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CFI 043/2014 DNB Bank ASA v (1) Gulf Eyadah Yadah Corporation (2) Gulf Navigation Holding Pjsc

CFI 043/2014 DNB Bank ASA v (1) Gulf Eyadah Yadah Corporation (2) Gulf Navigation Holding Pjsc

May 24, 2016

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Claim No: CFI-043-2014

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

 

IN THE COURT OF FIRST INSTANCE

BETWEEN

DNB BANK ASA

Claimant

and

(1) GULF EYADAH CORPORATION

(2) GULF NAVIGATION HOLDING PJSC

Defendants


 ORDER WITH REASONS OF H.E. JUSTICE ALI AL MADHANI


UPON reviewing the Defendants’ Application Notice CFI-043-2014/5 dated 18 April 2016 seeking a stay of the proceedings pending consideration of the conflict between provisions of the UAE Federal law and DIFC/Dubai legislation by the Union Supreme Court (the “Application”)

AND UPON reviewing the Claimant’s submissions in response to the Application dated 12 May 2016 and the Defendants’ submissions in answer dated 16 May 2016

IT IS HEREBY ORDERED THAT:

  1. The Defendants’ Application be dismissed.
  2. The Defendants shall pay the Claimant’s costs of the application, to be assessed if not agreed by the Registrar.

 

Issued by:

Natasha Bakirci

Assistant Registrar

Date of issue: 24 May 2016

At: 10am

SCHEDULE OF REASONS

The Application

1.The Defendants apply for an order referring the direct conflict between the Judicial Authority Law, Dubai Law No. 12 of 2004 (as amended by Law No. 16 of 2011) (“JAL”) and the UAE Constitution in the matter of recognition of foreign (court) judgments, therefore the unconstitutionality of the aforementioned laws, for determination by the Union Supreme Court (“USC”) pursuant to Articles 99(3), 121 and 151 of the UAE Constitution.

Background

2. DNB Bank obtained a judgment against the Defendants on 30 September 2014. The Judgment was issued by Mr Justice Cooke, sitting in the English Commercial Court.

3. The underlying dispute arose out of a loan agreement between DNB Bank and the First Defendant and a guarantee provided by the Second Defendant in respect of that loan. The English Judgment was in the sum of USD8.7m, plus costs.

4. DNB Bank commenced these proceedings for recognition and enforcement of the Judgment on 1 December 2014.

5. On 14 January 2015, the Defendants applied to the Court, contesting jurisdiction. The Defendants’ position was that the DIFC Courts only have jurisdiction to ratify foreign judgments where there are assets within the DIFC against which the judgment can be executed.

6. In evidence and in their skeleton argument below, the Defendants further argued that the claim was an abuse of process because it was an attempt to avoid seeking recognition and enforcement of the Judgment in the Dubai Courts.

7. The Court of First Instance dismissed the Defendants’ application. In dismissing their abuse of process argument I, as the trial Judge, found (at paragraphs 44 and 51 – 52) that the DIFC Courts had no power to refer a recognised foreign judgment to the Dubai Courts for execution. Even if successful, this claim could go no further. The premise for the abuse of process argument was therefore wrong and the argument failed.

8. The Claimant, although successful, appealed the judgment of the Court of First Instance on the basis that the resulting DIFC Courts judgment would not constitute a ‘recognised foreign judgment’, but a free-standing DIFC Courts judgment which would therefore fall under Article 7 of the JAL, and be enforceable in Dubai like any other DIFC Courts Judgment.

9. On 25 February 2016 the Court of Appeal issued its judgment, in which it held that:

(a) The DIFC Courts had jurisdiction to recognise and enforce foreign judgments, under Article 24(1) of the DIFC Court Law and Articles 5(A)(1)(e) and 7(6) of the JAL.

(b) The presence of assets in the DIFC was not a precondition to the DIFC Courts exercising jurisdiction.

(c) The proceedings were not abusive – there was nothing wrong with using the DIFC as a ‘conduit jurisdiction’.

(d) The Court of First Instance was incorrect to find that the resulting judgment would be a ‘recognised foreign judgment’. It would in fact be an independent DIFC Courts judgment. As such it would be a judgment within the meaning of Article 7(2) of the JAL, and so could be referred to and enforced by the Dubai Courts.

10. The Defendants, having lost their jurisdiction challenge at the appellate level as to why the judgment sought by the Claimant should not be issued (the hearing for which is to take place on 25 May 2016), have applied for a stay of these proceedings and a referral to the USC based on the fact that the UAE Civil Procedure Code (“CPC”) on the enforcement of foreign judgments (Article 235) relates to public policy, and this means that if a party is based outside of the DIFC then the DIFC Courts must apply the CPC. If they fail to do so, the Defendants contend that the DIFC Courts are acting unconstitutionally and depriving the Defendants of rights to challenge enforcement that they would normally have under the CPC.

11. The Defendants further argue that referral under Article 7 of the JAL means that the Dubai Courts would be forced to ignore the CPC and the rules it would normally apply to foreign court judgments.

12. Finally, the Defendants argue that the USC should consider the question of jurisdiction now, so that the Claimant is not left with the prospect of the Dubai Courts rejecting the DIFC Courts judgment when enforcement is sought using Article 7 of JAL.

The Respondent’s position

13. The Claimant contends that the argument put forward by the Defendants above was not an argument the Defendants had previously raised, despite extensive submissions before the Court of First Instance and the Court of Appeal.

14. The Claimant submits that similar arguments have been raised in relation to the enforcement of arbitral awards. In (1) Fiske (2) Firmin v Firuzeh (5 January 2015) ARB 001/2014, the Defendant (as here) sought a stay of the DIFC Courts proceedings and a referral of the matter to the USC to review the constitutionality of the DIFC Arbitration Law (the case concerning the recognition and enforcement of a foreign award). It was argued that the DIFC Arbitration Law was in conflict with superior Federal Law, which constitutes public policy in relation to enforcement of awards.

15. The Court then rejected the argument, finding that:

(a) (at paragraph 51) the rules of the CPC are not applicable in the DIFC or before the DIFC Courts by virtue of Federal legislation (Federal Law No. 8 of 2004(3)(2)), and that means there cannot (practically) be a conflict between an applicable rule (i.e. a DIFC rule) and an inapplicable one (i.e. a rule under the CPC).

(b) (at paragraph 53) it is public policy in the whole of the UAE not to apply the CPC within the DIFC.

(c) (at paragraph 55) the DIFC Courts should deal with matters before it according to the given laws, regulations, public policy or public order that are applicable to it within its capacity and jurisdiction. If the outcome of the DIFC Courts proceedings would result in conflict with the law or public policy of other or foreign courts’ jurisdiction (or is expected to in any way) then it is for that court according to its rules to decide whether to enforce the decision of the DIFC Courts or not for legitimate reason.

16. The Claimant further refers to the more recent case of Investment Group Private Limited (IGPL) v Standard Charted Bank (19 November 2015) CA-004-2015, where the Court of Appeal held that:

(a) (at paragraph 70) as was held by the USC in Case No.10/28 (hearing on 5 May 2002), a jurisdictional conflict that must be referred for resolution by the USC arises only when conflicting final judgments on jurisdiction have been issued by two or more courts of the UAE.

(b) (at paragraphs 83 and 94) the legal framework creating the DIFC and the DIFC Courts has been canvassed extensively by the DIFC Courts in Meydan Group LLC v Banyan Tree Corporate Pte Ltd (3 November 2014) ARB 005/2014. Having regard to the legislative history underpinning the establishment of UAE free zones (see paragraphs 83-88 of the IGPL judgment), the UAE free zones’ exemption from the CPC (in its entirety) is consistent with and sanctioned by UAE legislation. Far from subverting public goals, the exemption is an essential aspect of the state’s economic policy. It cannot be said that the DIFC’s exemption from the CPC is contrary to public order.

17. The Claimant further submits that the Court should follow the decision in Fiske and IPGL, and for the same reasons, dismiss the Defendants’ arguments and its request for a referral to the USC.

18. In response to the fact that this case refers to a foreign judgment rather than an arbitral award the Claimant asserts that it is immaterial. The arguments raised by the Defendants in both cases are the same: that there is a constitutional conflict because the rules applicable in the DIFC are different from the rules that apply in the rest of Dubai. The DIFC Courts have rejected such arguments and should continue to do so.

19. In response to the Defendants’ argument (at paragraph 12 above) that the Dubai Courts would be forced to ignore the CPC and the rules it would normally apply to foreign court judgments, the Claimant submits that the argument (that the DIFC Court should concern itself with the Dubai Courts’ position) was dismissed by the DIFC Courts in Fiske, where it was held (at paragraph 55) that if the outcome of the DIFC Courts proceedings would result in conflict with the law or public policy of other or foreign courts’ jurisdiction (or is expected to in any way) then it is for that court according to its rules to decide whether to enforce the decision of the DIFC Courts or not for legitimate reason.

20. The argument was also rejected in the Court of Appeal decision in DNB (paragraph 129), where it was held that ‘the DIFC Courts are not concerned with what happens in the Dubai Courts in which the Claimant seeks to enforce its judgment as it does not have the jurisdiction to dictate what they should do’.

21. In response to the Defendants’ third argument (paragraph 13 above) in regards to the timing when the USC should look at the matter of jurisdiction, the Claimant submits that it is not for the Defendants to concern themselves with the risks the Claimant may take in enforcing the resulting DIFC Courts judgment. If the Defendants are genuinely concerned about the risk, the best way for the Defendants to resolve it is to pay the judgment amounts without further delay.

Decision

22. As to the question whether this Court should follow the decisions in Fiske and IPGL (request for a referral to the USC), in my opinion the issue in this application and that in Fiske are identical insofar as whether any conflict exists between DIFC Law (JAL) and the Federal Law (CPC). Therefore I agree with the Claimant’s arguments in their response summarised above and the answer must be the same –  the argument of constitutionality must fail and be dismissed for the same reasons as in Fiske.

23. As to the Defendants’ attempt to distinguish this application from the issues dealt with in Fiske by contending that this case refers to a foreign judgment rather than an arbitral award, I agree with the Claimant’s assertion that it is immaterial. The arguments raised by the Defendants in both cases are the same: that there is a constitutional conflict because the rules applicable in the DIFC are different from the rules that apply in the rest of Dubai. Accordingly, this Court rejects such arguments.

24. As to the Defendants’ argument that if this application is not granted, the Dubai Courts would be forced to ignore the CPC and the rules it would normally apply to foreign court judgments, this argument must also fail.

25. In Fiske, it was held (at paragraph 55) that if the outcome of the DIFC Courts proceedings would result in conflict with the law or public policy of other or foreign courts’ jurisdiction (or is expected to in any way) then it is for that court according to its rules to decide whether to enforce the decision of the DIFC Courts or not for legitimate reason.

26. The same argument was also raised by the Defendants before the Court of Appeal and then rejected. In paragraph 129  it was held that ‘the DIFC Courts are not concerned with what happens in the Dubai Courts in which the Claimant seeks to enforce its judgment as it does not have the jurisdiction to dictate what they should do’

27. Lastly, as to the Defendants’ third argument in regards to the time when the USC should look at the matter of jurisdiction, the answer is that this application has nothing to do with issues related to jurisdiction, it rather concerns conflict of laws and the constitutionality of the application of the JAL versus the CPC.

28. Furthermore, if this Court sees no constitutional conflict between the JAL and the CPC since the latter is not applicable within the DIFC, then the time is not an issue which it has to consider.

Conclusion

29. The Defendants have not raised any credible arguments to justify staying the present proceedings and referring the matter to the USC.

30. The arguments raised relate to questions of jurisdiction and constitutionality that have already been rejected by the DIFC Courts in previous cases, notably the DNB Court of Appeal decision itself and Fiske.

31. It follows that in the circumstances of this case, the Defendants’ application should be rejected with costs.

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