DIFC Court issues first ever anti-suit injunction in respect of Dubai onshore court proceedings

Author

Matthew Heywood

Senior Partner

 LANDMARK CASE SENDS CLEAR MESSAGE IN THE REGION 

 A recent decision in the Dubai International Financial Centre (DIFC) Court in Dubai has sent a clear message to contracting parties in the region who elect for their contracts to be governed by DIFC law and stipulate DIFC-LCIA arbitration but choose instead to initiate proceedings in the Dubai Court. That message is, if asked, the DIFC will step in and ensure that the contractual dispute resolution procedure is complied with – and will do so even if proceedings in the Dubai courts have already been commenced. It has long been a tactic in Dubai for a contracting party to refer a dispute to the Dubai Court despite having agreed, in its contract, a different dispute resolution process. If the procedural law of the contract is DIFC then a party should now think again. 

Last week in Multiplex Constructions LLC v Elemec Electromechanical Contracting LLC, Justice Shamlan Al Sawalehi delivered an antisuit injunction award in favour of the Claimant, ruling on the exclusive supervisory jurisdiction of the DIFC Courts and the validity of an arbitration agreement. For a first time in Dubai, the Court ordered the Respondent, Elemec, to either discontinue the proceedings it had commenced in the Dubai Court, or face the prospect of being in contempt of court. 

The parties entered into a contract in 2015 which included an arbitration clause providing for DIFC–LCIA arbitration rules, the seat of the arbitration or the procedural law to be that of the DIFC, and the governing law to be that of the United Arab Emirates. A dispute arose and the sub-contractor, Elemec commenced proceedings in the Dubai Courts in contravention to the arbitration agreement. The main contractor challenged the jurisdiction of the Dubai Court which, quite properly, held over its decision on jurisdiction. Subsequently the main contractor commenced DIFC– LCIA arbitration proceedings against the sub-contractor pursuant to the arbitration agreement in the contract. The concern of dual actions related to the same dispute and the risk of a res judicata decision led to the main contractor asking the DIFC Court to make a ruling on the binding nature of the arbitration agreement, the exclusive supervisory jurisdiction of the DIFC Courts over the arbitral proceedings, and whether it had the authority to issue an antisuit injunction ordering the subcontractor to discontinue proceedings. The DIFC Court examined the case, facts and law extremely carefully over the course of three hearings and several submissions before delivering its decision. 

The DIFC Court had previously shown its willingness to issue such an antisuit injunction in the 2016 case of Brookfield Multiplex Construction LLC v DIFC Investments (CFI 020/2016). In that case, Justice Sir Jeremy Cooke, confirmed the jurisdictional authority of the DIFC Court and that if the circumstances were right, the DIFC Court would consider the issuance of an antisuit injunction to restrain a defendant from pursuing an action before the Dubai Courts. 

 Sir Jeremy stated: “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 the Brookfield case and others, the DIFC Court has previously ruled on its own jurisdiction and the validity of arbitration agreements but has not previously ordered a party to discontinue proceedings in the Dubai Courts on the basis of that jurisdiction. This decision therefore has extremely important consequences and sends a very clear message to contracting parties who seek to circumvent their contractual dispute resolution agreements which are seated in the DIFC. 

Since the inception of Law No. (16) of 2011 (the Judicial Authority Law), the DIFC Courts and Dubai Courts have had an established regime to recognise each other’s judgments and orders which is driven by mutual respect and trust. The Order granted by the DIFC Court in this most recent case is within that spirit and demonstrates the healthy evolution of the Dubai legal landscape. This is important because contracting parties in Dubai will now derive increased confidence from knowing that their contractual agreements will be protected, upheld and ultimately enforced. The ADGM Courts have yet to specifically address this issue but may well take the same approach with regard to contracts providing for the seat of an arbitration being ADGM Courts. 

Multiplex was represented by Matthew Heywood and Alexander Studholme of Mantle Law Limited and Sean Brannigan QC of 4 Pump Court and assisted in the DIFC by Morgan, Lewis & Bockius LLP. 

Heywood comments: “The DIFC Courts have delivered a bold and clear message upholding the sanctity of contractual agreements; this will provide confidence to contracting parties in the region. Crucially, if they have jurisdiction over a contract, they will uphold the terms of that contract even if a party has started proceedings in an alternative forum.”