A Tale of Two Courts: Anti-suit Injunctions in Dubai and the DIFC

Peter Smith - Senior Associate - International Litigation Group / Litigation

Can the Dubai and DIFC Courts issue anti-suit injunctions against proceedings before the other court?

A recent case in the DIFC Courts brings a constitutional and jurisprudential issue back to the fore, but a look at the history of the relations between the courts’ systems suggests this order is an evolutionary step rather than a revolutionary event.

In Multiplex Constructions LLC v Elemec Electromechanical Contracting LLC (unreported; 21 October 2020) H.E. Justice Shamlan Al Sawalehi made an interim injunction order in the DIFC, ordering the respondent not to take any further steps in proceedings before the Dubai Courts other than to discontinue those proceedings immediately. The interim order was upheld at the return date hearing on 5 November 2020. The Court made its orders on the basis of an express dispute resolution clause in the agreement under which the dispute arose, that the Court found was an “effective and binding” agreement to arbitrate between the parties. The Court also found that the dispute between the parties was subject to an ongoing arbitration under DIFC-LCIA Rules and seated in the DIFC, a finding which, inter alia, grounded the DIFC Courts’ jurisdiction.

In so doing, the Court reportedly rejected a number of arguments by the respondent, including arguments over the interpretation of the arbitration agreement and the capacity of the signee of the arbitration agreement (an argument made frequently in proceedings involving UAE-incorporated parties). It also considered whether the applicant had lost its right to an injunction through participation in the Dubai Court litigation, albeit under an express reservation of rights that left open a challenge to the Dubai Court’s jurisdiction, finding that it had not.

The effect of Justice Al Sawalehi’s order was to act as an anti-suit injunction, that is, an injunction against a party enjoining it from commencing or continuing with proceedings in a court or tribunal in another jurisdiction or forum. The anti-suit injunction was developed in the common law courts in early modern England to stop claimants from bringing litigation before the various other courts that existed. Such litigation was vexatious and oppressive because it caused the defendant to incur unnecessary time and expense to stop the alien litigation. But as the English courts’ structure consolidated into one, uniform system, anti-suit injunctions began to be used to stop parties from continuing proceedings in foreign jurisdictions.

A leading English law practitioners’ textbook refers, in its definition of the suit, to an anti-suit injunction restraining proceedings “abroad” (Gee on Commercial Injunctions, 6th ed., 14-001). There are obvious problems with this concept in the UAE context. The Dubai Courts are not ‘abroad’ from the DIFC Courts. They are part of the same nation State, governed by the same Federal constitution, located in the same Emirate and indeed in the same city; both systems are the fruits of the same tree. There is also an asymmetry as the UAE Courts (i.e. the non-DIFC civil law courts) themselves do not have any jurisdiction to issue an anti-suit injunction. The UAE Courts’ jurisprudence narrowly constrains its ability to interfere in ‘foreign’ litigation in that the Courts accept a party’s right to litigate in the forum of any national court without interference: Article 104 of the UAE Civil Code (UAE Federal Law No. 5 of 1985 as amended) says, “The doing of what is permitted by law negates liability, and no person who lawfully exercises his rights shall be liable for any harm arising thereout.” The UAE Courts respect the sovereignty of foreign courts to ascertain their own jurisdiction, a corollary, perhaps, of the UAE Courts’ historic willingness to allow parties to litigate before them, although the grounds for establishing the exclusive jurisdiction of the UAE Courts are becoming scarcer thanks to recent amendments to the Civil Code.

Yet, as the history of relations between the DIFC and Dubai Courts shows, the DIFC Courts’ order in Elemec should come as no surprise. After all, the anti-suit injunction does not operate to injunct the court or arbitral tribunal in which the parallel proceedings are taking place, and the comity between the two court systems is maintained – on the surface at least. The injunction order operates in personam, on the person against whom the order is made, who may disregard the injunction and continue with the parallel proceedings but at the risk of facing a prosecution for contempt in the injunction proceedings.

Also, as a common law court the DIFC Courts have restated the well-established principle that parties whose disputes are supervised by the DIFC Courts as a matter of contract should not be allowed to resile from that agreement, and particularly not by the instigation of parallel proceedings in the Dubai Courts in an effort to thwart the DIFC proceedings (whether before the Courts or in DIFC-seated arbitration). To that end, the DIFC Courts have issued injunction orders to restrain foreign proceedings in the courts of Pakistan (Hayri International LLC v Hazim Telecom Private Ltd [2016] DIFC ARB 010 (9 March 2017) with an injunction order that, possibly inadvertently, had the effect of restraining any contemplated or unknown Dubai Courts proceedings as well, but it has twice declined to make such an order in respect of proceedings before the US Federal and State of Illinois courts (in Federal Express International Inc v Abdul Latif Jameel Transportation Company [2018] DIFC CFI 038 (15 July 2018) and ED&F Man Capital Markets MENA Ltd v Hussain [2018] DIFC CFI 015 (31 October 2018) respectively).

 

Taaleem and Azzam: the comity of the Dubai Courts upheld

In Taaleem PJSC v (1) National Bonds Corporation PJSC and (2) Deyaar Development PJSC [2010] DIFC CFI 014 the notion of the DIFC Courts issuing an anti-suit injunction against the Dubai Courts was considered for the first time.

In the course of a jurisdiction challenge, the defendants issued proceedings in the Dubai Courts seeking payment of sums under the agreement which were in issue in the DIFC Court proceedings. The claimant issued an application in the DIFC Courts for an injunction requiring the first defendant to stay the Dubai Court proceedings, as well as bringing an application in the Dubai Courts relating to the action there.

Justice Sir John Chadwick referred to the Protocol of Jurisdiction in force between the two court systems, which the Judge said “recognises that under the present legislation there is no obvious solution” to the “problem” of the “possibility that each Court might reach a different decision as to whether a dispute fell within one or other” of the categories of dispute over which the DIFC Courts had exclusive jurisdiction (paragraph 13). Although the Protocol stated that the DIFC Courts had the exclusive jurisdiction to interpret the material legislation before it, this did not mean that the Dubai Courts were bound to accept the DIFC Courts’ decision on jurisdiction, although it did mean that, in the DIFC Courts, the DIFC Courts’ own view prevailed. The Judge ultimately declined to make the order sought by the claimant, reasoning at paragraph 16 that:

[T]he sensible course is to allow the Dubai Civil Court to consider the matter unimpeded by any order of this Court in the terms sought in the present application. The Dubai Civil Court will know that this Court has [accepted] jurisdiction. It will have the opportunity to consider, first, whether it accepts that view of jurisdiction; second whether, it prefers to await a reasoned judgment of this Court before coming to a conclusion on that point; and third, whether it would prefer to wait until there was an appeal judgment in this Court on the point.

He continued:

  1. It is far too early to accept that the Dubai Civil Court will arrive at a conclusion which differs from the conclusion of this Court. It is to be hoped that the two Courts will take the same view of matters of this kind – whether at First Instance or Appellate level – and it is to be expected, in the light of the common assurances of co-operation in the Protocol that some way will be found to resolve differences (if any) between them.
  2. What, as it seems to me, is unlikely to be helpful is for this Court to seek to appropriate to itself the right to decide questions of jurisdiction to the exclusion of the Dubai Civil Court; without affording to the Dubai Civil Court the opportunity of considering the problem in the individual case. It may be expected – that as the jurisprudence develops and as more cases come before the two Courts – a pattern will emerge which enables the parties and their advisors to predict with reasonable certainty which Court will accept jurisdiction and which will not.
  3. It is plainly not intended either that both Courts will accept jurisdiction; or that both Courts will decline jurisdiction. The framework within the legislation in force in the Emirate contemplates that these matters will be heard in one Court rather than the other and sets out provisions which enable a decision to be made as to which Court that should be.
  4. The problem arises because it is not impossible that, in some circumstances, the two Courts might take different views as to the effect of that legislation. If that proves to be a real problem in practice then some steps will need to be taken in order to solve it; but, as I have said, it seems to me essentially unhelpful to attempt to solve it by the grant of anti-suit injunctions at this stage. A fortiori in this case, where the problem may never in fact arise.

Justice Chadwick declined to make the sought order, even though he had decided conclusively that the DIFC Courts had exclusive jurisdiction over the claim; the language of the Judicial Authority Law (Dubai Law No.12 of 2004 as amended) which creates and sets out the DIFC Courts’ jurisdiction and is itself a Dubai and not merely DIFC statute, also speaks of the mandatory and exclusive nature of the DIFC Courts’ jurisdiction. However, the judge expressly left open the question of what to do when both the Dubai and DIFC Courts claim jurisdiction over the same dispute.

An early answer to that question was to refer the matter to the Union Supreme Court, the UAE’s paramount legal tribunal. The Taaleem litigation spawned a second dispute, Ziad Azzam v Deyaar Development PJSC [2015] DIFC CFI 024 (18 October 2015), in which H.E. Justice Omar Al Muhairi, now the Deputy Chief Justice, heard an application by the CEO of Taaleem arising from a claim in the Dubai Courts by the defendant, following Taaleem’s success in its original claim, in which the defendant raised a number of allegations that had already been ventilated in the Taaleem litigation by way of a counterclaim that was dismissed.

The Dubai Court of First Instance had already dismissed the defendant’s claim, and he now sought both a declaration that the DIFC Courts had jurisdiction over the dispute and an anti-suit injunction. The Judge referred to the reasoning in Taaleem and said at paragraph 27,

In addition to this, the Union Supreme Court, as the highest judicial court in the UAE has amongst other powers, the authority to hear any conflicts in jurisdiction between Dubai and the DIFC Courts. Surely, the USC has the jurisdiction to hear any jurisdictional or constitutional issues in all of the Emirates, including the DIFC. The establishment of the USC is laid out in Federal Law No 10. of 1973 as amended by Law No. 26 of 1992 and the DIFC is certainly not exempted from the jurisdiction of the USC. As his Excellency Justice Al Madhani directed in ARB-001-2014, X1 and X2 v Y,

“I also agree with the Defendant’s submission that the DIFC regime is not exempted from the jurisdiction of the USC when it comes to the Constitutionality Examination, including the fact that the DIFC Courts is a UAE Court that can refer a matter to the USC if requested to do so, and then must comply with the decision of the USC rendered in that connection.”

Ultimately, Justice Al Muhairi awarded a declaration that the DIFC Courts had jurisdiction over the dispute but he too declined to make an anti-suit injunction.

 

Brookfield Multiplex: the DIFC Courts’ position hardens

In Brookfield Multiplex Constructions LLC v (1) DIFC Investments LLC (2) Dubai International Financial Centre Authority [2016] DIFC CFI 020, the applicant – who was the same claimant as in Elemec albeit under a previous name – sought declarations that there was a binding arbitration agreement between the parties and that, subject to the arbitration agreement, the DIFC Courts had exclusive jurisdiction over the dispute with the respondents, with the Dubai Courts having no such jurisdiction. The applicant also sought an order restraining the respondents in pursuing proceedings in the Dubai Courts (those proceedings were for the appointment of an expert to investigate and report on damage to the DIFC Gate building). The applicant said that the arbitration agreement conferred a negative right on it, i.e. a right not to be sued in a court because of the agreement to arbitrate.

Ultimately, the DIFC Court declined to make an anti-suit injunction on the grounds that the Dubai Court proceedings were not substantive but were rather merely a process towards obtaining a non-binding expert report. In his judgment, Justice Sir Jeremy Cooke affirmed that the DIFC Courts would protect its jurisdiction even against actions in the Dubai Courts. He began by noting, again, the comity of the two court systems and the high hurdles that a successful anti-suit injunction application had to clear, but stressed the need for the DIFC Courts to act to uphold contractual agreements that implicitly ousted satellite attacks in other jurisdictions. At paragraph 4, he said:

It is self-evident that this Court should not interfere with the decisions of other courts of competent jurisdiction, particularly those of the non-DIFC courts of Dubai and should not impugn the contents of their judgements. 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 anti-suit injunction. The classic example is where there is an agreement between the parties which excludes the jurisdiction of the court in question from considering or making the decision or order in question. This Court must therefore grapple with issues of jurisdiction and its exercise, particularly where it is asserted that this Court has exclusive jurisdiction in respect of the parties and/or the subject matter of the dispute….

Based on English case law, the Court was willing to grant interim relief in support of an arbitration even where the seat was not the DIFC. He said:

  1. 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…

The Judge noted that that “respect” had been considered in the two previous cases of Taaleem and Azzam, and continued:

  1. 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.
  2. 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.

He concluded, at para 49, with a summary of the position that the DIFC Courts had jurisdiction to restrain litigation in the Dubai Courts, but only in extremis:

This Court does have jurisdiction to grant an anti-suit injunction, even if the seat of the arbitration is not in the DIFC. It would require an exceptional case for the Court to exercise it in those circumstances and in this case it would refuse to do so, whether or not the seat was in the DIFC, for the reasons which appear earlier in this judgment. The seat of the arbitration will have exclusive jurisdiction to supervise the arbitration itself but the powers of the court to make an anti-suit injunction exist where the courts are not the Courts of the seat, albeit that the exercise of those powers would be exceptional. In consequence there is however no exclusive jurisdiction for the making of an anti-suit injunction.

 

Conclusion: is the Joint Judicial Committee the solution?

As practitioners will know, although the power of the USC to decide which of the UAE’s court systems was the most appropriate lay exclusively with the USC at the time of the Azzam decision, the allocation of jurisdiction between the DIFC and Dubai Courts subsequently became a competence of the Joint Judicial Committee created by Dubai Decree 19 of 2016 (‘JJC’). The idea of the USC deciding on conflicts of jurisdiction was and remains an attractive one, not least because it would provide an overall constitutional mechanism for deciding on conflicts of jurisdiction between the DIFC Courts and the non-Dubai UAE Courts, such as the Courts of the Emirate of Sharjah, which fall outside the JJC’s jurisdiction. To an extent, a successful referral to the JJC acts in effect as an anti-suit injunction, as the JJC will, if real and existing conflicts of jurisdiction are found, order a stay on one of the competing litigation processes.

 

For further information, please contact Rita Jaballah (r.jaballah@tamimi.com).


 

Despite its sad ending, A Tale of Two Cities is a comparison between two similar yet distinct cultures in the process of the development and transformation of justice, like the Dubai and DIFC Courts.

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