UK: DIFC Court Accepts Jurisdiction In First Judgment On A Reinsurance Dispute

On 24 April 2013 the DIFC Court of First Instance issued an important judgment accepting jurisdiction over a dispute between a DIFC-based reinsurer and an Abu Dhabi based insurance company. The ruling is significant as it involves the first time that the DIFC Court has been required to consider an asserted conflict of jurisdiction with the courts of another Emirate and also its relationship with the jurisdiction of the Union Supreme Court (USC). The DIFC Court also considered the application of the common law doctrine of forum non conveniens in determining the appropriate forum between two different national courts.

Background

The judgment of H.E.Justice Ali Al Madhani decided the issue of the DIFC Court's jurisdiction as a preliminary issue in Allianz Risk Transfer AG (Dubai Branch) v Al Ain Ahlia Insurance Co PSJC.In this case the claimant reinsurer sought declaratory relief under a reinsurance contract entered into in the DIFC relating to claims arising from property damage and business interruption events during Arab Spring in Egypt, which the reinsurer argued were excluded under the original insurance policy and the reinsurance policy. The Defendant challenged the jurisdiction of the DIFC Court to determine the claim on the primary grounds that the Abu Dhabi Courts had jurisdiction; this was on the basis that, in absence of an express jurisdiction clause in the contract, as the defendant was an Abu Dhabi domiciled entity, the UAE Civil Procedure Code vested jurisdiction for the dispute with the Abu Dhabi Courts.  

By the time of the jurisdiction hearing in the DIFC Court the defendant had commenced parallel proceedings (seeking mirror relief) against the claimant in the Abu Dhabi Courts and it had also filed a constitutional petition before the USC requesting that court to intervene - pursuant to the USC's jurisdiction under Article 99(3) of the UAE Constitution - to decide which court had jurisdiction to hear the substantive dispute where there is a conflict of jurisdiction between two Emirate-level courts.

Jurisdiction

The DIFC Court held that it has jurisdiction to hear Allianz's claim on the basis that it is a DIFC Establishment and therefore jurisdiction is founded under the gateway provisions in Article 5(A)(1) (a) and (b) of Dubai Law No.12 (as amended by Law No.16 of 2011) conferring exclusive jurisdiction to the DIFC Courts in matters involving:

"(a) Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party;

(b) Civil or commercial claims and actions arising out of or relating to a contract or promised contract, whether partly or wholly concluded, finalised or performed within DIFC or will be performed or is supposed to be performed within DIFC pursuant to express or implied terms stipulated in the contract."

The DIFC Court reaffirmed that the jurisdiction of the DIFC Court is primarily determined by reference to Law No.12, as amended.

In determining jurisdiction in favour of the DIFC Courts, the judge also took into consideration the fact that there had been no written agreement between the parties to opt-out of the DIFC Court's exclusive jurisdiction in relation to the gateway jurisdiction under (a) and (b) above.

In considering the application of forum non conveniens (as relied on by the defendant to support its argument that the Abu Dhabi Courts were the more appropriate forum), while recognising generally the application of the doctrine under DIFC law, the Court held that it is not relevant to determining matters of jurisdiction between two national / domestic courts, and that it did not apply in this case. The DIFC Court held that forum non conveniens is a relevant consideration only where there is a dispute over the jurisdiction between the court seized and one or more international courts. 

No stay of proceedings

The defendant had pleaded as its secondary case that, if the DIFC Court found that it had jurisdiction over the dispute, the court should nonetheless stay the proceedings pending the decision of the USC on the defendant's constitutional petition.  Acknowledging the DIFC Court's status as a UAE Court and the application of the UAE Constitution to the DIFC and those within it, the DIFC Court noted that the defendant's petition to the USC (asserting a conflict of jurisdiction) had been filed before either the DIFC Court or the Abu Dhabi Courts had ruled on their own jurisdiction, respectively (and that, in fact, the petition had been filed even before the defendant had commenced its claim in the Abu Dhabi Courts).  

At the time of the hearing of the jurisdiction application in the DIFC Court the Abu Dhabi Courts had not ruled on their own jurisdiction over the defendant's claim and the USC had not issued judgment on the defendant's petition.  Before the judgment of H.E. Justice Ali Al Madhani was issued the USC issued judgment dismissing the defendant's petition on the basis that it had been brought prematurely as there was no actual conflict of jurisdiction; for this to exist there would have to be two final conflicting judgments over jurisdiction in the DIFC Courts and the Abu Dhabi Courts. It was recognised that the two courts said to be in conflict could in fact reach the same conclusion on jurisdiction, in which case there would be no conflict at all. 

The DIFC Court refused to stay the proceedings brought before it by Allianz notwithstanding that the Abu Dhabi Court proceedings were continuing in parallel, whilst recognising that this would have consequences in terms of costs for the parties.

Comment

The Allianz judgment is welcomed as it affirms the grounds on which the gateway jurisdiction of the DIFC Court can be asserted.  It also demonstrates the DIFC Court's approach to the area of potential conflict of jurisdiction between the DIFC Court and the courts of other Emirates. The DIFC Court has asserted its standing as another court within the UAE legal system. The judgment is also interesting from a constitutional law perspective, insofar as there were arguments made before the Court in reliance on UAE law and on related constitutional proceedings before the USC, and in terms of the Court's comments on the application of forum non conveniens to inter-Emirate jurisdictional considerations.  

While the Allianz case arose in a reinsurance context, and is the first judgment where a number of these issues have been considered in the DIFC Court, it is likely that other similar cases may arise where, on different facts, the DIFC Court may be required to consider further its constitutional obligations and its application of the forum non conveniens doctrine. 

Clyde & Co LLP acted for the successful claimant in this matter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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