Claim No. ARB 006/2024

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

BETWEEN

NEVILLE

Claimant/Applicant

and

NIGEL

Defendant/Respondent

REASONS FOR THE ORDER OF H.E. JUSTICE SHAMLAN AL SAWALEHI DATED 22 MAY 2024

Background

The parties

1. The Applicant is Neville (“Neville”), a company based in Orra, specialised in trading oil commodities. The Respondent is Nigel (“Nigel”), a company established in onshore Dubai free zone, that is in the business of trading and selling oil commodities, amongst other products.

2. The underlying dispute relates to a Sales Contract between the parties, dated 29 November 2023, for the sale and purchase of 6,000,000 barrels of crude oil, which Neville purportedly terminated on 28 March 2024 following in the heels of a dispute between the parties as to the delivery of oil which was anticipated to take place in December 2023. At issue are payments Neville made to Nigel in the sum of USD 230,228,799 which Nevilledemanded be repaid but was not.

Procedural History

3. By an ex parte application dated 3 April 2024, Neville sought urgent interim relief, including a freezing injunction order and an asset disclosure order (“Injunction Application”) in aid of a prospective Dubai International Arbitration Centre (“DIAC”) Arbitration against Nigel.

4. On 4 April 2024 after an ex parte hearing was held I granted the Injunction Application (“Injunction Order”).

5. On 7 April 2024, Nigel filed an Application to Discharge the Injunction Order (“Discharge Order”) strictly on the basis that the Dubai International Financial Centre (“DIFC”) Courts lacked jurisdiction, albeit also alleging that Neville breached its duty of full and frank disclosure at the ex parte hearing.

6. On 16 April 2024, Neville filed an Application to Continue the Injunction Order until either the dispute is finally resolved or Nigel pays security in the requisite sum (“Continuation Application”).

7. An inter partes hearing was held on 17 April 2024 to determine the Discharge Application and Continuation Application during which hearing Neville also confirmed it had filed a request for arbitration with DIAC.

8. On 18 April 2024 I invited the parties to provide their respective written submissions, including amongst others, on the issue of interpreting the term “Dubai Arbitration” as an ad hoc arbitration that can be seated in the DIFC and/or non-DIFC Dubai. The parties provided their supplemental written submissions on 22 April 2024.

9. The following are my Reasons for the Order dated 22 May 2024, reissued on 27 May 2024, dismissing Nigel’s Discharge Application and granting Neville’s Continuation Application.

Discussion

10. The issue of the DIFC Courts’ jurisdiction in this case turns on the interpretation of clause 13 of the Sales Contract which states “THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH ENGLISH LAW, DUBAI ARBITRATION.”

Summary of Nevilles position

11. Neville’s primary position is that clause 13 referencing “Dubai arbitration”, pursuant to Dubai Decree No. 34 of 2021 (“Decree 34”), and Article 20 of the DIAC Rules 2022, necessarily means DIAC arbitration seated in the DIFC, subject to the supervision of the DIFC Courts rather than an ad hoc non-DIFC Dubai arbitration.

12. In the alternative, and without prejudice to its primary position that clause 13 is a reference to DIAC institutional arbitration, with a default DIFC seat, Neville concedes that in the absence of any express definition, the words “Dubai arbitration” are broad and flexible enough, both legally and linguistically, to be interpreted as including an ad hoc arbitration seated in the DIFC, or ad hoc arbitration seated in non-DIFC Dubai.

13. It contends that if the words “Dubai arbitration” are construed as a reference to the seat of arbitration it is far more likely that the parties intended "Dubai arbitration" to be a reference to a DIFC seat, rather than a non-DIFC Dubai seat. In support of its position Neville relies on the following contextual factors being, amongst others, that the Sales Contract was an international contract, involving a subject matter that is international in nature, between international parties, one being a Swiss entity, the other party being a Dubai onshare freezone entity with a foreign shareholder and director from Hong Kong; the express agreement that contract will be be governed by English law; and the contractual negotiations and execution were carried out in the English language.

Summary of Nigel’s position

14. In a nutshell, Nigel’s position is that the true construction of clause 13, or more specifically the reference to “Dubai arbitration”, is not only that it is an ad hoc arbitration stipulating an arbitral seat but also that such arbitral seat can only mean non-DIFC Dubai. Nigel disputes that any of the contextual factors identified by Neville point towards a DIFC seat.

15. Further, it relies on Dhir v Waterfront Properties [2009] DIFC CFI 011 (8 July 2009) (“Dhir”), (1) Liman (2) Ludi v (1) Layli (2) Luni 030/2020 (29 July 2021) (“Liman”), Gaetan Inc v Geneva Investment Group LLC [2015] ARB 010 (16 May 2016) (“Gaetan”) and Investment Group Private Limited v Standard Chartered Bank [2015] DIFC CA 004 (19 November 2015) (“IGPL”) to support its interpretation that the arbitral seat can only be non-DIFC Dubai and for the proposition that a distinction must be drawn between interpreting jurisdiction clauses and arbitration agreements.

Analysis

16. It is common ground that the substantive law governing the Sales Contract is English law and that it is the well-known principles of contractual interpretation articulated in the English High Court decision in Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd (the “Ocean Neptune”) [2018] 2 All ER (Comm) 108 (“Lukoil”) that are applicable in interpretating clause 13.

17. In Lukoil Popplewell J (as he then was) noted that "the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant" and that "If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other".

18. With that in mind, I first turn to address Neville’s position that clause 13 is essentially a DIAC institutional arbitration. I do not disagree that the two words “Dubai arbitration” are broad and flexible, both linguistically and legally, to encompass many potential permutations of interpretation. I also do not foreclose the possibility that in a differently worded arbitration agreement and circumstances the words “Dubai arbitration” may well be interpreted to mean DIAC institutional arbitration. However, this is not, in my view, such a case.

19. While my interpretation of clause 13 in this instance should not be taken to mean that every reference to “Dubai arbitration” in an arbitration agreement will necessarily mean non-institutional ad hoc arbitration, I am unable to accept that in this case by merely using the two words “Dubai arbitration” the parties intended to stipulate a DIAC institutional arbitration pursuant to Decree 34, the DIAC Statute and the DIAC Rules 2022. It appears to me that if the parties intended it to be a DIAC institutional arbitration there would be at least some indicia demonstrating such an intent. There is none. This is of particular relevance given that the parties entered into the agreement after the legislative changes were effected by Decree 34, the DIAC Statute and the DIAC Rules 2022 which effectively make DIAC the primary international arbitration institution in Dubai.

20. Although Neville identified several contextual factors in support of its overall position, some of which I outlined in paragraph thirteen above, those factors are, in my view, more pertinent to the question of whether the parties intended the seat to be DIFC or non-DIFC Dubai rather than evidencing the parties’ intention pointing towards an institutional DIAC arbitration. Neville was unable to provide any persuasive reasons why clause 13 can be reasonably interpreted as being a reference to a DIAC institutional arbitration rather than an ad hoc arbitration.

21. Turning to Nigel’s position, I am equally unable to agree with its position, on the facts and circumstances of this case, that the reference to “Dubai arbitration” in clause 13 can only mean a non-DIFC seat or conversely it can never be interpreted as a reference to DIFC. As I stated in Liman “in this Court there is no general rule which applies in every such case. It is a matter of construing “the Emirate of Dubai” or “Dubai” as the case may be, in its context.”

22. I have considered the authorities Nigel cited and find they are of limited assistance since they are factually and contextually different and deal with differently worded contracts and/or clauses. Further, it seems prudent to use caution when considering authorities interpreting clauses contemplating institutional arbitration in the context of interpreting clauses contemplating ad hoc arbitration, as well as authorities that pre-date the more recent legislative changes made to the DIAC institutional arbitration regime.

23. Also, I do not accept that Dhir, Liman and Gaetan stand for the general proposition that the terms “Dubai” or “Emirate of Dubai” in arbitration clauses necessarily mean a non-DIFC Dubai seat in every case, as Nigel appears to suggest.

24. Notwithstanding the words “[t]he arbitration shall take place in the Emirate of Dubai” were interpreted in Dhir to mean a non-DIFC Dubai seat, I agree with Neville that this is not indicative that the DIFC Courts have decided definitively, as a matter of binding case law that a reference to “Dubai” necessarily equates to a non DIFC Dubai seat. Indeed, in Dhir the DIFC Court did not rule out “the possibility that there can be overriding indications in an arbitration agreement that the parties intended the DIFC to be the seat even if they expressly provide for another seat…”

25. It is also perhaps noteworthy that in Dhir, although the arbitration law was not expressly identified, the governing law was identified as being Dubai law, a likely factor that was considered by the Court when arriving at its conclusion on the intended choice of arbitral seat.

26. What the cited authorities seem to establish generally is that in the absence of express or unambiguous language in an arbitration agreement regarding arbitral seat or venue, the contractual interpretation of what the parties objectively intended will turn on the overall facts and circumstances specific to each case.

27. Nigel was also at pains to highlight authorities which it submits serve to caution the Court against drawing analogies between jurisdiction clauses and arbitration agreements because while “Courts of Dubai” could mean both DIFC and non-DIFC Dubai, when construing the choice of “Dubai” as the arbitral seat, it can mean only one of DIFC or non-DIFC Dubai.

28. In my view, the above proposition and the authorities Nigel relies on are, again, of limited assistance in this case since the central issue here is not whether the parties intended the “Dubai arbitration” to mean both DIFC and non-DIFC Dubai seats but rather whether the term “Dubai” in the context of an ad hoc arbitration is, firstly, capable of being interpreted as encompassing either a DIFC or non-DIFC Dubai and if so, secondly, which was more likely intended by the parties when referencing “Dubai arbitration”. In my view, the answer to the first question in the context of an ad hoc arbitration such as this which falls outside the purview of a DIAC institutional arbitration is in the affirmative.

29. The second question is based on the overall facts and circumstances of this case whether it is more likely than not that the parties intended DIFC instead of non-DIFC Dubai when referencing “Dubai arbitration” in clause 13. While Nigel’s characterisation of the contextual factors to support its position is one possible construction, having considered and weighed the overall factors, I prefer Neville’s characterisation of the contextual factors which is more consistent with business common sense.

30. While I do not disagree that the express choice of English law as the substantive law governing the dispute is not conclusive on the issue of the parties’ intent to select DIFC instead of non-DIFC Dubai, it nonetheless seems to me a relevant factor pointing to the parties’ preference to be governed by common law principles and by extension also an indicator pointing to a preference to be subject to the arbitral law and supervision of a common law court, such as the DIFC Courts.

31. Further, I am inclined to agree with Neville that except for Nigel’s incorporation in the onshore Dubai freezone, the international nature of the subject matter of the contract and the parties or their principals are factors that tip the balance in favor of DIFC instead of a non-DIFC Dubai seat. Although not determinative, there is also the uncontroverted affidavit evidence of the Chairman of Neville expressing his belief that the arbitration was subject to the DIFC Courts supervisory jurisdiction.

32. Finally, it appears to me that it is not open to Nigel on the one hand to take the position that Decree 34, the DIAC Statute and the DIAC Rules 2022 are inapplicable and irrelevant in interpreting clause 13 while at the same time seeking to rely on Article 4(1) of the DIAC Statute to support its preferred interpretation of the meaning of “Dubai arbitration”.

33. The remaining issues relate to the test for granting interim relief and whether Neville breached its duty of full and frank disclosure at the ex parte hearing.

34. Nigel did not make any submissions contesting Neville had satisfied the test for granting interim relief. I find it unnecessary to delve at any length into the merits of the test except to note that after considering Neville’s submissions regarding the existence of a good arguable case, the potential availability of the Nigel’s assets to satisfy any award or judgment entered against it, and a real risk of an unjustifiable dissipation of assets, I am satisfied that the conditions necessary to grant interim relief have been met and in all the circumstances that it is is just and convenient to grant and continue the Injunction Order sought.

Full and Frank Disclosure

35. Undoubtedly the importance of the duty of full and frank disclosure cannot be underscored. At the same time an alleged breach of the duty of full and frank disclosure being essentially an allegation of misconduct or default on the part of the Claimant or the lawyer is also serious which in my view, parties would be well served to advance with some restraint. As I mentioned during the hearing, not every failure to point to every detail or the failure to characterise a disputed issue or legal authority akin to how the Respondent itself would have characterised it amounts to a material non-disclosure.

36. Having considered the parties’ submissions and evidence, I am unable to concur with Nigel that Neville materially and deliberately breached its duty of full and frank disclosure, or that any such failure led to the Court being misled in a material way.

37. Nigel’s grievance in this regard is four-fold: that Neville failed to highlight to the Court (i) the decision in Dhir concerning the interpretation of the words “Emirate of Dubai” in the context of an arbitration agreement; (ii) the decision in Dhir and IGPL concerning the different approaches to be adopted when interpreting jurisdiction clauses as opposed to arbitration agreements and, in particular, the sharp distinction to be drawn between non-DIFC Dubai and the DIFC when interpreting the latter; (iii) Article 2 of the DIAC Rules concerning the scope of application of such Rules; or (iv) any of the English or DIFC authority on the effect of the parties to an arbitration agreement making reference to a place/venue/location. Nigel contends the foregoing failure resulted in the Court being misled in a material way.

38. From the outset of this case, a potential lack of the DIFC Courts’ jurisdiction, the competing interpretations of the terms “Dubai arbitration” within the broader context of the DIFC legal authorities, Decree 34, the DIAC Statute and the DIAC Rules 2022 were readily apparent to me. Equally, the ongoing debate surrounding the interpretation of the terms “Dubai” or “Emirate of Dubai” both in the context of arbitration agreements and jurisdiction clauses was also apparent to me.

39. Upon closer scrutiny, the essence of Nigel’s underlying concern appears to be that Neville did not go nearly far enough in disclosing the competing approaches to interpreting the term “Dubai arbitration” and refer the Court to the specific legal arguments which Nigel might have made in reliance of the legal authorities, which legal authorities Neville also failed to disclose. For reasons already discussed previously in these Reasons, namely the limited application of Dhir, IGPL and Gaetan in the specific facts and circumstances of this case, any failure by Neville to specifically draw these issues to the Court’s attention does not, in my view, amount to a material non-disclosure resulting in a breach of its duty of full and frank disclosure.

40. The Respondent, Nigel, shall pay the Claimant, Neville, its costs pertaining to all its Applications in ARB-006-2024 where the Claimant prevailed, to be assessed by the Registrar if not agreed.

Issued by:
Hayley Norton
Assistant Registrar
Date of issue: 2 July 2024
At: 2pm