Claim No: CA-005-2014
THE DUBAI INTERNATIONAL FINANCIAL CENTRE
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum,
BEFORE JUSTICE SIR DAVID STEEL, JUSTICE ROGER GILES AND H.E. JUSTICE ALI AL MADHANI
MEYDAN GROUP LLC
BANYAN TREE CORPORATE PTE LTD
Hearing: 16 September 2014
Counsel: Tim Taylor QC assisted by Joanne Strain, Parnika Chaturvedi and Nour Kirk (King & Wood Mallesons (MENA) LLP) for the Appellant/Defendant Michael Black QC and Sapna Jhangiani (Clyde & Co) for the Respondent/Claimant
Submissions: 24 September 2014
Judgment: 3 November 2014
Summary of Judgment
|The Appellant, a company incorporated in the
The Court upheld the decision of H.E. Judge
Lastly, the Court rejected the submission that the application for recognition constituted an abuse of process. It had been argued that the purpose of the application was to use the judgment of the DIFC Courts to enforce the award by application to the execution judge of the Dubai Courts
This summary is not part of the Judgment and should not be cited as such
UPONhearing counsel for the Appellant and counsel for the Respondent on 16 September 2014
AND UPONreading the submissions and evidence filed and recorded on the Court file;
IT IS HEREBY ORDERED THAT:
- The Appellant’s appeal is dismissed.
- The Appellant shall pay the Respondent’s costs within 14 days of the date of this order, the amount of which shall be assessed, if not agreed, by the
Date of Issue: 3 November 2014
JUSTICE SIR DAVID STEEL:
1. This appeal is concerned with an aspect of the Court’s jurisdiction to recognise and enforce domestic arbitration awards made within the Emirate of Dubai but outside the DIFC. The arbitration award in point was issued by the Dubai International Arbitration Centre (“DIAC”) in respect of a dispute between Banyan Tree Corporate PTE Ltd. (formerly known as Banyan Tree Hotels & Resorts PTE Ltd.) (“Banyan”), a company incorporated in Singapore engaged in the management of hotels and resorts, and Meydan Group LLC (“Meydan”), a company incorporated in the UAE engaged in real estate development, including hotels and resorts. Neither company was a DIFC establishment.
2. The award stems from a dispute arising under a Hotel Management Agreement (“HMA”) between Banyan and Meydan dated 15 August 2007 whereby Banyan was appointed as manager of a 285 room luxury hotel which was owned by Meydan and under construction at the time. Pursuant to the HMA, Banyan was appointed as manager for an initial term of 25 years, extendable for a further 15 years at Banyan’s discretion. The agreement was neither concluded nor performed within the DIFC.
3. On 4 November 2009 Meydan terminated the HMA and on 8 April 2010 Banyan filed a Request for Arbitration with the DIAC pursuant to Clause 25.1 (“the Arbitration Clause”) contained in the HMA. The Arbitration proceedings were conducted under the rules of the DIAC in Dubai. The applicable law pursuant to Clause 25.1 of the HMA was “ the law
4. The claim brought by Banyan was for a declaration that Meydan had wrongfully terminated the HMA and for an award of damages for loss of profit, expenses and interest in excess of US$ 99,000,000.
5. The arbitration had a somewhat chequered history. On 5 April 2011, the executive committee of the DIAC appointed Roland Ziade as sole arbitrator. Following his appointment, the time prescribed to render the award was extended by the committee from time to time. However, on 12 November 2012, Mr. Ziade withdrew from his appointment. On 4 March 2013, the DIAC appointed Alexis Mourre as sole arbitrator in his place. However Meydan’s position was that the arbitration mandate had expired. In the result Meydan did not participate in the arbitral process, save to protest the tribunal’s jurisdiction.
6. On 2 October 2013 Mr. Mourre issued an award in favour of Banyan declaring that the HMA had been wrongfully terminated and awarding compensatory damages in the sum of about US$ 19,377,821.
7. By an arbitration claim form dated 19 December 2013, Banyan applied to this Court for an order by way of recognition and enforcement of the award pursuant to Articles 42(1) and 43 of DIFC Law No. 1 of 2008 and Article 24 of DIFC Law No. 10 of 2004.
8. On 23 December 2013, Justice Omar Al Muhairi issued directions requiring Banyan to serve the arbitration claim form on Meydan in accordance with rule 43.9 of the DIFC Courts Rules (“the Court Rules”). Meydan filed an acknowledgement of service indicating its intention to dispute the court’s jurisdiction.
9. By an application notice dated 21 January 2014, Meydan applied for Banyan’s claim for recognition and enforcement to be dismissed on the basis that the DIFC courts
10. The application came before H.E. Justice Omar on 1 May 2014. In a judgment dated 27 May 2014, Justice Omar dismissed Meydan’s application contesting jurisdiction.
11. By appeal notice dated 10 June 2014, Meydan sought permission to appeal. This was granted by Justice Roger Giles on 19 June 2014. The appeal came before this court on 16 September 2014.
12. It should be noted in passing that in the meantime Meydan had instituted three sets of proceedings in the Dubai courts:
(a) A claim against DIAC and members of its executive committee seeking a declaration for annulment of the extensions of time and any decisions of the DIAC relating to the continuance of the arbitration, together with damages in the sum of AED 15 million. The Court of First Instance dismissed the case on the ground that it had been filed prematurely. Meydan filed an appeal.
(b) A claim against Banyan issued on 30 April 2013 seeking an inquiry into damages on the basis that the arbitration mandate had expired and thus the Dubai courts had become seized of the issues. The precise nature of the claim is unclear. In any event, the Dubai courts appointed an expert auditor who produced a report quantifying Meydan’s entitlement at AED 782,381,145. An attachment order in that sum was granted to Meydan.
(c) Meydan also brought a claim against Mr. Mourre on 2 May 2013 claiming AED 7 million in respect of wasted costs. Again the claim was dismissed by the Court of First Instance as premature. Meydan filed an appeal on 7 January 2014.
13. The first ground of appeal is by way of challenge to Justice Omar’s finding that the DIFC courts have jurisdiction to entertain the claim for recognition and enforcement by virtue of Articles 42 and 43 of the DIFC Arbitration law No. 1 of 2008. In so finding, Justice Omar adopted and agreed with the decision of DCJ Sir John Chadwick inX v. Y ARB-002-2013.
14. Article 42 reads so far as material as follows:
“An arbitral award
Meydan appeared to accept that this Article “could arguably be construed as conferring jurisdiction.” That is something of an understatement. On its face the article imposes an obligation on the DIFC courts to recognise and to enforce an award irrespective of the state
15. I confess that I had some difficulty in understanding the basis of the challenge to jurisdiction. The challenge was not merely difficult to follow but constituted something of a moving target. For example I understood it to be submitted in Meydan’s skeleton argument and initially in oral argument that one precondition to the existence of any jurisdiction was the presence of assets of Meydan within the DIFC at the time of issuance of the arbitration claim but that point appeared to have been abandoned (although retained as potentially relevant to any issue as to the appropriateness or otherwise of the exercise of the jurisdiction).
16. This left the proposition that there must be personal jurisdiction within the DIFC over the respondent. This was put in a variety of ways in the skeleton argument all much to the same effect.
(a) Express limitations on the grounds for refusing recognition “do not override the important Due Process rights and are requirements which require state courts first to establish their jurisdiction over people and/or property as a sine qua non to considering whether or not torecognise an award”: in this regard reliance was placed onYukos Capital SARL v. DAO Tomskneft VNIC  IEHC 115.
(b) “Originating jurisdiction is however a prerequisite to recognising awards by ratifying them in order to issue execution on them”: in this regard reliance being placed onTridon Australia Pty Ltd. v. ACD Tridon Inc NSWCA 146.
(c) “The concerned Emirate’s autonomy to legislate with respect to civil and criminal matters for the purposes of ensuring the functioning of a Financial Free Zone within its curtilage cannot usurp Due Process rights that arise as a matter of Public Order just because such rights are amongst those included with the Federal Civil Procedures Code (Federal Law 11 of 1992)”:in this regard reliance was placed onCCI v. Ministers of Irrigation of the Democratic Republic of the Sudan:Civil Cassation Appeal No. 156/2013.
17. As I see it, the theme of these submissionsrequires an examination of the statutory background to the establishment of the DIFC and the DIFC Courts in particular (as indeed was undertaken in the judgment inX v. Y supra). As already indicated, the presence of assets is no longer put forward as a requirement. As will emerge, I likewise find nothing to support the proposition that enforcement of awards within the DIFC is dependent upon some form of personal jurisdiction over the respondent within the jurisdiction.
18. The Constitution of the UAE is to be found in Law No. 1 of 1972. By virtue of Article 121, the Union has exclusive legislative jurisdiction in respect of “Civil and Commercial Transaction Codes… Code of Procedures before the civil courts…” Pursuant to those powers the Civil Transactions Code was enacted (Federal Law No. 5 of 1985) which, by virtue of Art. 21, allocated the making of jurisdictional rules to the forum of the relevant state. Thereafter the Civil Procedure Code (Federal Law No. 11 of 1992) was enacted which inter alia deals with matters of jurisdiction, service of proceedings and ratification of arbitration awards.
19. However, by virtue of Federal Law No. 8 of 2004, individual emirate states within the UAE were empowered to establish financial free zones. Of particular note are the following articles:
“Article 3(2). These Zones and Financial Activities shall also be subject to all Federal Laws, with the exception of Federal civil and commercial laws (emphasis added).
Article 7(3). Subject to the provision of Article 3, the concerned Emirate way within the limits of the goals of establishing the Financial Free Zone, issue legislation necessary for the conduct of its activities.”
20. On 27 June 2004, Federal Decree No. 35 of 2004 established the Financial Free Zone in Dubai entitled the DIFC.
21. Dubai Law No. 9 of 2004 set out the law of the DIFC including the formation of the DIFC Judicial Authority. Article 8(2) provided that the“Centre’s Courts shall have exclusive jurisdiction to hear and determine any claims in which the Centre… or any of the
22. The judicial authority law
23. The DIFC Courts Law was enacted in DIFC Law No. 10 of 2004:-
(1) The DIFC Courts of First instance has original jurisdiction pursuant to Article 4
(a) of the Judicial Authority Law to hear any of the following:
(d) any application over which the DIFC Courts has jurisdiction in accordance with DIFC Laws and Regulations.
24. Ratification of Judgments
(1) Pursuant to Article 7 (4) of the Judicial Authority Law, the Court of First Instance has jurisdiction to ratify an, order or award of any recognized:
(c) Arbitral Award
(d) Foreign Arbitral Award”
24. DIFC Arbitration law is contained in DIFC Law No 1 of 2008 which accords authority to the DIFC Courts to perform various functions including those contained in Articles 42 to 44 in regard to the recognition and enforcement of awards. Article 42 (1) is quoted above. Article 42 (4) provides:
“(4) Awards issued by the DIFC Courts may be enforced within the DIFC in the manner prescribed in this Law and any Rules of Court made for this purpose. Awards recognized by the DIFC Courts may be enforced outside the DIFC in accordance with the Judicial Authority Law and recognition under this law includes ratification for the purposes of Article 7 of the Judicial Authority Law.”
25. Article 44 limits the grounds upon recognition of any arbitral award can be refused to the same extent as the provisions of the New York Convention and the Model Law. Accordingly recognition or enforcement can only be refused by the DIFC Courtsinter aliawhere the award “contains decisions on matters beyond the scope of the submission to arbitration”or “the composition of the Arbitral
26. As best I understand it, Meydan’s submission was that the provisions of the Civil Procedure Code concerning service of proceedings applied as an overarching Federal law and/or because they constituted due process or public order rights to which deference was required; and they did not permit the service on Meydan as it had occurred. The basis of this submission was questioned by the bench but it was left delightfully vague.
27. In my judgment, perceiving matters against the statutory background outlined above, there is no basis for importing some limitation on the express terms of the DIFC Courts jurisdiction. The DIFC (and its Court) is in effect exempted from the Commercial and Civil laws of the Union. The State
28. Meydan’s reliance on the Irish decision inYukos Capitalis misconceived. Kelly J. observed at paragraph 62 that :“most legal systems require that preliminary to recognising and enforcing a foreign award there must be in personam jurisdiction.” Such is uncontroversial. Indeedin personamjurisdiction is furnished over Meydan by virtue of the Court Rules of the DIFC Courts. But in contrast, as analysed in paragraphs 58 to 61 of the judgment of Kelly J, the position in Ireland is that it is necessary for the applicant to obtain leave to serve out of the jurisdiction where the respondent is not normally resident within it.
29. Kelly J went on to draw support for the proposition that, for the purposes of enforcement of an award under the New York Convention in the U.S, the requirements of due process called for jurisdiction to exist over the respondent’s person or property. But even Meydan no longer pursues the argument that the presence of assets within the jurisdiction is a pre-requisite to the exercise of recognition and enforcement process (execution being of course a different matter). Indeed Kelly J reached the same conclusion at para 112 : see alsoTasarruf Mevduati Sigorta Tona v. Demirel of A11.E.R 1014.
30. Furthermore it is difficult to understand on what basis U.S due process considerations can be prayed in aid to require in personam jurisdiction other than as permitted by the Court rules. Kelly J’s observation that“nobody suggests that the United States of America is in breach of its Convention obligations by insisting that jurisdiction be established over a defendant before considering an application to enforce an award”asserts a proposition which has in fact been subject to considerable academic challenge.
31. However the point is moot in the present proceedings. The issue is set out in the judgment of the Chief Justice inCorinth PipeworksSA v. Barclay’s Bank Plc SA002/2011 at para 17-18:
“17. The differences between the English Commercial Court and the DIFC Courts were discussed and, in particular, the fact that, in the DIFC Courts, extra-territorial jurisdiction is not derived from a discretionary framework of the kind found in the English legal system in CPR
18. In contrast, in the DIFC Courts, service on a defendant outside the jurisdiction can be effected anywhere in the world provided that the claimant can bring himself within Article 5(A)(1) of Law No. 12. It is then open to a defendant to challenge the jurisdiction and apply to set aside
32. Once service is effected, the court must recognize the award. The only grounds for refusing recognition are set out in Art. 44 of the DIFC Arbitration Law No. 1 of 2008. These are exhaustive : seeRoseel NV. v. Oriental Commercial Shipping Co. (UK) Ltd 2 Lloyd’s Rep. 625 at p. 628. These grounds are the only relevant ones “irrespective of the State or jurisdiction in which the award was made”. There is no basis for contending that enforcement of a “domestic” award has any additional jurisdictional threshold requirement.
33. The absence of assets in the jurisdiction may be relevant consideration to the exercise of discretion to grant execution. But even then a judgment creditor is entitled to levy execution against assets which come into the jurisdiction after the judgment is entered or which did not even exist at that time. Furthermore an enforcement order alone may be of value in the tracing of assets by, for example, oral examination:Fonu v. Demirelsupra at para 43. In any event, it is clear that there is no barrier to enforcement given the absence of assets within the jurisdiction. This appears to be accepted and in any event is fully explained inTraxys Europe SA v. Balaji Coke Industry (No 2)FCA 276.
34. I regret I failed to understand the proposition that the Australian decision inTridon(supra) had any bearing on the suggestion that some form of originating jurisdiction (other than valid service under the rules) is required. This decision of Giles JA (as he then was) was merely to the affect that enforcement of an award in the form of declaration (where an enforcement order is discretionary) would serve no useful purpose. No such discretion is furnished by Art. 44.
35. Likewise I derive no assistance fromCCI v. Ministry of Irrigation. This is a decision of the Dubai Court of Cassation refusing to ratify an ICC award on the grounds that neither party was domiciled in Dubai, there was no contractual obligation to be performed in Dubai and there was no evidence of assets within the jurisdiction. Quite apart from being a controversial decision in the context of the New York Convention, it is a decision of the Dubai Courts and, in my judgment, it affords no assistance as regards the jurisdiction of the DIFC.
36. I reject this ground of appeal. The judge was correct to hold as he did in paragraph 31 of his judgment:
“Article 8(2) of Dubai Law No.9
37. In short the judge was quite correct to conclude that Article 5(A)(1)(E) of the Judicial Authority Law acted as the gateway by which Article 42 of the Arbitration Law conferred jurisdiction on the DIFC Courts to recognise the award as binding within the DIFC. That jurisdiction is not circumscribed by any requirements for in personam or subject matter connection with the DIFC. In so concluding the judge was right to rely upon the decision of the DCJ inX. v. Ysupra at paras 24 to 26.
Forum non conveniens
38. I was not certain that this contention survived the oral hearing. The common law doctrine of forum non conveniens is well known and understood. It is premised on the existence of two or more fora which are available for the determination of the issues between the parties, one of which is the more appropriate and suitable forum from the perspective of the parties and the interests of justice:Spiliada Maritime Corp. v. Cansulex Ltd AC460.
39. The short answer to the contention by Meydan that this court should stay proceedings on forum non conveniens grounds is that there is no alternative (let alone more appropriate) forum for the determination of the question whether the award should be recognised and enforced in the DIFC. The DIFC Courts have exclusive jurisdiction and thus the point fails in limine.
40. This conclusion renders it unnecessary to consider whether the concept of forum non conveniens has any application within the Emirates (let alone within Dubai itself). However, inAllianz Risk Transfer AG v. Al Ain Ahlia Ins. CoCF1012/2012, this court held that the federal constitutional and jurisdictional provisions in regard to both Emirate and Federal Courts precluded the application of the doctrine. So far as the arguments took the point in the present proceedings, I would be minded to agree.
Abuse of process
41. Once again this contention advanced by Meydan underwent a degree of development during the argument. I hope that I do the argument justice but, as eventually expressed, I believe it can be summarised as follows:
(i) The only legitimate purpose of seeking an order of the DIFC Courts was to provide for recognition and enforcement within the DIFC.
(ii) However it was not suggested that Meydan had any assets within the DIFC which were subject to execution.
(i) The manifest purpose of the application for recognition and enforcement was to use the machinery for automatic recognition and enforcement of DIFC money judgments in the Dubai courts.
(ii) But that machinery precluded any examination of the merits of the judgment or the underlying award by the execution judge of the Dubai Courts.
(i) Although the various proceedings instituted by Meydan in Dubai indirectly impeached the award, it was not open to Meydan to seek an order of the Dubai courts directly setting aside the award as such an application could only be made by way of counter to an application in the Dubai courts by Banyan to enforce the award which has not been made.
(ii) In the result Meydan would have to conduct its challenge to the validity of the award before the DIFC Courts under Article 44 of the Arbitration Law, which afforded (or at least might afford) more limited grounds for refusal of recognition that those potentially available to it on an application to the Dubai courts.
(iii) Since the Dubai Courts are the courts of the seat of the arbitration, this process constitutes an abuse of process (the more so if it would deprive Meydan of wider grounds) which justifies a refusal to exercise the jurisdiction.
42. The relationship between the jurisdiction of the Dubai Couirts and the DIFC courts in regard to recognition and enforcement of arbitration awards is set out in the judgment of the DCJ inX. v. Yat para 36:
“Not only are the jurisdiction of the DIFC Courts and the jurisdiction of the Dubai courts in relation to the recognition and enforcement of foreign arbitral awards mutually exclusive, they are also complementary. It is plain that, in enacting Article 7 of the Dubai Judicial Authority Law, the legislator contemplated that both the DIFC Courts and the Dubai Courts would have power (in appropriate cases) to ratify (or recognize) arbitral awards including foreign arbitral awards; that the enforcement of such awards within the DIFC (in the sense of execution of assets within the DIFC) would be for the DIFC Courts; and that the enforcement of such awards outside the DIFC would be for the competent entity having jurisdiction outside the DIFC (which in the case where execution was sought against assets outside the DIFC but within the emirate
43. It is right to say that there is no evidence that Meydan has assets within the DIFC (or otherwise within the jurisdiction of the DIFC Courts). But there is no basis for asserting that the application for enforcement within the DIFC has no independent purpose. I do not understand it to be accepted that no such assets exist or alternatively that no such assets (whether they currently exist or not) may come within the jurisdiction following an order for enforcement. In any event an order for enforcement would enable Banyan to engage the court’s machinery (in the form of say a freezing order or an oral examination) for obtaining details of any assets that are or become available.
44. It is also right to say that by virtue of Article 7 of the Judicial Authority Law and the Protocol on Jurisdiction between the DIFC Courts and the Dubai Courts, Banyan is enabled to present a DIFC order for enforcement to an execution judge of the Dubai Courts without that judge being enabled to consider the merits of the underlying order. But it is difficult to classify the use of that machinery as an abuse, not least before that machinery is even invoked. At the substantial hearing for relief, there may be a challenge to the validity of the award under Article 44 or alternatively any such challenge may be left to be raised before the Dubai courts. The matter is not capable of resolution at this stage. If in due course the matter is left to be raised before the courts of Dubai (which are the courts of the seat) the question whether the bar on considering the merits of the DIFC order before the execution judge would also inhibit the Dubai courts from ruling on a challenge to the validity of the underlying award is a matter for the Dubai courts and is a matter on which we have heard no argument.
45. As regards the present position in Dubai, it is accepted by Meydan that no direct challenge to the validity of the award had been issued. As noted above this was said to be because such a challenge was not open to Meydan by virtue of Article 216 of the Civil Procedures Code unless and until Banyan sought to enforce the award in Dubai. Following the oral hearing, the Court questioned this proposition, inviting comment on the effect of Article 213-3 of the Civil Procedures Code which as a matter of first impression only seemed to contemplate a direct challenge as being permissible.
46. The parties tendered some extensive material on this question. Meydan went so far as to serve an expert’s report (together with an uninvited further written submission on the merits). I have read the material with care but I am reluctant to seek to resolve the issue on this material particularly as other cases before the Court raise similar points. The material served by Meydan accepted that a direct challenge could be made in unidentified “exceptional circumstances” but contended that the Dubai courts would take a “dim” view of the taking of further proceedings. Nonetheless, if the position is that Meydan could, if so advised, make a direct challenge to the award in the Dubai courts there can be no basis for concern that the award might be enforced by a side wind.
47. If on the other hand it is not open to Meydan to initiate a challenge to the validity of the award prior to an application to recognize it, the problem thus created is a matter for the Dubai courts. I accept that a challenge to the validity of an award (as a matter of DIFC law and practice) should prima facie only be made in the court of the seat of the arbitration:C. v. D. EWCA Civ 1282. But this must be subject to the provisions of Articles 42 and 44. The position in Dubai on these points is unknown. It follows that questions may arise as to whether a bar on a consideration of the merits imposed on the execution judge imports with it any bar to a challenge to the validity of the underlying award. Indeed this may constitute the sort of “exceptional circumstances” spoken to above.
48. If for example there had been substantial assets of Meydan in or anticipated within the DIFC, it could scarcely be contended that engagement of the enforcement procedures of the DIFC Courts constituted an abuse. Furthermore, Meydan are not precluded from challenging the award in the DIFC. Article 44 clearly allows Meydan to take the point that the arbitrator lacked any jurisdiction on the basis that there had been no valid extensions of time to render the award or that otherwise the mandate had expired. To pursue the claim for enforcement given the scope of the entitlement to challenge it is again difficult to categorise as an abuse of this court’s procedures.
49. In this connection I quote with respectful approval part of the judgment of the DCJ in X v. Y at para 41:
“I reject the submission – advanced under paragraph 56 of the Defendants/Applicants’ skeleton argument – that it cannot have been the intention of the Dubai legislator in promulgating the Judicial Authority Law to allow the DIFC Courts to be used as a conduit jurisdiction for enforcement of an arbitration award against assets in Dubai (outside the DIFC) in circumstances where the owner of those assets has a legitimate expectation that such enforcement can only properly be brought in the Dubai Courts. It seems to me plain, from the provisions of Article 7 of the Judicial Authority Law, that the legislator did contemplate that there could be circumstances in which the recognition of a foreign arbitral award by the DIFC Courts could trigger enforcement proceedings, through the Dubai Courts, against assets in the Emirate of Dubai (but outside the DIFC) without the need for separate recognition of the award by the Courts of Dubai: and vice versa.”
50. I would dismiss this appeal on this ground as well.
JUSTICE ROGER GILES:
51. I agree with the Judgment of Justice Sir David Steel and have nothing further to add.
H.E. JUSTICE ALI AL MADHANI:
52. I agree with the Judgment of Justice Sir David Steel and have nothing to add.
Date of Issue: 3 November 2014