7 November 2018
At: 4pm
