Claim No: ARB 002/2015
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
BEFORE THE DEPUTY CHIEF JUSTICE SIR JOHN CHADWICK
EDWARD DUBAI LLC
EEVI REAL ESTATE PARTNERS LIMITED
Hearing: 9 September 2015
Counsel: Sean Brannigan QC instructed by Clyde & Co for the Claimant
Judgment: 9 September 2015
JUDGMENT OF THE DEPUTY CHIEF JUSTICE SIR JOHN CHADWICK
Transcribed from the oral judgment handed down on 9 September 2015, revised and approved by the Judge.
THIS JUDGMENT IS NOT TO BE PUBLISHED UNLESS ANONYMISED
1. These proceedings were commenced by the issue of an arbitration claim form on 13 August 2015. The Claimant, Edward Dubai LLC (“Edward”) sought against the Defendant, Eevi Real Estate Partners Limited (“Eevi”), a company registered in the Dubai International Financial Centre, an order pursuant to Articles 42 and 43 of the DIFC Arbitration Law (Law No. 1 of 2008) for recognition and enforcement of a Dubai International Arbitration Centre (“DIAC”) arbitral award (“the Award”) issued in Dubai by a three member tribunal on 19 July 2015.
2. The claim form was supported, as was required, by a witness statement setting out the evidence relied upon. At paragraph 8.3 of that witness statement, it was disclosed that on 29 July 2015, very shortly after receipt of the final award from DIAC, Eevi had commenced proceedings against Edward in the Dubai Civil Courts seeking the annulment of the Award. A copy of the statement of claim filed in those annulment proceedings was exhibited to that witness statement.
3. The existence of pending annulment proceedings in the Dubai Civil Courts was material in the context of the claim in this Court for recognition and enforcement of the Award. Article 42, in Part 4 of the DIFC Arbitration Law, is in these terms (so far as material):
“42 The Recognition and Enforcement of Awards
(1) An arbitral award, irrespective of the State or jurisdiction in which it was made, shall be recognised 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…”
As this Court has held in earlier decisions, the requirement to recognise and enforce an arbitral award is mandatory; save in cases which fall within Article 44 of the DIFC Arbitration Law. Article 44 provides that:
“(1) Recognition or enforcement of an arbitral award, irrespective of the State or jurisdiction in which it was made, may be refused by the DIFC Court only:
(a) at the request of the party against whom it is invoked, if that party furnishes to the DIFC Court proof that:
(2) If an application for the setting aside or suspension of an award has been made to a Court referred to in paragraph (1)(a)(v) of this Article, the DIFC Court may, if it considers it proper, adjourn its decision and may also, on the application of the party seeking recognition or enforcement of the award, order the other party to provide appropriate security.”
4. The arbitration claim form issued in this Court on 13 August 2015 has not been served on the Defendant, Eevi; and no application for a stay has been made under Article 44(2) of the DIFC Arbitration Law. But, in the circumstances that proceedings for annulment of the Award have been commenced in the Dubai Civil Courts, it must be anticipated that when the arbitration claim form is served on Eevi, there will be an application to strike out those proceedings on the grounds that the Award is bound to be annulled; or, at the least, an application for an adjournment pending the decision of the Dubai Civil Court in the annulment proceedings.
5. In the course of this year, this Court has considered – on at least three occasions – the factors to be taken into account when deciding whether to grant an adjournment of a claim for recognition and enforcement of an arbitration award in circumstances where proceedings for the annulment of the award are pending in another Court; and, in particular, where annulment proceedings are pending in the Civil Court of Dubai. Whether or not to grant an adjournment of the claim for recognition and enforcement of the Award is not a matter for decision at this stage; but I have in mind that it is foreseeable that this Court will be asked to determine that question in due course. The position, at present, is that the proceedings for recognition and enforcement of the Award have been commenced in this Court; and that there is a mandatory requirement that the Court does recognise and enforce such an award unless one or other of the grounds under Article 44(1)(a) of the DIFC Arbitration Law are satisfied. As I have said, those grounds include proof that the Award has been annulled by a Court of the jurisdiction in which the award was made.
6. It was in those circumstances that, on 6 September 2015, the application which is now before this Court under reference ARB-002-2015/1 was issued on behalf of Edward. That application seeks an interim freezing order restraining Eevi from removing or dealing with any assets up to the value of US$224,850,276.52 (that being the amount said to be due under the Award with interest and costs) located both within and outside of the jurisdiction of this Court. Also sought is an order that Eevi be directed to provide full disclosure about the location of all property and assets within 96 hours of service of the order. The basis upon which that order is sought is put on two grounds, summarised in the application notice on two grounds: first, that Edward has a good arguable case in its arbitration claim against Eevi as set out in the affidavit of Ms N sworn on 2 September 2015; and, second, that Edward believes that, if the order is not made, there is a real risk of dissipation of assets of Eevi which would otherwise be available to satisfy the Award such that a freezing order is just and convenient in the circumstances. Those are, of course, the classic pre-conditions for the grant of a freezing order in this type of case.
7. I am satisfied, on the material before the Court, that Edward has a good arguable case for the recognition and enforcement of the Award sought in its arbitration claim commenced in this Court on 13 August 2015. It has the Award in its favour; and Article 42(1) of the DIFC Arbitration Law imposes a duty on this Court to recognise and enforce the Award unless one or more of the conditions set out in Article 44(1) of the DIFC Arbitration Law are satisfied. At this stage, none of those conditions are satisfied. The possibility that the annulment proceedings pending in the Dubai Civil Courts may lead to an annulment of the Award is not of itself, as it seems to me, a ground for asserting that there is not, at this stage, a good arguable case that the Award will be recognized and enforced by this Court. I accept, of course, that it is a matter for the Dubai Civil Courts whether or not to make an order for annulment in the proceedings which are before them; but, on the material which I have seen – which includes the statement of claim in the annulment proceedings – it is certainly not self-evident that the result of those proceedings will be an order for annulment.
8. The issue for determination, then, is whether or not Edward has demonstrated a real risk that, if not restrained, Eevi will dissipate its assets to frustrate enforcement of the Award. In that context, I was referred to the decision of Mr Justice Flaux, sitting in the Commercial Court in London, in the case Congentra AG v Sixteen Thirteen Marine SA (the “Nicholas M”)  EWHC 1615 (Comm);  2 Lloyds LR 602. At paragraph  of his judgment ( 2 Lloyds LR 602, 614) Mr Justice Flaux said this:
“49. The relevant legal principle in determining whether for the purposes of granting or maintaining a freezing order a claimant has shown a sufficient ‘risk of dissipation’ is that the claimant will satisfy that burden if it can show that:
(i) there is a real risk that a judgment or award will go unsatisfied, in the sense of a real risk that, unless restrained by injunction, the defendant will dissipate or dispose of his assets other than in the ordinary course of business…; or
(ii) unless the defendant is restrained by injunction, assets are likely to be dealt with in such a way as to make enforcement of any award or judgment more difficult, unless those dealings can be justified for normal and proper business purposes.”
At paragraph  of the judgment ( 2 Lloyds LR 602, 615) he went on to say this:
“53. …The charterers have shown a good arguable case of wrongful attachment by the owners in New York in support of an unsustainable case, involving either bad faith, malice or at the very least gross negligence on the part of the owners. The charterers have also shown a good arguable case that the owners have engaged in what at its lowest is discreditable conduct in relation to the maintenance of the attachment, involving perjury on the part of Captain Bourdis. Of course whether any of these matters are made out will be for the arbitrators in due course. For the present it is sufficient that the charterers have a good arguable case on those matters raised. Nonetheless those matters are significant in the context of assessing the risk of dissipation. In my judgment the charterers can show a good arguable case for the purposes of discharging the burden of showing a real risk of dissipation that what has happened in New York reveals that these owners are the sort of people who will stop at nothing to frustrate the charterers from making any substantial recovery by dissipating their assets, unless restrained by the freezing order.”
That factor may perhaps be colloquially referred to as the “has shown form” factor: the person against whom the injunction is sought has shown by past conduct that they are likely to stop at nothing to frustrate the enforcement of an arbitration award which has been made against them. And, in that context, features present in this case, but not present in Mr Justice Flaux’s case, are that there has been an award and that, in the course of that award, the arbitrators made findings of bad faith on the part of Eevi. This, then, is not a case in which it can be said that whether there was a lack of good faith “will be for the arbitrators in due course”; the arbitrators have made that finding.
9. At Section 4 of the affidavit of Ms N, sworn on 2 September 2015 in support of the present application, she described, in paragraph 4.5, the grounds upon which Eevi seeks annulment of the Award:
“4.5 The first ground on which the Defendant seeks annulment of the Final Award is a jurisdictional one. It seeks to argue again that the Arbitration Agreement did not expressly provide for the arbitration to be administered pursuant to the DIAC Rules. This issue was fully ventilated by the parties before the Tribunal and was the subject of the Jurisdiction Ruling [pp 211-229 of HN1]. I believe and the Claimant submits that the Jurisdiction Ruling was obviously correct and the Defendant’s first ground for annulment is bound to fail.”
So it cannot be said that the first ground upon which annulment is sought has not already been considered by the arbitrators; the arbitral tribunal has considered the DIAC jurisdiction point at length and in detail in its Award; and have dismissed it. In the annulment proceedings Eevi seeks to re-open a point which has already been determined against it in the arbitration.
10. Ms N goes on to say this, at paragraph 4.6 of her affidavit:
“The second ground on which the Defendant seeks annulment is that the Award “violates the equality principle” because it alleges that the Claimant’s appointed experts were provided with transcripts of witness testimonies which were not provided to the Defendant’s appointed experts.”
She points out at paragraph 4.7, the whole of which should be read into this judgment, that the reason why the transcripts of witness testimonies were not provided to Eevi’s appointed experts is because Eevi made a deliberate choice not to do so; the fact that the transcripts were not provided to Eevi’s experts was Eevi’s choice, not the consequence of any ruling by the arbitral tribunal or of any conduct on the part of Edward. That is a matter to which I shall need to return.
11. At Section 9 of her Affidavit, Ms N sets out details of Eevi’s assets which Edward had been able to identify. Those assets are substantial; they include a building – known as “Eevi Building” – in the DIFC which will be familiar to anyone who works in the vicinity of this Court. There are also a number of bank accounts.
12. At Section 10 of her affidavit, Ms N turns to the risk of dissipation. The first factor on which Edward relies is Eevi’s established lack of good faith. Ms N directs the Court to the findings made by the arbitral tribunal at paragraphs 412-416 of the Award, in a section of the Award headed “Question(vii): Termination: Good Faith”. The arbitral tribunal, after summarising the facts, came to the conclusion that the construction contract under which Edward was employed as contractor for the construction of “Eevi Building” was not terminated by reason of any non-performance by Edward; but in order to put the employer, Eevi, in a position where it could make a call for substantial monies under an advanced payment guarantee from National Bank dated 1 May 2007 and a performance bond in the form of a letter of guarantee from the same bank dated 14 April 2007. Again, the whole of those paragraphs of the Award should be read into this ruling; but the arbitral tribunal summarises its findings at the end of paragraph 415 and in paragraph 416:
“415. …In the light of these findings, three matters are clear to the Tribunal, First, in January 2010, the Respondent faced overwhelming financial difficulties in pursuing the Project with the Claimant remaining in place as contractor. Second, those problems would be substantially alleviated if the Respondent were in a position to make calls on the Claimant’s bonds. Third, as is evident from the proposals put forward during the course of the negotiations with Saudi Edward, the Respondent was prepared, notwithstanding its criticisms of the Claimant’s performance, to continue the Project with the Claimant in the role of contractor.
416. In these circumstances, the Tribunal is driven to the conclusion that the Respondent used A&B’s certificate and Clause 63.1 of the Contract as a pretext for obtaining the bond monies. Had the Respondent genuinely taken the view that it wished to be rid of a contractor which was failing to perform, it would not have engaged in the negotiations. The termination of the Claimant’s employment was, in the view of the Tribunal, effected not because the Respondent was genuinely concerned to rid itself of a defaulting contractor, but rather for the extraneous purposes of resolving its cash-flow difficulties. In the view of the Tribunal, the Respondent’s conduct in implementing that termination was not consistent with the spirit of the Contract, nor was it consistent with the Respondent’s obligation of good faith [which, as the Tribunal had pointed out at paragraph 413, arose under Article 246(1) of the Civil Transactions Law].”
So there, in the Award, is an express finding that Eevi will act contrary to good faith in order to pursue its own objectives.
13. The second point taken by Ms N as a ground for a fear of dissipation is at paragraph 10.4 of her Affidavit:
“Secondly, the Defendant has shown every desire to avoid complying with the Award, by taking points in the Annulment Proceedings which are obviously bad. That suggests that it will also seek to take other steps, such as dissipating assets, to avoid enforcement proceedings.”
The points which give rise to concern in this context go beyond the jurisdiction point to which reference has already been made; they include the ground described in the annulment proceedings as “the violation of equality principle”. That point is taken in the statement of claim in the Dubai Civil Courts – an English translation of which has been provided to this Court – under the general heading ‘Reasons of Invalidity of the Arbitration Judgment’:
“Second, violation of equality principle – the arbitration tribunal deprived the plaintiff appointed expert to attend the sessions based on this decision, the plaintiff experts did not attend the arbitration sessions in which the defendant witness’s testimonies have been heard. The defendant provided its expert with the plaintiff witness’s testimonies transcript. Therefore, the defendant expert had a better place than the plaintiff expert as the former was aware of all witnesses’ testimonies including the plaintiff witness testimonies while the latter was deprived such a benefit.”
In reading that paragraph, it is necessary to keep in mind that, in the context of the Dubai Civil Court annulment proceedings, “plaintiff” refers to Eevi and “defendant” refers to Edward.
14. As can be seen from that paragraph, the point which Eevi seeks to take in the annulment proceedings is that the arbitral tribunal deprived Eevi of the opportunity to have its appointed expert in attendance at the sessions in which Edward’s witnesses of fact gave their evidence; and, further, that Edward provided its expert with transcripts of the evidence of the witnesses of fact, but Eevi was not permitted to do so, and the like treatment was not accorded to Eevi. But it can be seen from the transcript of the proceedings before the tribunal that that is not what happened. The point that has been taken in the annulment is based on a misrepresentation of the facts as they appear from the transcript of the proceedings before the Tribunal. What actually in those proceedings appears in a ruling on day 5 (5 March 2015) is transcribed at pages 174 and 175 of the transcript: The parties agreed that their experts would not be present in the tribunal room while witnesses of fact gave their evidence. That was a non-binding agreement, made between the parties through their legal representatives. The arbitral tribunal made no order as to whether expert witnesses should, or should not, be present when witnesses of fact gave their evidence.
15. The question whether or not transcripts of the evidence given by witnesses of fact should be provided to the parties’ expert witnesses was raised at the end of day 5, which was a Thursday. The arbitral tribunal made it clear that that was a matter for the parties. The tribunal itself made no ruling that transcripts should not be provided to the experts. When the matter resumed on the Sunday, at the beginning of the following week, the tribunal enquired whether the Eevi expert had been shown transcripts of the evidence of the witnesses of fact. The response from Counsel for Eevi, recorded in the transcript of day 6, (8 March 2015), at page 12 lines 2-6 was this:
“There was a question as to whether our experts had been shown the transcripts, and after consultations with our client, it was decided not to show them the transcripts. They have not seen them”.
There was no explanation as to why Eevi had decided not to show its appointed expert transcripts of the evidence of the witnesses of fact. But it is clear beyond doubt that, if Eevi’s expert did not see those transcripts, the reason why he did not do so was the consequence of a decision taken by Eevi; it was not the consequence of any opposition from Edward or any ruling from the Tribunal. Counsel for Edward made that point at the tribunal hearing. He said this (day 6, page 14 in the transcript):
“The other side’s decision not to show the transcripts to their experts is of course a decision entirely of their making. Nevertheless, and being blunt, it is clear that they are maneuvering for enforceability points, not surprising given how the evidence made out for them last week but nevertheless regrettable. That being the case we’ve taken the view that subject to the Tribunal disagreeing with us, we will revert back to the Tribunal’s suggestion as to how they level the playing field and not have our experts in the room even after they’ve given evidence.”
16. The comment that Eevi was “maneuvering for enforceability points” has evident force in the circumstances that the point is now taken (on a false basis of fact) in the annulment proceedings. Had Eevi shown its expert transcripts of the evidence given by Edward’s witnesses of fact (as it was free to do), it would not be in a position to take the point that there was a lack of equality. It is plain, if I may say so, that Eevi took the decision not to show their experts those transcripts with the intention that it should be able, at the enforcement stage, to assert inequality of treatment at the tribunal hearing. Eevi’s conduct in this respect points strongly to the conclusion that it is willing to take whatever course seems to likely to further its own interests; without regard to the ordinary considerations of commercial morality or the proper conduct of the arbitration proceedings into which it had entered, ostensibly in good faith.
17. Ms N takes a number of other points. She points to the corporate structure in the Eevi group, which makes it easy to move assets within the group so that they are outside of the reach of the DIFC Courts notwithstanding that Eevi is a DIFC registered company; and to a past history of the misuse of a project development loan and of transferring funds to directors and shareholders within the group. Taken together, I am left in no doubt on the material before me that this is a case in which the Defendant is likely, if it can, to dissipate its assets within the DIFC in order to defeat the enforcement of the arbitration award. Put shortly, there is ample motive to do that – in order to avoid the enforcement against substantial assets in the DIFC of an award of some US$ 225 million; there is ample opportunity to do that, given the corporate structure within which Eevi operates; and there is “form”, in the sense of a past history of willingness to do whatever best serves Eevi’s interest without regard to ordinary commercial morality. In those circumstances, I think it right to grant the freezing order as sought.
18. There are a few alterations or amendments to the draft order that has been put before the Court; but, subject to those alterations, which were canvased in the course of the hearing, I make the order in the form sought, with a return date of Monday 14 September 2015.
19. I do not, at this stage, think it appropriate to require the Claimant’s cross-undertaking to be supported by security. The Order which I make restrains Eevi from dealing with its assets until after the conclusion of the hearing on Monday. It seems to me unlikely that there will be any substantial damage suffered in that short period over the weekend. I do not, of course, rule out the possibility that the Defendant may make an application for security on Monday or thereafter. If it does, that matter will be considered by the Court when that hearing takes place.
Date of Issue: 10 September 2015