April 02, 2015 Arbitration - Judgments,Judgments
Claim No: ARB-003-2013
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 H.E. JUSTICE OMAR AL MUHAIRI
BANYAN TREE CORPORATE PTE LTD
MEYDAN GROUP LLC
Hearing: 20 January 2015
Counsel: Alec Emmerson and Rhys Monahan (Clyde & Co LLP) for the Claimant
No representative appeared on behalf of the Defendant
Judgment: 2 April 2015
JUDGMENT OF H.E. JUSTICE OMAR AL MUHAIRI
Summary of Judgment
|The Claimant, Banyan Tree, a company incorporated in Singapore engaged in the management and operation of resorts, brings a claim against the Defendant, Meydan Group LLC, a company incorporated in the UAE engaged in real estate development. Banyan requested the Court to recognize and enforce an Arbitration Award in favour of Banyan, issued by the Dubai International Arbitration Center. Meydan applied for the Claim to be dismissed on the basis that the DIFC Courts do not have jurisdiction to hear the Claim, alleging that the Dubai Courts and not the DIFC, is the proper venue for the Claim. Meydan’s application contesting jurisdiction was subsequently dismissed and H.E. Justice Omar Al Muhairi held that the DIFC Courts have jurisdiction under Article 5(A)(d) of the judicial authority law to hear the Claim.|
Meydan sought permission to appeal the judgment, which was granted by Justice Roger Giles and the enforcement proceedings were stayed pending the outcome of the appeal. On Appeal, the Court rejected the submission that the application for recognition should be stayed on forum non conveniens grounds because the DIFC Courts have exclusive jurisdiction and also rejected the submission that the application for recognition of the Award constituted an abuse of process. The Court of Appeal dismissed Meydan’s Appeal and ordered it to pay Banyan’s costs. Following the Appeal Judgment, Meydan notified the Court that they would henceforth take no further part in the case.
Now entitled to properly plead the merits of the case, Banyan refers to Article 44 of the DIFC Arbitration Law which sets the grounds on which the Court may refuse recognition and enforcement of an arbitral award and addresses each of the possible grounds for refusal, concluding that none of the Article 44 grounds for refusal are made out nor can be made out on the facts. The Court accepts Banyan’s submissions with regard to each ground laid out in Article 44(1)(a)(i)-(v) and concludes that none of the grounds warrant the refusal of recognition and/or enforcement of the Award. As for the argument of public policy in Article 44(1)(b)(vii), the Court ruled that the threshold for declining to recognize or enforce the Award on the premise that it would be contrary to the public policy of the UAE is high and far from being met. Lastly, the Court ruled against adjourning the proceeding despite an application for the setting aside of the Award in another jurisdiction. Accordingly, the Claimant’s application was upheld and the Award shall be recognised as binding within the DIFC, with costs to be paid by the Defendant.
This summary is not part of the Judgment and should not be cited as such
1. Before the DIFC courts is Banyan Tree Corporate PTE LTD formerly known as Banyan Tree Hotels & Resorts PTE LTD (“Banyan”), a company incorporated in Singapore engaged in the management and operation of premium resorts, hotels and spas around the world.
2. The Claimant, Banyan, brings a claim against the Defendant, Meydan Group LLC (“Meydan”), a company incorporated in the United Arab Emirates engaged in real estate development, investment in enterprise and management of hotels and resorts.
3. On 19 December 2013, Banyan filed an Arbitration Claim Form requesting the Court recognize and enforce an Arbitration Award (“Award”) in favor of the Claimant, issued by the Dubai International Arbitration Center (DIAC) in the total amount of USD 19,505,528.78, being the sum of USD 19,285,73.88 and costs, interest and court fees.
4. The Arbitral Award stems from a dispute over a terminated Hotel Management Agreement (“HMA”), entered into between Banyan and Meydan on 15 August 2007 which appointed Banyan as Manager of a 285-room luxury hotel (the “Hotel”) which was owned by Meydan and under construction at the time.Pursuant to the HMA, Banyan was appointed as Manager of the Hotel for an initial fixed term of 25 years extendable by an additional 15 years at Claimant’s discretion.
5. On 4 November 2009, Meydan terminated the HMA and a dispute arose between the Parties in relation to the HMA and the management and operation of the Hotel.
6. In Clause 25.1 of the HMA, the parties agreed to an Arbitration Clause which states:
“25.1 Submission to Arbitration
(a) If any dispute arises out of or in connection with this Agreement, including any question regarding its existence, validity or termination, then either party to this Agreement may deliver a notice in writing to the other party, setting out the details of the dispute.
(b) If the dispute is not resolved by agreement between the parties within 30 (thirty) days of delivery of the notice under clause 25.1(a), then the dispute may be referred by either Party for arbitration in the English language in accordance with the Rules of the Dubai International Arbitration Centre to be determined by a single arbitrator appointed by the Centre in accordance with the said Rules.”
7. On 8 April 2010, Banyan filed a Request for Arbitration with the DIAC against Meydan seeking a declaration that Meydan wrongfully terminated the HMA and damages for loss of profits, expenses, interest, costs and fees in excess of USD 99,000,000.
8. On 24 November 2010 the Executive Committee of the DIAC appointed Michael Polkinghorne as sole arbitrator. Subsequently, Meydan challenged the appointment of Mr Polkinghorne on the basis of a potential conflict and Mr Polkinghorne disclosed that partners of his firm based in Singapore and Washington had previously advised one of the Claimant’s affiliates. As a result, the Executive Committee replaced Mr Polkinghorne with Roland Ziade on 3 April 2011.
9. On 12 November 2012 Mr Ziade requested permission to resign as arbitrator of the case. The DIAC acknowledged receipt of the resignation and referred the matter to its Executive Committee, who informed the parties that it did not accept the resignation of Mr Ziade. Nevertheless, Mr Ziade confirmed his resignation on 6 February 2013 and on 4 March 2013 the Executive Committee appointed Alexis Mourre as sole arbitrator.
10. On 2 October 2013 the Tribunal issued an award in favour of Banyan declaring the HMA had been wrongfully terminated by Meydan 28 days after the notice of termination, and that the Claimant is entitled to compensation damages for the losses suffered due to the refusal by the Defendant to perform its obligations. Those damages amount to roughly USD 19,377,821.16 (See Arbitral Award Bundle Volume B, File 2, Tab A, Page 81).
11. The Award was served on the Parties by the DIAC under a cover letter dated 2 October 2013. To date, no payment has been made by Meydan and as a result Banyan seeks to recognize and enforce the Arbitral Award in the DIFC Courts.
Procedural History – Challenge to Jurisdiction
12. On 21 January 2014, Meydan applied for the Claim to be dismissed on the basis that the DIFC Courts do not have jurisdiction to hear the Claim, alleging that the Dubai Courts, and not the DIFC, is the proper venue for such a claim.
13. Meydan’s application contesting the jurisdiction of the DIFC Courts was heard by me on 1 May 2014. The challenge to jurisdiction was subsequently dismissed in amy Judgment (the “Judgment”) dated 27 May 2014. In the Judgment, I ruled that the DIFC Courts have jurisdiction under Article 5(A)(e) of the Judicial Authority Law as amended and under Articles 42, 43 and 44 of the DIFC Arbitration Law and awarded the costs of relisting the hearing to be paid by Meydan to Banyan, and the costs of the application to be costs in the case. Additionally, I directed both parties to file submissions in regard to whether the Award should be recognized and binding within the DIFC according to Article 42(1) of the DIFC Arbitration Law No.1 of 2008.
14. By Appeal Notice dated 10 June 2014, Meydan sought permission from the Court of Appeal to appeal against the Judgment, and by Order dated 19 June 2014, Justice Roger Giles granted Meydan permission to appeal against the Judgment.
15. Subsequently, on 21 August 2014, Meydan made an application to stay the enforcement proceedings in the Court of First Instance pending the outcome of its Appeal against the Judgment. On 25 September 2014, the Court ordered that the CFI proceedings be stayed pending the outcome of Meydan’s Appeal.
16. On 16 September 2014, the Court of Appeal comprised of Justice Sir David Steel, Justice Roger Giles, and H.E. Justice Ali Al Madhani heard the Appeal against the Judgment.
17. On Appeal, the Court rejected the submission that the application for recognition should be stayed on forum non conveniens grounds because the DIFC Courts have exclusive jurisdiction and thus there was no alternative forum for the determination of the issue. The Court also rejected the submission that the application for recognition of the Award constituted an abuse of process.
18. Subsequently, in its judgment dated 3 November 2014 (the “Appeal Judgment”), the Court of Appeal dismissed Meydan’s Appeal and ordered it to pay Banyan’s costs.
19. In response to the Appeal Judgment, in an email addressed to the Registrar of the DIFC Courts dated 4 November 2014, Mr Bader Sulaiman on behalf of Meydan notified the Court that Meydan would henceforth take no further part in the present case.
“…[I]t is clear that we are unfortunately, in all the circumstances of this case and in protection of our rights generally, now wholly unable to risk any conflict of jurisdictions and, therefore, hereby regretfully notify you formally that we shall henceforth take no further part whatsoever in any matter or further process hereon in your Court. We will, of course, have to deal with the consequences of this final and irrevocable decision taken by us as, where and when it may be relevant and/or necessary.”
20. Banyan applied for the assessment of its costs of the Appeal by way of an application dated 22 December 2014. The Notice of Commencement of Assessment of Costs and supporting documents were served by email and courier from Banyan to Meydan, but Meydan rejected the courier delivery. Banyan has additionally sought to serve all documents relating to these proceedings after 4 November 2014 on Mr Sulaiman by email, with some documents also sought to be served by courier on Meydan, but Meydan has rejected the courier delivery on each occasion.
21. On 17 December 2014, I issued directions requiring Meydan to file a new Acknowledgement of Service by 23 December 2014 in addition to directions regarding the listing of the hearing for the Claim. Meydan failed to file a new Acknowledgement of Service prior to the expiry of the time period for doing so, or at all.
22. As of 10 November 2014, neither Meydan nor its legal representatives in these proceedings have corresponded or otherwise communicated with the Registry of the Court or Banyan in relation to Banyan’s Claim.
23. On 20 January 2014, a hearing took place before me. The Claimant, Banyan, was represented by Clyde & Co LLP and attended by Alec Emmerson as Lead Counsel with Rhys Monahan assisting. Neither Meydan nor its legal representatives attended the hearing.
The Claimant’s Submissions
24. At this stage in the proceedings, now able to properly plead the merits of the case, Banyan refers to Article 42 of the DIFC Arbitration Law and Article 24 of the DIFC Courts Law No.10 of 2004 to put forth their argument that the DIFC Courts have jurisdiction and ought to recognize and enforce the Award.
“Article 42. Recognition and enforcement of awards
(1) An arbitral award, irrespective of the State or jurisdiction in which it was made shall be recognized as binding within the DIFC and, upon application in writing to the DIFC Courts, shall be enforced subject to the provisions of this Article and of Articles 43 and 44. For the avoidance of doubt, where the UAE has entered into an applicable treaty for the mutual enforcement of judgments, orders or awards the DIFC Courts shall comply with the terms of such treaty.
(4) Awards recognized by the DIFC Courts may be enforced outside the DIFC in accordance with the Judicial Authority Law and recognition under this Law includes ratification for the purposes of Article 7 of the Judicial Authority Law.
Article 24. Ratification of Judgments.
(1) Pursuant to Article 7(4) of the Judicial Authority Law, the Court of First Instance has jurisdiction to ratify any judgment, order or award of any recognized:
(a) Foreign court;
(b) Courts of Dubai or the United Arab Emirates;
(c) Arbitral Award;
(d) Foreign Arbitral Award; or
(e) orders for the purposes of any subsequent application for enforcement in the courts of Dubai.”
25. Banyan submits that the requirements set out in Article 42 above are satisfied for the purposes of this application and that both the Award and the HMA have been duly certified.
26. More specifically, Banyan refers to Article 44 of the DIFC Arbitration Law which sets out the grounds pursuant to which the Court may refuse recognition and enforcement of an arbitral award and addresses each of the possible grounds of refusal set out in Article 44, including any arguments raised by Meydan. Banyan additionally draws attention to the fact that the burden of proof under Article 44 is on the party resisting recognition and enforcement and in circumstances where Meydan does not make any submissions in opposition to the Claim; Banyan proposes that the burden of proof cannot be discharged. As such, Banyan submits that none of the Article 44 grounds for refusal to recognize or enforce are made out nor can be made out on the facts.
“Article 44. Grounds for refusing recognition or enforcement
(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 Courts only:
(a) at the request of the party against whom it is invoked, if that party furnishes to the DIFC Courts proof that:
(i) a party to the Arbitration Agreement as defined at Article 12 of this Law was under some incapacity; or the said Arbitration Agreement is not valid under the law to which the parties have subjected it or, in the absence of any indication thereon, under the law of the State or jurisdiction where the award was made;
(ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to Arbitration, or it contains decisions on matters beyond the scope of the submission to Arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to Arbitration may be recognised and enforced;
(iv) the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, in the absence of such agreement, was not in accordance with the law of the State or jurisdiction where the arbitration took place; or
(v) the award has not yet become binding on the parties or has been set aside or suspended by a Court of the State or jurisdiction in which, or under the law of which, that award was made; or
(b) if the DIFC Courts finds that:
(vi) the subject-matter of the dispute would not have been capable of settlement by Arbitration under the laws of the DIFC; or
(vii) the enforcement of the award would be contrary to the public policy of the UAE.
(2) If an application for the setting aside of an award has been made to a Court referred to in paragraph (1)(a)(v) of this Article, the DIFC Courts 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.”
27. As for Article 44(1)(a)(i), Banyan submits that there is no doubt that the arbitration clause in the HMA qualifies as an “Arbitration Agreement” as defined in Article 12 of the DIFC Arbitration Law and furthermore submits that Meydan does not appear to rely on this ground as a basis to refuse to recognize and enforce the Award, rather, Meydan’s argument is that the Award itself is invalid, as opposed to the HMA or Arbitration Agreement.
28. As to Article 44(1)(a)(ii) & (iii), there is no suggestion that Meydan was unable to present its case and presents evidence that all submissions and communications from Banyan and the Tribunal were received by Meydan. Additionally, there is no argument raised by Meydan that Article 44(1)(a)(iii) is satisfied in relation to the Award.
29. Regarding Article 44(1)(a)(iv), Banyan refers to Mr Sulaiman’s first witness statement on behalf of Meydan who alleged that the Tribunal, Mr Mourre, conducted the Arbitration “without any regard for due process.” By way of example, Mr Mourre did not schedule a preliminary meeting within the 30 days of the transfer of the case file to him, as required by Article 22 of the DIAC Rules and instead proposed a teleconference by way of preliminary meeting. In response to this, Banyan submits that as Mr Mourre was the second arbitrator appointed in the Arbitration, it was not necessary for him to comply with Article 22 as this was done by the first arbitrator appointed and further characterizes Mr Sulaiman’s allegations of lack of due process in paragraph 67 of Banyan’s 20 Jan 2015 Skeleton Argument as, “general, unparticularised and misconceived, and cannot constitute a ground for the DIFC Courts to refuse to recognize and enforce the Award.”
30. In respect to Article 44(1)(a)(v), Banyan addresses this point by raising Meydan’s contention that the Award was “issued out of time and [is] therefore invalid” and relies on Mr Nash’s second witness statement referring to DIAC’s letter dated 5 November 2012 confirming that the time period for the Arbitration did not expire prior to the Award. Furthermore, Meydan raised arguments as to the invalidity of the Award to the Dubai Courts in Case No. 211/2014, which dismissed Meydan’s claim on the basis of the arbitration clause in the HMA and therefore did not accept Meydan’s arguments as to invalidity.
31. As for the public policy defence in Article 44(1)(b)(vii), Banyan submits that the threshold for refusing to recognize or enforce the Award pursuant to Article 44(1)(b) on the basis that it would be contrary to the public policy of the UAE is high and far from being met in these circumstances. Banyan quotes the 2012 Digest of Case Law on the UNCITRAL Model Law which indicates how high the threshold is for refusing to recognize or enforce an arbitral award on the basis of public policy:
“The public policy defence should be applied only if the arbitral award fundamentally offended the most basic and explicit principles of justice and fairness in the enforcement State, or evidences intolerable ignorance or corruption on part of the arbitral tribunal. Courts have also stated that to refuse to enforce an award on the ground that it violates public policy, the award must either be contrary to the essential morality of the State in question, or disclose errors that affect the basic principles of public and economic life. Not ever infringement of mandatory law amounts to a violation of public policy. Occasionally it was also required that the violation of public policy must be obvious.”
32. Particularly, Banyan addresses Meydan’s Abuse of Process arguments as an underlying claim to trigger the public policy defense. Meydan’s argument that the Dubai Courts were a more appropriate forum for recognition and enforcement of the Award was rejected by the Court of Appeal Judgment (Paragraph 27, 33 & 39). Additionally, Meydan’s argument that there was a conflict between DIFC laws on the one hand and the Civil Procedure Code on the other was also dismissed in the Appeal Judgment (Paragraph 26 & 27) on the grounds that the DIFC is exempted from UAE Civil and Commercial Laws.
33. Finally, with regard to Article 44(2) cited in paragraph 26 above, Banyan submits that it would not be a proper exercise of the Court’s discretion for the DIFC Courts of First Instance to adjourn its decision in relation to this Claim on the basis of the Annulment Proceedings and relies on IPCO v NNPC  EWHC 726 (Comm), Gross J, which noted three factors relevant to the discretion to grant an adjournment: (1) whether the application challenging the award in the country of origin was brought bona fide and not simply by way of delaying tactics; (2) whether the application challenging the award had a real prospect of success; and (3) the extent of the delay occasioned by an adjournment and any resulting prejudice.
34. Regarding these three factors, Banyan submits that: (1) the Annulment Proceedings (Dubai Case No.2127/2014) commenced by Meydan are not bona fide, as can be seen by the lack of merit in Meydan’s arguments as to why the Award is “invalid” and should be annulled and that Meydan has sought to delay the Arbitration at every opportunity; (2) Meydan’s Annulment Proceedings are unmeritorious and therefore should not have a good prospect of success; and (3) the delay caused by an adjournment is likely to take eighteen months or longer, given that any decision in the Annulment Proceedings will likely be appealed and with regard to prejudice, even if the Award were to be annulled, this would not prevent its enforcement in some jurisdictions.
35. Lastly, should the Court consider adjourning the determination pending the Annulment Proceedings, Banyan would seek security for its Claim, however, since Meydan has made clear its intention not to participate in these proceedings and would therefore be unlikely to comply with such an order, Banyan would most likely suffer prejudice if any adjournment were granted.
36. I concluded in my previous Judgment that this court has jurisdiction under Article 5(A)(e) of the Judicial Authority Law as amended and Articles 42, 43 and 44 of the DIFC Arbitration Law to hear the recognition claim of the DIAC Award.
37. In this judgment I am going to decide whether the DIAC Award should be recognised as binding within the DIFC according to Article 42(1) of the DIFC Arbitration Law No.1 of 2008.
38. To answer this question I refer to Article 44 of the DIFC Arbitration Law as stated in paragraph 26 of this judgment, which set out the grounds for the reasons in which the Courts may decline the recognition and enforcement of an arbitral award.
39. With regard to Article 44(1)(a)(i), Banyan submits that the arbitration clause in the HMA qualifies as an "Arbitration Agreement" as characterized in Article 12 of the DIFC Arbitration Law, and furthermore presents that Meydan does not seem to depend on this ground as a premise to decline to recognize and enforce the Award. Instead, Meydan's contention is that the Award itself is invalid, rather than the HMA or Arbitration Agreement.
40. As for Article 44(1)(a)(ii) & (iii), there is no evidence that Meydan was not able to present its case and proof was presented that Meydan did receive all entries and correspondences from Banyan and the Tribunal. Furthermore, there is no contention raised by Meydan that proves Article 44(1)(a)(iii) is fulfilled in connection to the Award.
41. Regarding Article 44(1)(a)(iv), Banyan was correct to refer to Mr Sulaiman's first witness statement made on behalf of Meydan, in which it was claimed that the Tribunal, Mr Mourre, directed the Arbitration, "without any regard for due process." For instance, Mr Mourre refrained from planning a preliminary meeting within the 30 days in which he received the transfer of the case file, which is a requirement of Article 22 of the DIAC rules. Instead, Mr Mourre proposed a teleconference to substitute for the preliminary meeting. In light of this, Banyan presents that as Mr Mourre was the second arbitrator designated in the Arbitration, he was not required to conform to Article 22, as this was carried out by the first arbitrator delegated, and further portrays Mr Sulaiman's claims of lack of due process in paragraph 67 of Banyan's 20 Jan 2015 Skeleton Argument as, "general, unparticularised and misconceived, and cannot constitute a ground for the DIFC Courts to refuse to recognize and enforce the Award."
42. In light of Article 44(1)(a)(v), I accept Banyan’s submission on this point that challenged Meydan's argument that the Award was "issued out of time and [is] therefore invalid" and refers to Mr Nash's second witness statement which refers to DIAC's letter dated 5 November 2012, that confirms that the time period for the Arbitration did not expire in the period of time preceding the Award. In addition to this, Meydan challenged the invalidity of the Award to the Dubai Courts in Case No. 211/2014, which dismissed Meydan’s case on the premise of the arbitration clause in the HMA and accordingly did not acknowledge or accept Meydan's contentions as to invalidity.
43. With regards to the public policy defense in Article 44(1)(b)(vii), Banyan further submits, which I accept, that the threshold for declining to recognize or enforce the Award in accordance with Article 44(1)(b) on the premise that it would be contrary to the public policy of the UAE is high and far from being met in these circumstances. Banyan correctly refers to the 2012 Digest of Case Law on the UNCITRAL Model Law which demonstrates how high the threshold is for declining to recognize or enforce an arbitral award on the basis of public policy.
44. In regards to the abuse of process, this argument was dismissed by the Court of Appeal Judgment (Paragraph 27, 33 & 39). Accordingly, I accept Banyan’s submission on this point.
45. On March 4, 2015 the DIFC Courts Registry received a letter from Ahmed Ibrahim's law firm stating that Meydan has commenced a Jurisdiction proceeding before the UAE Federal Supreme Court, and attached an Arabic certificate of whom it may concern. I understood from that Arabic letter that there is a case filed before a Federal Supreme Court contesting the Jurisdiction. In the absence of assistance from the parties and no formal application filed by the Defendant, I hereby rule not to adjourn this proceeding.
46. In conclusion, Meydan needed to conduct its challenge to the validity of the award before the DIFC Courts under Article 44 of the Arbitration Law, but failed to attend the hearing and failed to properly conduct any challenge under Article 44 of the DIFC Arbitration Law.
47. As discussed above, I accept the Claimant’s claim and this Court has jurisdiction under Article 5(A)(e) of the Judicial Authority Law as amended and Articles 42, 43 and 44 of the DIFC Arbitration Law.
48. The DIAC Award shall be recognised as binding within the DIFC according to Article 42(1) of the DIFC Arbitration Law No.1 of 2008. Accordingly, I direct the Claimant to file a draft order in this regard.
49. The final issue to be decided is the question of costs. According to Rule 38.7 of the Rules of the DIFC Courts, 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. I am satisfied that the Defendant, as the unsuccessful party in this case, should pay the costs of the Claimant, to be subject to detailed assessment if not agreed.
Nassir Al Nasser
Date of Issue: 2 April 2015
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