Claim No: CFI 26/2009
CA No: 003/2011
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
BEFORE: DEPUTY CHIEF JUSTICE SIR ANTHONY COLMAN
JUSTICE SIR DAVID STEEL
H.E. JUSTICE ALI AL MADHANI
IN THE COURT OF APPEAL
(1) MR RAFED ABDEL MOHSEN BADER AL KHORAFI
(2) MRS AMRAH ALI ABDEL LATIF AL HAMAD
(3) MRS ALIA MOHAMED SULAIMAN AL RIFAI
(1) BANK SARASIN-ALPEN (ME) LIMITED
(2) BANK SARASIN & CO. LTD
Hearing: 28 & 29 November 2011
Counsel: Mr Kaashif Basit of KBH Kaanun appeared for the Claimants.
Mr Michael Black QC, Fiona Campbell and Rita Jaballah of Al Tamimi & Company
appeared for the Second Defendant
Judgment: 5 January 2012
1. By an Order dated 31 March 2011 Hwang C.J. struck out the claim against the Second Defendant (“Sarasin Switzerland”) and by a further Order dated 24 May 2011 he gave permission to appeal against that Order. The Court of Appeal reviewed his 24 May 2011 Order and by its Order dated 19 July 2011 it affirmed his Order granting permission to appeal and directed that the hearing of the substantive appeal should be adjourned. Permission was given to the claimant Applicants to amend their Grounds of Appeal and to both parties to address such further evidence as they might be advised. The reasons of the Court of Appeal for affirming the Order granting appeal are set out in separate Reasons issued subsequent to its 19 July Order. It is unnecessary to repeat them here.
2. Up to the time when those Reasons were issued, the jurisdiction of the DIFC Court was regulated by Law No. 2 of 2004 and, in particular, by Article 5(A)(1) of the Law.
3. Between then and the commencement of the hearing of the substantive appeal by this court, there was promulgated Law No.16 of 2011 which by Article 5(A) specified the scope of the DIFC Courts’ jurisdiction by wording which differed in various important respects from that used in Article 5(A) of Law No.12 and which by Article (1) expressly provided that the provisions of Law No.12 should be superseded by Law No.16. Article (2) of Law No.16 provided:
“Any provision in any other legislation shall be repealed to the extent that it contradicts the provisions of this law.”
Article (3) provided that Law No. 6 would come into force on the day on which it was issued. That was 31 October 2011. Law No.16 contained no transitional provisions.
4. When on 28 November 2011 this appeal came on for hearing, the court raised at the outset the question whether the appeal should be conducted on the basis of Law No.12 of 2004 or Law No.16 of 2011, and invited the assistance of counsel, who had come prepared to argue the appeal on either basis. There being some doubt as to whether Law No.16 would have retrospective effect, the appeal was argued by reference to both Laws in the alternative, subject to counsel being invited to present written submissions on that issue subsequent to the hearing. This was done and this court expresses its great appreciation for the assistance provided by counsel. The outcome of that research is as follows.
5. Article 112 of the UAE Constitution (in unofficial translation) provides:
“No laws may be applied except on what occurs as from the date they become in force and no retroactive effect shall result in such laws. This law may, however, stipulate the contrary in matters other than criminal, if necessity so requires.”
In a judgment of the Dubai Court of Cassation – 56/2009 – it was stated:
“the effects (of legislation) are not retrospective, unless the new law relates to public order …”
In a judgment of the UAE Supreme Court, 252 of Judicial Law 21 it was stated:
“the international jurisdiction vested in the judiciary of the UAE is a matter of public order as it is connected with the sovereignty of the state.”
In a judgment of the same court, 176 of Judicial Law 25, it was stated:
“the distribution of jurisdiction to try actions between the federal courts and the local courts in Dubai is a jurisdiction of authority and a matter of public order.”
In a judgment of the Dubai Court of Cassation in case 256/2008 it was stated:
“Questions of Jurisdiction of authority and jurisdiction by category are a matter of public order.”
This approach accords with English Law which applies the procedural exception to the rule against retrospectivity: see Tracomin SA v Sudan Oil Seeds Co. Ltd.  I WCR 1026 and Yew Bon Tew  1 AC 553 at 558 per Lord Brightman.
6. We, therefore, conclude that this appeal being concerned with matters of procedure and jurisdiction must be determined by reference only to Law No.16 and not to Law No.12.
The alleged Business Relationship between the Claimants and the Second Defendant
7. In about April 2007 Al Ahli Bank Kuwait (“ABK”) agreed to advance US Dollar funds to the First and Second Claimant, C1 and C2, to enable them to make investments outside Dubai. Such investments were to consist of capital guaranteed investment products with an investment bank rated AA or higher. ABK recommended that C1 and C2 should take advice as to suitable products from a Mr Kerry of Sarasin Dubai, described by Mr Cherian of ABK as a branch of Sarasin Switzerland which in turn was owned by Rabobank Nederland, a AAA-rated Dutch Bank.
8. Following a meeting in Kuwait between C1 and Mr Kerry and Mr Walia of Sarasin Dubai on 29 April 2007, at which C1 indicated his interest in making real estate investments in 100 per cent capital guaranteed products attracting 8 per cent to 10 per cent interest, Sarasin Dubai, in the DIFC, sent on 5 May 2007 to Mr Taha of C1’s office in Kuwait detailed term sheets for real estate investment trust baskets together with a Sarasin Switzerland pledge document. The term sheets showed Sarasin Dubai and Sarasin Switzerland as Lead Distributors. Sarasin Dubai also sent a Process Flow document which indicated that Sarasin Switzerland was to present the investments, confirm C1 and C2’s suitability for trading in such investments and to seek confirmation for such trading, to execute disclosure and pledge forms, trade in such investments followed by payment and settlement, confirm the pledge to C1 and C2 and ABK and transfer to C1 and C2 interest and principal on maturity of the investments.
9. On 6 June 2007 C1 and C2 in Kuwait signed and returned to Sarasin Dubai a number of documents, including Current and Custody Account Application forms. This form specified Sarasin Switzerland’s General Terms and Conditions relating to fiduciary investments and to Managed Investment Products. It also included a discretionary power for Sarasin Switzerland to invest the applicant’s funds derived from account balances in excess of CHF 20,000. The applicant confirmed that he/she had received a copy of “the General Terms and Conditions” of Sarasin Switzerland and accepted them as binding in all particulars by signing the application form. The last page of the form identified Sarasin Dubai as “an external adviser”, which it defined as:
“all external persons not employed by Bank Sarasin & Co. Ltd, such as agents, intermediaries and subsidiaries of Bank Sarasin & Co. Ltd who have been appointed by special authorisation or under special contractual agreement to act as so-called designated representatives in accordance with the Agreement on the Swiss banks’ code of conduct with regard to the exercise of due diligence (CDB)”
The application by C1 and C2 was referable to an account to be opened at the Zurich branch of Sarasin Switzerland. Other documents signed and returned by C1 and C2 in June 2007 included Sarasin Switzerland Trust Agreements, Sarasin Switzerland’s Deeds of Pledge and Additional General Business Conditions appertaining to the DIFC.
The Trust Agreements and Deeds of Pledge both contained the following wording:
“All legal relations between the Client and the Bank shall be governed by Swiss Law. The place of performance of all obligations, the place for dept [sic] collection procedures against customers domiciled abroad and the place of jurisdiction for all proceedings shall be Basel or the place where the branch of the bank is located with which the business relationship exists…” [emphasis added]
The Additional General Business Conditions were stated to be governed by the laws of the DIFC and submitted to the non-exclusive jurisdiction of the DIFC Courts”.
10. C3, the Third Claimant, opened a current and custody account with Sarasin Switzerland at its Geneva branch in January 2008.
11. On 17 June 2007 Sarasin Switzerland opened current and custody accounts for C1 and C2. In the course of a meeting in London on 22 June 2007 attended amongst others by C1 and Mr Walia and Mr Kerry, C1, on his own behalf and as agent for C2, agreed to the initial investment purchase recommended by Kerry and Walia and to US$50 million to be invested by him and US$ 30 million by C2.
12. At the same meeting C1 asked for a loan from Sarasin Switzerland to enable him to make investments other than with Sarasin Switzerland. It was agreed that interest payments on the loan would be funded from interest payments received on the investment products purchased through Sarasin Switzerland.
13. On 28 June 2007 C1 and C2 transferred a total of US$ 80 million form accounts at ABK to their respective accounts at Sarasin Switzerland and the latter purchased the recommended REIT products on 2 July 2007.
14. In the course of July 2007, following discussions with C1 and his representatives in which Mr Walia and Mr Kerry had participated by telephone, email and fax from Sarasin Dubai in the DIFC, C1, on the recommendation of Kerry and Walia, instructed Sarasin Dubai to make a US$100 million investment by C2 in their investment funds by means of a loan to C2 of the purchase cost by Sarasin Switzerland pursuant to a secured credit facility. Those investments were carried out by Sarasin Switzerland on 24 July 2007 pursuant to a secured facility letter dated 20 July 2007 using funds that had been credited to C2’s account on the same day.
15. A further secured credit facility in the amount of US$35 million was granted to C2 on 26 July 2007 by a secured credit facility letter of that date.
16. Both the secured credit facility letters contained a provision as to jurisdiction in similar wording to that in the Trust Agreements and Deed of Pledge set out above.
17. On 17 January 2008, following discussions between C1 and Mr Walia to the effect that C1 was interested in investing further funds on behalf of and in the name of C3 and in borrowing a further US$ 10 million from Sarasin Switzerland, C3 signed various documents, including Sarasin Switzerland’s Current and Custody Account Application Form Sarasin Switzerland’s Deed of Pledge, a power of attorney in favour of C1 in relation to her account and Sarasin Dubai’s Additional General Business Conditions for the DIFC. In the Current and Custody Account application Sarasin Dubai and Mr Kerry were respectively identified as the company and person “processing” the application. The Deed of Pledge and a Power of Attorney and Authorisation with regard to the EU Savings Directive contained jurisdiction clauses similarly worded to that quoted above. The Additional General Business Conditions contained a provision by which they were stated to be governed by and construed in accordance with DIFC Law and submitted to the non-exclusive jurisdiction of the DIFC Courts. The credit facility granted to C3 was guaranteed to the extent of US$27.5 million by ABK.
18. By a credit facility letter dated 12 February 2008 from Sarasin Switzerland and sent to C3 by Sarasin Dubai on the same date, Sarasin Switzerland offered to C3 a collateralised credit facility of US$60 million.
19. That credit facility also contained a jurisdiction clause similarly worded to that set out above.
20. On 12 February 2008 Sarasin Dubai emailed to Mr Taha product sheets identifying two investment products selected by Sarasin Switzerland for C3. US$5 million was then invested on the advice of Mr Kerry and/or Mr Walia in each of the two products on behalf of C3.
21. In the course of September-October 2008 Sarasin Dubai sent on to C1 letters from Sarasin Switzerland requesting repayment of cover shortfall or additional collateral in relation to loans taken out on C2’s and C3’s accounts with Sarasin Switzerland. The letters identified Mr Walia and Mr Kerry of Sarasin Dubai as the persons to be contacted in response to the letters.
22. On 8 October 2008 Sarasin Switzerland terminated the facilities granted to C2 and C3 and sold all the underlying investment.
The Claims against Sarasin Switzerland
23. The Claimants refer in the Re-Amended Points of Claim to two categories of contractual relationship with Sarasin Switzerland, described as “the Swiss Account & Escrow Contracts” and “the Swiss Financial Advisory Contract”. Paragraph 116 of the Re-Amended Points of Claim defines those categories as follows:
“(a) signing various documents including in particular the Current and. Custody Account Application Forms, the Trust Agreements, the Deeds of Pledge and the Authorisations for the exchange of information in connection with the EU Savings Directive, on 6 June 2007 (as to Mr Al Khorafi and Mrs Al Hamad) and 17 January 2008 (as to Mrs AI Rifai) and the Credit Facility Agreements on 12 February 2008 (“the Swiss Account & Escrow Contracts”);
(b) further or alternatively, the Claimants made investment decisions based on the proposals, advice and recommendations of Sarasin Switzerland and/or its agents. Accordingly, in view of the continuing business relationship between Sarasin Switzerland as a bank and the Claimants as its clients and the particular trust & good faith arising from such business relationship, a contractual financial advisory relationship was established as a matter of Swiss law between Sarasin Switzerland and each of the claimants (“the Swiss Financial Advisory Contract”).”
It is pleaded in paragraph 117 as follows:
“117. The Swiss Account & Escrow Contracts were arranged by Sarasin Dubai in or from the DIFC between the Claimants and Sarasin Switzerland as an intermediary: All subsequent (to the entering into of the various contracts/transactions) duties and obligations under the Swiss Account & Escrow Contracts and the Swiss Financial Advisory Contract, including account management and the provision of documentation (as set out above, for instance at paragraphs 50, 52, 56, 73, &3, 87-89, and/or 92-93), were performed in or from the DIFC by Sarasin Dubai, as an agent for Sarasin Switzerland.”
24. It is common ground that the relationship between Sarasin Switzerland and all the Claimants was governed by Swiss law. The Claimants plead at paragraph 118 that the contractual relationship arising under the Swiss Account and Escrow Contracts and the Swiss Financial Advisory Contracts were subject to Swiss mandate law, including the duties under Article 398/2 at the Swiss Code of Obligations. The contractual duties thus defined included:-
“(1) duties of disclosure (such as disclosure of the risk of loss between leveraging, pledges and income on the investments recommended);
(2) a duty to give (unsolicited) advice;
(3) a duty to Warn specifically of particular risks involved with the transaction:
(4) a duty to clarify financial experience and understanding of the client as well as his suitability to make particular investments. This duty is higher and more onerous in the event that the investments in question are made using borrowed funds.”
25. In paragraph 121 of the Re-amended Points of Claim the Claimants set out in summary form the conduct on the part of Sarasin Switzerland which it is alleged amounted to breach of either or both of the two categories of contract referred to:-
“(1) Sarasin Switzerland intentionally and/or negligently failed to give any or any sufficient advice to the Claimants.
(2) Further or alternatively, Sarasin Switzerland intentionally and/or negligently failed to identify and/or give any or any sufficient disclosure and/or warning of the risks involved in the Investments.
(3) Further or alternatively, Sarasin Switzerland intentionally and/or negligently failed to clarify (or sufficiently clarify) the financial experience and understanding of the Claimants and/or the suitability of the Investments for them.
( 4) Further, or alternatively, failed to give any or any sufficient recognition to the fact that the Investments were being made by the Claimants using proceeds from the ABK loan and/or leveraged funds advanced by Sarasin Switzerland.
(5) In the premises; Sarasin Switzerland is liable to indemnify the Claimants in full for their losses pursuant to Article 97 of the Code.”
26. It is then pleaded that in dealing with the Claimants, Sarasin Dubai, and/or Mr Walia and/or Mr Kerry acted as agent for Sarasin Switzerland, and as such, under Article 32 of the Swiss Code of Obligations, their acts and omissions are to be imputed to Sarasin Switzerland, thus rendering Sarasin Switzerland vicariously liable for the misrepresentations made by those persons which are essentially the basis of the Claimant’s case against Sarasin Dubai, such representations being alleged to have been untrue, fraudulent or negligently made. The Claimants allege that such vicarious liability arises under Article 15(4) and 15 (2) of the DIFC Law of Obligations 2005.
27. The Claimants further allege that Sarasin Switzerland owed a duty of care to them arising out of their knowledge of the Claimants circumstances and requirements and the reliance which the Claimants were likely to place on investment advice received from Mr Walia and or Mr Kerry of Sarasin Dubai.
28. The Claimants then allege that Sarasin Switzerland failed to exercise reasonable care with regard to the accuracy of the representations which they and/or their agents made to the Claimants and as to the adequacy of investment advice which they or their agents gave to the Claimants. Had Sarasin Switzerland exercised reasonable care in respect of such advice, the Claimants would not have made the recommended investments and/or would have suffered smaller losses.
The Claimants’ Submissions as to Jurisdiction
29. The Claimants’ case on jurisdiction can be summarised as follows:
(1) The material contractual documents as between the Claimants and Sarasin Dubai – the Additional General Business Conditions signed by C1 and C2 on 6 June 2007 and by C3 on 17 January 2008 – were signed in Kuwait and sent back for signature to Sarasin Dubai in the DIFC.
(2) Whether or not these documents were ultimately countersigned by Sarasin Dubai, they were accepted in the DIFC, by the contractual relationship which they evidenced being wholly or partly performed there, by the conduct of Sarasin Dubai, specifically of Mr Kerry and Mr Walia.
(3) These contracts were therefore wholly or partly performed within the DIFC and were entered into within the DIFC.\
(4) The contractual relationships evidenced by the Current and Custody Account Applications not only provided for the opening by Sarasin Switzerland of current and custody accounts in the names of the Claimants but also included provisions relating to the “Investment Strategies offered in relation to managed investment of products” which provided as follows:
“Every time the Applicant buys a managed investment product during the course of the business relationship he/she makes a decision in favour of one of the investment strategies which are described in the product literature or other documents produced by the Bank. In other words the Applicant does not select the overall investment style, but specifies the investment strategy on a product-specific basis each time he/she places an individual order, either by contacting his/her client advisor in person or by post, telephone, fax or e-mail. In other words, the Applicant makes a decision on an Investment strategy in conjunction with every managed investment product he/she buys. It is possible to select different investment strategies through different managed products. The descriptions of the individual investment strategies that appear in the product literature or in other documents produced by the Bank set out the investment horizon and risk and the portfolio composition of each product.
The Applicant undertakes to carefully read the product literature or any other documents produced by the Bank before placing an order with the Bank to purchase a managed investment product and/or selecting an investment strategy, and only to select managed investment products or investment strategies that are compatible with his/her personal attitude to risk and risk tolerance”.
(5) The contracts between the Claimants and Sarasin Switzerland were at least partly performed in the DIFC in as much as the investments were administered and managed in and the relevant documentation was sent out from the DIFC by Sarasin Dubai on behalf of Sarasin Switzerland. The Second Defendant had adduced no cogent evidence in rebuttal of the Claimants’ case that Sarasin Dubai was acting on behalf of Sarasin Switzerland.
(6) Accordingly, under Article 5(a) (1) (b) of Law No.16 the DIFC Court had exclusive jurisdiction over all claims “arising from” or “related to” those contracts. Even if the partial performance of those contracts within the DIFC was not carried out by Sarasin Switzerland but only by Sarasin Dubai on its behalf, the claim against the former arose from or related to a contract with it partly “implemented” on its behalf in the DIFC.
(7) Alternatively, all the claims against Sarasin Switzerland arose out of or related to a transaction which was wholly or partly performed within the DIFC and was related to DIFC activities within Law 16 Article 5(A)(1)(c). The transactions concerned were either the particular contracts between each of the Claimants and Sarasin Switzerland referred to above or the overall transaction whereby each of the Claimants was induced to make investments on the advice of representatives of Sarasin Dubai. Because Sarasin Dubai was incorporated in and carrying on business in Dubai, the transaction related to the activities of the DIFC. The transaction was entered into within the DIFC and was partly performed within the DIFC in as much as that was the place in which Sarasin Dubai administered the documentation required for creation and operation of the transaction and received the Claimants’ investment instructions.
(8) Alternatively, the claims against Sarasin Switzerland arose out of or related to an “incident” which was wholly or partly performed in the DIFC and was related to DIFC activities. The incident was the breach by Sarasin Dubai of its duty under contract or common law or the DIFC regulatory regime in recommending the investments and/or to give proper advice to the Claimants.
It will be observed that in order to found jurisdiction it is submitted that the words “arose out of or related to” provided a sufficient connecting factor between the claims against Sarasin Switzerland and the breaches of duty by Sarasin Dubai in the DIFC to bring those claims within the scope of this court’s jurisdiction.
(9) The Claimants further submit that there were contracts between them and Sarasin Dubai and that such contracts were wholly or partly concluded or implemented within the DIFC and/or were components of transactions wholly or partly performed within the DIFC and related to DIFC activities and that the claims against Sarasin Switzerland arise out of or relate to such contracts between the Claimants and Sarasin Switzerland.
(10) Finally, and in the further alternative, the Claimants rely on an argument based on Article 5(A) (1) of Law 16. The submission, as it appears in their skeleton argument, assumes that the wording of Article 5(A) (1) (a) of Law 12 remains in effect. However, there are important differences between Law 16 and Law 12. Thus it is submitted that Sarasin Dubai is a Centre Establishment and, if the claim “involves” that Centre Establishment, this court has exclusive jurisdiction. Since the claims against Sarasin Switzerland “involve” Sarasin Dubai, this court has jurisdiction over the claims against Sarasin Switzerland. However, it is to be observed that, under Law 16, Article 5A(1)(a) relates to:
“Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party”
This wording clearly indicates that the legal person against which the claim is made must be both within one of the four categories referred to and must a party to the claim or the proceedings. Since Sarasin Switzerland, although the person against which the claim is directed and a potential party to the proceedings, is not within one of the four categories of party referred to, jurisdiction over Sarasin Switzerland cannot be founded on Article 5A(1)(a). This submission therefore is to be rejected.
30. The Claimants further seek to rebut an argument, indeed the main argument, advanced by Sarasin Switzerland – that the contractual documents incorporate and, indeed, the whole legal relationship between it and the Claimants is subject to, the opt-out provision quoted above which is repeated here for convenient reference:
“Applicable law, place of performance and place of jurisdiction
All legal relations between the Client and the Bank shall be governed by Swiss law.
The place of performance of all obligations, the place for debt collection procedures against clients domiciled abroad and the place of jurisdiction for all proceedings shall be Basel or the place in which the branch of the Bank is located with which the business relationship exists. The Bank is also entitled to bring proceedings against a Client at his place of domicile or in any other competent jurisdiction.”
[Emphasis in Original Text]
31. The Claimants submit that Law 16 does not permit enforcement of such an opt-out where there would otherwise be exclusive jurisdiction of the DIFC Court by reference to the Article 5(A))1) gateways, except in very limited circumstances. The submission is to the following effect.
(a) Article 5(A)(2) of Law 12 has not been repeated in Law 16. Law No.12 provided by Article 5(1)(2):
“Parties may agree to submit to the jurisdiction of any other Court in respect of the matters listed under paragraphs (a), (b) and (d) of this Article”.
The references to paragraphs (a) and (b) are references to Articles 5(A)(1)(a) and (b) of Law No. 12.
(b) In its place there have been included in Law 16 Article 5(A)(3) which provides:
“The Court of First Instance may hear and determine any civil or commercial claims or actions falling within its jurisdiction if the parties agree in writing to submit to the jurisdiction of another court over claim or action but such court dismisses such claim for lack of jurisdiction.”
(c) The fact that Article 5A(2) of Law 12 which provided for the DIFC to give effect to an opt out agreement in cases where it would have had exclusive jurisdiction and had been replaced by the qualified opt-out in 5(A)3 of Law 16 strongly indicated that the legislative intent was to be consistent with the general provision for opting out originally in Law 12.
(d) Under Article 5A(3) of Law 16 the only effect was that, if there were a foreign jurisdiction agreement and, if an attempt had been made by one party to challenge the jurisdiction of the foreign court and that attempt had been successful, then if the DIFC court would otherwise have had exclusive jurisdiction on account of the claim failing within the Article 5A(1) gateways, the DIFC could then exercise that jurisdiction.
(e) In the present case, no attempt had been made to invoke the jurisdiction of the Swiss Courts and no Swiss court had declined to exercise such jurisdiction. Consequently, it was open to the DIFC Court to exercise its jurisdiction on the basis of the Article 5(A)(1)(b) or (c) gateways, the existence of an opt-out agreement being irrelevant.
32. The Claimants argue that in any event they are not bound by the jurisdiction clause in question because, although the General Terms and Conditions of Sarasin Switzerland were referred to in the Current and Custody Account Application forms and although, as applicants, the Claimants confirmed that they had received a copy and accepted those General Terms and Conditions as binding by signing the application forms, according to C1’s evidence those General Terms and Conditions had at no material time been sent to or seen by him. Sarasin Switzerland had tendered no evidence to the contrary. The Claimants submit that, given that, as is common ground, the contractual relationship is governed by Swiss Law, it is with reference to that law that this court must determine whether the effect of the reference in the Current and Custody Account applications to the General Terms and Conditions had the effect of incorporating the opt-out clause into their contractual relationship with Sarasin Switzerland. In this connection the evidence of Prof. Furrer, the Claimants’ expert on Swiss Law is specifically relevant. His view is that such terms could only be incorporated by reference if the General Terms and Conditions had been provided to or made available to the Claimants before they entered into the contract. This view is in substance broadly similar to that of Prof. Nobel, the expert relied on by Sarasin Switzerland who says that if the General Terms and Conditions were not supplied to the Claimants, it would be sufficient if they had some reasonable means of gaining access to them.
33. The Claimants submit that, although the jurisdiction claim is expressly contained in other contracts entered into between the Claimant and Sarasin Switzerland such as the Trust Agreements, the deeds of pledge and the credit facility letters, the opt-out only applied to claims under those particular contracts and not to the underlying obligations to make managed investments for the Claimants which arose only under the Account Applications which brought the contractual banking arrangement into existence. Accordingly the claims in the Particulars of Claim were outside the scope of application of the only effective jurisdiction clauses.
34. Further, the Claimants submit that, even if the jurisdiction clause is capable of being applicable to their claims against Sarasin Switzerland, it does not have the effect of identifying Basel as the place of jurisdiction. This is because “the place in which the branch of the Bank is located with which the business relationship exists” is the DIFC in view of the part played by Mr Kerry and Mr Walia of Sarasin Dubai in setting up the investment transaction between the Claimants and Sarasin Switzerland. It is the Claimants’ case that Sarasin Dubai is a “branch” of Sarasin Switzerland – “the Bank”.
35. In this connection the Claimants submit by reference to the application of the Swiss law principles of construction evidenced by the reports of Prof. Furrer, in particular, the essential principle is that the jurisdiction clause should be entrusted objectively from the perspective of an independent observer having regard to all the circumstances prevailing at the time when the contract was entered into. In this connection the submission advanced by Bank Sarasin that the word “branch” is intended to replicate the precise meaning of the German “Zweigniederlassung” should be rejected. That word might have signified to a Swiss banker an office which was part of the bank and not a subsidiary or a separately incorporated entity, but it would mean nothing to the Claimants who were relatively unsophisticated in the field of banking terms. Since there was no evidence that the parties had agreed as to the precise meaning of “branch”, a Swiss court could apply the objective test set out above. In so doing it would conclude that an independent observer would impute to the parties in all the relevant circumstances a common intention that “branch” should be understood as including a separately incorporated office which was not part of the principal bank and was merely a subsidiary of or in the same group as it.
36. For those reasons the effect of the jurisdiction clause was to identify the place of jurisdiction as that place where Sarasin Dubai was located, namely the DIFC. That was because the Claimants’ “business relationship” was with Sarasin Dubai.
The Submissions as to Jurisdiction by Sarasin Switzerland.
37. It is submitted that the starting point is to consider whether the jurisdiction clause quoted above and to be found in the deed of pledge, trust agreements and credit facility letters and other contractual documents confers exclusive jurisdiction over the claims advanced by the Claimants in these proceedings on the Swiss Courts. In support of the proposition that such jurisdiction clause is valid and covers all the claims advanced, Sarasin Switzerland relies on the third expert report of Prof. Nobel.
38. Sarasin Switzerland then argues that the terms of the jurisdiction clause do not have the effect of “specific, clear and express” provisions selecting the DIFC as the place of jurisdiction for the purpose of Article 5 (A) 2 of law 16.
39. It is argued that far from amounting to an effective opt-in provision in favour of the DIFC Court in favour of the DIFC Court, the jurisdiction clause amounts to an effective opt-out in favour of the Swiss courts.
40. Underlying this submission is Sarasin Switzerland’s submission as to the meaning of “branch” and of the phrase “with which the business relationship exists”.
41. As to the meaning of “branch”, it was a translation of the German “Zweigniederlassung” which signified a branch office of a bank as distinct from its subsidiary. On the evidence C1 was a relatively sophisticated and wealthy English-speaking investor of 15 years’ experience who had extensive financial interests and planned to set up an investment company with a very large portfolio and who might have had many previous dealings with banks and it was inferred that a customer in his position would have understood “branch” to mean a representative office as distinct from a separately-incorporated banking company. Indeed C1 had not said in his evidence that he had in fact ever considered what meaning “branch” might have. Accordingly, application of an objective test in accordance with Swiss legal principle led to the conclusion that in the circumstances the meaning of “branch” would not include the office of a separately incorporated entity, such as Sarasin Dubai.
42. It is further submitted that the business relationship relevant to the claims against Sarasin Switzerland was with Sarasin Switzerland’s branches in Basel and for C3 Geneva and not with Sarasin Dubai which did not act as an agent for Sarasin Switzerland in respect of the contracted relationship between the latter and the Claimants. Accordingly, there was by the jurisdiction clause an effective selection of the Swiss courts for the purposes of Article 5A(3).
43. If, contrary to the primary submission of Sarasin Switzerland, “branch” was to be given a wider meaning and could include Sarasin Dubai and the Claimants’ relevant business relationship was with Sarasin Dubai, it was submitted that this Court could/did not have jurisdiction over the claims against Sarasin Switzerland because it had not been established that any of them fell within the jurisdictional gateways specified under Article 5A(1) (b) or (c), of their alternative case, 5A(1)(a).
44. As to (b), the substance of the pleaded claims was made under what the Re-Amended Particulars of Claim referred to as the “Swiss Financial Advisory Contract”, that is to say an alleged all-embracing contractual relationship between the Claimants and Sarasin Switzerland which gave rise to duties to advise the Claimants as to the suitability of their investments and the risks involved in the recommended investments. However, there was no allegation that such contract had been broken within the DIFC. Mr Walia, Mr Kerry and Sarasin Dubai were not the agents of Sarasin Switzerland for any relevant purposes: the witness statement of Thomas Vogel relied on by Sarasin Switzerland confirmed that there was no agency relationship such as would give rise to liability on the part of Sarasin Switzerland for deficiencies in the conduct of any of those in the DIFC.
45. Further, the conduct of those in the DIFC with regard to the Swiss Account and Escrow contracts could not be relied upon as partial performance of any relevant contract for the purposes of Article 5A(1)(b) because the Claimants were not basing their claims on any breach of such contracts as distinct from the wider Swiss Financial Advisory Contract. It was thus impermissible to deploy performance of one contract for the purpose of getting through the Article 5A(1)(b) gateway when the claim was founded on breach of a different contract. In any event, on the evidence neither Sarasin Dubai nor Mr Kerry nor Mr Walia took any part in the performance of the Swiss Financial Advisory Contract. The mere occasional routeing of correspondence through the office of Sarasin Dubai was not a part performance of any of the contracts. It was not a term of those contracts that such routeing should take place and there was on the evidence no account management carried out in the DIFC.
46. A to Article 5A(1)(c), the claims for negligence and/or misrepresentation against Sarasin Switzerland were based on the vicarious liability of the latter for the conduct of Sarasin Dubai and its employees arising from the alleged position of Sarasin Dubai and Mr Kerry and Mr Walia as agents for Sarasin Switzerland. However, this type of claim was not covered by the words of the claim form and further, the whole of the legal relationship between the Claimant and Sarasin Switzerland was regulated by the Jurisdiction Clause which provided for the application of Swiss Law, even where the relationship was non-contractual or the claim was put in tort. Consequently, there was no effectively pleaded claim in tort for the Re-Amended Particulars of Claim based the relevant cause of action in tort on Articles 10, 29, 30 and/or 31 of the DIFC Law of Obligations.
47. There was, therefore. not shown to be a good arguable case in tort within the Article 5A(1)(c) gateway.
48. Further, and in any event, the Claimants had failed to show that any misrepresentation was received or actioned by any of them within the DIFC or to show that any of them had suffered any damage within the DIFC.
49. Accordingly, there were no claims of which it could be said that there was a good arguable case that they arose out of or related to any incident or transaction which was wholly or partly performed within the DIFC and which related to DIFC activities.
50. Finally, with regard to the discretion of the DIFC Court to decline to exercise such jurisdiction as it might have on forum non conveniens principles, Switzerland was the more appropriate forum for determination of the claims against Sarasin Switzerland. Applying the approach indicated by the English House of Lords decision in The Spiliada  3 All ER 843 at p. 854,
(1) Sarasin Switzerland carried on business in Switzerland and was subject to Swiss Banking Regulations;
(2) Neither the Claimants nor the Sarasin Switzerland witnesses were domiciled in Dubai;
(3) By reason of the applicable laws and jurisdiction clause all the transactions and issues were governed by Swiss Laws for which the Swiss courts were a particularly appropriate forum;
(4) The Claimants had no connection with the DIFC;
(5) The Claimants were guilty of “forum shopping” and had no real interest in their claims being determined in this court.
Discussion: the Relationship between the Claimants and Sarasin Switzerland
51. In the course of the period 6 June 2007 to 12 February 2008 the Claimants entered into a series of transactions under which they deposited funds with, and obtained credit from, Sarasin Switzerland for the purpose of acquiring real estate investments in the form of real estate investment trusts and evidenced or represented by capital protected notes. The Claimants through Mr Taha, who represented them throughout, allegedly made known to Mr Kerry of Sarasin Dubai that such investments should be low risk and should incorporate full capital protection. They should also generate sufficient return to finance interest payments which C1 and C2 borrowed from their bank – Al Ahli Bank Kuwait – and should provide full capital protection. They should also generate full capital protection in order that the loan could be re-paid in full at the end of the investment term. It is alleged that Mr Kerry and Mr Walia of Sarasin Dubai encouraged the Claimants to enter into the investments and for that purpose to sign the documents which were provided to them by Sarasin Dubai.
52. Further, in the course of June and July 2007, Mr Kerry and Mr Walia advised C1 and, through him C2 as to leveraged investments to be effected by means of a leveraged credit facility to be granted to C2 by Sarasin Switzerland. She duly invested US$135 million by this means.
53. In January-February 2008, following discussions between C1 and Mr Kerry and the provision by C1 of collateral to Sarasin Switzerland, C3 was offered in a letter from Sarasin Switzerland sent on by email by Ms Naz from Sarasin Dubai a collateralised credit facility of US$60 million. C3 executed and returned the offer letter to Sarasin Dubai and thereby obtained the collateralised credit. Mr Kerry then advised Mr Taha that some US$20 million out of the collateralised credit should be invested in two investment products which was duly done by Sarasin Switzerland.
54. In the course of April-October 2008 as the shortfalls in the value of the investments against the amount of the outstanding indebtedness of the Claimants to Sarasin Switzerland increased and calls were made to make good these shortfalls by further cash deposits, all communications travelled through Sarasin Dubai and it was with Mr Walia and Mr Kerry that there took place the 22 August 2008 meeting with C1.
55. It thus appears that in substance the relationship between the Claimants and Sarasin Dubai and Sarasin Switzerland was one which had the following salient characteristics.
(1) Client contact was exclusively within the province of Sarasin Dubai for all purposes to the effect that Sarasin Dubai was the only medium of communication between the Claimants and Sarasin Switzerland.
(2) Sarasin Dubai, in the persons of Mr Kerry and Mr Walia, was a marketing emanation of Sarasin Switzerland in the sense that one of its functions under its relationship with its majority shareholder was to sell investment products established by Sarasin Switzerland or by its holding company, Rabobank Nederland.
(3) In the course of its marketing function Sarasin Dubai offered advice to the Claimant either from its own judgment and/or from information or advice obtained from Sarasin Switzerland.
(4) The process of investment management was conducted by Sarasin Switzerland and/or Rabobank.
(5) In the current and Custody Account Application Forms Sarasin Dubai is designated the “External Adviser” in relation to the Claimants, and therefore must have been an agent, intermediary or subsidiary of Sarasin Switzerland “appointed by special authorisation or other special contractual agreement to act as so-called designated representatives in accordance with the Agreement on the Swiss banks’ code of conduct with regard to the exercise of due diligence”. In that capacity Sarasin Europe would have had the function of ascertaining the precise identification of the applicant and verifying all such information so as to satisfy the obligations (largely designed to prevent money laundering) which Sarasin Switzerland had assumed under Swiss Banks’ Code of Conduct.
(6) Sarasin Dubai was responsible to Sarasin Switzerland for providing to the Claimants the contractual documents which had to be completed to set up the different specific contractual links with Sarasin Switzerland and for receiving back the documents with the Claimant’s signatures so as to conclude each of the parts of the contractual structure required for the investments to be made.
(7) Most, if not all, communications from Mr Kerry, Mr Walia and Ms Naz, except meetings with the Claimants or Mr Taha, were made from Sarasin Dubai’s premises in the DIFC.
(8) All the contracts entered into by the Claimants which appertained to their acquisition from Sarasin Switzerland of the investment products and the funding of such acquisitions were contracts between the Claimants and Sarasin Switzerland.
56. The Claimants therefore dealt with two component entities which combined together to provide it with both the credit facilities and the acquired investments. In this dual exercise the role of Sarasin Dubai was to market and advise upon the investment products and also was to act in a ministerial capacity in order to procure execution of all the necessary documents. In that capacity they were not the Claimant’s agents, but were acting as part of the Bank Sarasin banking group for the purpose of processing, negotiating and administering credit and investment transactions on behalf of Sarasin Switzerland.
57. Against that background it is necessary first to ascertain whether any of the gateways to jurisdiction enacted in Article 5(A)(1) of Law 16 are engaged.
The Contract Claims: Discussion
We set out Article 5(A)(1) for convenience:
“Civil or commercial claims arising out of or relating to a contract or promise of contract, whether partly or wholly concluded, finalised or implemented within DIFC or will be implemented effectively or supposed to be implemented within DIFC pursuant to express or implied terms stipulated in the contract.”
58. In construing Article 5(A) it is necessary to keep very clearly in mind that the ultimate and dominant text is in Arabic and that this court is using a translation to arrive at the true meaning and intent of that Arabic text. In this correction it is to be remembered that Arabic may not lend itself to as precise a facility of expression of legal phraseology as English. Thus translation may result in what appears to be a very precise expression in English but which too narrowly defines the meaning of the original Arabic text. That is why it is important when construing DIFC legislation such as Law 16 not by a literalist construction of the English to lose sight of the legislative purpose underlying the text.
59. There can be no doubt that Sarasin Dubai, and in particular Mr Kerry and Mr Walia and to a lesser extent, Ms Naz played an essential part in negotiating and finalising the contracts required to complete the contractual structure necessary for the Claimants to make their investments in Sarasin Switzerland’s products. Specifically, the provision of advice, information about the available products, the provision of contractual documents and the receipt back of each such documents after signature, although in one sense ministerial functions on behalf of Sarasin Switzerland, were nonetheless essential steps in the conclusion of the contracts with Sarasin Switzerland.
60. The purpose of Article 5A(1)(b) is to bring within the exclusive jurisdiction of the DIFC Court claims arising out of or relating to a contract or to the negotiation for a contract where the connecting factor is that the contract or intended contract had been wholly entered into or partly entered into in the sense of negotiated or had been wholly or partly agreed upon or wholly or partly performed by conduct or an event which had taken place within the DIFC. The essence of the provision is that the court is given jurisdiction where there has been relevant activity with regard to the contract or related to it within the DIFC.
61. That being so, this court does have jurisdiction in respect of the claims for breach of contract against Sarasin Switzerland. Each of the component contracts was a part of the overall investment transaction and each such component was at least partly, if not wholly, “concluded” in the DIFC.
The Claims in Negligence and Misrepresentation and for Breach of Regulatory Law
62. Article 5A(1)c of Law 16 provides that the DIFC court shall exclusive jurisdiction to hear and determine
“Civil or Commercial claims and actions arising out of or relating to any incident or transaction which is wholly or partly performed within DIFC and is related to DIFC activities.”
63. The wording of this provision is somewhat oblique but the sense which reflects the legislative intent is fairly clear. The claim or action has to arise out of or relate to either an incident or a transaction. The meaning to be accorded to “incident”, as under Law 12, Article 5(A)(1)b, comprehends any of the essential elements of conduct or the incidence of loss or damage necessary to give rise to a cause of action in tort or for breach of statutory duty. The meaning to be accorded to “transaction” is any commercial relationship between the Claimant and defendant giving rise to mutual rights and obligations, including, but not limited to, a contractual relationship. Whereas it is meaningful to speak of a “transaction” as being “performed” in a particular place, that is not so of an “incident”. Accordingly, the words should be understood as referring to an incident which has occurred within the DIFC.
64. The requirement that the transaction or incident shall be “related to DIFC activities” simply means that such incident or transaction should have been in furtherance of or as a result of a particular commercial activity carried on in the DIFC.
65. With regard to “incidents”, the relevant acts or omissions said to give rise to tortious liability must take place in the DIFC. In this connection the mere location of Sarasin Dubai in the DIFC does not necessarily involve that all statements wherever made by Mr Kerry or Mr Walia or all omissions to question or warn at meetings took place in the DIFC. To the contrary, where, as on 29 April, 22 June and 11 July 2007, meetings took place outside Dubai at which advice was given, warnings were not given and material questions were not asked, such conduct cannot be relied upon as “incidents” within Article 5A(1)(c). This gives effect to the essential geographical connecting factor required by that provision.
66. However, it is alleged in the Re-Amended Particulars of Claim that on 4 July, Mr Kerry sent to Mr Taha by email various suggestions for the leverage and expansion of C2’s portfolio. Further, after the 11 July 2007 meeting in London, Mr Kerry sent to Mr Taha a brochure and term sheets relating to three investment products. Then Mr Kerry made recommendations to Mr Taha in the case of a telephone conversation as to investment in those products. It is alleged that C1’s agreement that the additional leveraged funds should be invested in the recommended products was based on such advice and recommendations as were provided by Mr Kerry and Mr Walia.
67. That advice was largely provided at the three meetings in April-July 2007 but it was also provided by Mr Kerry from Sarasin Dubai in the DIFC in the communications in July 2007.
68. Further, with regard to the investments made for C3 in February 2008, Ms Naz of Sarasin Dubai sent to her Sarasin Switzerland’s Credit Facility letter and when this had been countersigned and returned to Sarasin Dubai, the latter provided to Mr Taha information by way of investment confirmations regarding capital guaranteed products. Mr Kerry is said to have advised Mr Taha as to what investments should be made on the basis of that information. In reliance on that advice some US$20 million was invested by C3.
69. In as much as Ms Naz and Mr Kerry operated from the Sarasin Dubai offices in the DIFC, there were relevant “incidents” in the DIFC which form one of the components of the claims for misrepresentation and negligence against Sarasin Switzerland.
70. We now refer to the submission that those claims have not been shown to have sufficient substance for this court to exercise jurisdiction.
71. Sarasin Switzerland could only be liable in respect of such alleged misrepresentations or negligence if the relationship between it and Sarasin Dubai were such as to give rise to vicarious liability for the torts of the employees of Sarasin Dubai. Sarasin Switzerland rely on the evidence of Thomas Vogel, Head of Group Legal at Sarasin Switzerland , and in particular his Third Witness Statement in which he states at paragraphs 17-19:
“17. Unlike the Second Defendant, the First Defendant is not a private bank – it does not provide asset management services to its clients, hold client assets, accept deposits or provide credit. The First Defendant’s license means that its activities and services are limited to marketing and advising on financial products or credit as well as arranging custody (within the meaning of the DIFC Regulatory Law). It does not hold, manage or operate accounts or assets itself.
18. In carrying on its business, the First Defendant is not limited to activities in respect of “Sarasin Group” financial products, and may conduct, and does in fact conduct authorised activities including the marketing and arranging of financial products from various third party investment banks and financial institutions.
19. The First Defendant is not an “agent” of the Second Defendant nor did it perform any contractual obligations for or on behalf of the Second Defendant. The Second Defendant has never stated that the First Defendant is and agent of the Second Defendant. Other than acting from time to time as a “post-box” (but having no obligation to do so), the First Defendant only conducted such pre-contractual potential client identification checks which are permitted to be delegated to it as I describe below.”
72. Without deciding whether Sarasin Dubai were agents in the strict sense of being clothed with authority from Sarasin Switzerland to create privity of contract between the latter and third parties, we find that there is at least a good arguable case that they were employed by Sarasin Switzerland to market its investment products. There is no evidence of the internal group terms on which Sarasin Dubai acted in that capacity. However, we infer from the conduct of the Sarasin Dubai personnel involved and their apparent system of instant contact with Sarasin Switzerland that they were employed as a nominally independent but in-house marketing organisation.
73. In that capacity, as an independent contractor, their conduct in relation to the marketing of these products could not give rise to the vicarious liability of Sarasin Switzerland in the strict sense. However, if their defective conduct had been specifically authorised by Sarasin Switzerland to the effect that the misrepresentation and non-disclosures of risk were specifically authorized, Sarasin Switzerland could incur liability as a principal tortfeasor whose tortious conduct had been delegated to Sarasin Dubai.
74. That would be the position in English Law. There is, however, no evidence as to the position in Swiss Law, which could apply if the law and jurisdiction clause were binding. Accordingly, on that hypothesis it is permissible for this court to presume for present purposes that Swiss Law is the same as DIFC and English Law and on that basis to conclude that the claim against Sarasin Switzerland is shown to have sufficient substance for this court to exercise jurisdiction, provided that one of the jurisdictional gateways is engaged.
75. On at least that basis, therefore, we conclude that the Article 5A(1)(c) gateway is engaged and further that the wording of the claim form as amended is sufficiently wide to accommodate such a claim.
76. The Claimants alternatively rely on their tort claims being such as to fall within “claims and actions arising out of or relating to any … transaction which is wholly or partly performed within DIFC and is related to DIFC activities.”
77. In our judgment there was no performance of any part of the overall transactions within DIFC nor did the transaction call for any such performance. The transmission of pre-contractual messages cannot be relied upon as “performance”. Nor can any subsequent communications for such communications as there were did not constitute performance in the sense of carrying out of any transitional obligations.
78. The claim for breach of statutory duty is founded on allegations of omission to comply with the Regulatory Law. Although breach of statutory duty is a civil wrong giving rise to entitlement to compensatory damages and is to that extent analogous to a tort, it is confined in application to the party upon whom the statute imposes the duty in question. Although such a duty could in this case be imposed on Sarasin Dubai, as a DIFC Establishment or Licensed Establishment, it would not be imposed on a foreign shareholder in Sarasin Dubai which was not licensed in the DIFC.
The meaning of “arising out of or related to”
79. In our judgment the words are intended to convey a relationship between the claimant and the defendant within which the defendant is or would be a party to the relevant contract or transaction or a participant in the relevant incident. It follows that unless Sarasin Switzerland occupied that position, the subject matter gateways could not be engaged and the DIFC could not otherwise exercise jurisdiction in the absence of an opt-in agreement.
The Claimant’s alternative case under Article 5(A)(1)a
80. As we have already indicated, this was very much a “fall-back” submission which no doubt originated in the similar provision of Law 12.
81. It is however, an entirely misconceived application of Article 5(A)(1)a.
82. Sarasin Switzerland is not a DIFC Body or a DIFC Establishment or DIFC Licensed Establishment. Nor is it a party to any claim against Sarasin Dubai which is a DIFC Establishment or Licensed Establishment. It is necessary for the purposes of this provision to show that there is a claim for a remedy by or against a party which falls within one of the four identified categories. It is insufficient to rely on the fact that a different party to that against which the claim in question is brought happens to be a party to the proceedings.
The Jurisdiction Clause in Sarasin Switzerland’s General Terms and Conditions
83. The first question that arises is whether the jurisdiction clause was validly incorporated into any of the pleaded contracts.
84. C1 says that the General Conditions were not shown or sent to him. Therefore, he never read the jurisdiction clause and he and the other Claimants are not bound by it.
85. On this issue we prefer the evidence of Dr Nobel, the expert on Swiss Law relied on by Sarasin Switzerland.
86. The issue in Swiss Law is to be determined by Article 17.1 of the Lugano Convention which was still in force when these contracts were entered into and which now has become Article 23.1 of the Council Regulation No. 44/2001 of the European Union. It is thereby provided that such a jurisdiction agreement must be “in writing or evidenced in writing or in a form which accords with practices which the parties have established between themselves or in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware …”
87. In the present case the Application for Opening Current and Custody Accounts included the following clause:
“The undersigned Applicant confirms that he/she has received a copy of the General Terms and Conditions of Bank Sarasin & Co. Ltd (version 05.01), of the Safety Custody Regulations and of the Metal Account Regulations, and accepts them as binding in all particulars by signing this application form. He/she explicitly confirms the Bank’s right of lien, the provisions contained therein in relation to charges, the outsourcing of services, the joint account and the recording of telephone conversations and the place of jurisdiction that are stipulated therein.”
Those General Terms and Conditions included the law and jurisdiction clause quoted above.
88. There can in our judgment be no doubt that, in the context of a modern international banking transaction of this kind, C1 effectively agreed by his signature to be bound by the General Terms and Conditions, including the law and jurisdiction clause, notwithstanding that it may not have been shown to him when he signed the document. The fact that the jurisdiction clause was not printed on the document signed is nothing to the point. It was for C1 to request a copy, particularly having regard to the express statement in which he confirmed that he had received a copy and agreed to be bound by it.
Was there an effective Opt-Out?
89. Law 16 Article 5A3 provides as follows:
“3. The Court of First Instance may hear and determine any civil or commercial claims or actions falling within its jurisdiction if the parties agree in writing to submit to the jurisdiction of another court over the claim or action but such court dismisses such claim or action for lack of jurisdiction.”
90. It is to be observed that this does not provide in terms for parties whose dispute would otherwise fall within the exclusive jurisdiction of the DIFC Court to agree to submit their disputes to the jurisdiction of a foreign court. That had been expressly provided for by Article 5(A)2 of Law 12 which is not repeated in Law 16. However, Article 5(A)3 of Law 16 makes no sense if there is no underlying right to contract out of the exclusive jurisdiction of the DIFC Court. One or both of the parties must be presumed not to have invoked DIFC jurisdiction and to have gone straight to a foreign court in reliance on a foreign jurisdiction agreement and then to have met with a refusal by the foreign court to hear the claim.
91. The absence in Law 16 of an explicit right to contract out of DIFC jurisdiction is probably best explained by the existence of Article 13(1) of law 10 of 2005 by which it is provided:
“A submission to the courts of a jurisdiction in a contract shall be effective”.
92. Succinct though this provision may be, its meaning is reasonably clear. The reference to “a jurisdiction” is clearly to a jurisdiction other than that of the DIFC Court and its effectiveness clearly indicates that it can be recognised in those cases where the DIFC Court would otherwise have exclusive jurisdiction. As such, there is no inconsistency between Article 13(1) and anything in Law 16 which would involve Article 13(1) being automatically repealed.
93. It follows that this court can recognise an opt-out agreement notwithstanding that the exclusive jurisdiction provisions in Article 5(A) I would have conferred jurisdiction on the DIFC Court.
94. Both parties have adduced extensive expert reports on the principles of construction under Swiss Law which would be applicable to arrive at the meaning to be attached to the wording of the Law and Jurisdiction Clause. The experts were in many respects agreed on the general approach.
95. The starting point is to ascertain whether the parties can be shown to have mutually subjectively intended a particular meaning. If they have not, it is then necessary to arrive objectively at a mutually intended meaning.
96. In the present case the crucial issue is as to the meaning of the word “branch”, the contention of Sarasin Switzerland being that Sarasin Dubai was not its “branch” within the meaning of the jurisdiction clause but was a separately incorporated entity, the subsidiary of Sarasin Switzerland.
97. C1 never saw the clause so that he could have formed no subjective understanding of its meaning.
98. Sarasin Switzerland’s understanding was that “branch” meant an office of itself and not the office of a subsidiary.
99. It is accordingly necessary to impute a mutually understood meaning to the parties by an objective test which takes into account not only the dictionary scope of meaning of the word as understood by people engaged in banking, but all the surrounding circumstances.
100. In this process of analysis the starting point, but not the dominant consideration, is the transactional context.
101. Thus, “the place of jurisdiction for all proceedings” must refer to proceedings to which the Bank is a party, for only the Bank and the client are parties to the agreement containing this term. The assumption is that either the Bank will sue or be sued in the place of jurisdiction. That which determines the place of jurisdiction is the location of the branch “with which the business relationship exists.” That is to say the business relationship upon which the claim is based.
102. It will be observed that the only branch with which there can be a meaningful business relationship within the context of the clause is one whose conduct can be the basis of a claim against the Bank under the contract to which the jurisdiction clause relates or one by the Bank, that is Sarasin Switzerland, in respect of its rights against the Applicant. The assumption would, therefore, be that any relevant branch would be of the same corporate entity as the Bank and that since a corporation separate from that of the Bank could not bring the Bank’s claims or be liable for claims against the Bank, it was probable that “branch” was not intended to extend to such a separate entity.
103. Further, in English banking phraseology “branch” always means an office which is part of a bank as distinct from a separate legal person which is a constituent of a banking group. Although a branch in this sense usually has a large measure of autonomy in the conduct of banking business, the one essential characteristic is that it is inseparable from the assets of the bank of which it is a part to the effect that a creditor’s rights are secured by those assets. It could thus hardly be expected that a bank anywhere in the world which conducted its business in English – the most common language of international banking – would use an expression such as “branch” with any different meaning from that which banks throughout the world would normally expect it to have.
104. Finally, C1 had business experience extending over 15 years. This experience extended to international investments and clearly included regular dealing with banks. He spoke and understood English to a sufficient extent to be able to deal with English-speaking companies and to participate with them in international business.
105. An objective assessment of what would have been the mutual understanding of a bank in Switzerland which conducted its foreign business in English and a person having C1’s characteristics leads clearly in the opinion of this court to the conclusion that “branch” would be mutually understood to mean an office of Sarasin Switzerland and to exclude a separate legal entity such as Sarasin Dubai.
106. There was, therefore, an effective agreement to refer disputes with Sarasin Switzerland to the Swiss courts.
107. In this connection we share the opinion of Dr Nobel (although we accept that it went beyond the scope of admissible expert evidence on Swiss legal principles) that the scope of the jurisdiction clause is all-embracing and extends to all disputes between the Claimants and Sarasin Switzerland and it is not confined to disputes in relation to the particulars contract in which the jurisdiction clause appeared. The use of the words “all legal relationships between the Customer and the Bank” is a very strong indication that the words “the place of jurisdiction for all proceedings” was mutually intended to refer to any proceedings in respect of any legal relationship between the Customer and Bank.
108. Accordingly, there was in the judgment of this Court an effective agreement to confer on the applicable Swiss Courts jurisdiction over all the claims advanced by the Claimants in these proceedings.
Forum non Conveniens
109. It is submitted on behalf of the Claimants that this court should not give effect to the jurisdiction agreement for the following reasons.
110. Were there to be a separate trial in Switzerland of the claims against the Sarasin Switzerland, there would be a risk of inconsistent decisions on fact and law as between a trial of the claims against Sarasin Dubai in the DIFC and a trail of the claims against the Sarasin Switzerland in Switzerland.
111. Further, the two key witnesses who would have to give evidence for Sarasin Switzerland will have to give evidence for Sarasin Dubai in this court, namely Mr Kerry and Mr Walia and their evidence on the same facts will have to be exhausted by different courts.
112. On behalf of Sarasin Switzerland it is submitted that the claims against Sarasin Switzerland are all governed by Swiss Law on account of the words of the law and jurisdiction clause and all the employees of Sarasin Switzerland who might be witnesses are resident in Switzerland. Rather Sarasin Switzerland carries on business in Switzerland.
113. The proper approach to this issue in English law, subject to minor modifications was laid down 42 years ago by Brandon J in The Eleftheria  1 Lloyd’s Rep. 237. His judgment was approved and adopted by the House of Lords in Donoghue v Armco  1 Lloyd’s Rep 425.
114. The overriding principle is that the English courts will give effect to a foreign jurisdiction clause unless “strong cause” can be shown why effect should not be given to it. At page 242 the principle was stated in the following passage:
“The principles established by the authorities can, I think, be summarised as follows: (I) where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the English court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not. (II) the discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (III) The burden of proving such strong cause is on the plaintiffs. (IV) In exercising its discretion, the court should take into account all the circumstances of the particular case. (V) In particular, but without prejudice to (IV), the following matters, where they arise, may properly be regarded: (a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts; (b) Whether the law of the foreign court applies and, if so, whether it differs from English law in any material respects; (c) With what country either party is connected, and how closely; (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages; (e) Whether the plaintiffs would be I prejudiced by having to sue in the foreign court because they would-(i) be deprived of security for that claim, (ii) be unable to enforce any judgment obtained, (iii) be faced with a time-bar not applicable in England, or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial.”
115. It is right to add that in subsequent decisions the “strong cause” hurdle for not enforcing a foreign jurisdiction clause has been set at a high level. The underlying approach can be summarised by saying that the parties should be kept to their bargain unless to do so would or might cause some serious injustice to one party or the other or both. Thus, in The Eleftheria itself Brandon J declined to enforce the foreign jurisdiction clause mainly because of the plaintiff’s declared intention to join in the pending English proceedings a party who was not bound by the clause, thereby giving rise to the risk of inconsistent findings as between two parties against whom the claims were brought.
116. In the present case, were there to be separate trials in DIFC and Switzerland there would unquestionably be a significant risk of inconsistent findings of both fact and of the scope and indeed existence of the duty in contract and more so in tort owed to the Claimants by Sarasin Dubai on the one hand and Sarasin Switzerland on the other. Moreover, separate trials would increase the overall costs of resolving the dispute to all parties. Some witnesses, notably C1, Mr Taha, Mr Kerry and Mr Walia would have to give evidence twice about the same matters.
117. There would thus be serious procedural dislocation.
118. That said, the natural forum for the claims against Sarasin Switzerland is certainly Switzerland.
119. On balance, however, we have come to the conclusion that this is one of those exceptional cases where the court should exercise its discretion against enforcing the jurisdiction clause and should permit the proceedings against Sarasin Switzerland to continue in this Court which we consider to be the appropriate forum in the interests of justice, convenience and fairness. To the extent that there will need to be consideration by the DIFC Court of relevant principles of Swiss Law, expert evidence can be called to enable the court to give effect to the choice of Swiss Law in the contracts. Nor does production of witnesses who may be in Switzerland present significant difficulties or excessive cost.
120. For the reasons set out in this judgment, this Court refuses the application by Sarasin Switzerland to set aside the claim against it. The appeal against the judgment of Hwang C.J. will, therefore, be allowed.
121. Applications relating to the costs of this appeal may be made in writing which must be tendered to the court within 21 days of the date of this judgment.
Deputy Chief Justice Sir Anthony Colman
Justice Sir David Steel
H.E. Justice Ali Al Madhani
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