In a landmark decision recently handed down in Multiplex Constructions LLC v Elemec Electromechanical Contracting LLC, the Dubai International Financial Centre (DIFC) court has sent a clear message that arbitration agreements providing for a DIFC seat must be respected.
In the ruling, Justice Al Sawalehi upheld a DIFC-LCIA arbitration agreement and restrained Elemec from pursuing proceedings in the onshore courts of Dubai. The injunction, which if breached could result in fines being issued and even imprisonment, is the first ever occasion that such an order has been issued by the DIFC courts. Parties should take note that going forward, the DIFC courts are unlikely to stand by idly when the commonly used tactic in the region of commencing onshore court proceedings is invoked in an attempt to usurp an agreement to arbitration seated in the DIFC. The decision supports the DIFC’s continued growth as a major centre for international arbitration, which in the past year, according to its latest annual report, has seen a total of 80 new cases registered (an increase of 18% from the preceding year), with a total value of USD1.25 billion (more than twice the value of the preceding year).
Multiplex and Elemec entered into a contract containing an arbitration agreement, which provided for the application of the DIFC-LCIA arbitration rules and arbitration seated in the DIFC. Multiplex is a multinational construction company founded in Perth, Western Australia. It has completed approximately two dozen projects in the Middle East, including Emirates Towers in Dubai and the W Hotel in Doha. Elemec is a Dubai based contractor, providing electromechanical works for construction and infrastructure projects.
A dispute arose between the parties, but contrary to the arbitration agreement, Elemec commenced proceedings in the onshore Dubai courts. Multiplex commenced a DIFC-LCIA arbitration and applied to the DIFC courts for an anti-suit injunction restraining Elemec from taking any further steps in the onshore Dubai courts and discontinuing the proceedings started there.
The anti-suit Injunction
Over the course of three hearings, Justice Al Sawalehi carefully considered the construction of the arbitration agreement, the capacity of its signatories and whether Multiplex had waived its right to challenge the validity of the onshore court proceedings, including because it had already participated in those proceedings, albeit with a reservation of rights. The judge drew upon the previous case of Brookfield Multiplex Construction LLC v DIFC Investments, in which Justice Sir Jeremy Cooke expressed the view that the DIFC courts should be astute to protect the sanctity of arbitrations seated in the DIFC. Justice Al Sawalehi’s ruling goes further, because not only does it confirm the validity of the arbitration agreement, it pronounces on the invalidity of the onshore court proceedings in breach of that agreement.
Impact of ruling
The ruling demonstrates the willingness of the DIFC courts to exercise to the fullest extent its supervisory authority over arbitrations seated within its jurisdiction. Parties who select arbitration in the DIFC to resolve their disputes should feel more confident that the DIFC courts are prepared to grant measures to seek to ensure that agreements to arbitrate will not be hijacked by an attempt to litigate instead in the onshore Dubai courts. Whilst cooperation between the DIFC and onshore Dubai courts has increased in recent years, including by way of recognition of the other’s judgments and orders, it remains to be seen what the “onshore” reaction to this ruling will be. For example, a reference might be made to the Joint Judicial Committee, comprising judges from both the DIFC and onshore Dubai courts, which in the past, has issued decisions overruling DIFC jurisdiction. In addition, the ruling applies only in Dubai. It will therefore be interesting to see whether the ADGM courts, the free zone equivalent in Abu Dhabi, follow suit.