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Claim No. CFI 018-2016

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BEFORE H.E. JUSTICE OMAR AL MUHAIRI

BETWEEN

STANDARD CHARTERED BANK

Claimant/Respondent

and

(1) FAL OIL COMPANY LIMITED

(2) INVESTMENT GROUP PRIVATE LIMITED

Defendants/Applicants

ORDER WITH REASONS OF H.E. JUSTICE OMAR AL MUHAIRI

UPON the Defendants’/Applicants’ (hereafter the “Applicants”) Application dated 11 February 2018, contesting the jurisdiction of the DIFC Courts to hear the Claim and seeking to Set Aside the Order of H.E. Justice Omar Al Muhairi dated 12 October 2016;

AND UPON reading the documents submitted in the Court file and hearing the Applicants’ and Claimant’s/Respondent’s (hereafter the “Respondent”) arguments at the Hearing on 22 May 2018;

IT IS HEREBY ORDERED BY THAT:

1.The Applicants’ Application to Contest Jurisdiction is dismissed. The DIFC Courts have jurisdiction to hear the Claim.

2. The Applicants’ Application to Set Aside the Order of H.E. Justice Omar Al Muhairi dated 12 October 2016 is dismissed.

3. The Applicants’ request for sanctions is dismissed.

4. The Applicants shall pay the costs associated with this Application, to be assessed by the Registrar if not agreed by the parties within 30 days of the issuance of this Order.

Issued by:

Ayesha Bin Kalban

Assistant Registrar

Date of Issue: 11 June 2018

At: 9am 

SCHEDULE OF REASONS

Introduction

1.The Applicants, Fal Oil Company Limited and Investment Group Private Limited (hereafter the “Applicants”), are the Defendants in the underlying Claim No. CFI-018-2016.

2. The Respondent, Standard Chartered Bank (hereafter the “Respondent”), is the Claimant in the underlying Claim No. CFI-018-2016.

Procedural Background

3. The Respondent filed this Claim Form No. CFI-018-2016 on 4 May 2016, seeking payment of USD 187,152,533.48, being the alleged principal sum owed to the Respondent under the terms of five financial facilities agreements.

4. The Respondent filed an Application for Permission to Serve the Claim Form via Alternative Method using email. That Application for Alternative Service was heard without notice and was granted via the Order of H.E. Justice Omar Al Muhairi dated 12 October 2016 (hereafter the “Service Order”). The Respondent then proceeded to serve the Claim Form via the advised alternative method and subsequently file two Requests for Default Judgment.

5. The Respondent was awarded this Claim sum, along with the DIFC Courts Fee of USD 130,000 and interest in the sum of USD 65,530,985.05 via two Default Judgments issued on 23 May 2017 and 6 July 2017 respectively.

6. The Applicants applied via two Set Aside Applications, dated 12 October 2017 and 5 November 2017, to have the Default Judgments set aside. These Set Aside Applications were granted via the Order of H.E. Justice Shamlan Al Sawalehi dated 21 January 2018. This Order gave the Applicants seven days to file an Acknowledgment of Service.

7. The Applicants filed an Acknowledgement of Service on 28 January 2018 indicating their intention to contest jurisdiction. The Applicants followed this Acknowledgment of Service with the current Application to Contest Jurisdiction on 11 February 2018 (hereafter the “Application”), requesting that the Claim be set aside for lack of jurisdiction, that the Service Order be set aside, that the service made in reliance on the Service Order be set aside and that the Respondent should pay the Applicants’ costs of this Application.

8. Both parties have provided submissions regarding the Application and I heard oral arguments from both parties at a Hearing on 22 May 2018. At the Hearing, I reserved the Application for decision.

The Applicants’ Arguments

9. The Applicants first argue that the Service Order was wrongly granted and should be set aside pursuant to RDC 23.94. As a consequence of setting aside the Service Order, the service effected under that order ought to also be set aside and therefore the Claim must be dismissed.

10. The Applicants argue that they were not served with a copy of the application notice pursuant to which the Service Order was granted and therefore, they are entitled to apply to set aside that order pursuant to RDC 23.94. The Service Order was materially defective and the Court was wrong to make the Service Order in the form proposed by the Respondent for a number of reasons:

a. The Service Order breached RDC 23.93(2) for failure to include the required statement of the right to make an application to set aside or vary the Order;

b. The Respondent was required to serve the Application for Alternative Service pursuant to RDC 23.93(1) and relevant papers and failed to do so;

c. There was no good reason for the Service Order to be granted as the Respondent failed to take sufficient steps to serve under RDC 9.54 and under the law of Sharjah;

d. The Respondent failed to disclose the methods of service available under RDC 9.54, pursuant to Sharjah law and thus the Court was not in a position to determine whether service could be effected under Sharjah law;

e. The Respondent did not show that the requested method of service was permissible under RDC 9.55 or that there was good reason to use the requested method;

f. Finally, the Respondent’s nondisclosure on a number of issues material to the Service Order provides additional grounds to set aside the Service Order.

11. For all of these reasons, the Service Order should be set aside pursuant to RDC 23.94. These deficiencies are not mere procedural defects that lack prejudice and are instead fundamental defects that cannot stand. Service of the Claim is a fundamental and necessary step that must occur without defect in order to establish jurisdiction for the Claim.

12. These are not minor errors and any relief that the Respondent may receive from sanctions for these procedural defects must be granted only upon an application from the Respondent for relief. No such application has been submitted and therefore, the Applicants have not had the opportunity to reply to such an application with evidence in response. Furthermore, the arguments against sanctions included in the Respondent’s arguments are not convincing and have been submitted without proper evidence. There are no grounds to grant an application for sanctions relief, should the Court determine that it should entertain this issue.

13. Additionally, once the Service Order is set aside, legal principles require that the subsequent service of the Claim Form, which relied upon the Service Order, was invalid. Absent the proper service of the Claim Form, the DIFC Courts cannot have jurisdiction to hear this Claim, especially as the time for service of the Claim Form has long expired. Therefore, on the grounds of setting aside the Service Order, this Claim should be dismissed.

14. The Applicants secondly argue that the DIFC Courts do not have jurisdiction under the statutory provisions of Dubai Law No. 12 of 2004, as amended (hereafter the “judicial authority law”) and they seek a declaration of lack of jurisdiction pursuant to RDC 12.1 and dismissal of the Claim.

15. The Applicants argue that the DIFC Courts do not have jurisdiction over a claim unless jurisdiction is conferred under the terms of the Judicial Authority Law. However, in this case, none of the provisions of the Judicial Authority Law applies. Additionally, some of the agreements relied upon by the Respondent expressly grant non-exclusive jurisdiction to other courts.

16. The Applicants argue that the facility agreements at issue in the Claim do not grant jurisdiction to the DIFC Courts. The agreements entered into prior to Dubai Law No. 16 of 2011 cannot have the intent of agreement to the jurisdiction of the DIFC Courts as such an option was not a possibility at the time. This limitation would apply to a number of the agreements at stake in this claim. Furthermore, none of the post-2011 agreements contain any reference that would confer jurisdiction upon the DIFC Courts.

17. The Applicants additionally argue that the Second Defendant is only included in the Claim for alleged breach of an agreement dated 9 November 2009, an agreement entered into at a time when it was impossible to opt-in to the jurisdiction of the DIFC Courts.

18. The Applicants argue that the Respondent cannot rely on its status as a DIFC Establishment pursuant to Judicial Authority Law Article 5(A)(1)(a) as doing so would run against the intention of the legislation. It cannot be the intent that the Respondent’s status as a DIFC Establishment creates exclusive jurisdiction for any claim involving the Respondent, effectively eliminating the jurisdiction of the Dubai Courts over the Respondent or other similar DIFC Establishments and creating exhoribtant jurisdiction for the DIFC Courts.

19. The Applicants attempt to distinguish this Claim from two other cases cited by the Respondent: Corinth Pipeworks v Barclays Bank, (22 January 2012) CA-002-2011 (hereafter the “Corinth Case”) and Investment Group Private Limited v Standard Chartered Bank, (18 November 2015), CA-004-2015 (hereafter the “IGPL Case”).

20. First, the Applicants argue that the Corinth Case was based on the earlier, unamended version of the JAL which specifically included an option to opt-out of the exclusive jurisdiction of the DIFC Courts. As regards the IGPL Case, the Applicants argue that the Court of Appeal made no reference to the amendments to the JAL and rather relied upon the older version of the law.

21. The amended version of the JAL does not contain this same provision and without the opt-out ability in its prior form, the exclusive jurisdiction of the DIFC Courts has become exhorbitent. This is bolstered by the fact that the doctrine of forum non conveniens (hereafter “FNC”) has been found not to apply between the Dubai and DIFC Courts as other structures such as the Union Supreme Court and the Joint Judicial Committee have been determined to be the proper forum to adjudicate issues of FNC between these two Courts. The Applicants argue that as the Corinth Case was decided under the unamended JAL and as any mention of the amended JAL was obiter in that case, the case can be looked at afresh at this time.

22. Therefore, the Applicants argue that the prior reasons by which the jurisdiction of the DIFC Courts was not exhorbitent (ability to opt-out and possible application of FNC) are crumbling pillars and therefore both of these decisions can be reassessed with specific attention towards the amended version of the JAL. Under the amended JAL, the DIFC Courts’ exclusive jurisdiction has become exhorbitant and out of scope with the legislative intent. Instead of extending DIFC Courts’ jurisdiction to the Respondent as an entity by nature of its status as a DIFC Establishment, the more reasonable and narrow approach would be to require that the DIFC branch take party in the underlying dispute in order for DIFC Courts’ jurisdiction to follow.

23. The Applicants additionally argue that the Claim does not fall within any of the other gateways of the JAL as no portions of the relevant contracts were concluded, finalised or performed within the DIFC. The Applicants argue that no business was done with the Respondent’s DIFC branch, as evidenced by the agreements themselves. Furthermore, performance of the obligations of the agreements was based in Sharjah and on-shore Dubai, not in the DIFC.

24. The Applicants argue that neither party has conceded that the DIFC Courts have jurisdiction over this claim. Any concession that the DIFC Courts has jurisdiction to determine the Applications to Set Aside the Default Judgments cannot and should not be interpreted to a concession that the DIFC Courts has jurisdiction over the underlying Claim. The Applications to Set Aside expressly set out that the Applicants would challenge the jurisdiction and furthermore, set aside is not a concession to jurisdiction.

25. Finally, the Applicants argue that, should the Court adopt the findings of the IGPL case, the parties have opted-out of the jurisdiction of the DIFC Courts pursuant to the facility agreements granting jurisdiction to other courts.

26. The Applicants argue that they should receive their costs in defending the Claim, including the costs reserved as relevant to the setting aside of the Default Judgments and the costs related to this Application.

The Respondent’s Arguments

27. The Respondent argues that there is no defect in the Service Order and it should not therefore be set aside. Furthermore, service of the Claim Form was effective. The Defendants were deliberately evading service, that is the reason why the Service Oder was made. The Respondent argues that the Applicants were aware of the claim when it was served and that there is no doubt that the Claim Form was in fact received by the Applicants.

28. The Respondent argues that there was no requirement in the Service Order to serve the application notice and furthermore, without prejudice, this is a procedural issue which the Court can within its discretion correct via RDC 4.51. Furthermore, the potential failure to include mention of a right to apply to set aside is without any resulting prejudice to the Applicants as they are currently applying to set aside at this time. There was no prejudice alleged due to any potential procedural defects and any decision to set aside the Service Order would significantly delay an already delayed claim.

29. Any alleged procedural defects were inadvertent mistakes and it is not appropriate for the Applicants to seek to take advantage of these mistakes in the hopes of a sanctions windfall. These procedural issues are not substantive and therefore are less appropriate for sanctions. Any decision to set aside the Service Order would serverly prejudice the Respondent.

30. Furthermore, the Respondent argues that there was good reason for granting the Service Order. There was no requirement to provide evidence of the law in Sharjah or requirement for substantial efforts to serve or exhaustion of all methods of service. Instead, the Respondent detailed numerous efforts to serve the Claim, including that the Sharjah Courts’ baliff was not successful in physically serving the Claim. There was therefore good reason to grant the right to serve via an alternative method.

31. There was also good reason for the specific method of service granted, seeing as the Respondent had read receipts from not long before the application was made and seeing as numerous physical service attempts were unsuccessful. Therefore, there is no reason to set aside the Service Order at this time, and in fact setting aside would severely delay the Claim.

32. The Respondent argues that the DIFC Courts have exclusive jurisdiction over this Claim in accordance with Article 5(A)(1)(a) of the Judicial Authority Law seeing as the Respondent is a DIFC Establishment. Due to the Respondent’s status as a DIFC Establishment, the relevant question in this case is whether the parties have validly opted-out of the jurisdiction of the DIFC Courts, not whether they have opted-in. There is no need to opt-in as there need be no other connection to the DIFC other than the Respondent’s status as a DIFC Establishment.

33. The Respondent argues that the Applicants’ attempts to distinguish the Corinth and IGPL Cases are misguided. The Corinth Case clearly states that once it is shown that a party is a DIFC Establishment, the inquiry into jurisdiction is essentially over, unless there is a valid opt-out provision. The Applicants are incorrect in their assumption that under the amended JAL, the ability to opt-out of the jurisdiction of the DIFC Courts is somehow limited. The opt-out ability remains in tact under the amended JAL and thus the jurisdiction of the DIFC Courts is not exhorbitent. Furthermore, there is no issue with the binding authority of either case based on reference to the unamended law as both cases addressed the amendments with sufficient attention.

34. Furthermore, there is jurisdiction pursuant to Article 5(A)(1)(b) of the Judicial Authority Law seeing as the agreements between the parties were at least partially concluded, finalised or performed within the DIFC. Certain of the relevant agreements were signed by the Respondent in the DIFC and furthermore certain functions of the agreements and guarantee were performed in the DIFC. While the Applicants argue that none of the obligations of the agreements were performed in the DIFC, many of the rights established by the agreements have been exercised from this jurisdiction.

35. The Respondent argues that the dates of the relevant agreements, whether they were entered into prior to 2011, are not significant for the purposes of establishing DIFC Courts’ jurisdiction over the Claim seeing as the provisions upon which the Respondent relies to grant jurisdiction have existed in the Judicial Authority Law at all times. This is not a case of opting-in to the jurisdiction of the DIFC Courts via written agreement, an option added to the Judicial Authority Law in 2011. Furthermore, the amendements to the JAL apply with retrospective effect.

36. Furthermore, the parties have not opted-out of the jurisdiction of the DIFC Courts, certainly not in a clear and expressed agreement. There is no such clause that can be said to qualify as an opt-out under DIFC Law. Any such agreement would need to clearly state the intention to specifically exclude the DIFC Courts. Reference to courts of Dubai or UAE will necessarily include the DIFC Courts and furthermore, as the Applicants’ concede, the jurisdiction clauses included in the relevant agreements are non-exclusive.

37. Finally, the Applicants have both conceded that the DIFC Courts have jurisdiction over the Claim by mounting a substantive argument in their set aside application. It is not the case that any set aside application would concede jurisdiction. Instead, the set aside application contained arguments relevant to the merits of the claim.

Discussion

38. I shall address each of the Applicants’ arguments in turn in the below discussion, beginning with the Application to Contest Jurisdiction.

39. My view is that the DIFC Courts have jurisdiction to hear this claim pursuant to Dubai Law No. 12 of 2004 (hereafter the “Judicial Authority Law”), as amended and I am satisfied with the Respondent’s arguments.

40. I am bound by the IGPL Case (CA-004-2015) which established that should the claimant be a DIFC Establishment and should the parties have partially performed their contracts within the DIFC, then the DIFC Courts shall have jurisdiction over the dispute. In this case, it is clear that the Respondent is a DIFC Establishment and I am convinced by the Respondent’s argument that certain actions relevant to the underlying agreements were finalised and performed from their DIFC branch.

41. The Applicants do not contest that the Respondent is a DIFC Establishment. The Applicants’ distinction between the Respondent as a legal entity and as an individual DIFC branch is not relevant, as established in the Corinth Case. As it is clear that the Respondent is a DIFC Establishment, the Respondent is quite correct that there need not be any specific opt-in clause apparent in the relevant agreements. The jurisdiction of the DIFC Courts extends from the Respondent’s status, not from a jurisdiction clause. Instead, the Respondent is correct that the next assessment would be whether there is a valid opt-out clause applicable to the claim.

42. I must reject the Applicants’ arguments seeking to distinguish the Corinth and IGPL Cases and encouraging a reassessment of these decided issues. In both of those cases, the amended JAL was well known to the Judges. Furthermore, the opt-out provision may have been amended, however, there is no doubt that parties are still able to opt-out of the jurisdiction of the DIFC Courts via clear and expressed written provisions.

43. There is no valid opt-out clause in this case. As both parties have agreed, the relevant jurisdiction clauses contained in the agreements between the parties are non-exclusive. A non-exclusive jurisdiction clause would not qualify as a clear and expressed opt-out clause and would not confer exculsive jurisdiction on any one court. While it may be true that the Applicants did not intend to opt-in to the jurisdiction of the DIFC Courts, this is not a case of opting-in but rather a case of failing to opt-out.

44. The Respondent argues that the parties’ relationship in the case has a sufficient nexus with the DIFC to alternatively and independently confer jurisdiction of the DIFC Courts via Article 5(A)(1)(b) of the JAL. I agree that the details showing a nexus with the DIFC bolster the Respondent’s argument for DIFC Courts’ jurisdiction pursuant to Article 5(A)(1)(a) of the JAL. The Respondent relies on the case of Mr Rafed Abdel Mohsen Bader Al Khorafi & Ors v (1) Bank Sarasin-Alpen (ME) Limited (2) Bank Sarasin & Co. Ltd [2011] DIFC CA 003 to highlight the broad scope of Article 5(A)(1)(b), which requires that the conclusion, finalization or performance of an agreement need only take place in part from the DIFC, rather than entirely within the DIFC. Therefore, acts relevant to the underlying agreements performed out of the DIFC, as shown by the Respondent, bolster the argument in favour of the jurisdiction of the DIFC Courts.

45. These factors are enough to establish the jurisdiction of the DIFC Courts and the parties’ failure to conclusively opt-out of that jurisdiction prevents me from any other finding. As mentioned at the Hearing, there are ongoing proceedings relevant to the case in the Dubai Courts at this time. This may be a case where it is appropriate for the Joint Judicial Committee to resolve any potential duplicate proceedings due to concurrent jurisdiction in both the DIFC and Dubai Courts.

46. In conclusion, based on the precedent set by the Corinth and IGPL decision, the DIFC Courts have jurisdiction to hear the present Claim and therefore the Applicants’ Application to Contest Jurisdiction is dismissed.

47. Even if the DIFC Courts have jurisdiction over the claim, I must still address the Applicants’ Application to Set Aside the Alternative Service Order. As to this issue, I must reject the Applicants’ arguments and instead adopt the Respondent’s arguments.

48. I note that the failure to include the statement of the right to make an application to set aside or vary the Order (pursuant to RDC 23.93(2)) and the failure to serve the application and relevant papers (pursuant to RDC 23.93(1)) are not substantive defects and are rather procedural in nature. I find it appropriate under the power granted in RDC 4.51 to remedy these errors. While service of the claim is a fundamental and substantive issue, there is no doubt that the Claim Form was served on the Applicants.

49. RDC 9.31 states “Where it appears to the Court that there is a good reason to authorize service by a method not permitted by these Rules, the Court may make an order permitting service by an alternative method.” RDC 9.32 requires:

“An application for an order permitting service by an alternative method –

(1) must be supported by evidence stating

a. the reason an order for an alternative method of service is sought; and

b. what steps have been taken to serve by other permitted means; and

(2) may be made without notice”

50. There was “good reason” to grant the Service Order. The Respondent showed that it took steps to serve pursuant to the procedures in effect in Sharjah. Service was clearly conducted by the Sharjah Courts and it can be seen from the Sharjah Courts’ Bailiff statement that the Applicants’ Secretary refused to receive the Service documents. The evidence provided was sufficient and there need not have been an exhaustion of all service methods available nor a detailed presentation of the laws of service in Sharjah. The evidence presented also supported the argument that there was good reason to allow email service. Any failure to include certain information in the application was not significant.

51. Therefore, I must dismiss the Applicants’ Application to Set Aside the Alternative Service Order. The Service Order was properly granted and shall stand, and the resulting service shall remain valid.

52. As for the arguments regarding sanctions, the DIFC Courts have the power to correct procedural errors pursuant to RDC Part 4 and in this case, I find it appropriate to do so. I find it inappropriate to require any sanctions at this time.

Costs

53. As regards this Application, I find it appropriate to apply the default rules as to costs, pursuant to RDC 38.7. Thus, as this Application has been dismissed on all grounds, the Applicants shall be responsible for the Respondent’s costs as to this Application. The parties are free to agree on the costs within 30 days of the issuance of this Order and should the parties fail to agree, such costs may be assessed by the Registrar.

Conclusion

54. In sum, the Applicants’ Application is dismissed in full with the Applicants responsible for the Respondent’s costs as to the Application, to be agreed by the parties within 30 days of the issuance of this Order or else to be assessed by the Registrar.