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Banyan Tree Corporate PTE Ltd v Meydan Group LLC [2013] DIFC ARB 003

Banyan Tree Corporate PTE Ltd v Meydan Group LLC [2013] DIFC ARB 003

May 27, 2014

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Claim No: ARB-003-2013

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

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


IN THE COURT OF FIRST INSTANCE
BEFORE H.E. JUSTICE OMAR AL MUHAIRI

BETWEEN

BANYAN TREE CORPORATE PTE LTD Claimant
andMEYDAN GROUP LLC Defendant

 

Hearing: 1 May 2014
Counsel: Michael Black QC (instructed by Clyde & Co) for the ClaimantTim Taylor QC (King & Wood Mallesons (MENA) LLP) for the Defendant
Judgment: 27 May 2014

JUDGMENT OF H.E. JUSTICE OMAR AL MUHAIRI

Background

1. Before the DIFC Courts is Banyan Tree Corporate PTE LTD formerly known as Banyan Tree Hotels & Resorts PTE LTD (“Banyan“), a company incorporated in Singapore engaged in the management and operation of premium resorts, hotels and spas around the world.

 

2. The Claimant, Banyan, brings a claim against the Defendant, Meydan Group LLC (“Meydan“), a company incorporated in the United Arab Emirates engaged in real estate development, investment in enterprise and management of hotels and resorts.

 

3. On 19 December 2013, Banyan filed an Arbitration Claim Form requesting the Court recognize and enforce an Arbitration Award (“Award“) in favour of the Claimant, issued by the Dubai International Arbitration Center (DIAC) in the total amount of USD 19,505,528.78, being the sum of USD 19,285,73.88 and costs, interest and court fees.

 

4. The Award stems from a dispute over a terminated Hotel Management Agreement, (“HMA“) entered into between Banyan and Meydan on 15 August 2007 which appointed Banyan as Manager of a 285-room luxury hotel (the “Hotel“) which was owned by Meydan and under construction at the time. Pursuant to the HMA, Banyan was appointed as Manager of the Hotel for an initial fixed term of 25 years, extendable by an additional 15 years at the Claimant’s discretion.

 

5. On 4 November 2009, Meydan terminated the HMA and a dispute arose between the Parties in relation to the HMA and the management and operation of the Hotel.

 

6. In Clause 25.1 of the HMA, the parties agreed to an Arbitration Clause which states:

“25.1 Submission to Arbitration

(a) If any dispute arises out of or in connection with this Agreement, including any question regarding its existence, validity or termination, then either party to this Agreement may deliver a notice in writing to the other party, setting out the details of the dispute.

 

(b) If the dispute is not resolved by agreement between the parties within 30 (thirty) days of delivery of the notice under clause 25.1(a), then the dispute may be referred by either Party for arbitration in the English language in accordance with the Rules of the Dubai International Arbitration Centre to be determined by a single arbitrator appointed by the Centre in accordance with the said Rules.”

 

7. On 8 April 2010 Banyan filed a Request for Arbitration with the DIAC against Meydan seeking a declaration that Meydan wrongfully terminated the HMA and damages for loss of profits, expenses, interest, costs and fees in excess of USD 99,000,000.00.

 

8. On 24 November 2010 the Executive Committee of the DIAC appointed Michael Polkinghorne as sole arbitrator. Subsequently, Meydan challenged the appointment of Mr Polkinghorne on the basis of a potential conflict and Mr Polkinghorne disclosed that partners of his firm based in Singapore and Washington had previously advised one of Claimant’s affiliates. As a result, the Executive Committee replaced Mr Polkinghorne with Roland Ziade on 3 April 2011.

 

9. On 12 November 2012 Mr Ziade requested permission to resign as arbitrator of the case. The DIAC acknowledged receipt of the resignation and referred the matter to its Executive Committee, who informed the parties that it did not accept the resignation of Ziade. Nevertheless, Ziade confirmed his resignation on 6 February 2013 and on 4 March 2013 the Executive Committee appointed Alexis Mourre as sole arbitrator.

 

10. On 2 October 2013 the Tribunal issued an award in favour of Banyan declaring the HMA had been wrongfully terminated by Meydan 28 days after the notice of termination, and that the Claimant is entitled to compensation and damages for the losses suffered due to the refusal by the Defendant to perform its obligations. Those damages amount to roughly USD 19,377,821.16 (See Arbitral Award Bundle Volume B, File 2, Tab A, Page 81).

 

11. The Award was served on the Parties by the DIAC under a cover letter dated 2 October 2013. To date, no payment has been made by Meydan and as a result Banyan seeks to recognize and enforce the Arbitral Award in the DIFC Courts.

 

12. The Defendant rejects the claim put forth by Claimant on jurisdictional grounds, alleging that the Dubai Courts, and not the DIFC Courts, are the proper forum to deal with such a claim.

 

The Hearing

13. A hearing for this case was held before me on 1 May 2014. The Claimant’s legal representatives, Clyde & Co LLP, instructed Mr Michael Black QC to represent Banyan at the hearing, while the Defendant’s was represented at the hearing by Tim Taylor of King & Wood Mallesons LLP.

 

14. By consent at the hearing, the proceedings were made public and no order was made for the confidential treatment of the proceedings. Additionally, the full text of this decision shall be published with no redactions made.

 

15. The only issue to be decided by this Court at this time is jurisdiction. The Court did not entertain arguments in favor for or against the recognition or enforcement of the Award.

 

The Defendant/Applicant’s Submissions

16. At the hearing, Meydan sought the dismissal of the Arbitration Claim on jurisdictional grounds, alleging that the Award has no connection with the DIFC and no grounds exist for the DIFC Courts to assert jurisdiction over the claim. Meydan further asserts that the Dubai Courts is in fact the proper venue for such a claim to be filed.

 

17. Meydan relies on Federal Law No. 11 of 1992 concerning Civil Procedure which sets out that in matters of local jurisdiction, jurisdiction is determined by reference to the domicile or place of business of the Defendant. Chapter 1, Section 3, Article 31 provides:

“(1) Jurisdiction shall be vested in the court within whose area the defendant has his domicile unless the law provides otherwise and if the defendant has no domicile in the State jurisdiction shall be vested in the court in whose area he has his place of residence or place of business;

 

 

(3) In commercial matters jurisdiction shall be vested in the court in whose area the defendant has his domicile or the court in whose area the agreement was made or was performed in whole or in part or in the court in whose area the contract should have been performed.”

 

18. Meydan asserts that the DIFC Courts have been established as a carve out to the Federal Civil System and that in order to establish jurisdiction within the DIFC Courts, Banyan must show that some special requirement has been met such as to trump the general jurisdiction of the Dubai Courts.

 

19. Furthermore, Meydan argues that the Court cannot be concerned with the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958, (the “New York Convention“) because it does not apply in this case. Article 1 of the New York Convention provides for the enforcement of awards and states as follows:

1. “This convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.”

 

20. Meydan alleges that there is no distinction between domestic and international awards with respect to awards rendered in the UAE and therefore on any interpretation of Article 1, the New York Convention does not apply to this case.

 

21. Additionally, Meydan argued that the DIFC Courts should exercise their power of forum non conveniens and submits that even if the DIFC Courts hold that it does have jurisdiction over the dispute that overlaps with the jurisdiction of the Dubai Courts, this Court is required to decline to exercise that jurisdiction and cede jurisdiction to the Dubai Courts.

 

The Claimant/Respondent’s Submissions

22. Banyan asserts that the DIFC Courts have jurisdiction to hear this claim and relies on Articles 42 and 43 of the DIFC Arbitration Law to confer jurisdiction on the DIFC Courts to recognize and enforce all arbitral awards. The DIFC Arbitration Law states:

“Article 42. Recognition and enforcement of awards

(1) An arbitral award, irrespective of the State or jurisdiction in which it was made shall be recognized as binding within the DIFC and, upon application in writing to the DIFC Court, shall be enforced subject to the provisions of this Article and of Articles 43 and 44. For the avoidance of doubt, where the UAE has entered into an applicable treaty for the mutual enforcement of judgments, orders or awards the DIFC Court shall comply with the terms of such treaty.

 

 

(4) Awards recognized by the DIFC Court 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.

 

Article 43. Recognition

(1) Where, upon the application of a party for recognition of an arbitral award, the DIFC Court decides that the award shall be recognized, it shall issue an order to that effect.”

 

23. Banyan also relies on DIFC Court Law No. 10 of 2004, Article 24(1) which provides:

“Article 24. Ratification of Judgments.

(1) Pursuant to Article 7(4) of the Judicial Authority Law, the Court of First Instance has jurisdiction to ratify any judgment, order or award of any recognized:

(a) Foreign court;

 

(b) Courts of Dubai or the United Arab Emirates;

 

(c) Arbitral Award;

 

(d) Foreign Arbitral Award; or

 

(e) orders for the purposes of any subsequent application for enforcement in the courts of Dubai.”

 

24. Banyan further cites the Judicial Authority Law, Dubai Law No.12 of 2004 as amended by Law No.16 of 2011 which provides as follows at Article 5(A):

“Article 5. Jurisdiction

 

A. Court of First Instance:

1. The Court of First Instance shall have exclusive jurisdiction to hear and determine:

a. Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;

 

b. Civil or commercial claims and actions arising out of or relating to a contract or promised contract, whether partly or wholly concluded, finalized or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract;

 

c. Civil or commercial claims and actions arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and is related to DIFC activities.

 

d. Appeals against decisions or procedures made by the DIFC Bodies where DIFC Laws and DIFC Regulations permit such appeals.

 

e. Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.

 

2. The Court of First Instance may hear and determine any civil or commercial claims or action where the parties agree in writing to file such claim or action with it whether before or after the dispute arises, provided that such agreement is made pursuant to specific, clear and express provisions.

 

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.

 

4. notwithstanding Clause (2) of Paragraph (A) of this Article, the Court of First Instance may not hear or determine any civil or commercial claim or action in respect of which a final judgment is rendered by another court.”

 

25. Banyan relies on the above authorities to allege that the DIFC Courts have exclusive jurisdiction over this claim because the DIFC Courts have jurisdiction to recognize or enforce the Award, “in accordance with DIFC Laws and DIFC Regulation.” (Judicial Authority Law Article (5)(A)(1)(e)). The requisite relevant DIFC Law according to Banyan is Article 42 of the DIFC Arbitration Law.

 

26. In response to Meydan, Banyan admits and accepts the underlying dispute and that the parties have no connection with the DIFC, but further alleges that the DIFC Legislation does not require a connection with the DIFC. Banyan asserts that the “gateway” to jurisdiction, as set out above, is Article 5(A)(1)(e) of the Judicial Authority Law which does not include the requirement for a connection as such. Banyan asserts that such a requirement is neither found in the DIFC Arbitration Law nor DIFC Courts Law.

 

27. Additionally, as to the issue of forum non conveniens, Banyan alleges that nothing in the DIFC legislation provides that the jurisdiction of the DIFC Courts to enforce the Award is to the exclusion of the Dubai Courts and further that the DIFC Courts and Dubai Courts may have concurrent jurisdiction to enforce or recognize the Award.

 

Discussion

28. The sole issue I am ruling upon is one of jurisdiction and whether Banyan’s claim should be upheld or dismissed on jurisdictional grounds only.

 

29. I rely on the Redacted Judgment of the Deputy Chief Justice Sir John Chadwick in the matter ARB-002-2013 where he upheld the DIFC Courts’ jurisdiction to recognize an arbitral award by relying on the relevant legislative framework. Justice Chadwick states in his judgment:

“24. Article 5(A)(1)(e) of the Judicial Authority Law must be read with Article 8(2) of Dubai Law No. 9 of 2004, as amended by Dubai Law No. 7 of 2011, which provides that the jurisdiction of the DIFC Courts is to be determined by “the Centre’s Laws”. Article 5(A)(1)(e) of the Judicial Authority Law reflects that provision.

 

25. Article 42(1) of the DIFC Arbitration Law provides that an arbitral award, irrespective of the State or jurisdiction in which it was made, “shall be recognized as binding within the DIFC”; subject to the provisions of Articles 43 and 44. Article 44(1) describes the circumstances (and the only circumstances) in which recognition may be refused by the DIFC Court.

 

26. It is important to appreciate that the jurisdiction, in relation to recognition, conferred on the DIFC Courts by Article 42(1) of the DIFC Arbitration Law is jurisdiction to recognize that the arbitral award is binding within the DIFC.”
It is important to note the distinction between ARB-002-2013 and this case in the sense that the former deals with the enforcement of a foreign arbitral award whereas the latter concerns a domestic arbitral award. Nonetheless, Justice Chadwick’s judgment applies in the present case due to the language of Article 42(1) of the DIFC Arbitration Law stating that: “An arbitral award, irrespective of the State or jurisdiction in which it was made, shall be recognized as binding within the DIFC…”

 

30. In his opinion, it is clear Justice Chadwick uses Article 5(A)(1)(e) of the Judicial Authority Law to act as the “gateway” by which Articles 42, 43 and 44 of the DIFC Arbitration Law confer jurisdiction on the DIFC Courts to recognize that the arbitral award in question is binding within the DIFC. I am in full agreement with this analysis.

 

31. Additionally, in Paragraph 24 (cited above), Justice Chadwick cites Article 8(2) of Dubai Law No. 9 of 2004 as amended by Dubai Law No. 7 of 2011 which provides that the jurisdiction of the DIFC Courts is to be determined by “the Center’s Laws.” The law states, “The jurisdiction of the Center’s Courts shall be determined pursuant to the Center’s Laws.” This is in direct conflict with Meydan’s reliance on Federal Law No. 11 of 1992 concerning Civil Procedure on jurisdiction as support for their argument that jurisdiction is improper in the DIFC. The Federal legislation is therefore irrelevant and not applicable as jurisdiction of the DIFC Courts is to be determined by the Center’s own laws.

 

32. The Claimant is correct to assert that the DIFC Courts have jurisdiction to hear this claim and properly relies on Articles 42 and 43 of the DIFC Arbitration Law for the recognition and enforcement of all arbitral awards.

 

33. Furthermore, I accept Banyan’s argument that a connection with the DIFC to hear an application for recognition of an Award is not
required. The gateway to jurisdiction, as set out above, is Article 5(A)(1)(e) of the Judicial Authority Law, which does not include such a requirement and such a requirement cannot be found in the DIFC Arbitration Law or DIFC Courts Law either.

 

34. The doctrine of appropriate forum (or forum non conveniens) permits a court to decline to accept jurisdiction that it otherwise has in circumstances where the court is persuaded that it is not the natural or appropriate court for the determination of the dispute and there is another court that is clearly the more appropriate forum for the determination of the dispute. This doctrine was developed in the context of disputes where the parties and/or the subject matter of the dispute had a connection with a foreign jurisdiction.

 

35. The DIFC Courts have previously stated that the jurisdiction of the DIFC Courts is subject to the doctrine of appropriate forum where the alternative court is a foreign court. (See Al Khorafi v. Bank Sarasin-Alpen Ltd CA 001/2010 and CA 002/2010; [2011-12] DIFC. C.L.R. 9 and Corinth Pipeworks SA v. Barclays Bank PLC CA 002/2011; [2011-12] DIFC. C.L.R. 6). Alternatively, in a more recent DIFC Court of First Instance decision, H.E. Justice Ali Al Madhani held that the doctrine of appropriate forum does not apply where the alternative forum is a local court of an Emirate, which in that case was the Abu Dhabi Civil Courts. (See Allianz Risk Transfer AG v. Al Ain Ahlia Insurance Company CFI 012/2012).

 

36. For the purposes of discussion, since the alternative forum in this case is the local Dubai Courts, the doctrine of forum non conveniens is unrelated to the present case.

 

37. With regards to the New York Convention, it is unanimous between both parties and this Court that the New York Convention is inapplicable in the current claim under Article 1 of the New York Convention. Meydan is correct to assert there is no distinction between domestic and international awards with respect to awards rendered in the UAE thus rendering the New York Convention inapplicable.

 

38. Moreover, Meydan asserts in paragraph 4.3 of their Skeleton Argument that these proceedings have been put forth by Banyan to circumvent the otherwise required ratification proceedings in the Dubai Courts, which constitute an abuse of process. Paragraph 1.11 states, “It is plain that Banyan has commenced these proceedings for an improper purpose, namely to circumvent the requisite Dubai Court of First Instance and Dubai Court of Appeal ratification proceedings.” This Court rejects that argument, citing Article 7(2) and (3) of the Judicial Authority Law which provides for the procedure in which orders issued by the DIFC through Dubai Courts must be followed, as cited below:

“Article 7. Execution

2. Where the subject matter of execution is situated outside the DIFC, the judgments, decisions and orders rendered by the Courts and the Arbitral Awards ratified by the Courts shall be executed by the competent entity having jurisdiction outside DIFC in accordance with the procedure and rules adopted by such entities in this regard, as well as with any agreements or memoranda of understanding between the Courts and these entities. Such execution shall be subject to the following conditions:

a. …

 

b. …

 

c. …

 

3. In addition to Paragraphs (a), (b) and (c) of Clause (2) of this Article, when executing the judgments, decisions and orders issued by the Courts or Arbitral Awards ratified by the Courts through Dubai Courts, the following must be observed:

a. the Courts shall issue an execution letter to the Chief Justice of the Court of First Instance of Dubai Courts stating the procedure to be carried out;

 

b. the person requesting execution shall submit to the execution judge of Dubai Courts an application accompanied by a copy of the judgment, decision or order, legal translation of the same, and the execution letter;

 

c. …

 

d. …”

 

39. It is clear from the legislation above that the DIFC Courts and Dubai Courts cooperate to facilitate the recognition and enforcement of arbitral awards and it is customary, as evidenced by the legislation above, that both the DIFC Courts and Dubai Courts may recognize and/or enforce the same arbitral award.

 

40. Additionally, Justice Chadwick explains in his judgment in ARB-002-2013 that the jurisdiction of the DIFC Courts does not deprive the Dubai Courts altogether of any jurisdiction which they may have in respect to the recognition and enforcement of arbitral awards pursuant to Articles 31 and 236 of the UAE Civil Procedure Code. He explains in Paragraph 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)…”

 

41. I agree with the opinion of Justice Chadwick and as such reject Meydan’s claim that it is an abuse of process for Banyan to approach the DIFC Courts for recognition and enforcement of the Award and that the DIFC Courts are required to cede jurisdiction to the Dubai Courts, as put forth in paragraph 3.14 of Defendant’s Skeleton Argument.

 

Conclusion

42. As discussed above, there is no doubt that the DIFC Courts have jurisdiction under Article 5(A)(e) of the Judicial Authority Law as amended and Articles 42, 43 and 44 of the DIFC Arbitration Law to hear the recognition claim of the DIAC Award.

 

43. Accordingly, the Defendant’s application contesting jurisdiction is hereby dismissed.

 

44. In light of this decision, it is necessary to decide whether the Award should be recognised as binding within the DIFC according to Article 42(1) of the DIFC Arbitration Law No.1 of 2008. I hereby direct the parties to file submissions in this regard.

 

Costs

45. I will deal with the issue of costs by dividing it in two parts; the first being the cost of relisting the hearing from 30 April 2014 to 1 May 2014, and the second being the hearing of the Jurisdiction Application.

 

46. In relation to part one as per paragraph 45 above, I am satisfied that the Defendant should pay the costs of relisting the hearing from 30 April 2014 to 1 May 2014. I am also satisfied that this is a case for an award of costs on a standard basis to be assessed if not agreed.

 

47. My reasons for this view are on the basis that the Defendant contacted the Registry on 27 April 2014 with a request to reschedule the jurisdiction hearing to 29 April 2014, the day before it was scheduled, or 1 May 2014, being the day after it was due to take place. This was followed by an email on the same day at 08:20pm explaining that lead counsel for the Defendant, Mr Tim Taylor QC, was required to attend a hearing in the High Court in London on 30 April 2014.

 

48. Despite the fact that the hearing was fixed by the Registry on 6 March 2014 to be heard on 30 April 2014, and the fact that the Claimant did not agree to a hearing date change on such short notice, the hearing was nonetheless moved to 1 May 2014.

 

49. The Defendant should have been able to proceed on 30 April 2014 with or without Mr Tim Taylor QC. Assuming that the hearing in London was for an application for permission to appeal, I would expect lead counsel to attend the hearing by video conference or send alternative counsel in his place.

 

50. In relation to part 2 as per paragraph 45 above, being the costs of the Jurisdiction Application hearing, I direct that they be costs in the case.

 

Issued by:
Mark Beer
Registrar
Date of issue: 27 May 2014
At: 11am

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