DIFC Case Law: Whistleblowing

In the case of Bassam Khalifa v S.W.I.F.T (Dubai) Limited, the DIFC Court of Appeal has issued a judgment which clarifies the application of the whistleblowing protections under the DIFC Operating Law, and the Court of First Instance’s (“CFI”) power to grant relief for any breach of the whistleblowing protections.

The Law

“Whistleblowing” is essentially is a disclosure of (often confidential) information that exposes illegal or unethical practices within an organisation. The disclosure is usually made by an employee or an ex-employee of the entity itself, for example via a confidential whistleblowing hotline, or, an independent third party, such as a regulatory authority.

The DIFC Law No. 7 of 2018 (“Operating Law”) sets out whistleblowing protection that applies in the DIFC and it applies to any person operating or conducting business in or from the DIFC.

Article 64 of the Operating Law provides that a person who makes a disclosure of information (outlined below) to the DIFC Registrar of Companies or the relevant DIFC entity’s auditors or to a Director/officer of the DIFC entity itself, is entitled to the protection set out under the Operating Law. The disclosure must including the identity of the person making the disclosure, related to a reasonable suspicion that the DIFC entity has contravening the Operating Law or other regulations/legislation and must be in good faith.

In terms of whistleblowing protection, the Operating Law provides that those making good faith disclosures in accordance with the law shall not, as a result of making the disclosure, be:

• Subject to any legal or contractual liability;
• Subject to any other contractual, civil or other remedy or suffer any adverse consequence; and/or
• Dismissed from employment or otherwise subject to a detriment by the employer or any related person.

Pursuant to Article 64 any act in contravention of the above may result in a fine of USD 30,000.

In addition, Article 40 provides that the DIFC Courts may make orders for the recovery of damages or compensation or such other orders as it sees fit where a ‘person intentionally, recklessly or negligently commits a breach of any requirement, duty, prohibition, responsibility or obligation which is imposed by or under this Law or Legislation administered by the Registrar, the person is liable to compensate any other person for any loss or damage caused to that other person as a result of such conduct, and is otherwise liable to restore such other person to the position they were in prior to such conduct.’

Case summary

In April 2020, the CFI issued a judgment in the case of Bassam Khalifa v S.W.I.F.T (Dubai) Limited in which it ruled that the Court had power to grant relief under Article 40 of the Operating Law for losses suffered as a result of breach of Article 64 of the Operating Law.

In this case, the Claimant, Mr Bassam Khalifa, was employed by the Defendant, S.W.I.F.T (Dubai) Limited as a commercial manager. During his employment, the Claimant alleges that he became aware of fraudulent activity as a result of which he made five disclosures to the Defendant between November 2017 and October 2018. An investigation was undertaken by the Defendant. On conclusion of the investigation, no further action was taken however, the Claimant’s employment was later terminated. The Claimant’s position was that he was terminated as a direct result of making the disclosures and as such, he should be afforded protection under Article 64 of the Operating Law and he sought relief under Article 40.

The Claimant’s arguments rested on the fact that even though the Operating Law came into effect after the disclosures had been made (on 12 November 2018), an individual is entitled to the protections afforded under Article 64 where the termination occurred after the introduction of the law. Effectively arguing that the Operating Law was to be applied retrospectively from its enactment. The CFI held in the Claimant’s favour indicating that it has the power (under Article 40) to grant relief for loss suffered as a result of a breach of Article 64.

The Court of Appeal has since overturned the CFI’s judgment and ruled that the Operating Law does not have retrospective effect and accordingly, dismissed the Claimant’s submissions that he was entitled to relief under Article 40 of the Operating Law.

Notwithstanding, the Court of Appeal did affirm that where there has been a breach of the whistleblowing protections afforded under Article 64 of the Operating Law, that the CFI does have power to grant relief in accordance with Article 40, provided its terms are met.

The full judgment is publically available and can be accessed online.

Significance of the judgment

The judgment is significant as it affirms that the CFI has the power to grant relief under Article 40 of the Operating Law where there has been a breach of the whistleblowing protections. Employees and ex-employees have a means by which they can seek compensation before the courts in the event that the applicable whistleblowing provisions under the Operating Law are engaged. Given these risks and the potential exposure, it increases the focus upon good corporate governance to ensure transparency, particularly in relation to financial dealings, by taking steps such as creating and maintaining proper whistleblowing policies and procedures.

Accordingly, we would recommend a thorough review of your business’s existing whistleblowing framework to ensure that it is robust. Please let us know if you require any assistance with implementing and/or updating internal policies and procedures.