Claim No: ARB 009/2019

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

OCIE

Claimant

and

ORTENSIA

Defendant

ORDER WITH REASONS OF H.E. JUSTICE OMAR AL MUHAIRI

UPON reviewing the Oshin arbitral award issued on 15 March 2019 and the subject of a Memorandum of Correction issued on 1 May 2019 (the “Award”)

AND UPON reviewing the Claimant’s without notice application under Article 42 of DIFC Law No. 1 of 2008 being the Arbitration Law and Part 43 of the Rules of the DIFC Courts (the “RDC”) for recognition of the Award dated 9 May 2019 (the “Recognition Application”)

AND UPON reviewing the Order of Judicial Officer Nassir Al Nasser recognising the Award and ordering that the Claimant was at liberty to enforce the Award dated 13 May 2019 (the “Recognition Order” or the “Order”)

AND UPON considering the Defendant’s application for the Order to be set aside on the grounds of material non-disclosure in breach of RDC 23.11 (the “Set-Aside Application”)

AND UPON hearing Counsel for the Defendant and Counsel for the Claimant at the hearing listed on 3 February 2020

AND UPON reviewing all the relevant documents on the Courts’ file

IT IS HEREBY ORDERED THAT:

1. The Defendant’s Set-Aside Application is dismissed.

2. The Order of Judicial Officer Nassir Al Nasser is upheld.

3. The stay on the Order is lifted.

4. The Defendant is to pay the Claimant’s costs of the Set-Aside Application on the standard basis, to be assessed by a Registrar if not agreed.

Issued by:
Nour Hineidi
Deputy Registrar
Date of issue: 19 February 2020
At: 11am

INTRODUCTION

1. The Defendant applies for an order setting aside the Order of Judicial Officer Nassir Al Nasser issued on 13 May 2019 (the “Set-Aside Aside”). That order was made without notice on the application of the Claimant for recognition of an Oshin arbitral award issued on 15 March 2019 and the subject of a Memorandum of Correction on 1 May 2019 (the “Award”), awarding the Claimant AED 95,550,936.50. The basis of the Defendant’s application, in short, is that, on 15 and 16 of April 2019, it instituted proceedings in Abu Dhabi and onshore Dubai, respectively, challenging the underlying arbitration agreement and, in turn, the Award, while the Claimant, the Defendant submits, wrongfully omitted to mention either of the proceedings to this Court when making its initial without notice application, thereby failing to fulfil its “clear and heavy” disclosure duty under RDC 23.11.

BACKGROUND

2. The Defendant was the main contractor on a project to construct a new campus in Abu Dhabi. The Claimant was engaged as a subcontractor for certain mechanical, electrical and plumbing works. The contract between the parties (the “Contract”) contained an arbitration agreement (the “Old Arbitration Agreement”) which required the parties to refer any dispute to arbitration, to be held in Abu Dhabi and heard by a single arbitrator under the Procedural Regulations of the Omerzay (the “Omerzay”). In 2016, however, the parties agreed to delete from the sub-contract the Old Arbitration Agreement and in its place substitute an agreement that any dispute arising out of the sub-contract be resolved by a three-person arbitral panel under the Arbitration Rulesof the Oshin seated in the DIFC (the “New Arbitration Agreement”). A dispute arose and the Claimant filed a Request for Arbitration with the Oshin in May 2016. Arbitration proceedings then proceeded, resulting ultimately with the Award made by the tribunal on 15 March 2019.

3. On 14 April 2019, the Defendant issued proceedings in Abu Dhabi challenging the validity of the New Arbitration Agreement. The basis of that challenge, in short, was that, the Defendant submitted, the provisions of the UAE Federal law which governed the Contract denied the parties the option of changing their arbitration agreement from one governed by the Omerzay to one governed by the Oshin. The Defendant also submitted that the Claimant is a sole proprietorship owned by O’Shay and that under the law of the UAE, sole proprietorships have no juristic personality of their own and no financial liability or rights distinct from those of their owners. There was a hearing in the Abu Dhabi courts on 1 May 2019 which both parties’ legal representatives attended. Further hearings took place on 13 May, 22 May, 12 June, all of which were attended by both parties’ legal representatives. As matters stand today, the Defendant’s application has been dismissed by the Abu Dhabi court, but it remains under appeal.

4. On 16 April 2019, the Defendant had issued proceedings in the onshore Dubai courts, too, seeking annulment of the Award. As well arguing for the invalidity of the New Arbitration Agreement by reason of the matters submitted to the Court in Abu Dhabi, the Defendant also argued that the Award breached public order laws in including usury interest at an unacceptably high rate and by the fact that the fees for the arbitrators and lawyers were excessive. The Defendant also complained in the onshore-Dubai proceedings that the Award was invalid because of its failure to identify the addresses and nationalities of the arbitrators and because the tribunal rendered their Award long after the period allowed for determination, being six months. The Dubai proceedings were duly served on the Claimant and hearings took place on 1 May, 29 May and 12 June in the presence of the Claimant’s legal representatives.

5. Earlier, on 7 May 2019, the Claimant had sent a demand letter for payment of the AED 96 million to the Defendant’s former lawyers. Subsequently, on 9 May 2019, the Claimant issued a Part 8 Claim Form, seeking a without notice order for recognition of the Award under Article 42 DIFC Law No. 1 of 2008, being the Arbitration Law (the “Arbitration Law”), and RDC 43.62.

6. On 13 May 2019, the Court issued the order of Judicial Officer Nassir Al Nasser duly recognising the Award and ordering that the Claimant was at liberty to enforce the Award (the “Enforcement Order” or the “Order”). The Enforcement Order gave the Defendant fourteen days in which to apply to have it set it aside, in accordance with RDC 43.70 to 43.72.

7. On 29 May 2019, the Defendant filed an application to the Joint Judicial Committee (the “JJC”), under Decree 19 of 2016 on the basis that the DIFC proceedings and the onshore Dubai proceedings were in conflict. The Defendant had claimed that this application should have had the effect of automatically staying the DIFC proceedings pending the decision of the JJC under Article 5 of Decree 19. However, the Deputy Registrar of DIFC Courts wrote to the Defendant on 30 May 2019 explaining that, as clarified at a recent meeting with the JJC, all proceedings in the DIFC Courts and the Dubai Courts would remain on foot until the Registry received a stay order from the JJC.

8. As the Award had been recognised by the DIFC Court, on 9 June 2019, the Claimant took a further step, issuing enforcement proceedings. Ten days later, however, on 19 June 2019, the Defendant served two applications to the DIFC Courts. Firstly, the Defendant served an application for an extension of time to bring an application to set aside the Enforcement Order, as by then twenty-one days had already elapsed since the expiry of time for applying to set aside the Enforcement Order. Secondly, it served an application to set aside the Order specifically on the grounds of material non-disclosure under RDC 23.11. The alleged material non-disclosure was that neither the claim nor the supporting affidavit made mention of the fact that the Award was subject to challenge before the Abu Dhabi and onshore-Dubai courts. The Defendant submitted in its application that the existence of closely related proceedings in these courts which deal with the validity of the subject New Arbitration Agreement and the Award are matters highly relevant to the Claimant’s Recognition Application.

9. In relation to the Defendants first application, on 26 June 2019, the DIFC Courts granted the extension of time to bring a new application to set aside the Enforcement Order, giving it until 24 July 2019 to do so. Meanwhile, the DIFC Registry contacted the parties with a view to listing the Defendant’s second application for hearing on 23 July 2019. By email to the Claimant’s lawyers dated 14 July 2019, the Defendant’s lawyers stated that the Defendant intended to file a new application to set aside the Enforcement Order on or before 24 July 2019, and requested the Claimant’s consent to postponing the hearing of the Defendant’s second application so that it could be heard together with this new application. The Claimant agreed and the Defendant’s second application was listed by the DIFC Courts to be heard on 5 September 2019.

10. In the event, the Defendant did not make a new application to set aside the Order. Instead, on 21 July 2019, it filed a third application with the DIFC Courts requesting a stay of the DIFC proceedings pending the outcome of the JJC proceedings. The Defendant also requested that this third application be determined on an urgent basis prior to 24 July 2019, that is, the date of the extended deadline for service of a new application to set aside the Enforcement Order.

11. The Court acceded to the Defendant’s request that it act urgently. The DIFC Courts granted the stay to the DIFC Proceedings by an order dated 22 July 2019 and vacated the hearing of the Defendant’s second application listed for 5 September 2019.

12. On 11 December 2019, the JJC rendered a decision on the Defendant’s application. The JJC dismissed its submissions, determining that the DIFC Courts alone has jurisdiction over the instant matter matter, and ordering that the Dubai Court cease hearing the matter accordingly. As such, the proceedings in onshore Dubai have now come to an end.

13. The following day, the Claimant wrote to the DIFC Courts’ Registry requesting that the Court lift the stay on the DIFC Proceedings under Article 5 of Decree 2016. The stay was duly lifted by an order of myself, dated 18 December 2019. The DIFC Courts’ Registry subsequently emailed the parties on 22 December 2019 confirming that, following the lifting of the stay, the Defendant had until 4pm on 23 December 2019 to file any new application to set aside the Enforcement Order. However, the Defendant chose not to file a new application to set aside the Order. Instead, by email to the DIFC Courts’ Registry on 22 December 2019, the Defendant’s lawyers indicated that the Defendant did not intend to file a further application to set aside the Order, and would instead pursue only its second application, that is, its application for an order setting aside the Enforcement Order specifically on the grounds of material non-disclosure under RDC 23.11.

DISCUSSION

14. The narrow issue to be determined now is, firstly, whether the matter in question was not disclosed by the Claimant when making its without notice application for recognition of the Award and, if not, secondly, whether this matter was a “relevant matter” for the purposes of RDC 23.11 such as to warrant setting aside the Order in the instance of a breach. I will discuss each question in turn now.

NON-DISCLOSURE

15. The matter in question that the Defendant argues was not disclosed to this Court is the proceedings in both the Abu Dhabi and onshore Dubai courts which were ongoing at the time of the Claimant’s application. The Claimant says that its application for recognition of the Award made no secret of the fact that the Defendant had brought proceedings against it in the Abu Dhabi Court and the Dubai Court. The supporting Affidavit of the application noted the Defendant’s recent change of name which was said to have come to the attention of the Claimant “through Abu Dhabi and Dubai Court submissions filed by the Defendant.” The Claimant says that this reference to submissions filed by the Defendant in these courts demonstrates that there was no attempt by the Claimant to conceal the fact of the parallel proceedings from the DIFC Court and that, on the contrary, the Claimant drew this Court’s attention to those proceedings at the earliest opportunity. The Defendant says that this reference in the aforementioned affidavit “is the most oblique reference one could imagine” and that “the passing reference to the Abu Dhabi and Dubai Court proceedings is mentioned only in the context of [the Defendant’s] change of name, without even saying that the proceedings relate to the extant case let alone what defence [the Defendant] might posit in those cases.”

16. In my view, the Defendant is correct in its analysis. The reference to “submissions filed by the Defendant” in the Claimant’s supporting affidavit does not amount to disclosure. As the Defendant highlights, this passing reference does not even indicate that the proceedings in question related to the instant case nor, importantly, what the pleadings were in them. Moreover, the reference does not say when these proceedings were initiated, much less that they were then ongoing, and nor is it unambiguous as to whether the Claimant was even involved in these proceedings. Accordingly, I find that the matter in question – the then ongoing proceedings in Abu Dhabi and onshore Dubai – was not disclosed to this Court in the Claimant’s application.

A DUTY OR OTHERWISE TO DISCLOSE THE MATTER

17. The next question for me to consider is whether the Claimant had a duty to disclose the matter in question when making its application. To determine this, it is essential to look at the relevant RDC, RDC 23.11, which provides:

“On all applications without notice it is the duty of the applicant and those representing him to make full disclosure of all matters relevant to the application including, in particular, disclosure of any possible defences that may be available to the respondent in response to the application.”

The first part of RDC 23.11 is unambiguous: the duty created by the rule arises upon all applications without notice. As for the correct understanding of the nature of that duty, this necessitates some closer analysis. For starters, RDC 23.11 requires an applicant to make full disclosure of all matters “relevant” to the application being made. The first question, then, is what amounts to a relevant matter?

18. The Defendant relies on several authorities in making its case that the Claimant had failed in its duty to disclose a relevant matter. Most relevantly for the present discussion, the Defendant cites the English Court of Appeal in Knauf UK GmbH v British Gypsum [2001] EWCA Civ 1570, which stated: “…there is a ‘golden rule’ that an applicant for relief without notice must disclose to the court all matters relevant to the exercise of the court's discretion.” The basis of the Defendant’s application is, of course, that it claims that the Claimant failed to disclose that the Award was subject to challenge by the Defendant in the courts of Abu Dhabi and onshore Dubai when it issued the instant claim for recognition of the Award and that this matter was relevant to the Court’s decision on the application. In reply, the Claimant submits that those proceedings were not “relevant to the application” and did not amount to “possible defences” to the application as “neither the Abu Dhabi Court nor the Dubai Court had any jurisdiction over this matter.”

19. I agree with the conclusion of the Claimant – that the proceedings were not relevant to the application and did not amount to possible defences to the application – and, largely, with its reasoning. But for me, the merits or otherwise of the non-DIFC proceedings are not the main issue. Instead, the crux of the matter is whether or not the Court had any discretion upon the application for recognition of the Award which required the Claimant to respond by way of full disclosure of all matters relevant to the exercise of that discretion – this is what the ‘golden rule’ requires. If a court has no discretion on an application, it follows that no matter can acquire the quality of relevance in the context of the application.

20. To proceed, the Article under which an arbitral award is recognised and enforced by this Court is Article 42(1) of the Arbitration Law, which provides:

“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…” (emphases added)

The word “shall” in Article 42(1) indicates that there is no discretion on the part of the Court, subject to Article 44 (Article 43 is not relevant to the issue of discretion); unless Article 44 applies, an arbitral award must be recognised as binding within the DIFC and, upon application in writing to the Court, must be enforced. As for Article 44, it begins:

(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:

The word “may” in Article 44(1) indicates discretion on the part of the Court. The word “only” which follows it indicates that the ensuing list – from Article 44(1)(a) to (b)(vii), which incorporates into DIFC law Article V of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards – is exhaustive: the Court’s discretion in applications for recognition and enforcement can only operate within the precincts of Article 44(1)(a) to (b)(vii).

21. As discussed above, before the Claimant began these DIFC Courts proceedings, the Defendant had begun proceedings in Abu Dhabi and onshore Dubai. It is not necessary to recount the Defendant’s pleadings in both of those proceedings. Suffice it to say that the Defendant variously pleaded incapacity on the part of the Claimant to take part in arbitration proceedings and that the Award and Arbitration Agreement were invalid as they were contrary to the public policy of the UAE. In my view, these pleadings adequately engaged grounds for refusal of recognition or enforcement of an arbitral award in Article 44, namely Article 44(1)(a)(i) and (b)(vii). Article 44(1)(a)(i) provides:

Article 44(1)(b)(vii) provides:

The question, then, is whether the Claimant had a duty under RDC 23.11 to disclose to the Court on its application these possible defences that may have been available to the defendant.

22. It can be said at once that the Court’s discretion cannot be enlivened by its notice of a possible defence against the recognition or enforcement of an arbitral award under Article 44(1)(a)(i), even in the context of without notice applications. This is because Article 44(1)(a)(i) requires a defendant to firstly request the DIFC Court to refuse recognition or enforcement of an arbitral award and secondly to furnish the requisite proof before the Court can act under the authority of the “may” of discretion of Article 44(1). By definition, on a without notice application, the Defendant is unaware of the application and so is not in a position to enliven the Court’s discretion. Hypothetically speaking, even if pursuant to RDC 23.11 a Claimant on a without notice application provided the Court with conclusive evidence that Article 44(1)(a)(i) was satisfied, in my view, the Court would not be able to exercise any discretion it has under Article 44(1) until the Defendant, himself, took the required steps. Accordingly, I find that the Claimant had no duty to disclose to the Court that the Defendant may have a defence under Article 44(1)(a)(i) as such a disclosure could not qualify as “relevant” to the application insofar as it could not enliven the Court’s discretion, much less inform it in deciding the application.

23. A duty to disclose a possible defence under Article 44(1)(b)(vii) is not so easily dismissed, however. This provision enables the Court to take a position ex officio – “…if the DIFC Courts finds that…” – and so under this provision the Court has discretion to refuse recognition or enforcement of an arbitral award if it finds that enforcement of the award would be contrary to the public policy of the UAE. Strictly speaking, there is no need for an intervention by the defendant under Article 44(1)(b)(vii). However, in practice, the public policy exception is reserved for exceptional circumstances and the standard of proof required for it to be established is very high. Refusals under this exception are accordingly rare. Indeed, I am unaware of an occasion when this Court refused to recognise or enforce an arbitral award for public policy reasons. The ‘UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)’ (2016 edition) provides helpful guidance for present considerations:

24. This last passage – which is consistent with the jurisprudence of England and Wales – is extremely important in the present context: despite the fact that, strictly speaking, a court may act ex officio under Article 44(1)(b)(vii), in practice the burden of proof in establishing that public policy has been breached rests on the defendant in recognition and enforcement proceedings (see Gater Assets Ltd. v Nak Naftogaz Ukrainiy [2007] EWCA Civ 988, [2007] 2 CLC 567). Only after a defendant has discharged this burden will the court usually be willing to make a finding under Article 44(1)(b)(vii). As such, while the wording of Article 44(1)(b)(vii) allows the Court to make a finding on public policy on its own motion, the burden of proof with respect to establishing a breach invariably rests on a defendant. Moreover, and more importantly perhaps, this commercial and civil Court will rarely be in a position to make findings related to the public policy of the UAE without the assistance of expert evidence, while I do not think that a claimant has a duty under RDC 23.11 to adduce such evidence. As such, that a defendant may have a defence under Article 44(1)(b)(vii) will, if disclosed, be a matter of interest, perhaps, but rarely of “relevance,” insofar as, alone, it will not enable this Court to act upon its Article 44(1)(b) discretion.

25. Much like with Article 44(1)(a) defences, then, a defendant who may have a defence under Article 44(1)(b) will be required to establish his case himself, while, again, this is not possible in the context of without notice applications. It follows that, save in exceptional circumstances, the Court will not act upon any discretion conferred on it by Article 44(1)(b), even if it has notice of a relevant possible defence which may be available to the defendant. In conclusion, while Article 44(1)(a) and (b) are different in law in terms of the discretion the Court has under each provision, in my view, for all intents and purposes, they are the same in practice. The Court’s discretion under Article 44(1)(b) functions as a ‘safety valve,’ but one that is rarely used or needed. In all but exceptional cases, it is a defendant’s responsibility to establish that any of the grounds in Article 44(1)(b) are satisfied.

26. The above does not entail that in applications for recognition or enforcement of arbitral awards a defendant does not have or has not had an opportunity to raise any possible defences that may be available him. On the contrary, a defendant will have had an opportunity to do so and he will be afforded another opportunity to do so again. I will say more about the opportunity that a defendant is given after a recognition or enforcement order is issued below, under the heading ‘Further Considerations.’ Regarding an opportunity which a defendant already will have had, it must be borne in mind that at the time of an application for recognition of an arbitral award, firstly, the award will already have been issued and, secondly, it will not have been complied with. Moreover, and more importantly, in most cases – as in the present case – by this stage, a defendant will not have applied to the Court for the arbitral award to be set aside under one of the grounds in Article 41 of the Arbitration Law, which contains an exhaustive list of the recourses available to an award debtor against arbitral awards made in the seat of the DIFC. For the instant case, it is noteworthy that Article 41 includes a provision substantially identical to Article 44(1)(b)(vii), namely Article 41(2)(b)(iii):

(It is also noteworthy that Article 41 contains a provision substantially identical to Article 44(1)(a)(i), namely Article 41(2)(a)(i), and so the Defendant could have applied for the Award to be set aside on the basis of incapacity, too.) In my view, and to use the language of RDC 23.11, at the time the Claimant in the instant matter made its application for recognition and enforcement, and in the absence of an application made under Article 41 of the Arbitration Law by the Defendant, both the Court and the Claimant were entitled to presume that any matters relevant to the application, that is, relevant to the Court’s discretion, if any, would have already been the subject of an application for setting aside the award by the defendant or else be without substance or importance.

27. In the DIFC Court of Appeal case of Ithmar Capital Ltd v 8 Investment FZE [2008] CA 001, the then Chief Justice Sir Anthony Evans held at paragraph 34 that the duty in without notice applications to disclose any defences or possible defences which a defendant may rely upon excluded defences “which can be dismissed as without substance or importance.” In my view, the Claimant was entitled to consider the public policy defences raised by the Defendant in the Courts of Abu Dhabi and Dubai as “without substance or importance” on several bases. Firstly, as stated above, the Defendant did not raise those defences itself when the Award was issued in this Court, being the supervisory court of the arbitration centre that issued the Award, the only court that there could be a consensus between the parties regarding jurisdiction to determine the defences and being, crucially, a court that’s laws enabled it to deal with the entirety of the challenges raised. On this basis alone, in my view, the Claimant was entitled to regard the Defendant’s defences as without substance or importance. Moreover, in all likelihood, neither the Abu Dhabi nor the onshore Dubai courts had jurisdiction to determine the challenges. The Defendant had itself entered into the New Arbitration Agreement which named the DIFC as the seat of arbitration and which stated that any arbitration would be conducted under the Rules of the Oshin before taking part in Oshin arbitration when a dispute arose, thereby, in my view, waiving any right it may have had to challenge the jurisdiction of the Oshin. Moreover, the inherent contradiction in the Defendant issuing proceedings in onshore Dubai while its position in the Abu Dhabi proceedings was that only the Abu Dhabi Courts had jurisdiction similarly undermines the substance and importance of its resistance to the Award.

28. The position is even stronger when the following is considered. After receiving the Recognition Order, the Claimant, on 15 May 2019, served it on the Defendant. The Order stated:

“The Defendant may apply to set aside this Order within 14 days from the date in which the Defendant is served with this Order. The Final Award shall not be enforced until after the expiration of that period or, if the Defendant applies within that period to set aside the Order, until the application is finally disposed of.”

In the event, the fourteen-day period expired on 29 May 2019 without the Defendant having filed any application to set aside the Order and nor did it make any allegation of material non-disclosure. As the Claimant has correctly submitted, this is another inherent contradiction in the Defendant’s position: whilst it complains that the Claimant failed to disclose the substance of the non-DIFC proceedings, the Defendant itself chose not to make any submissions or otherwise disclose the substance of those proceedings to the DIFC Courts within the fourteen days permitted for a set aside application. This indicates, I think, and as the Claimant submits, that the Defendant did not itself regard the existence of those proceedings to be of great relevance. The Claimant concludes that this argument appears only to have been deployed as a last resort to delay and obstruct enforcement. I am inclined to agree with the Claimant. It is worthy of mention that after being given an extension of time to make an application for the Order to be set aside, the Defendant, on its own accord, decided to not pursue the defences it claimed it had which engaged Article 44(1)(a)(i) and (b)(vii) of the Arbitration Law. While this relatively recent development in the proceedings could not form part of the Claimant’s consideration when making its application, to me, it is quite a strong indication that the Defendant, again, does not consider the defences to be of substance or importance; and to the extent that it does not, I do not think that the Claimant should be prejudiced now for having come to the same conclusion earlier.

29. In written submissions, the Defendant has submitted that “the deliberate choice made by [the Claimant] and its advisers to conceal the existence and details of the Abu Dhabi and Dubai proceedings from the eyes of the DIFC Court should lead the court to set aside the order of 13 May 2019 and to not reinstate it.” As Mr Justice Christopher Clarke said regarding the discharging of orders obtained in breach of the duty of full and fair disclosure on without notice applications in the case of Millhouse Capital UK v Sibir Energy [2008] EWHC 2614 (Ch), at paragraph 102,

“the application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice…. The jurisdiction is penal in nature and the courts should have regard to the proportionality between the punishment and the offence.”

Given the aforesaid, in my opinion it would be entirely disproportionate to apply this penal jurisdiction in the instant matter and to discharge the Order, not to mention refusing to reinstate it, on the basis of non-disclosure. In my opinion, the Claimant did not have a duty under RDC 23.11 to disclose the matter in question as it was not relevant to its application insofar as the Court did not have discretion to act upon any disclosure or was not in a position to act upon any discretion it may legally have had and, moreover, as the Claimant was entitled to regard those parts of the matter that the Court legally had discretion to act upon as being without substance or importance. Accordingly, the Defendant’s Set-Aside Application is dismissed.

FURTHER CONSIDERATIONS

30. As Mr Justice Christopher Clarke stated in the aforementioned case of Millhouse Capital UK:

“If the Court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.” [102]

As such, the duty of full and fair or frank disclosure is a heavy duty. While in my view the foregoing was sufficient to make a decision on the Defendant’s Set-Aside Application, for completeness I will make a few further observations, in particular addressing the question of whether RDC 23.11 creates an additional requirement on the part of an applicant for orders recognising or enforcing arbitral awards which, if breached, may render any order subsequently granted liable to being set aside.

31. Relevance has been discussed above but I think there is another aspect of the term which is important. In my view, the quality of relevance or otherwise pertaining to a particular matter will be determined not just by discretion but also by the type of application being made. (These two considerations are of course intimately connected and are often inseparable.) The Defendant has emphasised in submissions that the duty of RDC 23.11 applies to all applications without notice but has failed to provide the Court with assistance in terms of determining how ‘relevance’ might differ from type of application to type of application. For me, it goes without saying that ‘relevance’ in an application for, say, a freezing order will be different to ‘relevance’ in an application for a search order, as will relevance in an application for an order recognising or enforcing an arbitral award be different again.

32. A comparison between applications for freezing orders and orders recognising or enforcing arbitral awards demonstrates this difference. In the case of the former, an applicant is required in his application to demonstrate, firstly, that he has a good arguable case against the respondent(s), secondly, that there is a real risk of dissipation and, thirdly, that it is appropriate or just and convenient to make the order. For such an application, relevant matters which the applicant has a duty to fully disclose under RDC 23.11 will pertain to the alleged good arguable case, risk of dissipation and appropriateness of making the order. In particular, the applicant will be required to “[draw] attention to evidence and arguments which [the applicant] can reasonably anticipate the absent party would wish to make” (per Popplewell J in Banca Turco Romana S.A. (in liquidation) v Cortuk [2018] EWHC 662 (Comm) [45]). Therefore, under RDC 23.11, an applicant for a freezing order has a duty to bring to the attention of the court matters which suggest that there is not a good arguable case, that there is no real risk of dissipation or which otherwise contradict his case. The logic behind this duty is straightforward:

“It is the necessary corollary of the court being prepared to depart from the principle that it will hear both sides before reaching a decision, which is a basic principle of fairness. Derogation from that basic principle is an exceptional course adopted in cases of extreme urgency or the need for secrecy. If the court is to adopt that procedure where justice so requires, it must be able to rely on the party who appears alone to present the evidence and argument in a way which is not merely designed to promote its own interests, but in a fair and even-handed manner… It is a duty owed to the court which exists in order to ensure the integrity of the court's process.” (ibid)

33. An application for an order recognising or enforcing an arbitral award is a very different type of application, however. For starters, and as was said above, the Court effectively has no discretion with respect to them: an application that meets all the requirements will be granted. Secondly, it is not insignificant that an application for as order recognising or enforcing an award comes after a dispute has already been argued and resolved by a tribunal in proceedings which the defendant will have taken part in. The defendant will be aware of his liability under any award that was issued. Moreover, nor does an order recognising or enforcing an arbitral award create a new circumstance – it simply gives support to a circumstance which already existed, being liability under an award, and which was partly the making of the defendant himself insofar as he agreed to the arbitration agreement and the rules of arbitration and participated in the arbitral proceedings. All of this is radically different to freezing orders, whereunder a defendant loses the liberty to deal with his frozen assets, all of a sudden and before having an opportunity to himself be heard.

34. Furthermore, unlike with freezing orders, the requirements for applications for an order recognising or enforcing an award do not go to the substance of the alleged dispute and are instead thoroughly procedural. Article 42(3) and RDC 43.66 set out these requirements. Article 42(3) provides:

“For the purposes of the recognition or enforcement of any award within the DIFC, an original award or an original Arbitration Agreement shall be duly certified if it is a copy that is certified in the manner required by the laws of the jurisdiction in the place of arbitration or elsewhere. A translation shall be duly certified if it has been certified as correct by an official or sworn translator in the place of arbitration or elsewhere.”

RDC 43.66 provides:

It is conceivable that in rare cases where enforcement is applied for a defendant may dispute whether or not an award has been complied with or the extent to which it has been complied with. However, an enforcement order that does not acknowledge that an award has been complied with or the extent to which it has does not create a new liability for a defendant. To the extent that an award has been complied with an enforcement order is of no effect. In my opinion, by RDC 43.66(4), the Court merely wants a declaration that there is something to be enforced and that there is no abuse of process or harassment of former award debtors who have complied with an arbitral award. As such, it is questionable whether such a ‘defence’ would amount to “a matter relevant to the application” for the purposes of RDC 23.11. Putting this consideration to the side, there is nothing else in Article 42(3) or RDC 43.66 that a defendant might mount a defence against in response to an application made under it. Again, the application is thoroughly procedural. As such, while in theory RDC 23.11 gives rise to a duty to an applicant who applies for a recognition or enforcement order without notice, in practice there will scarcely be any matter relevant to the application which the applicant might disclose, much less be required to.

35. In this regard, it is worthwhile to point out that an application for recognition or enforcement on the one hand must be distinguished from an order recognising or enforcing an arbitral award or with the award itself on the other. This distinction is important because, of course, RDC 23.11 only applies to matters relevant to applications, that is, not awards or orders. As discussed above, Article 41 of the Arbitration Law provides several bases on which this Court, upon application, might set aside an arbitral award. And once an order of recognition or enforcement has been made, a defendant is proffered another opportunity to challenge the award by way of setting aside the order. RDC 43.70 provides:

36. In my view, the mechanisms for challenging arbitral awards both before and after a recognition or enforcement order is made significantly reduce the gravity of any possible non-disclosure that might occur on an application. As such, to the extent that non-disclosure can occur in the context of a without notice application for orders recognising or enforcing arbitral awards, in my view it will invariably be of the least materiality.

37. It is noteworthy that when the authorities expound upon the duty to give full and frank disclosure on without notice applications, the duty is always coupled with negative consequences that non-disclosure would bring. In the aforementioned case of Knauf UK GmbH, the Court of Appeal had regard to “prejudice” that might be caused to the defendant. In Brink’s Mat Ltd. v Elcombe [1988] 1 WLR 1350, Balcombe L.J. spoke of “an advantage improperly obtained” (page 1358) if full and frank disclosure was not made. In Behbehani v Salem [1989] 1 WLR 723, Woolf L.J. (as he then was) referenced the “the harm that will be caused if applicants for the draconian relief of Mareva… orders do not, on an ex parte application, make full disclosure of all the material facts” (page 729). In the instant proceedings, and as the Claimant has said, the Defendant has failed to highlight a single prejudice that the Defendant has suffered due to the alleged material non-disclosure, nor any harm caused to it or an advantage improperly obtained by the Claimant. As such, the Defendant’s is a highly technical case: there is a duty under RDC 23.11 and a breach of this duty, irrespective of the gravity of the breach or its consequences, must result in the discharge of the order subsequently obtained. But the Defendant’s case fails, too, as a technical one: its case is distinguished from the above authorities – which it relied on in submissions – on the basis that no negative consequence of the non-disclosure in question have been highlighted or can be envisioned. For me, this is a necessary component of the duty of full and frank disclosure.

38. In conclusion, I find that “relevance” in RDC 23.11 is determined by two factors: discretion on the part of the adjudicator on the one hand and the nature of the application being made without notice on the other. And regarding applications for orders recognising or enforcing arbitral awards in particular, while applicants are compelled by RDC 23.11 to disclose all matters relevant to the application on the one hand, they are simultaneously all but deprived by Article 44 of the Arbitration Law from having any relevant matter to disclose on the other.

COST

39. According to RDC 38.7, if the Court decides to make an order on costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, while the Court may if it decides make a different order. The Defendant is the unsuccessful party in the present application and I am satisfied that I should not depart from the general rule in awarding costs.

CONCLUSION

40. The JJC has ruled that the courts of onshore Dubai do not have jurisdiction over this matter and that the DIFC Court has sole jurisdiction. As I see it, it is high time that the Defendant honours its agreement and ceases what appears to be meritless attempts to escape the Award. In this regard, it will be of comfort to the Claimant that the Defendant has confirmed that material non-disclosure is the only ground on which it seeks to have the Enforcement Order set aside; an application that has been unsuccessful.

41. Therefore, I have determined that the Defendant’s Set-Aside Application must be dismissed, the Order of Judicial Officer Nassir Al Nasser be upheld, the stay on the Order be lifted and I order that the Defendant is to pay the Claimant’s costs of the Set-Aside Application on the standard basis, to be assessed by a Registrar if not agreed.