ARB 009/2024 Narciso v Nash [2024] DIFC ARB 009 (20 June 2024)

Claim No. ARB 009/2024

THE DUBAI INTERNATIONAL FINANCIAL CENTRE

IN THE COURT OF FIRST INSTANCE
ARBITRATION DIVISION

BETWEEN

NARCISO

Claimant/Applicant

and

NASH

Defendant/Respondent

ORDER WITH REASONS OF JUSTICE MICHAEL BLACK KC

PENAL NOTICE

IF YOU, NASH DISOBEY THIS ORDER, YOU MAY BE HELD TO BE IN CONTEMPT OF COURT AND ANY MAY BE REFERRED TO THE ATTORNEY GENERAL OF DUBAI, FINED OR HAVE THEIR ASSETS SEIZED.

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS THE DEFENDANTS TO BREACH THE TERMS OF THIS ORDER MAY ALSO BE HELD TO BE IN CONTEMPT OF COURT AND MAY BE REFERRED TOTHE ATTORNEY GENERAL OF DUBAI, FINED OR HAVE THEIR ASSETS SEIZED.

UPON the Claimant’s ex parte Urgent Application No. ARB-009-2024 dated 17 May 2024 seeking an Interim Anti-Suit Injunction (the "Anti-Suit Application")

AND UPON the Court granting the Anti-Suit Application on 20 May 2024 (the "Interim Anti-Suit Injunction")

AND UPON the Claimant issuing an Amended Claim Form seeking amongst other things a permanent Anti-Suit Injunction (the "Part 8 Proceedings")

AND UPON the DIFC Court granting the continuation of the Interim Anti-Suit Injunction on 27 May 2024 (the "Interim Anti-Suit Continuation Order") and adjourning the Return Date hearing until 14 June 2024

AND UPON the Defendant's Application No. ARB-009-2024/2 dated 3 June 2024 challenging the jurisdiction of the DIFC Court and seeking to discharge the Interim Anti-Suit Injunction (the "Defendant's Application")

AND UPON reading the first witness statement of Neville dated 3 June 2024 with the accompanying exhibits

AND UPON reading the second witness statement of Naveed dated 10 June 2024 with the accompanying exhibits

AND UPON reading the skeleton arguments filed on behalf of the Claimant and the Defendant submitted on 12 June 2024

AND UPON hearing the Counsel for the Claimant and the Defendant at the Return Date held on 14 June 2024

IT IS HEREBY ORDERED THAT:

1. Terms defined in the Interim Anti-Suit Injunction shall apply to this Order.

2. The Defendant's Application is dismissed.

3. Paragraph 2 of the Interim Anti-Suit Order shall be continued until the final determination of the Part 8 Proceedings or until further order of the Court subject to the undertakings set out in the Schedule to the Interim Anti-Suit Order.

4. The Defendant shall:

a. Take all necessary steps required to maintain the adjournment of the Sharjah Proceedings until the final determination of the Part 8 Proceedings or until further order of the DIFC Court;

b. Within 24 hours of this Order being served, send to or lodge with the relevant authority or authorities in Sharjah further documents (if any) required for the application or continuation of the adjournment of the Sharjah Proceedings, and provide a copy or copies of the same to the Claimant's solicitors; and

c. Comply with all requirements for the adjournment of the Sharjah Proceedings.

5. All matters of costs are reserved to the hearing of the Part 8 Proceedings.

Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 20 June 2024
At: 8am

SCHEDULE OF REASONS

INTRODUCTION

1. On 20 May 2024, I made a without notice Anti-Suit Injunction against the Defendant and ordered that a Return Date hearing be held on notice on 27 May 2024. On 27 May 2024, the Defendant requested more time to answer the injunction and to make an application to challenge the jurisdiction of the Court. I adjourned the matter further (while keeping the injunction in place) so that the Return Date and jurisdictional challenge could be heard together on 14 June 2024. These are the reasons for my decisions on those applications.

FACTUAL BACKGROUND

2. The Claimant was main contractor and the Defendant sub-contractor under an agreement with the effective date of 8 April 2020 for various engineering and construction related activities related to a residential project for 380 houses in Sharjah, UAE (the “Subcontract”).

3. Clause 11 of the Subcontract (the “Arbitration Agreement”) provided:

“Any dispute or difference arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be firstly settled amicably within 14 days from the date of the dispute being notified in writing by either party to the other party, unless settled amicably, the dispute shall be finally resolved byarbitration under the Arbitration Rules of the DIFC-LCIA Arbitration Centre, which Rules are deemed to be incorporated by referenceinto this clause. The number of arbitrators shall be one. The arbitral tribunal shall be a sole arbitrator,only the Main Contractor is entitled to unilaterally nominate the sole arbitrator without the need to confer and obtain the Sub-Contractor's consent. The seat, or legal place, of arbitration shall be Dubai International Financial Centre, Dubai, United Arab Emirates. The language to be used in the arbitration shall be English. [emphasis added].”

4. Clause 35.0 of the Supplementary Terms and Conditions of the Subcontract provide that:

“This Sub-Contract shall be governed and construed in accordance with the Laws of the Emirates Abu Dhabi and the Federal Laws of the United Arab Emirates.”

5. Disputes arose between the parties, the details of which are irrelevant to the matters under consideration (whichever way I find) that culminated in the termination of the Subcontract by the Claimant on 14 July 2021.

6. It is necessary to interpose that on 17 September 2021, His Highness, the Ruler of Dubai, passedDecree No. (34) of 2021 Concerning the Dubai International Arbitration Centre(“Decree 34”). Decree 34 is a Dubai (not DIFC) Decree under which:

1) It was enacted that the Dubai International Arbitration Centre (“DIAC”) would be headquartered in the Emirate of Dubai but would have a branch in the DIFC;

2) DIAC would be regulated according to the Statute attached to the Decree:

3) the DIFC-LCIA Arbitration Centre (the “DIFC-LCIA”) was abolished and all its rights and obligations were transferred to DIAC;

4) All agreements to resort to arbitration under the DIFC-LCIA, concluded by the effective date of the Decree, were deemed valid. DIAC would replace the DIFC-LCIA in considering and determining all disputes arising out of the said agreements unless otherwise agreed by the parties.

7. TheStatute of the Dubai International Arbitration Centreattached to the Decree stated that unless otherwise agreed by the parties to arbitration, where the parties to arbitration choose the DIFC as the seat or place of arbitration, the Arbitration Agreement and arbitration proceedings would be governed by the DIFC Arbitration Law No. (1) of 2008 and the DIFC Courts would have jurisdiction to consider any claim, application, or appeal relating to any award issued or arbitration measure taken by the DIAC arbitration tribunals.

8. Pursuant to the terms of the Subcontract, the Defendant procured an Advanced Payment Guarantee and Performance Bond (the “Securities”) from Naval (“Naval”). On 2 November 2021, the Claimant made demand to Naval for payment of the sums secured under the Securities. Naval challenged the demand. The Claimant commenced proceedings before the Abu Dhabi Courts against Naval on 31 May 2022. On 13 July 2023, the Abu Dhabi Court of Cassation awarded the Claimant the principal sum of AED 17,816,932.25 plus interest. Naval was granted time to pay the judgment.

9. There were unsuccessful attempts to settle the dispute between 31 July 2023 and 16 August 2023. On 22 August 2023, the Defendant’s legal representatives, Abdeen Legal Consultants (“Abdeen”) wrote to the Claimant headed “Invitation to appoint an arbitrator” inviting the Claimant to appoint an arbitrator pursuant to Clause 11 of the Subcontract by 24 August 2023. In particular the letter stated:

“As we have been informed by NASH team that a settlement is far away to be reached, hence please, consider this letter as an official medium to request NARCISO to appoint an arbitrator according to clause 11.0 of the underlying contract by August 24th,2023 otherwise we will be left without option other than to approach the DIFC court as an appointing authority to appoint an arbitrator for the stated dispute. [emphasis added].”

10. The Claimant ignored Abdeen’s letter.

11. On 21 September 2023, Abdeen wrote to the Court of DIAC under the heading“Application under section 12(3) of DIAC Arbitration Rules¹, 2022 for directions of the hon'ble court for appointment of a sole arbitrator for resolution of disputes between the parties.”In the application Abdeen:

1) Recorded the full name, nationality, address and other contact details including telephone and email address of each party to the arbitration;

2) Attached a copy of the Subcontract which contained the agreement to arbitrate;

3) Gave a brief description of the nature and circumstances of the dispute giving rise to the claim and a preliminary statement of the relief sought and an estimate of the sum claimed;

4) Gave all relevant particulars concerning the number of arbitrators and their choice in accordance with the relevant provisions of Articles 10, 11 and 12 of the DIAC Rules;

5) Drew attention to Clause 11 of the Subcontract which specified the seat and the language of the arbitration.

6) Stated:
“That in view of the aforesaid facts and circumstances, it is clear that there exists the dispute inter se the applicant and the respondent and further it is pertinent to note that the respondents have failed to appoint an arbitrator in the present dispute matter, now it is imperative that dispute between the applicant and respondent is to be settled through the Sole Arbitrator appointed by this Hon'ble Court in view of the powers conferred under section 12(3) of the DIAC Arbitration Rules of 2022.”

7) Asked the DIAC Court to:

a) Appoint a Sole Arbitrator to decide and adjudicate upon the dispute between the applicant and respondents arising out of wrongful termination of the agreement; and

b) Direct that the Sole Arbitrator so appointed with seat at DIFC shall be entitled to receive the fee and other expenses in terms of statutory provisions in this regard.

12. Abdeen’s application seems to me to have satisfied the criteria for a valid Request for Arbitration under Article 4.1 of the DIAC Rules.²

13. What was not done was to make payment of the registration fee required by Article 1.1 of Appendix I to the DIAC Rules. Article 4.1 of the DIAC Rules states that if the Claimant fails to pay the registration fee, the Request shall not be registered by the Centre.

14. For reasons that are not wholly apparent to me, DIAC did not treat Abdeen’s application as a Request for Arbitration and the appointment of a sole arbitrator under Article 12.3 of the DIAC Rules (as was indeed expressly stated) and call for payment of the registration fee. Instead, DIAC treated the application as having been made under paragraph 4.1 of Appendix II to the DIAC Rules. Paragraph 4.1 addresses the situation where parties agree that DIAC shall appoint arbitrators “in matters that are not otherwise subject to the Rules”. This was not what Abdeen was suggesting, Abdeen was seeking the appointment of an arbitratorpursuantto the DIAC Rules.

15. Acting under this misapprehension DIAC wrote to the parties on 24 October 2023 (over a month after the Defendant’s application):

“The Claimant has filed the present Application with the Centre and has requested that the Centre acts as Appointing Authority in this case.

The Respondent is invited to confirm whether it agrees for DIAC to act as Appointing Authority.

…

The Centre understands the Claimant has submitted the Application to the Centre, pursuant to Article 4.1 of Appendix II of the Rules, requesting the Centre appoint an arbitrator on behalf of the parties, in its capacity as Appointing Authority.”

16. In fairness to DIAC Abdeen did not correct this error. There seems to me to have been a failure to understand the difference between the appointment of an arbitrator under the DIAC Rules and DIAC acting as an appointing authority. The former would not require the Claimant’s agreement whereas the latter would. There is a slight sophistication in that Clause 11 of the Subcontract stated that“only the Main Contractor is entitled to unilaterally nominate the sole arbitrator without the need to confer and obtain the Sub-Contractor's consent”but all that would have meant was either that the Claimant had waived that right by ignoring Abdeen’s letter of 22 August 2023 or (the more likely course taken by DIAC) DIAC should have given the Claimant an opportunity to nominate the sole arbitrator. Either way, the appointment of the sole arbitrator always was, under the DIAC Rules, a matter for the DIAC Court³.

17. The Claimant’s former legal representatives were under no duty to correct DIAC’s error even if they had spotted it (which apparently they had not⁴). They responded to DIAC’s letter on its own terms on 3 November 2023:

“The Application seeks, inter alia, to circumvent the Parties’ agreement by requesting DIAC to act as Appointing Authority before the Respondent has had the opportunity to make its nomination at the appropriate juncture.

The Respondent notes that this Application is out of order and/or premature and would be prejudicial to the Respondent if allowed.”

18. As DIAC was proceeding on the mistaken basis that it required the agreement of both parties to appoint an arbitrator rather than simply request the Defendant to pay the registration fee and register the arbitration, it wrote on 7 November 2023:

“As Narciso does not agree to DIAC acting as appointing authority in these proceedings, we are unable to register the Claimant’s request.

We will now proceed to close this file.”

19. Abdeen then wrote to the London Court of International Arbitration (the “LCIA”) on 1 December 2023 but the LCIA replied (correctly) that it was no longer able to assist.

20. In April 2024, the Defendant issued proceedings against the Applicant in the Sharjah Court (the “Sharjah Proceedings”). The Statement of Claim was received by the Claimant on 7 May 2024. The first meeting with the Case Management Officer for the Sharjah Proceedings was scheduled for 9 May 2024. The Case Management Officer requested the Defendant’s counsel to provide a power of attorney and granted the Claimant until 21 May 2024 to respond to the Statement of Claim. The next hearing was scheduled for 21 May 2024.

21. It took the Claimant a few days to hire new legal representatives and within a couple of days they had filed the without notice application for the Anti-Suit Injunction. I am satisfied that the Claimant was not guilty of delay in making the without notice application on 20 May 2024.

22. On 20 May 2024, I ordered that until the Return Date or further order of the Court, the Defendant shall not, by themselves, their directors, employees, officers or agents:

1) Pursue any step in, or take any further step in pursuit of, the Sharjah Proceedings;

2) Procure or assist the pursuit of any step in, or the taking of any further step in pursuit of, the Sharjah Proceedings; and

3) Commence (or re-commence) or pursue or procure or assist the commencement (or re-commencement) or pursuit of any proceedings relating to the Subcontract other than by way of an arbitration pursuant to Clause 11 of the Subcontract.

23. On 28 May 2024, the Claimant and the Defendant attended a remote hearing before the Sharjah Court during which the Defendant orally requested an adjournment of the Sharjah Proceedings. The Defendant also submitted a Memorandum recording its position that the Claimant had waived the arbitration agreement and that the DIFC Courts did not have jurisdiction. Notwithstanding and in accordance with the Court’s order, it requested the Sharjah Court to postpone the hearing of the case and proceeding with its procedures until the final ruling is rendered by the Dubai International Financial Centre Court of Arbitration [sic] regarding the jurisdiction of the arbitration centre and regarding the existence or absence of the arbitration clause in the first place.

24. On 3 June 2024, the Defendant served an application to discharge the Anti-Suit Injunction.

25. The current status of the Sharjah Proceedings is that they have been transferred to the Construction Judicial Department within the Sharjah Court. On 11 June 2024, both parties attended a hearing held in the Sharjah Court and requested the Sharjah Court to stay the Sharjah Proceedings until the final determination of the Anti-Suit Application. The Sharjah Court has hitherto made no substantive orders.

26. The Claimant has suggested that the Defendant was in breach of the Court’s Order. It seems to me the Defendant has taken the steps necessary to stay the Sharjah Proceedings and the Claimant (sensibly) did not press the point at the hearing on 14 June 2024.

27. At the hearing on 14 June 2024, the Defendant submitted that:

1) The DIFC Courts did not have jurisdiction;

2) The Arbitration Agreement was invalid;

3) Even if valid, the Arbitration Agreement had been abandoned by the Claimant, terminated or the Claimant is estopped by conduct from relying on the Arbitration Agreement; and

4) Even if the Arbitration Agreement were effective, an anti-suit injunction was not justified.

28. The Claimant challenged the Defendant’s submissions and asked the Court to continue the Anti-Suit Injunction.

JURISDICTION

29. The Defendant contends that that DIFC court has no jurisdiction to try the application for the Anti-Suit Injunction because neither of the parties is a DIFC Establishment. The Defendant referred to the DIFC Court Law (No.10 of 2004). The relevant statutory provision is Dubai law No.12 of 2004 (as amended), the Judicial Authority Law, Article 5(A)(1) of which states (in relevant part):

“The Court of First Instance shall have exclusive jurisdiction to hear and determine:

(a) Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;

…

(e) Any claim or action over which the Courts have jurisdiction in accordance with DIFC Laws and DIFC Regulations.”

30. The Defendant submits that the applicable law of the underlying contract is UAE law which deprives the DIFC Court from exercising its authority conferred by the DIFC Arbitration law No 1 of 2008 to try anti-suit injunctions. The Defendant citedEnka Insaat Ve Sanayi AS v OOO Insurance Company Chubbat first instance ([2019] EWHC 3568 (Comm)), Redfern and Hunter,The Law and Practice of International Commercial Arbitration, 3rd ed., Sweet & Maxwell, 1999, para. 2–86,Union of India v McDonnell Douglas Corp [1993] 2 Lloyd’s Rep 48, andSonatrach Petroleum Corporation (BVI) v Ferrell Int’l Ltd [2002] 1 All ER (Comm) 627 in support of the proposition that the choice of a substantive law in the main contract also applies to govern the arbitration agreement.

31. The Defendant points to Clause 35.0 of the Supplementary Terms and Conditions of the Subcontract⁵. I accept that UAE law appears to be the law governing the Subcontract. I will address whether or not Clause 11 of the Subcontract⁶on its proper construction makes a choice as to the law governing the Arbitration Agreement below.

32. It appears to be common ground between the parties that the DIFC Courts have the power to grant anti-suit injunctions as confirmed inBrookfield Multiplex v DIFC Investments LLC [2016] DIFC CFI 020 in which the DIFC Court held that it has the power to grant anti-suit injunctions pursuant to Article 32 of DIFC Law 10 of 2004. The power was also accepted by the Court of Appeal inLedger v Leeor [2022] DIFC CA 013 [39-41, 67].

33. InBrookfield, Justice Sir Jeremy Cooke held:

“36. What is sought here is however an injunction to protect Brookfield’s negative right – its right not to be sued in a Court because of the agreement to arbitrate. It was contended by DIFCI that such an injunction could only be granted by the court of the seat of the arbitration and not by the court of any other seat. In reliance on the English Court’s decision in Nomihold Securities Inc v Mobile Telesystems Finance SA [2012] 1 Lloyd’s Rep 442 at paragraphs 44-52 (Andrew Smith J), it was submitted that an anti-suit injunction was only issued as part of the Court’s supervisory jurisdiction and thus was only granted when the seat of the Arbitration was in the jurisdiction of the court. I do not accept this submission in the light of the decision of Blair J in U&M Mining Zambia Ltd v Konkola Copper Mines PLC [2013] 2 Lloyds Rep 218, and the decision of the Supreme Court in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] 1 WLR 1889.

37. The effect of those decisions is that the power of the English court to grant such injunctions derives from Section 37 of the Supreme Court Act 1981 (the equivalent of Article 32 of the DIFC Courts Law No. 10 of 2004), rather than the powers given by the Arbitration Act and that the negative aspect of an arbitration agreement is a right enforceable independently of the existence of any arbitral proceedings. An anti-suit injunction is not “for the purposes of and in relation to arbitral proceedings”, but for the purposes of and in relation to the negative promise contained in the arbitration agreement not to bring foreign proceedings. There is a distinction to be drawn, therefore between orders made by the court in exercise of its supervisory jurisdiction, on the one hand, and orders made, on the other hand, in support of the right of a party to insist on arbitration rather than litigation where that has been agreed (see the judgment of Lord Mance at paragraphs 25-28 and 48 in particular). The decision of Blair J, which preceded the decision of the Supreme Court in 2013 drew a distinction between a supportive jurisdiction and a supervisory jurisdiction. He considered that, where the seat of the arbitration is abroad, the court was in a position to grant an anti-suit injunction but would need a very good reason to do so, such as the inability of the court of the seat to grant such an injunction or the practical ineffectiveness of any such remedy.

38. I do not therefore accept that, even if the seat of the arbitration is non-DIFC Dubai, the Court has no jurisdiction to grant an anti-suit injunction but it would be an unusual and exceptional case where the Court did so, particularly bearing in mind the appropriate respect that the courts of the two different systems in the Emirate of Dubai must have for each other. This is a point which has been emphasised in the past by Justice Sir John Chadwick in Taaleem v National Bonds Corporation [CFI-014-2010] at paragraph 18 and by Justice Omar Al Muhairi in Azzam v Deyaar Developments [CFI-024-2015] at paragraph 26.

39. It is clear to me that, if non-DIFC Dubai is the seat of the arbitration, this Court would not interfere with an order made by that court because of the existence of an arbitration agreement. When making the order that it did on 7 June, the non-DIFC Dubai Court was fully aware of the arbitration agreement and decided that it did not prevent the Court from making the order it did. If that court had jurisdiction to make the order which it did, this Court could not and would not impugn it.

40. Although the DIFC Courts are given exclusive jurisdiction over DIFC Bodies and Entities both generally and in relation to transactions of the character of the construction contract between the parties so that it has jurisdiction, in its own eyes, to enforce the arbitration agreement in that contract, regardless of the seat of the arbitration and the implied choice of the parties of the courts of the seat as the supervisory courts, the DIFC Courts would not in practice do so, save in exceptional circumstances. Its jurisdiction cannot be ousted by the parties’ choice of the seat and supervisory jurisdiction, but comity would militate against the exercise of that jurisdiction when the courts of the seat can not only supervise the arbitration but are in a position to grant any injunction necessary and to ensure that the arbitration agreement is not breached by pursuit of remedies in that court.

41. If the seat of the Arbitration is DIFC however, the position is different, because the primary responsibility for the enforcement of the arbitration agreement would lie on the courts of the seat, if relief was sought. This Court would then be concerned, first, to protect its own exclusive jurisdiction under the Judicial Authority Law and, secondly, as the Court of the seat, to protect the agreement of the parties to refer their disputes to the determination of arbitrators, if there was some infringement of the parties right to arbitrate their disputes.”

34. Thus, as far as jurisdiction is concerned, Justice Sir Jeremy Cooke held that the DIFC Courts had jurisdiction to grant anti-suit injunctions both where the DIFC was, and was not, the seat of the arbitration. If the DIFC is not the seat of the arbitration the DIFC Court would only grant an anti-suit injunction in an unusual and exceptional case.

35.Enka v Chubbreached the English Supreme Court. The Supreme Court laid down the principles of English common law that govern determination of the proper law of an arbitration agreement. In summary, where the law is not expressly stated generally the applicable law will be that of the matrix contract irrespective of the seat. Where there is no express choice of law in the matrix contract generally the law of the seat will govern the arbitration agreement (paragraph [170]). The Supreme Court also made clear that where the seat of the arbitration is England the principles governing the grant of anti-suit injunctions do not differ according to whether the arbitration agreement is governed by English law or foreign law (paragraph [184]:

“We therefore agree with the Court of Appeal that the principles governing the grant of an anti-suit injunction in support of an arbitration agreement with an English seat do not differ according to whether the arbitration agreement is governed by English law or foreign law. Forum conveniens considerations are irrelevant and comity has little if any role to play. The court’s concern will be to uphold the parties’ bargain, absent strong reason to the contrary, and the court’s readiness to do so is itself an important reason for choosing an English seat of arbitration.)”

36. As will be seen below the principles governing the determination of the proper law of an arbitration agreement under DIFC law are different from those under English law, but I accept the logic of the Supreme Court inEnka v Chubbin holding that the law applicable to the arbitration agreement should not make any difference to the jurisdiction of the courts to protect their own exclusive jurisdiction and to protect the agreement of the parties to refer their disputes to the determination of arbitrators (as Justice Sir Jeremy Cooke put it in Brookfield).

37. Thus, as far as jurisdiction is concerned, it matters not whether the arbitration agreement is governed by DIFC or another law. The dispositive point is that the parties have chosen the DIFC as the seat of their arbitration which carries with it the implicit choice of the DIFC Courts as the supervisory courts. The Defendant’s challenge to the Court’s jurisdiction on the basis that the arbitration agreement is governed by UAE law fails whether or not that law or DIFC law governs the Arbitration Agreement. I therefore find that the Court has jurisdiction over the Claimant’s claim.

38. Having found that the Court has jurisdiction to try the Claimant’s claim, I must consider whether to continue the interim Anti-Suit Injunction until the hearing of the Claimant's Part 8 claim for a final anti-suit injunction. Gee on Commercial Injunctions 7th Ed., states at paragraph 14-055:

“On the application for an interim injunction, the court is not making any final findings of fact, and what the facts are may well be disputed. Save that the court has to consider the needs of comity and the reasons for caution at the interim stage because an injunction will interfere with the foreign proceedings, the court should apply the principles in American Cyanamid; there is no heightened standard that before an interim injunction can be granted the court has to form the view that there is a high degree of probability that the injunction will be granted at trial. In a contractual case within the considerations of comity is the requirement to establish that there is a binding negative covenant which applies, or there is a strong case to that effect. This justifies the interference with the proceedings before a foreign court because of the policy of upholding bargains and because the injunction is to enforce private rights.

…

Once it has been established that such a promise has been given, and is valid and enforceable, the English court will enforce that promise unless strong reason is shown for not doing so.”

39.Gee cites Enka v Chubbat paragraph [184] as authority for the last proposition. The necessity to show a strong reason for not enforcing an arbitration agreement finds its origin in the judgment of Millett LJ (as he then was) in The “Angelic Grace” [1995] 1 Lloyds Rep 87, 96:

“In my judgment, where an injunction is sought to restrain a party from proceeding in a foreign Court in breach of an arbitration agreement governed by English law, the English Court need feel no diffidence in granting the injunction, provided that it is sought promptly and before the foreign proceedings are too far advanced. I see no difference in principle between an injunction to restrain proceedings in breach of an arbitration clause and one to restrain

proceedings in breach of an exclusive jurisdiction clause as in Continental Bank N.A. v. Aeakos Compania Naviera S.A., [1994] l W.L.R. 588. The justification for the grant of the injunction in either case is that without it the plaintiff will be deprived of its contractual rights in a situation in which damages are manifestly an inadequate remedy. The jurisdiction is, of course, discretionary and is not exercised as a matter of course, but good reason needs to be shown why it should not be exercised in any given case.”

VALIDITY OF THE ARBITRATION AGREEMENT

The Proper Law of the Arbitration Agreement

40. It is necessary to determine the proper law of the Arbitration Agreement in order to consider (1) the validity of the Arbitration Agreement and in particular to identify the seat of the arbitration, (2) the principles applicable to question as to whether or not the Arbitration Agreement has been abandoned, and (in any event) (3) whether to grant an anti-suit injunction (which will, at least in part, also depend on the location of seat).

41. When the Court is considering the grant of an anti-suit injunction, as I stated in Ledger v Leeor at first instance⁷as confirmed by the Court of Appeal⁸, the Claimant must show“a high degree of probability”that the DIFC is the seat of the arbitration following the decision of Justice Sir Jeremy Cooke inHayri International LLC v Hazim Telecom Private Ltd [2016] DIFC ARB-010 in which he also said,“this court has a supportive jurisdiction in relation to the grant of interim anti-suit injunctions even if the seat were to be said to be non-DIFC Dubai, although it would be rare for such a jurisdiction to be exercised.”

42. The importance of the seat is twofold. First, the location of the seat may be determinative of the proper law of the relevant arbitration agreement. Secondly, different considerations apply according to whether the seat is the DIFC or elsewhere.

43. As to the former, the meaning and effect of an arbitration agreement (including the determination of the applicable law) is to be determined by the application of the rules of contractual interpretation of DIFC law being the law of the forum⁹.

44. Clause 11 of the Subcontract¹⁰specified that the seat of the arbitration was to be the DIFC. The clause also expressly incorporated the Arbitration Rules of the DIFC-LCIA Arbitration Centre by reference. Article 16.4 of the DIFC-LCIA Rules provided:

“The law applicable to the Arbitration Agreement and the arbitration shall be the law applicable at the seat of the arbitration, unless and to the extent that the parties have agreed in writing on the application of other laws or rules of law and such agreement is not prohibited by the law applicable at the arbitral seat.”

45. As the parties agreed that the seat of the arbitration would be the DIFC this would mean (if the Arbitration Agreement survived the enactment of Decree 34) that DIFC law was the law governing the Arbitration Agreement.

Decree 34

46. In the present case the location of the seat, the law applicable to the arbitration agreement and the validity of the Arbitration Agreement are inextricably tied up with Decree 34. Decree 34 is Dubai, not DIFC, legislation. Dubai Law No. 5 of 2021“Concerning the Dubai International Financial Centre”provides at Article 22(b):

“With the exception of the legislation relating to the environment, health, public safety, and food control applicable in the Emirate, the DIFC, the DIFC Bodies, the DIFC Establishments, the staff and employees of any of them or the persons authorised by them, and the land, real estate, and properties located in the DIFC, shall not be governed by the legislation issued by the Government or any local Government authority in the Emirate, except to the extent to which such legislation include the DIFC in their provisions by a specific express provision.”

47. Decree 34doesinclude the DIFC in its provisions by specific express provision:

1) Article 2 established a DIAC office in the DIFC;

2) Article 4(2) abolished the Dubai International Financial Centre Arbitration Institute regulated pursuant to Law No. (5) of 2021 and other legislation in force within the Dubai International Financial Centre;

3) Article 5 transferred the property, rights and obligations of the DIFC-LCIA (within the DIFC) to DIAC;

4) Article 7 concerns the jurisdiction of the DIFC Courts; and

5) The Statute of the Dubai International Arbitration Centre attached to the Decree at Articles 4(a)(2) and (b) addresses the choice of the DIFC as the seat of arbitration and the jurisdiction of the DIFC Courts.

Consequently, I consider that by reason Dubai Law No. 5 of 2021, Decree 34 forms part of the law of the DIFC.

48. I am reinforced in this view by the decision of H.E. Justice Shamlan Al Sawalehi inLikitif v Luvain(ARB 028/2020) in which he held that“pursuant to Dubai Decree No. 34 of 2021 (the “Decree”), DIFC-LCIA arbitrations are now conducted under the DIAC Arbitration Rules 2022”. In Ledger in the Court of Appeal, the Court also recognised the Statute of DIAC to be part of the relevant statutory framework governing the grant an anti-suit injunction (paragraphs [35] and [36]).

49. Decree 34 does not purport totally to rewrite the terms of every arbitration agreement made before the Effective Date of the Decree. On the contrary, Article 6(a) provides that all agreements to resort to DIFC-LCIA arbitration concluded by the Effective Date of the Decree were deemed valid but DIAC would replace the DIFC-LCIA“in considering and determining all Disputes arising out of the said agreements unless otherwise agreed by the parties thereto.”The Effective Date was 20 September 2021, being the date the Decree was published in the Dubai Official Gazette.

50. There is nothing in the DIAC Rules of 2007 (in force at the time of the Decree) or those of 2022 (which came into force on 1 March 2022) that is inconsistent with Article 16.4 of the DIFC-LCIA Rules. Indeed, it may be argued that even if that article were superseded, it was effectively re-enacted by Article 4(a)(2) of the DIAC Statute:

“Where the parties to arbitration choose the DIFC as the seat or place of arbitration, the Arbitration Agreement and arbitration proceedings will be governed by the above-mentioned DIFC Law No. (1) of 2008 or any other superseding legislation; and the DIFC Courts will have jurisdiction to consider any claim, application, or appeal relating to any award issued or arbitration measure taken by the DIAC arbitration tribunals.”

51. It follows in my judgment that, either way, it is strongly arguable that on its proper interpretation, Clause 11 of the Subcontract amounts to an agreement that the law governing the Arbitration Agreement is DIFC law.

Approach to Anti-Suit Injunctions depending on Seat

52. If the seat is the DIFC good/strong reason would have to be shown why the agreement to arbitrate should not be enforced (Brookfieldat paragraph [41];The Angelic Graceat page 96; andEnka v Chubbat paragraph [184]).

53. If the DIFC is not the seat, as Justice Sir Jeremy Cooke noted in both Hayri¹¹and Brookfield¹², while the DIFC Court does have jurisdiction to grant an anti-suit injunction irrespective of the seat, that jurisdiction would only be exercised in rare and exceptional circumstances.

The Present Case

54. The Defendant argues that I should find the Arbitration Agreement is invalid on the following grounds:

1) The law applicable to the Arbitration Agreement is UAE law;

2) Article II (3) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) mandates the court of a contracting state when seized of an action in a matter in respect of which the parties have made an agreement to arbitrate, to refer the parties to arbitration“unless it finds that the said agreement is null and void, inoperative or incapable of being performed”;

3) Arbitration is a matter of consent and a party should not be forced to arbitrate in a forum which it did not choose;

4) The arbitration clause is unenforceable because the selected forum, the DIFC-LCIA no longer exists, having been abolished by Decree 34;

5) As noted in the case ofBaker Hughes Saudi Arabia Co. v. Dynamic Indus., Civil Action 2:23-cv-1396 (E.D. La. Nov. 6, 2023), a decision of the United States District Court, Eastern District of Louisiana:

“Notwithstanding these binding precedents, and despite the fact that, under the Contract, Plaintiff agreed to arbitrate in the DIFC LCIA, not the DIAC, Defendant argues that this Court may nonetheless compel Plaintiff to arbitrate its claims against Defendant in the DIAC. See R. Doc. 8 at 10. The crux of Defendant's argument is that the Dubai government's decree dissolving the DIFC LCIA also “transferred the assets, rights and obligations” of the DIFC LCIA to the DIAC and “expressly states that DIFC-LCIA arbitration agreements entered into before the effective date of [the decree] are deemed valid[.]” Id. However, as Plaintiff states, “with all due respect to the Dubai government, it does not have the authority . . . to unilaterally change the arbitration forum agreed to by the parties” in their Contract. R. Doc. 11 at 11. As the Fifth Circuit explained, this Court “cannot rewrite the agreement of the parties and order the [arbitration] proceeding to be held” in a forum to which the parties did not contractually agree. Nat'l Iranian Oil Co., 817 F.2d at 334. Nor can the Dubai government. Whatever similarity the DIAC may have with the DIFC LCIA, it is not the same forum in which the parties agreed to arbitrate. That forum is no longer available, and this Court thus cannot compel Plaintiff to arbitrate. Accordingly, no enforceable forum selection clause compels the dismissal of this case on the ground of forum non conveniens. [emphasis added];”

6) In summary Decree 34 is in conflict with the principle of party autonomy and ought not be enforced.

55. For the reasons already stated, I consider that it is at least strongly arguable that DIFC law and not UAE law is the governing law of the Arbitration Agreement. If that is correct, and I am correct in my view that Decree 34 forms part of the law of the DIFC, it seems to me that I am bound to give effect to the Decree.

56. If I am wrong in either respect, on the facts of the present case it will be UAE law that will govern the validity of the Arbitration Agreement. InVaned Engineering GMBH v Reem Hospital(Case No. 1046-2023), a decision of the Abu Dhabi Court of First Instance, upheld by the Abu Dhabi Court of Appeal, the effect of Decree 34 was considered. It was found to be effective and, far from overriding party autonomy, reinforced it. The court therefore gave effect to the parties’ arbitration agreement as a matter of UAE law. I make no apology for citing the judgment in extenso as its impressive reasoning is generally persuasive and not limited to UAE law.

57. It was held (in translation), having considered the terms of the New York Convention and itsTravaux Préparatoires, in particular the obligation on a state court to give effect to an arbitration agreement unless“null and void, inoperative or incapable of being performed”:

“In the light of the foregoing, and whereas the court, in its consideration and examination of the case, has thoroughly examined and analyzed the Arbitration Agreement concluded between the parties, which appeared to include four main elements: First: an express agreement that the parties shall not resort to the national courts for consideration of any disputes subject of the agreement; Second: the parties shall, exclusively, recourse to arbitration through appointing an arbitral award to determine the dispute; Third: the scope of the Arbitration Agreement and the matters it will govern; and Lastly, Fourth: determination of the arbitration-related procedural matters, including the seat of arbitration, the procedure for appointing arbitrators, language and body - institution - that will manage the arbitration. Whereas it goes without saying, that the main objective that the parties intended by their agreement on arbitration is to determine an effective method - according to their point of view - to finally resolve their commercial disputes. The parties have expressly disclosed, of their own free will, their intention to resolve any dispute between them by way of

arbitration, which was the principal intention of both parties. Hence, the lack - of any element of the agreed-on procedural elements - such as: cancellation of the arbitration institution subsequent to the conclusion of the agreement, does not make it incapable of being performed and does not affect the rest of the elements of the arbitration agreement, which remained unaffected by the said amendment. Hence, the agreement on arbitration remains in force and independent from the rest of the elements which ceased to exist. Accordingly, as long as the agreement on arbitration has been duly made, then its validity cannot be affected by the existence or cancellation of the arbitration institution subject of the agreement, which ceased to exist for a reason that is out of the parties' control.

… it is concluded that the Legislator indicated that originally there is no agreement on the procedure for appointment of arbitrators that does not annul the arbitration agreement or makes it incapable of being performed, and that in that case, the competent court may be resorted to at the request of the interested party to take the necessary action. Whereas the conclusion reached, based on the foregoing, is that the Arbitration Law considers that the lack of a provision determining the procedure in the arbitration clause or failure to enforce any such procedure does not annul the arbitration clause, as long as it is not vitiated by nullity and can be performed, which applies to this case and confirms the conclusion that the court has reached.

….

At first, the court indicates that the provisions of Decree No. 34 of 2021 Concerning the Dubai International Arbitration Center do not expressly provide that the parties are forced to resort to DIAC. It is evident, through perusal of the provision of Clause 1 of Article 6 of the Decree, that it considers an agreement concluded prior to the issue of the Decree is valid and enforceable, and that DIAC shall replace the cancelled center in hearing the disputes arising out of any such agreement, unless otherwise agreed between the parties. The import of the aforementioned provision is, that the parties are not required to resort to DIAC and that they have the right to resort to any other arbitration center, if they are willing to do so.

…

This means that the rules of arbitration institutions are not permanent and fixed in nature. Hence, any amendment thereto or development thereof does not make it impossible to apply the arbitration agreement or make it incapable of being performed. This also applies to the arbitrator lists, as they cannot be deemed permanent and fixed in nature. It is noteworthy, that the DIFC-LCIA Rules were amended in October-2020, which is a date subsequent to when the Equipment Supply Contract was concluded. The Claimant did not submit to the court anything that proves the existence of material differences that could inflict harm upon it in the event of resorting to arbitration before any other center. Hence, the Claimant may not disavow the arbitration clause under the Contract (subject of the dispute), under which it consented to subject any dispute thereon to arbitration, arguing that the rules and limitation periods are different.”

58. In summary, the Abu Dhabi courts held:

1) The parties have unequivocally elected for determination of their disputes by arbitration;

2) The abolition of the arbitral institution the parties had nominated was not of itself sufficient to render the arbitration agreement null and void, inoperative or incapable of being performed;

3) The provisions of the Federal Arbitration Law (which, like the DIFC Arbitration Law, is based on the UNCITRAL Model Law) give effect to the parties’ bargain by supplying any absence in terms of applicable procedure;

4) Decree 34 preserves the parties’ bargain and if the parties had not wished their arbitration after the Effective Date of the Decree to have been administered by DIAC according to its Rules, it was open to the parties to have agreed that another institution was appointed in its place. I would add that if these parties had been genuinely concerned about the differences between the DIFC-LCIA and DIAC Rules they could have agreed to the rules of the LCIA itself which were materially identical the DIFC-LCIA Rules;

5) Institutional rules change from time to time. When rules change it does not enable a party to renounce the arbitration agreement.

59. Of the Louisiana decision the Abu Dhabi court said the following:

“Although the court fully appreciates the judgments rendered in other legal systems. However, its first priority is to better serve justice and uphold the Autonomy of Will" principle. This reflects the provisions of the UAE Arbitration Law, which embodies a commitment to promote arbitration and establishes its role as an arbitration center in the region. Lastly, the court will refer to the judgments that matches its position; supporting arbitration, which reflect unanimous agreement with the court's orientation towards upholding the "Autonomy of Will" principle and the parties' agreement, namely as follows: (1) French Courts:Epoux Convert v. Societe Droga, Court of Appeal of Paris, France, 14 December 1983, 1994 Rev Arb. 483S.A.S.A.D. Bev. Societe REO INDUCTIVE COMPONENTS AG, Court of Appeal of Paris, France, 20 March 2012, N 10/23578 (2) Swiss Courts:Federal Tribunal, Switzerland, 8 July 2003, 129 Ill 675 (3) German Courts:Kammergericht [KT] Berlin, 15 October 1999, XXVI Y.B. Com. Arb. 328 (2001),OLG Munich, 6.8.2015, 34 Sch 3/15, BeckRS 2016, 4080;OLG Karlsruhe, 28.2.2012, NJOZ 2012) (809 BGH, Beschluss vom 14. 7. 2011 – Ill ZB 70/10) (4) Hong Kong Courts:Lucky Goldstar International Limited v. Ng Moo Kee Engineering Limited, High Court, Supreme Court of Hong Kong, Hong Kong, 5 May 1993, XX Y.B. Com. Arb. 280 (1995) (5) U.S. Courts:HZI Research Ctr. v. Sun Instrument Japan Co., 1995 WL 562181, at *2 (S.D.N.Y. Sept. 20. 1995)Control Screening LLC v. Tech. Application Prod. Co., 687 F.3d 163, 166 (3d Cir. 2012).”

60. I understand the Abu Dhabi Courts to be saying that the Louisiana decision is a decision under US law which gave context to the analysis of the concept of forum selection. It seems to me that the Louisiana Court (perhaps constrained in its thinking by authority) did not appear to appreciate the difference between forum and the procedural rules. The decision speaks of“Plaintiff agreed to arbitrate in the DIFC LCIA, not the DIAC, Defendant argues that this Court may nonetheless compel Plaintiff to arbitrate its claims against Defendant in the DIAC.”No party agrees“to arbitrate in”DIFC-LCIA or DIAC. Parties agree to arbitrate subject to a set of institutional rules; the forum is and always remains international arbitration. The approach of the Abu Dhabi Courts therefore appears to me to be more closely reasoned and to uphold the twin principles of party autonomy and holding parties to their agreements to arbitrate in a way that resonates with the pro-arbitration policy of the DIFC Courts.

61. Thus, even if Decree 34 were not (at least strongly arguably) binding upon me, I would respectfully adopt the reasoning of the Abu Dhabi Courts in holding that Decree 34 does not render an arbitration agreement subject to DIFC law unenforceable on the grounds of violation of the principle of party autonomy.

Conclusion on Validity of Arbitration Agreement

62. Given that, at this stage, I am considering an interim anti-suit injunction pending the hearing of the Claimant’s claim under Part 8 for a permanent injunction, as Gee emphasizes, I need only consider matters on theAmerican Cyanamidbasis. That is to say, am I satisfied that there is a serious issue to be tried? Having said that, for the reasons set out in the preceding paragraphs, I am of the strong (albeit necessarily provisional) view that Decree 34 has not rendered the Arbitration Agreement in the present case null and void, inoperative or incapable of being performed.

63. It would therefore follow (on the same basis) that as the parties have expressly agreed that the DIFC is the seat of any arbitration conducted under the agreement, DIFC law is the governing law of the Arbitration Agreement.

ABANDONMENT, TERMINATION AND ESTOPPEL

64. The Defendant notes that when it invited the Claimant to appoint the sole arbitrator on 23 August 2023, no response was received from the Claimant¹³. It argues that when contacted by DIAC the Claimant showed “a stalling attitude” indicating no intention to proceed with the arbitration. The Defendant approaches the issue of abandonment on the basis of UAE law, being the law governing the Subcontract as a whole. It submits that Article Section (55) of the Civil Transactions Law of the United Arab Emirates, in accordance with the latest amendments to Federal Decree Law No. 30 of 2020 states:“That is forfeited, alike the inexistent, shall not come back to existence”and that Article (472) of the Civil Transaction Act states:“A right is extinguished if the debtor establishes that its performance has become impossible by reason of a cause beyond his control”. Essentially the Defendant is saying that the Claimant has disavowed the Arbitration Agreement and cannot now seek to rely upon it.

65. Alternatively, the Defendant says that the Arbitration Agreement has been terminated by abandonment. The Defendant points to the proceedings before the Abu Dhabi Courts¹⁴calling the Securities. It suggests that this explains why the Claimant has abandoned the Arbitration Agreement. If the Defendant prevailed in any arbitration the Claimant would be forced to regurgitate the fruits of its judgment.

66. In the further alternative, the Defendant submits that the Claimant is estopped by conduct as the Claimant cannot change its position adopted in previous DIAC proceedings and then expect the Court not to hold that party to its previous conduct.

67. The Claimant submits that whether or not the Claimant abandoned or repudiated the Arbitration Agreement must be analysed through the governing law of the Arbitration Agreement. The Claimant's position is that whether this question is approached through DIFC Law or UAE Law, the answer is the same – there has been no waiver or repudiation of the Arbitration Agreement.

68. As far as DIFC law is concerned, the Claimant suggests that an arbitration agreement can be repudiated, and the repudiation accepted in the same manner as any other contract on the basis of the English Court of Appeal case ofJohn Downing v Al Tameer Establishment [2002] EWCA Civ 721 at [21]. The Claimant notes that position appears slightly different as a matter of UAE law: in the Dubai Court of Cassation Case 185/2008, it was held that:

“…it is permissible for a party to waive reliance on an arbitration clause expressly or by implication, it is necessary in the case of an implied waiver that it must be by an act or step clearly demonstrating the same, and demonstrating the withdrawal from it in such a manner as to leave no room for doubt as to the intention to waive that clause, and it must be conclusive in demonstrating his consent to abandon the right of reliance on it.”

Accordingly, says the Claimant, whether DIFC law or UAE law is used to analyse the question, it is clear that there must be:

1) A clear intention by one party that it no longer wishes to arbitrate the dispute; and

2) That intention can be expressed or implied.

In respect of DIFC Law only, there appears to be a requirement that there also be acceptance of that clear indication by the other party.

69. DIFC law is similar to English law but not identical. Article 86 of the DIFC Contact Law provides:

“(1) A party may terminate the contract where the failure of the other party to perform an obligation under the contract amounts to a fundamental non-performance.

(2) In determining whether a failure to perform an obligation amounts to a fundamental non- performance regard shall be had, in particular, to whether … (d) the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance.”

Article 87(1) requires notice of termination:

“The right of a party to terminate the contract is exercised by notice to the other party.”

70. Under English law, repudiatory conduct is accepted by the other party. Under DIFC law repudiatory conduct enables the other party to give notice of termination. I thus accept that, like English law, DIFC law requires a further act from a party before an arbitration agreement is terminated by repudiatory conduct on the part of the opposing party. That does appear to be a difference between DIFC law and UAE law which requires only an unequivocal abandonment of the arbitration clause.

71. The Claimant submits there was no repudiatory conduct on its part:

1) It suggests that in its letter of 21 September 2023, the Defendant requested that DIAC appoint an arbitrator pursuant to article 12.3 of the DIAC Rules but that application was clearly misplaced, as Article 12.3 refers to extant arbitration proceedings and not a prospective arbitration;

2) In its letter of 24 October 2023, DIAC recognised that it was not able to appoint the arbitrator under Article 12.3 of the DIAC Rules, and that is why it said it was treating the Defendant's request as an application under Article 4.1 of Appendix II of the DIAC Rules for DIAC to act as an appointing authority;

3) In its letter of 3 November 2023, the Claimant in fact invoked the Arbitration Agreement but voiced its opposition to DIAC acting as the appointing authority before it had had the opportunity to make its nomination at the appropriate juncture. It suggested the application was “premature”;

4) The Defendant was in error in the manner in which it tried to start the arbitral proceedings;

5) There is no positive duty as a matter of DIFC law or UAE law on a party to explain a mistake made by an opponent in litigation. Notwithstanding, on 15 May 2024, Stephenson Harwood Middle East LLP (the Claimant’s legal representative) issued a letter to the Defendant and Abdullah Al Shamsi Advocates and Legal Consultants Office (who act for the Defendant in the Sharjah proceedings) explaining that the Defendant had previously not applied the correct procedure for commencing DIAC arbitration and explained to the Defendant how it should commence arbitration correctly.

72. The Claimant conveniently ignores its failure to respond to the Defendant’s letter of 23 August 2023, which does the Claimant no credit. I do not doubt that the Claimant had little enthusiasm for an arbitration given that it had obtained judgment under the Securities which might have been put in jeopardy. The Claimant admits as much at paragraph 16 of the First Witness Statement of Naveed, Legal Counsel of the Claimant, dated 24 May 2024.

73. I have considerable sympathy for the Defendant when faced with the Claimant’s silence. I am of the view that the Defendant’s application to DIAC of 21 September 2023 was a valid Request for Arbitration within the meaning of Article 4.1 of the DIAC Rules as it satisfied all the relevant requirements as set out in detail at paragraph 11 above.

74. The one thing the Defendant did not do was pay the registration fee, but that should have been easily cured by DIAC simply requesting payment before registering the Request. At that point DIAC would have had to have considered whether by its unreasonable refusal to answer the Defendant’s letter of 23 August 2023 the Claimant had waived its right to nominate the sole arbitrator or DIAC would have invited the Claimant to make its nomination within a specified time.

75. Instead (as set out paragraphs 14 and 15 above), DIAC treated the application as having been made under paragraph 4.1 of Appendix II to the DIAC Rules notwithstanding that the Defendant had made no reference to that provision, which only applies in arbitrations not governed by the DIAC Rules, and indeed had expressly invoked the DIAC Rules. Thereafter confusion appears to have reigned all round. The Defendant did not pick up the error that DIAC was treating the arbitration as one that was not governed by its Rules when it had stated that it was seeking the appointment of an arbitrator under DIAC’s Rules.

76. Taking the Claimant’s reply dated 3 November 2023 to DIAC’s letter of 24 October 2024 at face value, the statement“The Application seeks, inter alia, to circumvent the Parties’ agreement by requesting DIAC to act as Appointing Authority before the Respondent has had the opportunity to make its nomination at the appropriate juncture”was both wrong and legally misconceived. It was wrong because the Defendant had given the Claimant the opportunity to make its nomination by its letter 23 August 2023. It was legally misconceived in the sense that on any view DIAC was at all times the only entity empowered to appoint an arbitrator. I do however accept that the letter was written in the context of DIAC acting as the appointing authority within the meaning of paragraph 4.1 of Appendix II to the DIAC Rules.

77. The Defendant has compounded the confusion by executing avolte faceand now claiming that the Arbitration Agreement that it had sought to invoke in the latter part of 2023 is invalid and that it was offering the Claimant“a new opportunity to the Applicant to save the arbitration agreement by offering the submission to DIAC as an appointing authority”¹⁵. That does not appear to me to bear any relation to what in fact occurred.

78. It is not the function of the Court finally to determine on this application whether or not the Claimant has abandoned or terminated the Arbitration Agreement or whether the Claimant is estopped from relying on the Arbitration Agreement. On a provisional basis (as it must be), as DIFC is the proper law of the Arbitration Agreement, in order to establish that the Arbitration Agreement has been terminated, it would have to be shown that the Defendant gave notice of termination on the basis that the Claimant had fundamentally failed to perform the Arbitration Agreement having regard in particular to the matters set out at Article 86(2) of the DIFC Contract Law. As Gee notes,“On the application for an interim injunction, the court is not making any final findings of fact”. Applying American Cyanamid principles, it is clear that these are serious issues to be tried.

Anti-Suit Injunction not Justified

79. Once the correct test is identified the question is one of discretion based upon the balance of convenience, there being serious issues to be tried (there is no suggestion that damages would be an adequate remedy).

80. There is some dispute over the correct test. The Defendant points to the admonition of Justice Sir Jeremy Cooke inBrookfieldat paragraph [4] that“It is self-evident that this Court should not interfere with the decisions of other courts of competent jurisdiction…and should not impugn the contents of their judgments. It is only where there is an absence of jurisdiction or where proceedings are vexatious and oppressive that a court is ordinarily prepared to grant an antisuit injunction.”The Defendant also makes reference to(1) ED&F Man Capital Markets MENA Limited (2) ED&F Man Capital Markets Limited v (1) Sayyed Hussain (2) RJ O'Brien MENA Capital Limited (3) Stephen Ghallami, CFI 015/2018 in which H.E. Justice Omar Al Muhairi held that, “the party seeking an anti-suit injunction must generally show that proceeding before the foreign court is or would be vexatious or oppressive.”

81. The reasons relied upon by the Defendant for not enforcing the agreement to arbitrate, the validity of which is a serious issue to be tried on theAmerican Cyanamidbasis, are that:

1) The Sharjah Proceedings are not vexatious or oppressive;

2) There is no apparent injustice in allowing those proceedings to continue; and

3) The Claimant is perfectly capable of seeking a stay of proceedings or dismissal the case on legal grounds by application in the Sharjah Proceedings.

82. I consider that the Defendant is not applying the appropriate test. The citation from Brookfield was a general introductory paragraph. Later in the judgment (paragraph [41]) Sir Jeremy contrasted the general position with that where the Court is that of the seat of an arbitration. In such a case the Court would be concerned to protect its own jurisdiction and to protect the agreement of the parties to refer their disputes to arbitration. ED&F was not an arbitration case at all. As stated at paragraph 52 above, the English common law practice (which the DIFC Courts follow) is that if the seat is the DIFC, good/strong reason would have to be shown why the agreement to arbitrate should not be enforced.

83. I do not consider that the points raised by the Defendant amount to good or strong reasons why the agreement to arbitrate should not be enforced.“Vexatious or oppressive”is not the applicable test. The injustice of allowing the Sharjah Proceedings to continue is that to do so (at least arguably) is to permit the Defendant to act in breach of the Arbitration Agreement.

84. I accept that the Claimant can apply to stay the Sharjah Proceedings under Article 8 of the UAE Federal Arbitration Law. It appears that the Claimant has done that. However, I note that on 11 June 2024, both parties attended a hearing held in the Sharjah Court and requested the Sharjah Court to stay the Sharjah Proceedings until the final determination of this Anti-Suit Application. It seems to me therefore that both parties have accepted that this Court is the appropriate forum to determine whether or not the Sharjah Proceedings should continue.

85. I understand the Defendant may argue that it was doing no more than observe my without notice Order. If that is so, then I accept that it is necessary restrain the Defendant from proceeding with its Memorandum of 28 May 2024. The Memorandum seeks (1) dismissal of the Claimant’s application to enforce the Arbitration Agreement, (2) the assumption of jurisdiction by the Sharjah Court, (3) a declaration that the DIFC [sic] has no jurisdiction to arbitrate the dispute, and (4) effectively grant an anti-anti suit order directed to this Court. In my judgment, the DIFC Court, as the court of the agreed seat, is the appropriate forum to consider the effectiveness of the Arbitration Agreement and the relief sought in the Memorandum is an inappropriate (and in the case of (4) inadmissible) attempt to interfere with the jurisdiction of this Court which ought to be restrained.

86. I find that there is no good or strong reasonnotto enforce the parties’ Arbitration Agreement and to the contrary there are good reasons to enforce it.

OVERALL CONCLUSION

87. It follows from the foregoing that:

1) The Defendant’s application challenging the jurisdiction of the DIFC Courts is dismissed; and

2) The without notice Interim Anti-Suit Injunction granted on 20 May 2024 shall be continued until determination of the Claimant’s Part 8 claim for a permanent anti-suit injunction or until further order.

88. The parties should now liaise with a view to agreeing further directions for the service of any additional evidence and submissions and for fixing the hearing date of the Claimant’s Part 8 claim. In the absence of agreement, the parties may apply to the Court for directions under RDC 8.20.

COSTS

89. The Claimant has prevailed in both applications and seeks its costs. I have not heard submissions concerning costs and it seems to me that there will be a considerable overlap between the costs incurred in relation to these applications and those incurred in relation to the Claimant’s Part 8 claim. I will therefore reserve the costs of and occasioned by these applications to the final hearing of the Claimant’s Part 8 claim.

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You are here: BAILII >> Databases >> The Dubai International Financial Centre >> ARB 009/2024 Narciso v Nash [2024] DIFC ARB 009 (20 June 2024) URL: http://www.bailii.org/ae/cases/DIFC/2024/DARB_009.html Cite as: [2024] DIFC ARB 9, [2024] DIFC ARB 009

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ARB 009/2024 Narciso v Nash