26 Mar 2018

A resolution in sight?

Authored by: Ruth Liew

A resolution in sight?

Ruth Liew of Hadef & Partners discuss the impact of the DIFC Injunction and Decree No. 19 of 2016 in the light of a recent dispute in Dubai.

There has been much discussion and scrutiny of Decree No. 19 of 2016 (“Decree”) in resolving conflicts of jurisdiction between the Dubai Courts and the DIFC Courts.

A recent dispute in Dubai and application to the Judicial Tribunal (“JT”) has raised an interesting point regarding the impact of the provisions of the Decree on interim orders issued by the DIFC court.

Assas Opco Limited (“Assas”) v VIH Hotel Management Ltd (“VIH”), Cassation No. 8/2017

This matter concerned a dispute between a hotel operator, VIH, and the business owner of the hotel, Assas concerning the purported termination of the hotel management agreement (“HVA”) by Assas.

VIH sought and obtained an ex-parte interim injunction from the DIFC Court preventing Assas from enforcing the purported termination. VIH also commenced arbitration proceedings in the DIFC-LCIA pursuant to an arbitration clause in the HVA.

Thereafter, Assas commenced proceeding in the Dubai Court seeking orders that the arbitration provision in the HVA was invalid (as the signatory to the agreement lacked capacity) and the annulment of the HVA on grounds that VIH was in breach of public policy including its licensing requirements.

Having commenced the Dubai Court proceedings, Assas contended there was a conflict with the interim injunction issued by the DIFC Court and the underlying DIFC-LCIA arbitration proceedings. Assas filed an application before the JT asserting a conflict of jurisdiction between the respective courts which required resolution in accordance with the Decree.

In the session held on October 30, 2017, the JT dismissed the application by Assas upon the following grounds:

1. The injunction is an interim measure aiming at maintaining and restoring the status quo pending determination of the dispute; and

2. As an interlocutory order, the injunction did not prevent either the court or the arbitral panel from entertaining the case.

3. At page 5 of its judgment, the JT stated the “Dubai Courts can make its decision on the merits of the case raised before it regardless of the existence of the injunction order which will disappear after the court delivers its judgment.”

In summary, the JT ruled that at the point of determining Assas’ application there was no conflict between the two courts but a conflict of jurisdiction would arise if, at a later time, both courts endeavored to hear the case. The JT intimated that any conflict would be resolved by determining the challenge to the arbitration clause.

The case gives rise to an issue as to the effect (if any) of Assas’ application to the JT on the interim injunction issued by the DIFC Court.

Article 5 of the Decree stipulates the consequences of referral of disputes to the JT and states:

“In accordance with the provisions of Article (4) hereof, referral of disputes to the Judicial Body shall result in the following:

1. Actions or Motions subject of the conflict of jurisdiction shall not proceed further until the Judicial Body issued a decision determining the court having jurisdiction to hear the same.

2. Stay of execution of the contradicting judgments until the executable judgment is determined under a decision to be issued by the Judicial Body in this regard.”

Article 6 of the Decree states:

“The legal time limits as well as the prescription periods provided for in the legislation in force shall be suspended from the date of filing the Motion to the Judicial Body.”

Articles 5 and 6 are clear. If an application to the JT is filed, the substantive proceedings in the respective conflicting courts cannot proceed until the JT determines the conflict of jurisdiction. Article 6 works to suspend any procedural timetable and/or any procedural time limit pending the decision of the JT.

However, does Article 5 have the effect of discharging the interim injunction issued by the DIFC Court? The issue arises due to the terms of Rule 25.66 of the DIFC Court which states as follows:

“If:

(1) the Court has granted an interim injunction other than a freezing order; and

(2) the claim is stayed other than by agreement between the parties;

the interim injunction shall be set aside unless the Court orders that it should continue to have effect even though the claim is stayed.”

In Assas case, the interim injunction granted by the DIFC Court was not a freezing order. Does Article 5 and the stipulated consequence that the DIFC-LCIA arbitration proceeding commenced by VIH “…shall not proceed further…” constitute a “stay” for the purposes of RDC 25.66(2)? If it does, then it would set aside the interim injunction in the absence of a DIFC court order that it should continue to have effect.

As Article 5 imposes a procedural and interim stay pending a decision by the JT and not a stay due to a failure to properly prosecute a claim by a party or due to an abuse of process, one could question whether Article 5 triggers RDC 25.66(2). Indeed, such a consequence seems contrary to fairness. Just as the JT commented in Assas that the interim injunction preserves the status quo pending determination of the dispute; the interim injunction also preserves the status quo pending determination of the jurisdictional challenge under the Decree itself. Nevertheless, the wording of Article 5 is clear. Given the wording of RDC 25.66(2) does not distinguish between an interim or permanent stay, the best course for a litigant impacted by this uncertainty would be to immediately seek an order from the DIFC Court that the interim injunction remains in effect.

This is a question that hopefully in due course is addressed to provide clarity to litigants as to the effect of Article 5 of the Decree and its impact on RDC 25.66.

 
 

This article, including any advice, commentary or recommendation herein, is provided on a complimentary basis without consideration of any specific objectives, circumstances or facts. It reflects the views of the writer which may, in some cases, differ from those of the firm, especially in the developing jurisdiction of the UAE.