REUTERS | Tim Wimborne

DIFC v Dubai court: first antisuit offshore-onshore

In a ruling of November 2020, which, to date, has remained unpublished (albeit not unreported), the Dubai International Financial Centre (DIFC) Court of First Instance (DIFCCFI) pronounced the first ever anti-suit injunction over competing proceedings commenced in violation of an arbitration agreement before the onshore Dubai courts.

The DIFC is a judicial free zone carved out of the heart of Dubai, which operates a self-contained common law legal system overseen by its own, autonomous common law courts, the DIFC courts. By dint of DIFC Law No. 1 of 2008 (DIFC Arbitration Law), the DIFC is available to serve as a stand-alone seat of arbitration with the curial and supervisory assistance of the DIFC courts. The DIFC is also home to the DIFC-LCIA, the sister organisation of the London-based LCIA in the DIFC. Parties are free to contract into the DIFC-LCIA Rules of Arbitration (DIFC-LCIA Rules) to govern their arbitral proceedings offshore, which in turn engages the DIFC-LCIA as the administering institution of the arbitration.

By way of background to the case, Multiplex Constructions LLC, an Australian construction company, entered into a contract with a Dubai-based subcontractor, Elemec Electromechanical Contracting LLC, in 2015 (the subcontract agreement). The subcontract agreement was governed by UAE law, but provided for arbitration under the DIFC-LCIA Rules with seat in the DIFC (and hence contemplated the application of the DIFC Arbitration Law to any prospective arbitration) in the event of any disputes (the arbitration agreement).

Before completion of the subcontract works, a dispute, the details of which are presently unknown, arose between the parties. As a result, Elemec filed proceedings before the onshore Dubai courts in violation of the arbitration clause contained in the subcontract agreement. While reserving its position on jurisdiction in the onshore courts, Multiplex commenced arbitration proceedings before the DIFC-LCIA in accordance with the arbitration agreement. At the same time, it applied to the DIFC courts in their capacity as the offshore supervisory courts of the arbitration for a declaration confirming the binding nature of the arbitration agreement, coupled with an anti-suit injunction restraining Elemec from continuing the onshore proceedings before the Dubai courts.

Given the clarity of the terms of the arbitration agreement, Justice Shamlan Al Sawalehi, rendering the ruling of the DIFCCFI, found in favour of the binding nature of the arbitration agreement and confirmed that the onshore court proceedings had been commenced in violation of the obligation to arbitrate under the arbitration agreement. On that basis, Justice Shamlan did not hesitate to pronounce an anti-suit that required Elemec to discontinue the proceedings before the onshore Dubai courts. In support, he relied upon an obiter of Justice Sir Jeremy Cooke in Brookfield Multiplex Construction LLC v DIFC Investments, which reads in relevant part as follows:

“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 dispute.”

In Brookfield more specifically, Brookfield Multiplex Constructions LLC, a Dubai-based construction company, commenced Part 8 proceedings before the DIFC courts against the DIFC Investments LLC (DIFCI) and the Dubai International Financial Centre Authority (DIFCA) (both DIFC authorities) in pursuit of two main declarations:

  • That there was a binding arbitration agreement between Brookfield on the one hand and the DIFCI and the DIFCA on the other.
  • That, subject to the arbitration agreement, the DIFC courts, as opposed to the onshore Dubai courts, had exclusive jurisdiction to hear the underlying substantive dispute.

The mentioned arbitration agreement was contained in a building contract concluded between the DIFCA and Brookfield for the construction of the Gate Building in 2003, also known as “The Gate” and the main landmark of the DIFC. That contract was said to “be governed by and construed according to the laws of and applicable in the Emirate of Dubai”. The contract further provided for disputes or differences arising from it to be “submitted to arbitration in the Emirate of Dubai”.

Purported instances of deficient workmanship on part of Brookfield, including the collapse of some marble cladding on the façade of The Gate, gave rise to a dispute between the parties in late 2015. Pending settlement negotiations between the parties, the DIFCI successfully applied to the onshore Dubai court for the appointment of an expert to investigate and report back on the condition of The Gate under article 68 of the UAE Law of Evidence, read together with article 28 of the UAE Civil Procedures Code. In response to this interim application before the onshore Dubai court, Brookfield requested the DIFC courts to restrain any proceedings pending before the Dubai court in favour of the proper exclusive jurisdiction of the DIFC courts over the dispute. Hence, essentially asking for an anti-suit injunction from the offshore DIFC courts over the pending proceedings before the onshore Dubai court.

The DIFCCFI ruled, in principle, in favour of the availability of interim measures issued by the onshore Dubai Courts in support of arbitrations seated in the offshore DIFC. Even though the DIFCCFI’s findings to this effect were not express but only implied (given that the court was not required conclusively to determine the ultimate seat of the arbitration, whether onshore Dubai or the offshore DIFC, in the prevailing circumstances) and in this sense obiter, it bears mentioning that Justice Cooke ruled in no uncertain terms that measures of interim relief available before the onshore Dubai courts in support of an arbitration with seat in mainland Dubai could equally be harnessed in support of arbitral proceedings seated in the DIFC (despite the exclusive role of the DIFC Courts as the curial courts of a DIFC-seated arbitration).

In light of the foregoing, it is evident that Multiplex v Elemec goes beyond the previous limits set by Brookfield and confirms that the DIFCFI have the power to pronounce anti-suit injunctions over competing proceedings before the onshore courts that have been commenced in disregard of a prevailing obligation to arbitrate offshore. Importantly, to lend its anti-suit injunction the required force, the DIFCCFI also issued a penal notice, as a result of which Elemec may, at the hands of the Dubai Public Prosecutor, face criminal liability before the onshore courts should it fail to comply with the terms of the injunction.

In conclusion, it is important to note that under article 7 of the DIFC Law No. 12 of 2004 as amended by DIFC Law No. 16 of 2011 (also commonly known as the Judicial Authority Law, which codifies a free area of movement of judicial instruments between the onshore Dubai and the offshore DIFC Courts and vice versa), the onshore Dubai courts will be under an obligation to recognise the DIFCCFI’s anti-suit order restraining Elemec from continuing the proceedings onshore without any review of the merits of that order. It is encouraging to see the resolve with which an Emirati judge of the DIFCCFI affirms the enforcement of an offshore arbitration agreement at the cost of local onshore court proceedings. It must evidently be borne in mind that the DIFCCFI’s anti-suit operates in personam, that is, as against Elemec, and not in curiam (against the local onshore Dubai courts), before which the competing proceedings have been commenced. Hence, little friction is to be expected in its implementation onshore.

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