Claim No: CFI 024/2010
Application 81/2010
THE JUDICIAL AUTHORITY OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum,
Ruler
IN THE
COURT
BEFORE DEPUTY
CHIEF JUSTICE
BETWEEN
CORINTH PIPEWORKS S.A.
Claimant
and
BARCLAY'S BANK PLC
Defendant
Hearing: 17 January 2011
Counsel: Michael Black QC (representing Ince & Co) for the ClaimantJames Abbott, Clifford Chance for the Defendant
Judgment: 8 February 2011
JUDGMENT
Introduction
1. This is an application by the Defendant under RDCRule 12.1for a declaration that this Court
2. The factual foundation for the application is as follows.
The Claimant is a Greek company which carries on business in Athens. By a purchase order dated 30 April 2009 the Claimant sold and delivered to Afras Limited ("Afras"), a company whose head office is at Jebel Ali, Dubai, four consignments of steel pipes. Invoices in respect of the purchase price amounted in value to US$34,668,868.26.
3. Afras is said to have paid to the Claimant no more than US$9,642,278, thereby leaving some US$24,198,231.25 outstanding, taking into account a credit of US$828,177. Afras had an account at the Defendant's branch at Jebel Ali, Dubai, outside the DIFC
4. In the course of the period 28 April 2010 to 16 June 2010 an employee of the Defendant bank at its Jebel Ali branch, one Joseph Figueredo, sent a number of emails to Radhakrishnan Nanda Kumar of Afras by which, it is alleged, Mr Figueredo represented on behalf of the Defendant bank that Afras had requested the Defendant to transfer funds to the Claimant to pay the outstanding amount due in respect of the purchase of pipes. It is alleged that the emails indicated and represented that payment could be made within a short time and that such emails were sent by the Defendant bank to Afras so that Mr Nanda Kumar could pass them on to the Claimant. It is further alleged that such representations were untrue.
5. It is also alleged that similar false representations were made orally by Mr Figueredo to representatives of the Claimant on 27 May, 6 June and 15 June 2010.
7. The Claimant alleges that the representations by Mr Figueredo were made with the intention of discouraging the Claimant from taking steps to recover the debts or to freeze or otherwise secure Afras's assets. It is the Claimant's case that, had such representations not been made, it would have taken steps as early as April 2010 to obtain security for its claim by freezing orders against Afras.
8. The Claimant puts forward its claim in deceit and negligence and/or unlawful conspiracy. As to the last, it is pleaded that Mr Figueredo conspired unlawfully with Afras and/or Mr Kumar to defraud the Claimant by means of the false representations. It is said that by reason of the Defendant bank's tortious conduct the Claimant is no longer able to recover full payment of the outstanding debt and/or the Claimant has lost the chance of recovering full payment.
9. The Claimant further claims multiple damages under Article 40(2) of the DIFC Law of Damages
11. The Defendant contends that this Court has no jurisdiction because the Claimant cannot bring itself within any of the heads of jurisdiction under Article 5(A) of Law No. 12 of 2004 ("Law No. 12). This provides as follows:
"The Court of First Instance:
(1) Without prejudice to paragraph 2 of this Article, the Court of First Instance shall have the exclusive jurisdiction over:
(a) civil or commercial cases and disputes involving the Centre or any of the Centre's Bodies or any of the Centre's Establishments.
(b) civil or commercial cases and disputes arising from or related to a contact that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre.
(c) objections filed against decisions made by the Centre's Bodies, which are subject to object in accordance with the Centre's Laws and Regulations.
(d) any application over which the Courts have jurisdiction in accordance with the Centre's Laws and Regulations;
(2) Parties may agree to submit to the jurisdiction of any other court in respect of the matters listed under paragraphs (a), (b) and (d) of this Article."
12. The Claimant submits that the Defendant is a "Centre's Establishment within the words of Article 5(A)(1)(a) of Law No.12. The essence of that submission is that the Defendant has a branch in the DIFC through which it carries on business in the DIFC and has been designated a recognised company
13. The Claimant argues that, no matter that it relies in no respect on any conduct of, or facts affecting, the Defendant's DIFC Branch and that its case is confined to allegations of tortious conduct by an employee of the Defendant's Jebel Ali Branch, which is outside the DIFC, this Court nevertheless has jurisdiction because the Defendant companyas a whole, and not just its DIFC Branch, has been designated a Licensed Centre Establishment and thereby a "Centre Establishment" within Article 5(A)(1) of Law No.12.
14. It is to be observed that the Claimant does not seek to found jurisdiction on any other head of Article 5(A)(1).
15. It is submitted on behalf of the Defendant Bank that the underlying purpose of Article 5(a)(1)(a) is to confer jurisdiction on this Court over claims brought by or against entities falling within the descriptions of those DIFC entities set out under Article 5(A)(1)(a) and that in this case the Claimant, as is common ground, not being a Centre Establishment, the claims are brought against the Defendant Bank on the basis of the conduct of employees at its Jebel Ali Branch and not of its DIFC Branch. Accordingly, the requirement that, for the purposes of establishing jurisdiction under Article 5(A)(1)(a), the Centre Establishment must be a party to the claim is not satisfied. An essential connecting factor between the Defendant and the claim is thus missing.
16. It is further argued on behalf of the Defendant Bank that if, contrary to its primary submission, this Court does have jurisdiction, it should apply the principles of forum non conveniens identified in the English Courts, specifically in the decision of the House of Lords inSpiliada Maritime Corporation v Consulex Ltd.[1981] AC 460 and stay these proceedings.
17. Mr Abbott, on behalf of the Defendant Bank submits that, by reference to Article 30(2) of Law No.10 of 2004 this Court should apply to jurisdiction disputes the principles of forum non conveniens. That Article provides as follows:
"The
DIFC Courts
18. He argues that the Civil Courts of Dubai (as distinct from this Court) are clearly and distinctly shown to be the appropriate forum in the interests of justice and the parties.
19. In this connection it is submitted that the rules of substantive law applicable to the causes of action alleged by the Claimant must be those of the law
20. Further, the key witnesses — Mr Figueredo and Mr Nanda Kumar — are located in Dubai and not the DIFC, as are the documents, given that the Claimant has a branch in Dubai and the Jebel Ali Branch of the Defendant Bank is in Dubai. Further, in view of the allegation of conspiracy against Mr Nanda Kumar of Afras it was probable that by being in Dubai, he would be joined as a necessary party in proceedings already commenced by the Claimant in the Dubai Civil Courts. These other proceedings are as follows.
21. In Dubai Courts
22. Mr Abbott, on behalf of the Defendant Bank, draws attention to very substantial overlap of the facts relied on and likely to be relied on in the substantive proceedings already commenced in the Dubai Civil Court and the present proceedings in this Court and also to the fact that the Claimant has commenced those two distinct sets of proceedings in two separate jurisdictions. The existence of such parallel proceedings raised a significant risk of conflicting decisions on the same factual issues. Applying the decision of the English House of Lords inThe Abidin Dover[1984] AC 398, the Claimant had failed to establish that there was some personal or juridicial advantage that would be available to him only in the proceedings in the DIFC Courts that was of such importance that it would cause injustice to the Claimant were he to be deprived of it by imposing a stay or otherwise declining to exercise jurisdiction in this Court : see Lord Diplock at pages 411–412.
23. It is further submitted on behalf of the Defendant Bank that, although any trial of the issues raised by the claim against the Bank would be entirely an English language trial (both the oral evidence and most of the documents would be in English), the Dubai Civil Courts would be quite capable of dealing with this evidence through interpreters and translations.
24. Finally, Mr Abbott submits that it is relevant to consider the policy of the law of Dubai in creating the jurisdictional structure governing the respective scope of the jurisdiction of the DIFC Courts and the Dubai Civil Courts.
25. The scope of jurisdiction of the DIFC Courts is defined by Article 5(A) of Law No.12 and by Law No.10 of 2004 was intended not to encroach on the scope of jurisdiction of the Dubai Civil Courts. "Exclusive" jurisdiction having been conferred on the DIFC Courts in respect of those claims and disputes specified in Article 5(A), all of which were connected with the DIFC area, it could not have been the legislative intention that claims, such as that raised in these proceedings, which had absolutely no connection with the DIFC but which were most closely connected with non-DIFC Dubai could be litigated in this Court. Centre's Establishment in Article 5 (A)(1)(a) therefore had to be given a meaning consistent with that underlying consideration. Were it to be construed as referring to the entire corporate structure of a company located in DIFC but also extending to non-DIFC Dubai, and the places far distant from DIFC or Dubai, it would open the floodgates to litigation of claims wholly unconnected with DIFC, such as a claim by or against an international corporation in respect of its operations in, for example, India. That would be contrary to the legislative purpose of Article 5(A).
26. Mr Michael Black QC, on behalf of the Claimant, submits that the Defendant's submissions fail to distinguish between the nature of the different jurisdictional requirements under Article 5(A)(1). Thus, the requirement under (a) is concerned only with the personal characteristics of either party to the proceedings : the Centre, any of the Centre's Bodies and any of the Centre's Establishments. By contrast the requirements under (b) are concerned only with the characteristics of the cause of action or dispute, namely the place where the Contract or transaction in question was entered into, where the contract was performed or where the incident occurred. In each case the relevant location must be the DIFC. Accordingly, it is argued that the Defendant's submissions are an attempt to introduce into the requirement set out in (a) a geographical qualification applicable only to the requirements for subject-matter jurisdiction under (b).
27. It is further said in support of the Claimant's submission on the effect of Article 5(a)(1)(a) that, subject to an important exception, the application of the principles of forum non conveniens would normally prevent litigation in the DIFC Courts of claims by or against parties of the kind described in sub-paragraph (a) where the subject-matter of the dispute was unconnected with the DIFC and where the Courts of another place were clearly and distinctly the appropriate forum for the disposal of that dispute. Accordingly, the "floodgate" argument advanced on behalf of the Defendant Bank was misplaced because, although the scope of this Court's jurisdiction would be theoretically geographically extensive, in practice it would not normally be exercised.
28. The exception to the applicability of the forum non conveniens principle, which Mr Black strongly emphasised, was that the DIFC Courts would be precluded from staying proceedings in those cases where the alternative forum was the Dubai Civil Court. This was the consequence of the legislative allocation of jurisdiction within the Emirate whereby under the judicial authority law
Discussion
29. There can be no doubt that the argument advanced on behalf of the Claimant would, if correct, have potentially far-reaching consequences. Many members of the legal professional conversant with the DIFC and its Courts would assume that, given that the purpose of the Court was to provide a dispute resolution facility for the DIFC and with regard to transactions associated or connected with it or the commercial enterprises carrying on trade within the DIFC, an international company with a branch licensed to carry on business in the DIFC would be confined to bringing claims within the DIFC Courts in respect of disputes connected with the business of that branch in the DIFC. The suggestion that an international company incorporated and having its head office in, say, the United States or the United Kingdom, but with a branch registered and licensed to do business in the DIFC, could start proceedings in the DIFC Courts or could be sued in that Court in respect of a claim wholly unconnected with the DIFC or the business of its DIFC branch would, on the face of it seem distinctly improbable. Were that so, the scope of jurisdiction of the DIFC Courts would have an international dimension which had not hitherto been generally perceived.
30. The legislative basis of the jurisdiction of the DIFC Courts differs fundamentally from that applicable to the English Commercial Court which in most other respects substantially contributes to both the substantive legal regime and the procedural framework of the DIFC Courts. Specifically, extra-territorial jurisdiction is not derived from a discretionary framework of the kind found in CPR
31. By contrast, in the DIFC Courts, service on a defendant outside the jurisdiction does not require permission and can be effected anywhere in the world provided always that the claimant can bring himself within Article 5(A)(1) of Law No.12. It is then open to the defendant upon whom service has been effected to challenge the jurisdiction and apply to set aside
32. It is to be observed that Article 5(A)(1) is comprised of four distinct kinds of connecting factor for jurisdictional purposes.
33. First, — in (a) — the connecting factor is defined by reference to a description of the party involved in the dispute who, on clear authority in this court, must be a party to the proceedings in question : seeDhir v Waterfront Property Investment LtdCFI 011/2009, per Hwang DCJ at paragraph 64. Three kinds of party are identified — the Centre, any of the Centre's Bodies, any of the Centre's Establishments.
34. Secondly, — in (b) the — connecting factor is defined by reference to the nature of the substance or subject-matter of the dispute.
35. Thirdly — in (c) — objections against the decisions by the Centre's Bodies again refers to the substance of the dispute, but with the connecting factor identified as the decision of a Centre Body.
36. Fourthly, — in (d) — those applications specifically reserved to the Court by DIFC legislation rather than under Article 5(A).
37. In construing these four jurisdictional gateway provisions, not least (a) and (b), the assumption must be that the purpose of dividing up the provisions in this way has to bring within the jurisdiction of the Court distinct kinds of dispute bearing the descriptions set out in the separate paragraphs. Thus, for example, the assumption must be that the jurisdictional gateway defined by (b) would confer jurisdiction in respect of disputes that might not already be covered by (a) and vice versa.
38. Further, with regard to sub-paragraph (a), the involvement of the Centre, and of the Centre's Bodies or any of the Centre's Establishments can clearly be either as a claimant or a defendant in the relevant case or dispute. There is nothing in the express words or in the words as to be understood within their context which would confine the meaning of "involving" to involvement only as a defendant. Indeed, the concept of involvement must apply in the same way to each of the three possible parties covered by (a) — the Centre itself, the Centre Bodies
39. The Centre
40. Article 2 provides that Centre's Bodies has the following meaning:
"Those bodies established pursuant to sub-paragraph 3 of Article 3 of this Law and any other bodies Created by those bodies or the President."
41. Article 3(3) provides:
42. By way of example, just as DFSA could be sued in the DIFC Courts in respect of a breach of contract or duty alleged by a corporation which was not a Centre Establishment and was incorporated anywhere outside the DIFC, so also could the DFSA sue such a corporation in the DIFC Courts, subject always to the DIFC Courts' discretion in the application of the forum non conveniens principle.
43. Applying the same principle to Centre's Establishments, by parity of reasoning, they can sue and be sued in the DIFC Courts as parties to a civil or commercial case or dispute no matter that the opposite party is outside the DIFC. The only express qualification to this jurisdiction by reference to the subject matter of the dispute is that it should be of a civil or commercial nature. Most relevantly to the present application, there is nothing in Article 5(A) which expressly or impliedly introduces into the jurisdictional gateway in sub-paragraph (a) any further subject-matter qualifications and in particular any of those identified in sub-paragraph (b).
44. Centre Establishments
45. Article 2 defines Licensed Centre Establishments as follows:
| "Licensed Centre Establishments: | Any entity licensed, registered or otherwise authorised to carry on financial and banking business including those activities and businesses referred to in Article 9 of this Law." |
46. Article 9 provides:
"Article 9 Licensed Centre Establishments
Licensed Centre Establishments carry on financial and banking businesses, including Islamic financing and business, and other activities, as permitted by their licenses or registration, including the following
47. Article 10 provides:
Article 10 Centre EstablishmentsCentre Establishments shall carry out their activities in accordance with the Centre's Laws, Centre's Regulations and the licenses issued to them. Centre Establishments may be located in the Emirate outside the Centre for a period not exceeding four years from the date of the establishment of the Centre and in accordance with the conditions and restrictions determined by the Centre Authority and, in the case of Licensed Centre Establishments, the Financial Services Authority. For the purposes of this Article, practising such activities and business outside the Centre shall be deemed as if conducted within the Centre, and shall be subject to the Centre's Laws and the Centre's Regulations."
48. It is to be noted that the concept of a Centre Establishment involves an "entity", not necessarily a corporate body, which is permitted to carry on business within the Centre in accordance with the Centre's Laws, the Centre's Regulations and the licence issued to it and with its registration. One can thus identify an Centre Establishment as an entity which is permitted to conduct business within the DIFC in accordance with the terms of its license and registration with the DIFC. The entity in question will normally consist of or be within a corporation or partnership or it may be a sole trader. There is, however, no requirement that, if it is a corporation or partnership, it should be unique to the DIFC. If the entity is a division of an international company it can carry on business in the DIFC, provided that it is sufficiently licensed and otherwise registered to do so. Thus, in the present case Barclay's Bank plc was both registered as a recognised company under the reference 0060 to carry on in the DIFC the business of "Arranging Credit or Deals in Investments" and "Advising on Financial Products or Credit." That was the only business it was authorised to carry on. As such, all its main Board Directors are listed, as well as its total authorised and paid up share capital. It also had a commercial license which repeated its business activities as above and identified its address in the DIFC. It had in addition a license from the DFSA. In the case of each of those documents what was being authorised was the conduct by the London-registered company of the business of providing, at the address specified in the DIFC, the specified financial services. That part of the company which conducted that business thus authorised was, therefore, the "entity" which constituted the Centre's Establishment.
49. Where the entity is a division or part of a corporation incorporated outside the DIFC, proceedings in respect of the business carried on by the entity have to be brought in the name of the corporation. That is because the entity is not a legal person and cannot sue or be sued as a separate corporate body. Its only corporate identity is that of the corporation of which it is a part. That is why when it came to register the Centre Establishment and to grant it a licence to conduct business in the DIFC, the registration or grant could only be to the legal person identified by the corporate name, there being no more specific legal person which could be registered or to which a licence could be granted.
50. Although, when the relevant legislation was introduced, commercial and financial transactions conducted by entities authorised to carry on business from inside the DIFC were only just about to be commenced, it must have been appreciated that at least some of those entities were likely to be divisions or parts of international corporations, such as banks or insurance companies, which might wish to locate an arm of their business to be carried on in the DIFC, the dispute resolution facilities provided by the DIFC Courts should be available to it. It must also have been appreciated that such DIFC-based entities, not least those providing financial services, might engage in transactions of an international nature involving performance outside the DIFC and which might have been entered into outside the DIFC. By including in Article 5(A)(1)(a) a specific reference to Centre's Establishments the purpose of the legislator was clearly to enable the DIFC Courts to provide a dispute resolution service for just such transactions, regardless of the absence of those features essential for the Court's subject-matter jurisdiction identified under sub-paragraph (b).
51. Thus, if an international corporation maintained a branch authorised to carry on business in the DIFC and that branch in the course of such business entered into a transaction outside the DIFC which required to be performed outside the DIFC, the jurisdiction of the DIFC would be wide enough to entertain disputes about performance of that transaction even though the dispute would not fall within any of the subject-matter jurisdictional gateways in sub-paragraph (b). The jurisdiction would thus be sufficiently wide to provide an effective service to the Centre's Establishments in relation to all those commercial activities for which they were authorised by the DIFC to operate from the DIFC. Where the authorised business was to be carried out by a branch of a larger corporate body the Court would, therefore, be available as a dispute resolution facility in respect of all commercial and civil disputes and claims to which the business authorised to be conducted in the DIFC might give rise. Just as the claims and disputes of the Centre itself and the Centre's Bodies were to be catered for by the DIFC Courts' jurisdiction because those DIFC entities were carrying out their DIFC functions, so the assumption must be that the Centre's Establishments were included so that if claims and disputes arose involving their DIFC function, that is the business which they had been authorised to carry on in the DIFC, such claims might be entertained by the DIFC Courts.
52. It is against the background of that perceived legislative purpose that one has to ask the questions whether the scope of jurisdiction of the DIFC Courts extends to cover not only claims and disputes connected with the business of an international corporation conducted by its DIFC branch but with any claims and disputes to which the international corporation is a party connected with any business wherever conducted.
53. The argument in favour of that jurisdiction is very simple. When by the process of registration of a business and the granting of the necessary licenses a Centre Establishment is created, it is the entire corporation body to which that registration and those licenses are granted because the process involves registration and grant in the name of that corporation alone and not in the name of any other exclusively DIFC legal person. Moreover, when the corporation enters through its DIFC branch into a commercial transaction it is the corporation as a whole that does so. Therefore, a dispute arising out of a transaction entered into by a branch of the corporation located outside the DIFC is as much a dispute involving a Centre's Establishment as a dispute arising out of a transaction entered into by a branch of that same international corporation authorised to carry on business within the DIFC.
54. I have no doubt that this argument is fundamentally defective. The flaw is in according to the entire business of the corporation that characteristic which only the DIFC-authorised part of the business has. The fact that all the branches of the corporation may be part of a single legal person with a single corporate name emphatically does not result in all the branches of the corporation being part of a Centre's Establishment. The international corporation is a Centre's Establishment only to the extent to which its branch is authorised to conduct business in and from the DIFC and a claim or dispute only "involves" a Centre's Establishment when that claim or dispute is connected with or arises out of the activities of the corporation conducted by its DIFC branch or division. The requirement that the corporation as a whole must be a party to the proceedings and in its corporate name is simply a procedural consequence of its branch or division having no separate legal personality by which it can sue or be sued. What matters as regards jurisdiction under Article 5(A)(1)(a) is that it is with the conduct of the DIFC-authorised business that the cause of action is connected. The function of the DIFC Courts is to provide a justice system for the DIFC itself and to adjudicate on disputes connected with the commercial and civil activities of its organs (Centre's Bodies) and its population of those who are authorised to conduct a business in the DIFC in respect of which disputes have arisen.
55. For these reasons the Defendant is entitled to the declaration for which it applies and this claim must be struck out. This Court has no jurisdiction over claims arising out of the conduct of the Bank's Dubai Branch any more than it would have over claims arising out of the conduct of the Bank's Head Office in London.
56. It is unnecessary to take a concluded view on the application of the principle of forum non conveniens had the scope of jurisdiction under Article 5(A)(1) been wide enough to cover a claim arising out of the conduct of the Bank's Dubai Branch. However, myprovisionalview is that as between the DIFC Courts and the Dubai Civil Courts, the doctrine has no part to play : if the claim or dispute in question is such that the DIFC Courts has been accorded "exclusive" jurisdiction over it, that court has no residual discretion to stay the proceedings in favour of the Dubai Civil Courts. In this context "exclusive" conveys the effect that the jurisdiction of other Dubai Courts is indeedexcluded. Only if there were expressed by the legislation to be a residual jurisdictional discretion would there be room for the DIFC Courts to decline jurisdiction where the competing jurisdiction was that of the Dubai Civil Court.
57. This application therefore succeeds.
58. The defendant Bank is entitled to its costs of these proceedings, of the application and of the hearing, such costs to be on the standard basis to be assessed if not agreed.
Sir Anthony Colman
Deputy Chief Justice
Date of Issue: 9 February 2011