January 17, 2023 SCT - Judgments and Orders
Claim No. SCT 473/2022
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE SMALL CLAIMS TRIBUNAL
ORDER WITH REASONS OF SCT JUDGE MAITHA ALSHEHHI
UPON the claim having been filed on 29 December 2022 (the “Claim”)
AND UPON the Defendant indicating its intention to contest the DIFC Courts’ jurisdiction on 5 January 2023 (the “Defendant’s Jurisdictional Challenge”)
AND UPON a hearing listed before SCT Judge Maitha AlShehhi on 12 January 2023 to determine the Defendant’s Jurisdictional Challenge, with the Claimant’s representative and the Defendant’s representative in attendance
AND UPON reading the submissions and evidence filed and recorded on the Court file
AND PURSUANT TO Rules 53.2, 53.16 and 53.18 of the Rules of the DIFC Courts (“RDC”)
IT IS HEREBY ORDERED THAT:
1. The Defendant’s Jurisdictional Challenge is granted.
2. The DIFC Courts does not have jurisdiction to hear and determine this Claim.
3. Each party shall bear their own costs.
Date of Issue: 17 January 2023
SCHEDULE OF REASONS
1. The Claimant filed its claim with the DIFC Courts Small Claims Tribunal (the “SCT”) seeking the payment of outstanding sums allegedly owed to the Claimant by the Defendant pursuant to a Subcontract Agreement dated 31 March 2012 in the amount of AED 289,152 (the “Subcontract Agreement”).
2. The Subcontract Agreement was signed between Mahar who are registered in Ras Al Khaimah and Moori who were registered in Abu Dhabi.
3. Moori name has been changed to Moori (Moori Group) which was communicated to the Claimant on 26 December 2017 who were also registered in Abu Dhabi. The company’s name has been further changed to Mihi Contracting LLC who are now registered in Dubai.
4. Mihi Contracting LLC (the “Defendant” or “Mihin”) responded to the Claim Form on 5 January 2023 indicating its intention to contest the jurisdiction of the DIFC Courts to hear the Claim and requested that the Claimant’s claim be dismissed with costs.
5. In line with the rules and procedures of the SCT, this matter was referred to me for determination, pursuant to a jurisdiction hearing held on 12 January 2023 with the Claimant’s representative and the Defendant’s representative in attendance (the “Hearing”).
The Defendant’s Jurisdictional Challenge
6. The Defendant disputes the DIFC Courts jurisdiction to hear and determine this Claim on the basis that paragraph 16 of the Appendix of the Subcontract Agreement stipulates that the governing law is “United Arab Emirates as applied in the Emirate of Abu Dhabi”.
7. Paragraph 3.2 of the Subcontract Agreement reads as follows:
“The Subcontract Agreement shall be governed by the Laws set out in the Appendix to Subcontract”.
8. The Defendant asserts that the parties have elected to resort to arbitration in case of any dispute, as clearly stated in paragraph 20 of the Subcontract Agreement. As such, the Defendant argues that the default jurisdiction for the Claim at hand should be conferred to arbitration in Abu Dhabi in compliance with the Subcontract Agreement.
9. The Defendant requests that the case be dismissed with costs due to lack of jurisdiction.
10. At the Hearing, the Defendant expressly denies that there is an agreement to opt in to the DIFC Courts’ jurisdiction.
11. The Claimant submits that they have tried to resolve the dispute via arbitration in both Abu Dhabi and Ras Al Khaimah through the chambers of commerce but could not retrieve their money from the Defendant.
12. The Claimant further submits that given that the Defendant company is now registered in Dubai, the DIFC Courts may practice its jurisdiction to determine the Claim and not Abu Dhabi as claimed by the Defendant.
13. The Claimant reiterates that the outstanding debt remains payable by the Defendant even if the company’s name has been changed three times and the registration has been moved to Dubai instead of Abu Dhabi and this is pursuant to Federal Law No. 2 of 2015 (Article 12 Clause 2) which stipulates that liabilities are considered as assets and are transferred even through the change of name of the company.
14. It is imperative to note that this Order only addresses whether the DIFC Courts is eligible to hear the Claim or not and does not address the merits of the Claim itself.
15. RDC 53.2 requires that the SCT hear only cases that fall “within the jurisdiction of the DIFC Courts” which are set out below:
“(1) where the amount of the claim or the value of the subject matter of the claim does not exceed AED 500,000 or;
(2) where the claim relates to the employment or former employment of a party; and all parties elect in writing that it be heard by the SCT (there is no value limit for the SCT’s elective jurisdiction in the context of employment claims); or
(3) which do not fall within the provisions of sub-paragraphs (1) or (2) above, but in respect of which:
(a) the amount of the claim or the value of the subject matter of the claim does not exceed AED 1,000,000; and
(b) all parties to the claim elect in writing that it be heard by the SCT, and such election is made in the underlying contract (if any) or subsequent to execution of that contract
(c) where they have been filed with the Small Claims Leasing Tribunal
(4) such other claims as may be ordered or directed by the Chief Justice to be heard by the SCT from time to time.”
16. The jurisdiction of the DIFC Courts is determined by Article 5(A) of the Judicial Authority Law, Dubai Law No. 12 of 2004, as amended (the “JAL”), which provides a number of limited gateways through which the DIFC Courts have jurisdiction over a claim, which are, as relevant:
“(a) Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;
(b) Civil or commercial claims and actions arising out of or relating to a contract or promised contract, whether partly or wholly concluded, finalised or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract;
(c) Civil or commercial claims and actions arising out of or relating to any incident or transaction which has been wholly or partly performed within DIFC and is related to DIFC activities;
(e) Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.
(2) … civil or commercial claims or actions where the parties agree in writing to file such claim or action with [the DIFC Courts] whether before or after the dispute arises, provided that such agreement is made pursuant to specific, clear and express provisions.”
17. Neither the Claimant nor the Defendant is a DIFC body/establishment nor is the action arising out of the Subcontract Agreement was performed in the DIFC. Hence, Articles 5(A)(a)(b)(c) and (e) of the JAL do not apply to this Claim.
18. Pursuant to Article 5(A)(2) of the JAL, the DIFC Courts can exercise its jurisdiction over a matter that is unrelated to the DIFC, where the parties have agreed in writing that any dispute arising between them would be referred to the DIFC Courts for adjudication. Such a provision would allow the parties to ‘opt-in’ to the DIFC Courts’ jurisdiction, provided that it clearly demonstrates the parties’ intention to do so.
19. The Court must now consider whether there is any agreement in writing between the Claimant and Defendant selecting the DIFC Courts as their preferred mechanism to settle disputes arising out of the Subcontract Agreement.
20. Paragraph 20 of the Subcontract Agreement refers to the dispute mechanism as agreed between the parties with regards to settlement of disputes which reads as below:
“20 Settlement of Disputes
20.1 Amicable Settlement and Arbitration
20.1.1 If a dispute of any kind whatsoever If a dispute of any kind whatsoever arises between the Contractor and Subcontractor in connection with, or arising out of the Subcontract Agreement, whether during the execution of the Subcontract Works or after their completion and whether before or after repudiation or other termination of the Subcontract Agreement, then the Contractor or the Subcontractor may give a notice of such dispute to the other party, in which case the parties shall attempt for the next ninety (90) days to settle such dispute amicably before either party may, following 20 days notice to the other party, refer the matter to arbitration. Such notice shall state that it is made pursuant to this Sub-Clause 20.1.1.
20.1.1. Any dispute referred to arbitration in accordance with Sub- Clause 20.1.1 shall:
(a) apply the arbitral rules and procedures the set out in the Appendix to Subcontract;
(b) be heard before the number of arbitrators stated in the Appendix to Subcontract, each appointed by the parties nominated in the Appendix to Subcontract;
(c) have a seat of the Arbitration in the location set out in the Appendix to Subcontract; and
(d) be conducted and awarded in English.
20.1.2. Arbitration may be commenced prior to or after completion of the Subcontract Works. The obligations of the Contractor and the Subcontractor shall not be altered by reason of the arbitration being conducted during the progress of the Subcontract Works.”
21. Notwithstanding the reference to arbitration above and for the avoidance of doubt, I asked the Claimant at the Hearing whether there was any written agreement between the Claimant and Defendant indicating their intention to elect the DIFC Courts as their preferred mechanism to settle disputes, however, the Claimant confirmed that no such agreement exists with BICC.
22. Upon reviewing the Subcontract Agreement and the documents filed in support, it appears that it does not contain an express clause by virtue of which the DIFC Courts would be able to exercise jurisdiction over this Claim.
23. For the sake of clarity, arbitration is an alternative dispute mechanism used to settle disputes which is a wholly separate and distinctive process from court proceedings. Paragraph 20.1.1 of the Subcontract Agreement refers to “arbitral rules” and “arbitrators” which are only accessible in arbitration centres and not the DIFC Courts as the Court is not an arbitration centre nor does it retain a list of arbitrators.
24. Consequently, this cannot be construed as having elected to the DIFC Courts jurisdiction on the premise that the dispute resolution clause set out in paragraph 20 of the Subcontract Agreement is evident and a clear indication that it was the parties’ preference for disputes to be settled via commencing arbitration proceedings.
25. Due to the lack of any other written evidence that would suggest that the parties have agreed to bring the Claim to the DIFC Courts for adjudication after signing the Subcontract Agreement, I find that the Defendant’s Jurisdictional Challenge must be granted in compliance with paragraph 20 of the Subcontract Agreement as well as for failure to meet the requirement under Article 5(A)(2) of the JAL.
26. In light of the aforementioned, I find that the DIFC Courts does not have jurisdiction to determine this Claim due to the absence of any written agreement that demonstrates the parties’ intention to opt in.
27. Each party shall bear their own costs.