January 22, 2015 Arbitration - Orders,Orders
Claim No. ARB 002/2014
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BEFORE JUSTICE SIR DAVID STEEL
REDACTED REASONS FOR THE ORDER OF JUSTICE SIR DAVID STEEL DATED 16 DECEMBER 2014
FURTHER TO the Order of Justice Sir David Steel dated 16 December 2014 rejecting the Defendant’s Application Notice ARB-002-2014/3 dated 8 September 2014 (“the Defendant’s Application”) contesting the DIFC Courts’ jurisdiction;
1. These are the reasons for the order made on 16 December 2014 dismissing the Defendant’s amended application in regard to jurisdiction under Part 12 of the Rules of the DIFC Courts (“RDC”) dated 24 November 2014.
2. The application arose from a Claim Form issued by the Claimant which sought an order recognising and ratifying an arbitration award issued under the auspices of the Dubai International Arbitration Centre (“DIAC”).
3. The arbitration was conducted pursuant to the terms of a Consultancy Services agreement between the Claimant and the Defendant. The seat of the arbitration was identified by Clause 13.3 of the agreement as the “Emirate of Dubai.”
4. The arbitrator awarded $3,055,465.02 to the Claimant together with costs in the amount of $515,510.37, making a total award of $3,570,975.39 together with interest at 12%. No payment has been made by the Defendant.
5. The Claim Form sought an order from this Court to:
(1) recognise and ratify the Arbitral Award in accordance with Article 43 of the DIFC Arbitration Law;
(2) issue an order for payment in the amount of $3,570,975.39 plus daily interest at the rate of $1,174.02 from the date of the Award until payment ;
(3) affix the executory formula on the ratified Arbitral Award in accordance with Article 7(2)(1) of the judicial authority law (Law No. 12 of 2004 (as amended)); and
(4) attach to its order or judgment a letter from the DIFC Courts’ Registry to the Chief Justice of Dubai Court of First Instance requesting enforcement of the judgment or award in accordance with Clause 1(c) of the Summary of the Protocol of Enforcement between Dubai Courts and DIFC Courts.
6. The Claim Form was served on the Defendant on 7 August 2014 and on 18 August 2014 the Defendant filed an acknowledgement of service but indicated that it proposed to contest the Courts’ jurisdiction.
7. On 7 September 2014, the Defendant commenced proceedings in the Dubai Courts for the annulment of the award. The grounds for that annulment that were put forward can be summarised as follows:
the reference to arbitration was premature in that Clause 14 of the agreement required the parties first to take reasonable steps to settle failing which, after 28 days, to embark on reconciliation procedures in accord with the Rules of Commercial Reconciliation and Arbitration of the Dubai Chamber of Trade & Industry;
(a) the witnesses failed to take the required oath;
(b) the award was rendered after the date specified in the agreement;
(c) the award improperly included legal costs.
8. The next day, 8 September 2014, the Defendant filed the original application in the present proceedings. As originally drafted the application sought a number of orders as follows:
(1) An order in the form of a declaration under Rule 12.1 and/or 12.7 that the DIFC Courts has no jurisdiction to try the Claim ( on the basis, as it is rather quaintly put, that Article 5 (A) (1)has not been “enlivened”); or
(2) In the alternative, should the DIFC Courts decide that it has jurisdiction to try the Claim, an order in the form of a declaration under RDC 12.1 and/or 12.7 that the DIFC Courts should not exercise such jurisdiction; and
(3) In addition to either Order (1) or (2) above, an order under RDC 12.7(1) setting aside the Claim Form; or
(4) In the further alternative, should the DIFC Courts decide that it has jurisdiction to decide the Claim and should exercise that jurisdiction , an order:
(a) staying the proceedings on the Claim generally under RDC 4.2(6);
(b) alternatively, staying the proceedings on the Claim under RDC 4.2(6) pending the outcome of:
(i) the proceedings commenced by the Defendant against the Claimant in the Dubai Courts on 7 September 2014, and all appeals from those proceedings, under RDC 4.2(6); and/or
(ii) the DIFC Courts of Appeal judgment in Banyan Tree Corporate PTE Ltd v Meydan Group LLC ARB003/2013; and/or
(iii) the Union Supreme Court’s ruling (following a petition which the Defendant intends to issue or request that the Dubai Courts issue) on the question of whether Dubai Courts or the DIFC Courts have jurisdiction to try the Claim and in which of those Courts the Claim should proceed; or
(c) In the further alternative, should the DIFC Courts not order a stay of proceedings on either ground (a) or (b) above, staying the proceedings on the Claim under Article 44(2) of the Arbitration Law of 2008.
9. There was thereafter a fairly elaborate exchange of “pleadings” from which it was apparent that many of the arguments raised matched those raised in an appeal in the matter of Banyan Tree Corporate PTE Ltd v. Meydan Group LLC which was due to be heard on 16 September 2014. In the result it was agreed by the parties (and the Court) that the hearing of the Defendant’s application should await the outcome of that appeal.
10. The judgment in Banyan was handed down on 3 November 2014 whereafter the parties were notified by the Court that the Defendant’s application had been listed for hearing on 15 December 2014.
11. On 24 November 2014, the Defendant filed an amended application. Although the form of relief sought was not dissimilar, the grounds relied upon were markedly different. It would appear that there were two reasons for this. First, that the thrust of application as originally advanced had been rendered unarguable by the decision in Banyan. Second, that the legal advisers of the Defendant were instructed to take any other conceivable point whether having merit or not.
12. Once again there ensued a fairly elaborate set of written submissions. These were in due course supplemented by skeleton arguments from each side. The hearing duly took place on 15 December 2014. Following the hearing the Court issued an order dismissing the application with reasons to follow.
13. I will try and take the contentions advanced on behalf of the Defendant in the order they were advanced. First the Claim Form is said not to have been properly served and accordingly the Court has no jurisdiction to entertain the application. The defects were said to be:
(a) Neither the original award nor a certified copy of it had been provided;
(b) Neither the original arbitration agreement nor a certified copy had been provided;
(c) The translation of the Claim Form was not certified;
(d) The translation was not accompanied by a statement containing the translator’s identity, address and qualifications.
14. These points give a good flavour of the kind of technical matters which the Defendant felt it appropriate to raise. Furthermore they were all utterly hopeless. In terms of jurisdiction the question of service is entirely irrelevant as service is not a prerequisite to an application to enforce an award: see RDC rule 43.9(2) . In any event the Defendant was not in a position to advance these complaints because, as noted above, it had filed an acknowledgement of service on 18 August 2014. For good measure it emerged during the course of argument that none of the complaints could be sustained as a matter of fact.
15. Second the objection is taken that the form of order sought is expressed in terms of recognition and ratification. Since Article 43 of the Arbtiration Law contemplates an application for recognition and an order to that effect, the point is taken that this does not encompass “ratification.” So far as it goes, I am prepared to accept that the order might legitimately only speak in terms of recognition and enforcement as prescribed by Article 42. However, it may well be that this is a distinction without a difference. Article 7 of DIFC Law 12 of 2004 as amended which deals with matters of enforcement refers to “ratification” of Arbitral awards. It would appear that both courts treat recognition as equivalent to ratification. If there is a distinction, it can no doubt be raised at the appropriate time.
16. The third argument is that the Court has no power to enter judgment in terms of the award. In this regard reliance was placed on the absence of any equivalent to Section 66(2) of the English Arbitration Act 1996 which expressly permits the court to enter judgment “in terms of the award.” This was another contention that did not survive the argument as the relevant power is expressly contained within RDC 43.75.
17. Fourth, the Defendant submitted that the Court had no power to award the Claimant its costs of the arbitration. The point was incomprehensible since no such order was sought (let alone made). The point was abandoned during the argument.
18. Fifth, it was said that the Court had no power to respond to the application to attach a letter to the order. The point here appeared to be that the reference to the Protocol of Enforcement mistakenly failed to reflect the fact that it had been superseded by Law No. 16 of 2011 (by way of amendment to Law No.12 of 2004). This struck me as pure pedantry. In the event the point was not pursued.
19. Sixth, on the basis that the Court did indeed have jurisdiction to entertain the application, it was submitted that, in order to give effect to the overriding objective as set out in RDC 1.7, the Court should not exercise that jurisdiction.
20. I confess I had some difficulty in following this argument. I hope I do it justice when I seek to summarise it as follows:
(a) The Court can only make an order for recognition within the DIFC but the Defendant has no assets within the DIFC;
(b) It follows that to achieve enforcement, the award would need to be separately ratified by the Dubai Courts;
(c) To the extent that that process could be bypassed by virtue of Article 42(4) of DIFC Law No. 1 of 2008 and/or Article 7 of the Judicial Authority Law, these provisions were invalid as being beyond the powers extended to the Emirate of Dubai in respect of Finance Free Zones (see Federal Law no.99 of 1971 and Federal Law No. 8 of 2004);
(d) In any event the Claimant should not be permitted to forum shop;
(e) In the result the process instituted by the Claimant is a waste of costs and time and risks inconsistent decisions between the DIFC and Dubai Courts;
(f) This in turn would lead to a referral to the Union Supreme Court.
21. I regret to say that I cannot accept any step in this argument. It is not for this Court to embark on an analysis of its jurisdictional competence to enforce awards. No application to refer matters to the USC is made. In any event no question of constitutional conflict arises at this stage: see X1 v. Y ARB 001 2014. I of course agree that the Court can only order recognition and enforcement within the DIFC. But the DIFC Courts has exclusive jurisdiction and no other forum is available to obtain such an order. Likewise the Dubai courts can only order recognition within Dubai. But no question of forum shopping arises. Applications can be made to both courts.
22. I also accept that it is not apparent that the Defendant has any assets within the DIFC against which enforcement could be made. But in this regard I repeat a passage from the judgment in Banyan which, in my view, is equally applicable here:
“ 43. It is right to say that there is no evidence that Meydan has assets within the DIFC (or otherwise within the jurisdiction of the DIFC Courts). But there is no basis for asserting that the application for enforcement within the DIFC has no independent purpose. I do not understand it to be accepted that no such assets exist or alternatively that no such assets (whether they currently exist or not) may come within the jurisdiction following an order for enforcement. In any event an order for enforcement would enable Banyan to engage the court’s machinery (in the form of say a freezing order or an oral examination) for obtaining details of any assets that are or become available.”
23. Even allowing for the fact that the main (perhaps only) purpose of the application is to make use of the machinery for execution within Dubai as furnished by Article 7 of Law 12 of 2004, the suggestion that those provisions are unconstitutional is not open before me.
24. It is also accepted that the public interest (and indeed compliance with the overriding objective) is not best served where there is a risk of inconsistent decisions. It is open to the Defendant to resist enforcement in the DIFC only by reference to the permitted grounds of challenge under the Arbitration Law (which match the terms of the New York Convention). But the Courts of the seat of the arbitration were the Courts of Dubai. It is on this basis that it is said that the Court should decline jurisdiction where the only courts with power to annul the award are the Courts of Dubai. But even in the event of annulment, recognition in the DIFC is not barred.
25. Focusing on the proceedings in Dubai, the skeleton served on behalf of the Defendant was most unhappily coy. As already noted, on 7 September 2014 (i.e. a day before the present application was filed,) the Defendant commenced proceedings in the Dubai Courts to annul the award. In fact this claim was dismissed 5 November 2014 with costs. It was categorised by the Court as “factually and legally groundless.”
26. This is not surprising as the basis for challenging the award as outlined earlier in this judgment was spurious:
(a) As regards the failure to engage in voluntary alternative dispute resolution, the terms of reference recorded that the Defendant had no objection to the validity of the arbitral proceedings. It is accepted that the Defendant never asked for conciliation (and indeed that the conciliation provisions referred to were no longer in force). The award itself records the formal withdrawal of any jurisdictional challenge.
(b) As regards the matter of an oath, it is far from clear that an oath was compulsory under the procedural law let alone under DIAC rules. In any event, both the transcript and the award record that all the witnesses gave their evidence on oath.
(c) As regards extensions of time, the award records the agreement of the Defendant.
(d) As regards costs, the terms of reference confirm that the tribunal was entitled to have regard to the parties’ legal costs (including the costs of experts) when allocating costs in the award.
27. It is true that an appeal was lodged on 23 November 2014. This development must be considered in the context of the alternative application by the Defendant for an adjournment. Suffice it to say for the moment that, save in one respect, the appeal raises precisely the same issues and nothing in the documents or in the argument suggest that there is any realistic prospect of success on the appeal.
28. A new point appears to have been added to the effect that the arbitration agreement was not signed by a person properly authorised by in the Defendant. Strikingly there is no reference to this point in the award or in the judgment at first instance. It only emerged in the appeal notice served by in the Defendant. It would appear to be equally hopeless.
29. I confess I found Counsel’s submissions on this aspect incoherent. The position was entirely straightforward. The signatory was the Managing Director of the Defendant who would on the face of it clearly have implied, if not express actual, authority to sign. The articles of association were not produced let alone by way of counter to that assumption. In any event the terms of reference were signed in accord with powers of attorney. In my judgment these powers of attorney were compliant with Article 58 of the Civil Procedure Law and furnished authority to represent the Defendant in the arbitration. Thus any unauthorized act in relation to entering into the arbitration agreement was duly ratified.
30. It follows that the suggested risk of wasted costs, let alone of inconsistent decisions, is not remotely made out. I detect no consideration relevant to the overriding objective to persuade the Court not to exercise its jurisdiction.
31. The last point taken by the Defendant is to invite the Court to adjourn the recognition and enforcement application pending the outcome of the appeal to the Dubai Courts pursuant to Article 42(2) of the Arbitration Law. In this regard I was reminded of the judgment of Gross J in IPCO (Nigeria) Ltd. v. Nigerian National Petroleum Corp  EWHC 726 (QB) where he considered the relevant criteria for such an application:
“…the Act does not furnish a threshold test in respect of the grant of an adjournment and the power to order the provision of security in the exercise of the court’s discretion under s.103(5). In my judgment, it would be wrong to read a fetter into this understandably wide discretion (echoing, as it does, Art. VI of the New York Convention). Ordinarily, a number of considerations are likely to be relevant: (i) whether the application before the court in the country of origin is brought bona fide and not simply by way of delaying tactics; (ii) whether the application before the court in the country of origin has at least a real (i.e., realistic) prospect of success (the test in this jurisdiction for resisting summary judgment); (iii) the extent of the delay occasioned by an adjournment and any resulting prejudice. Beyond such matters, it is probably unwise to generalise; all must depend on the circumstances of the individual case.”
32. The present case is at the bottom end of any sliding scale in regard to these considerations. The appeal in the Dubai Courts borders on the hopeless. It is clearly a device to delay matters and given the technical and unmeritorious nature of the challenge (further exemplified by the sort of points taken in the present application) is redolent of want of good faith. As regards delay I have received no assistance save that a further appeal to the Court of Cassation is contemplated. Any such delay and enhanced cost is clearly prejudicial.
33. In my judgment an adjournment is not appropriate. If I had considered otherwise I would have ordered security to be posted for the full amount of the award but perhaps surprisingly the Claimant did not press for this alternative. From the Defendant’s perspective that might be regarded as a welcome relief.
Date of issue: 22 January 2015
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