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CFI 026/2014 Standard Chartered Bank v Investment Group Private Limited

CFI 026/2014 Standard Chartered Bank v Investment Group Private Limited

January 15, 2015

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Claim No: CFI-026-2014

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

 

IN THE COURT OF FIRST INSTANCE

BEFORE JUSTICE SIR DAVID STEEL

BETWEEN

STANDARD CHARTERED BANK

Claimant

and

 

INVESTMENT GROUP PRIVATE LIMITED

Defendant


 ORDER OF JUSTICE SIR DAVID STEEL


UPON reviewing the Defendant’s Application Notice CFI-026-2014/1 dated 21 September 2014 and supporting documents contesting the jurisdiction of the DIFC Courts;

AND UPON hearing Counsel for the Claimant and Counsel for the Defendant on 27 November 2014;

IT IS HEREBY ORDERED THAT:

1. The Defendant’s Application is dismissed.

2. The Defendant shall pay the Claimant its costs of the application within 14 days of the date of this Order, to be assessed by the Registrar if not agreed.

 

SCHEDULE OF REASONS

1. The Claimant (“SCB”) has issued proceedings in the DIFC Courts in respect of two loan agreements totaling US$128,968,280.52.  The Claim Form was issued on 6 August 2014.  In the acknowledgment of service, the Defendant (“IGPL”) gave notice that it intended to contest jurisdiction.  In its application notice issued on 21 September 2014, IGPL sought an order that the Court had no jurisdiction or, alternatively, that it should decline to enforce its jurisdiction on forum non conveniens grounds.

2. In the event, the challenge to the existence of jurisdiction was abandoned shortly before the hearing.  This concession was sound.  SCB’s principal office is in England.  It operates in the UAE and the DIFC through franchises located in both non-DIFC Dubai and in the DIFC.  Within the DIFC, SCB is a licensed entity and therefore is a DIFC establishment within the meaning of Article 5 of the Judicial Authority Law No. 12 of 2004, as amended.  It follows that pursuant to “gateway” 1(a) of Article 5 the DIFC Court has exclusive jurisdiction to hear the present claim at least within the Emirate of Dubai.

3. Likewise it was correctly conceded that the parties had not opted out of the jurisdiction.  In this regard, the two loan agreements had different jurisdiction clauses.  The 2009 Loan agreement was expressly subject to UAE law.  Clause 27 of the “General Terms” applicable provided as follows:

27.1     Jurisdiction of courts

(a)        Subject to sub-clause (b) below, unless a Finance Document provides otherwise, each Borrower submits to the exclusive jurisdiction of the courts of the United Arab Emirates to settle any dispute arising out of or in connection with any Finance Document (including a dispute regarding the existence, validity or termination of any Finance Document) (a “Dispute”). ”

4. There was some suggestion on behalf of IGPL that the DIFC Courts was not one of the courts of the UAE.  But any such contention would be misconceived.  The DIFC Courts is one of the courts of Dubai: see National Bonds Corp. v. Taaleem CA-001-2011.  By extension it is a court of the UAE.  Indeed within Dubai, it has exclusive jurisdiction.  Accordingly, absent an agreement to accord exclusive jurisdiction to another court, there is no basis for excluding the DIFC Courts as a court of the UAE.  It is thus a court of competent jurisdiction in respect of claims under the 2009 Agreement.

5. The 2010 Loan agreement was expressly subject to English law.  The provision as to jurisdiction was as follows:

 

“36.2     Jurisdiction

a)     The parties agree that the courts of England shall have jurisdiction to settle any disputes or proceedings which may arise in connection with any Finance Document (in this clause referred to as “Proceedings”) and that any judgment or order of an English court in connection with any Finance Document is conclusive and binding on them and may be enforced against them in the courts of any other jurisdiction.  This Clause 36.2(a) is for the benefit of the Finance Parties only and shall not limit the right of any Finance Party to bring Proceedings against the Borrower in connection with any Finance Document in any other court of competent jurisdiction or concurrently in more than one jurisdiction.

b)    The Borrower:

(i)   waives any objections which he may have to the English courts on the grounds of venue or forum non conveniens or any similar grounds as regards any Proceedings: and

 (ii)   consents to service of process by post or in any other manner permitted by the relevant law.”

SCB is a Finance Party within the meaning of Clause 36.  It has selected   the DIFC Courts and it follows that the DIFC Courts are a court of competent jurisdiction in respect of the 2010 Agreement.

6. It should perhaps be noted that the Claim Form also advances a claim under a “Share Pledge Agreement” which furnished security in regard to the 2009 Loan agreement.  This agreement was expressly subject to “the laws of the Emirate of [Dubai/Abu Dhabi] (SR) and the applicable federal laws of the UAE”.  As regards jurisdiction IGPL “irrevocably submits to the non-exclusive jurisdiction of the Dubai Courts.”

7. Against that background, IGPL now contends that, despite the DIFC Court having jurisdiction, it should not exercise that jurisdiction by virtue of the principle of forum non conveniens.  In short it was submitted that the Courts of Sharjah (being the jurisdiction in which IGPL was registered and conducted its business) were clearly the more appropriate and suitable forum from the perspective of the parties and the interests of justice.

8. This gives rise to a threshold issue as to whether the principle of forum non conveniens (FNC for short) has any application within the Emirates.  In Allianz Risk Transfer AG v. Al Ain Ahlia Ins. Co CFI-012-2012 it was held that the federal constitutional and jurisdictional provisions in regard to both individual Emirate and Federal courts precluded the application of the doctrine.  It was IGPL’s submission that this decision was wrong and I was invited not to follow it.

9. The first difficulty with this challenge is that the doctrine of FNC as introduced in England in Spiliada Maritime Corp v. Cansulex Ltd [1987] AC. 460 is directed at circumstances where a court in another state has competent jurisdiction.  It is not apposite to a situation where there is concurrent competent jurisdiction in different courts of the same state.

10. Under both loan agreements it is common ground that all courts of the UAE have jurisdiction.  As regards the 2009 agreement, those courts have exclusive jurisdiction.  Under the 2010 agreement, SCB could legitimately invoke jurisdiction in any court of the UAE.  The UAE is a sovereign state.  The jurisdictional dispute between the parties does not involve consideration of the appropriateness of the court of any other state.

11. The second threshold difficulty is that the courts of the UAE (other than the DIFC Courts) do not recognise or accept the Common Law concept of forum non conveniens.  In common with civilian law tradition, issues of jurisdiction and its exercise are not as a result susceptible to discretionary considerations.

12. In Allianz supra, the court was concerned with a dispute as to jurisdiction as between the courts of Abu Dhabi and the DIFC Courts.  It would appear that neither party raised the question whether the doctrine of FNC was of any application.  It follows that the court’s conclusion on the topic was obiter albeit highly persuasive.

13. The judgment of H.E. Justice Ali Al Madhani placed great emphasis on the UAE federal constitutional and statutory provisions which restricted if not eliminated the room for conflict between courts, with any residual dispute as to jurisdiction at federal or local level being resolved by the Union Supreme Court under the UAE Constitution; see Article 99 of the Constitution of the UAE and Article 33 of the Supreme Court Establishment Law No. 10 of 1973.

14. The difficulty that would arise if the DIFC Courts were to apply the FNC doctrine is neatly summarised in paragraph 62 of the judgment:

“62. Another difficulty arises if one is to assume that the DIFC Courts apply the FNC doctrine and relinquish jurisdiction in favour of another UAE Court, such as a Dubai Court or an Abu Dhabi Court.  The rest of the UAE Courts do not recognise by definition or apply the FNC doctrine, which means that the local court in its usual application might still decline to deal with the said case just because there is a jurisdictional link with the other court, which might even be the court which just relinquished the exercise over its jurisdiction.”

15. The judge formulated his conclusion on the issue at paragraph 64:

“64.  In conclusion, in my opinion, the doctrine of FNC was introduced to give Judges the discretion to stay proceedings in favour of another foreign competent court to enhance justice at the international level.  It is not applicable at a national level (inside one country) where the parameters of jurisdiction between the local courts are clearly defined and, more importantly, where there is a higher authority responsible to decide over jurisdictional conflicts.  If the FNC doctrine is said to be applicable at national level, there would need to be clarity (through clear policy) and authority to determine the most appropriate court.”

16. The issue had been left over for consideration in a later case in the context of the Dubai Courts and the DIFC Court in Corinth Pipeworks SA v. Barclays Bank PLC CA 002/2011.  The issue re-emerged in the Court of Appeal in Meydan Group LLC v. Banyan Tree Corporate PTE Ltd CA 005 2014.  Having concluded that there was no alternative forum even within the Emirate of Dubai (since the DIFC Court had exclusive jurisdiction), Justice Sir David Steel (with whom the other members of the court agreed) added:

40. This conclusion renders it unnecessary to consider whether the concept of forum non conveniens has any application within the Emirates (let alone within Dubai itself).  However, in Allianz Risk Transfer AG v. Al Ain Ahlia Ins. Co CF1012/2012, this court held that the federal constitutional and jurisdictional provisions in regard to both Emirate and Federal Courts precluded the application of the doctrine.  So far as the arguments took the point in the present proceedings, I would be minded to agree.

17. Having now had the benefit of full argument, I fully endorse H.E. Justice Al Madhani’s conclusion.  It follows that this application must be dismissed.  However in case I am wrong I go on to consider the outcome on the basis that the principles of FNC apply.

18. There was some dispute as to the documentary make-up of the 2009 Loan agreement but in broad terms as noted above the position in regard to the two loans and the share pledge agreement was as follows:

a)    The 2009 agreement was subject to the exclusive jurisdiction of the courts of the UAE.

b)    The 2010 agreement was subject to the jurisdiction of the English Courts albeit SCB would invoke the jurisdiction of any other competent court.

c)    The Share Pledge Agreement was subject to the jurisdiction of the courts of Dubai.

19. Whilst not the exclusive selection of the parties, it follows that the Dubai Courts (including the DIFC Courts) were a contractually agreed jurisdiction.  In the result, the burden on IGPL to show that Sharjah is clearly or distinctly a more appropriate forum is a heavy one.  In my judgment, IGPL has fallen well short of establishing any such thing.  The principal reasons for that conclusion are as follows:

a)   It is obviously desirable that the disputes arising from the two loan agreements and the Share Pledge Agreement are heard in the same place.  Although Sharjah is an Emirate within the UAE, the DIFC Courts are no less within the scope of potential fora under the terms of the 2009 Loan agreement.  Further, Sharjah was not selected by SCB as an alternative to English jurisdiction under the 2010 Loan agreement and Sharjah was not an agreed forum under the Share Pledge Agreement. The only forum satisfying the jurisdictional requirements of all three contracts are the courts of Dubai.

b)   The 2010 Loan agreement is governed by English law, which the DIFC Courts are much better placed to apply than the Sharjah Courts.

c)   All three agreements are in English. Translation of the agreements (and any relevant contemporary documentation) would be required for proceedings in Sharjah which would be costly, time consuming and likely to give rise to disputes.

d)    In terms of physical convenience there is nothing between Dubai and its adjacent Emirate.20. It follows that the application must be dismissed with costs.

20. It follows that the application must be dismissed with costs.

 

Issued by:

Mark Beer

Registrar

Date of issue: 15 January 2015

At: 10am

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