March 23, 2020 Court of Appeal - Judgments
Claim No: CA 010/2019
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
(1) FIRST ABU DHABI BANK PJSC
(2) FAB SECURITIES LLC
LARMAG HOLDING B.V
|Hearing||: 25 September 2019|
|Counsel||: Rupert Reed QC instructed by Al Tamimi & Co. for the Appellants |
Michael Black QC instructed by Clyde & Co. for the Respondent
|Judgment||: 23 March 2020|
UPON the Appellants’ appeal (the “Appeal”) against the jurisdictional ruling (the “Jurisdictional Ruling”) of Justice Sir Richard Field dated 4 August 2019
UPON permission to Appeal being granted on 1 September 2019
UPON the hearing before the Court of Appeal on 25 September 2019 (the “Appeal Hearing”)
UPON the Appeal being dismissed on 30 September 2019, with reasons cited below
UPON costs of the Appeal being reserved pending written submissions from the parties due by 4.00pm on 2 October 2019
AND UPON reading the relevant evidence and documentation on the Court file
IT IS ORDERED
1. Appeal dismissed.
2. Costs be awarded to the Respondent in the sum of USD 63,806.42.
Date of issue: 23 March 2020
SCHEDULE OF REASONS
CHIEF JUSTICE ZAKI AZMI:
1. This Appeal deals with the issue of whether or not the DIFC Court has the jurisdiction to hear the claim, in particular whether it can issue the injunctions against the Appellants. The Court of First Instance issued an injunction restraining the Appellants from disposing of, dealing with, or diminishing the value of certain Reditum SA Bonds (the “Bonds”) held at any time in the account within direct or indirect control of the Appellants, including any assets received or derived from the said Bonds.
2. The parties at the same time seek to have a final determination on the question of jurisdiction. Parties also agree that for the purposes of determining the case, irrespective of the outcome of the application for injunction, that there will be a Case Management Conference (“CMC”) on procedural matters such as production of further evidence and submissions.
3. In the substantive proceedings, the Appellant contends it was induced by fraud allegedly committed by a Mr Aljabri (“Mr Aljabri”) and an entity called Elite Holding Group (“Elite”) to sell bonds to Elite and deliver them by transfer to an account held by the Second Appellant.
4. For the purposes of this Appeal, these allegations are not of relevance. They may, however, be relevant when this suit goes to trial. For this Appeal only, we have to decide whether the DIFC Courts has the jurisdiction to hear this dispute.
5. Whether this case falls within the jurisdiction of the DIFC Courts depends on whether it is within Article 5(A)(1)(a) of the judicial authority law (the “JAL”). Article 5(A)(1)(a) of the JAL provides the DIFC Courts with jurisdiction in respect of civil or commercial claims, or actions “to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party”.
6. The relevant entities are the “DIFC Establishment” (“DIFC Establishment”) and “Licensed DIFC Establishment” (“Licensed DIFC Establishment”). The DIFC Establishment is defined as an “entity or enterprise established, licensed, registered or authorised to carry on business or conduct any activity within the DIFC pursuant to DIFC Laws, including Licensed DIFC Establishments”, and the “Licensed DIFC Establishment” is defined as an “entity or enterprise licensed, registered or authorised by the Dubai Financial Services Authority to provide financial services, or conduct any other activities in accordance with the DIFC Laws”. In my opinion, what we have to decide is whether the Appellants fall within the definition of “Licensed DIFC Establishment”.
7. The Learned Judge in the first instance delved into the arguments in great detail and it is therefore not necessary for me to regurgitate them in this Judgment. The Learned Judge went to great lengths to analyse the meaning of those words and apply them to the activities of the Appellants in DIFC. He determined that the Court has jurisdiction over the Appellants pursuant to Article 5(A)(1)(a) of the JAL on the basis that the Appellants are “Licensed DIFC Establishments” as defined in the JAL.
8. We now must determine whether the claim relating to this application for injunction is one which pertains to the Appellants being entities and enterprises which are established, licensed, registered or authorised to carry on business and conduct their activities within the DIFC pursuant to DIFC laws.
9. In our approach in respect of the construction of Article 5(A)1A we must also bear in mind the words of Sir John Chadwick CJ in Corinth Pipeworks SA v. Barclays Bank PLC  DIFC. As rightly recognised in the Jurisdictional Ruling, at paragraph 34, once is it shown that the party by or against whom the civil or commercial clean claim is brought, is an entity or enterprise licensed, registered, or authorised by the DFSA a to provide financial services or to conduct any other activities in accordance with the DIFC laws, the requirement under paragraph a of JAL 5 is met. Sir Richard Field notes: “[t]he jurisdiction exists ad hominem - there is no further “transaction-based” requirement, Comparable to that imposed under paragraphs (b) and (c) of Article 5(A)(1).”
10. The Learned Judge further noted that the Court of Appeal has observed, on more than one occasion, any exorbitance of jurisdiction that results from Article 5(A)(1)(a) party jurisdiction stands to be mitigated by the application of the forum non conveniens doctrine where an alternative jurisdiction exists outside of the UAE. 1
11. The Learned Judge concluded that by virtue of the DFSA entering the names of the Appellants in its list of Recognised Members (“Recognised Members”) and therefore entitling them to trade on NASDAQ, and indeed as they are authorised by the DFSA to provide services in accordance with the DIFC laws, that the Appellants are therefore DIFC Licensed Establishments.
1 See paragraph 35 of the Jurisdictional Ruling.
12. With this in minds we shall take another look at the business activities of the Appellants and how if, at all, they fall within that definition. Before we come to this, it is first worth overviewing the facts of the case and the submissions of the parties.
13. The Appellants are both incorporated and have their headquarters in Abu Dhabi. The First Appellant is licensed and regulated by the Central Bank of the UAE. It is registered with Dubai Financial Services (the “DFSA”) as a recognised member. It is a ‘market maker’ in NASDAQ Dubai (“NASDAQ”), which is an American Stock exchange. The Second Appellant is a wholly owned subsidiary of the First Defendant as well as a member of NASDAQ Dubai.
14. The Appellants’ appeal is based on a highly technical argument on what might be the correct interpretation of the wording “licensed, registered or authorized” and whether the abovementioned definitions (in paragraph 4) are to be construed as “permitted or allowed by the DFSA to carry out any financial services in the DIFC”, or in their “technical sense” in fact referring to the separate processes by which entities are formally “licensed”, “registered” and “authorized” to do the same. Much of the appeal is based on whether the Arabic-English translation is correct. Issues of the Arabic language and its construction is used in the relevant provision where also raised. It was suggested that for example, “authorized” may have a broader meaning, and so may “registered” which could be broadly construed to mean “recorded”.
15. The Appellants further argue that the Judge’s reasoning with regards to the exemption for UAE-regulated entities cannot reasonably be confined to only UAE firms. It is not necessary to repeat the arguments put forth here, but in sum they contend that the effect of the exemption is that non-UAE firms such as Goldman Sachs may trade on a DIFC exchange as long as they comply with certain conditions. Their submission is that the Judge’s “wider analysis” of the legislative intention leads to the “extraordinary conclusion” that global firms such as Goldman Sachs & Co (as well as the London Stock Exchange) are “DIFC Establishments” and “Licensed DIFC Establishments”.
16. The Respondent argues that the Appellants’ submissions are ill-established, and illogical. They contend any supposed policy reasons for the Court to hold that it does not have jurisdiction over the Appellants have already been considered and rejected by the DIFC Court of Appeal in Corinth Pipeworks SA v Barclays Bank PLC. 2
17. With regard to the translation and construction aspects of the Appellants’ appeal, the Respondent’s argued that these are convoluted, futile and untenable arguments which are simply a bid to try and escape the jurisdiction of this Court and to re-run the ‘floodgate’ argument. The Respondent submitted that the JAL itself should be interpreted by recognising that: (i) it is a Dubai statute; (ii) it is enacted officially only in Arabic; and (iii) it serves as the basis of the DIFC Courts’ jurisdiction.
18. On the Respondent’s account, the phrase “licensed or registered or permitted/authorised” in Article 5(A)(1(a) of the JAL14 should be ‘interpreted autonomously and not fettered by subsequent English language linguistic choices of either the DFSA or those drafting or amending DIFC legislation’. 3
19. Though the Appellants have put forth an admirable effort to persuade this Court otherwise, I am not convinced that this case is one revolving around a sophisticated theoretical dispute concerning the semantics of language. Rather, I am in line with the Respondent’s submission that an autonomous, ordinary and natural definition of the JAL is preferred.
20. Returning now to the principal issue, that is, the determination of whether the claim relating to this application for injunction is one which pertains to a “DIFC Establishment” or a “Licensed DIFC Establishment”, it is important to look at the business activities of the Appellants to determine if they fall within the latter definition as set out at the beginning of this Judgment.
21. It is notable that the Respondents cite numerous business activities of the Appellants which are of public record, notably that the Second Respondent (FAB) is one of the four market makers on Nasdaq Dubai, and FAB is a market maker on NASDAQ Dubai for DP World PLC, which is the most actively-traded equity on NASDAQ Dubai, and that the Second Respondent has undertaken to buy and sell shares in “DP World”. Further, to quote from the skeleton argument:
2 See the Defendant’s skeleton argument, paragraph 33.
3 See paragraph 16 of the Defendant’s skeleton argument.
When Nasdaq Dubai closed its link with Euroclear in respect of equities, FAB offered to act as a Nasdaq Dubai Custodian in respect of shares previously held via Euroclear; and d. FAB acted as co-manager in respect of the following offerings which were listed on Nasdaq Dubai: (a) A USD 1 billion conventional bond issued by Emirates NBD […]; and (b) A USD 1.5 billion Sukuk issued by Islamic Development Bank […]. 4
22. The Respondent rightly cites various other cases in which international banks were “Recognised Companies” and “Authorised Firms” and were held to be DIFC Establishments and/or Licensed DIFC Establishments. 5
23. On the evidence before the Court, it is clear that the Appellants’ status is indeed a Licensed Establishment of the DIFC, and this very recognition entitles or permits them to provide various “financial services” or conduct “other activities in accordance with the DIFC laws” such as trading securities on their own behalf, as well as on behalf of customers and as a “market maker”. Indeed, the Appellants satisfy that definition because, as UAE-regulated entities the Appellants are authorised and/or registered by the DIFC.
24. In my opinion, the legislative purpose of Article 5(A)(1)(a) of the JAL is clear, and the DIFC Courts’ in personam (or indeed ad hominem) jurisdiction over international financial institutions pursuant to Article 5(A)(1)(a) of the JAL is well-established.
25. The JAL’s very definition of “Licensed DIFC Establishment” is intended to cover entities such as the Appellants, who provide financial services or conduct any other activities in accordance with DIFC laws, which they evidently do, as per paragraph 17 above.
26. In determining whether or not the DIFC Court has the jurisdiction to issue the injunction against the Appellants, I uphold that the Learned Judge made the correct ruling in the first instance by restraining the Appellants from disposing of, dealing with, or diminishing the value of the Bonds and the Jurisdictional Ruling should therefore be upheld.
27. The Appeal is therefore dismissed.
4 See paragraph 52 of the Defendant’s skeleton argument.
5 See Allianz Risk Transfer AG Dubai Branch v Al Ain Ahlia Insurance Company PJSC  DIFC CFI 012 (30 April 2013); Barclays Bank plc v Afras Ltd et al  DIFC CFI 008 (11 August 2013); Investment Group Private Ltd v Standard Chartered Bank  DIFC CA 004 (18 November 2015); Tavira Securities Limited v (1) Re Point Ventures Fzco (2) Jai Narain Gupta (3) Mayank Kumar (4) Saroj Gupta  CFI 026 (17 December 2017).
28. At the close of the Hearing, the Appellants requested there should be no order as to the costs. We asked parties to file further submissions in respect of costs. This Court has a discretion under RDC 38.6 as to whether costs are payable by one party to another.
29. The Appellants argue, in short, that there should be no order as to the costs of the appeal on the basis that: i) the Appellants act on the Respondent’s case as a trustee or nominee; ii) the hearing was of significant public importance and the case should be considered as being, in effect, a test case as it raised issues of real public importance to the DIFC as a financial centre; and/or; iii) there has been no issue as to conduct.
30. On the contrary, the Respondent submits that the relevant principles are simply not controversial and their costs should be covered in the sum of USD 63,806.42. The Respondent further submits that even if the appeal had been brought in the “wider interests of the banking and financial services communities”, there is no proper basis to depart from the general rule of awarding costs to the successful party.
31. Indeed, the Hong Kong Court of Final Appeal overviewed relevant authorities from across the common law world in Designing Hong Kong Ltd v Town Planning Board  and:
In Chu Hoi Dick and Another v Secretary for Home Affairs (No. 2), Lam J (now Lam VP) gave useful guidance […] Lam J formulated a number of criteria relevant to the court’s consideration of whether it was appropriate to disturb the usual order of costs following the event:- “[…] I shall therefore formulate the three criteria as follows, (a) A litigant has properly brought proceedings to seek guidance from the court on a point of general public importance so that the litigation is for the benefit of the community as a whole to warrant the costs of the litigation be borne by the public purse as costs incidental to good public administration; (b) The judicial decision has contributed to the proper understanding of the law in question; (c) The litigant has no private gain in the outcome. I should also mention that the public interest element is only one of the factors that is relevant for the exercise of the discretion as to costs. Even if all these criteria are satisfied, the court must also have regard to other relevant factors such as the conduct of the litigants in the proceedings in coming to a final decision on what is just in the circumstances. 6
32. In my opinion, this case falls far short of satisfying those criteria set out in the Hong Kong case. Even if I was convinced that this litigation is for the benefit of the community as a
6 HKCFA 16 at . Cited in the Respondent’s further submissions on costs at paragraph 11. My italics.
whole to warrant the costs of the litigation be borne by the successful party, other criteria are simply not met.
33. I find the circumstances of this appeal are not such to warrant a departure from the general rule that the unsuccessful party will be ordered to pay the costs of the successful party as per RDC 38.7(1).
34. Therefore, costs are to be awarded to the Respondent, on the general basis that the unsuccessful party (being the Appellants) pay the other party’s costs of the litigation.
35. Costs are immediately assessed in the sum of USD 63,806.42 and this is to be paid by the Appellants to the Respondent within 30 days of these Reasons being issued.
DEPUTY CHIEF JUSTICE OMAR AL MUHAIRI
36. I agree with the abovementioned judgment and I have nothing further to add.
HIS EXCELLENCY JUSTICE ALI AL MADHANI
37. I agree with the abovementioned judgment and I have nothing further to add.
Date of issue: 23 March 2020
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