Neal v Nadir [2024] DIFC CA 001 (22 March 2024)

Claim No. CA 001/2024

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the Name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF APPEAL
BEFORE CHIEF JUSTICE TUN ZAKI AZMI, JUSTICE SIR JEREMY COOKE AND JUSTICE ANDREW MORAN

BETWEEN

NEAL

Claimant/Respondent

and

NADIR

Defendant/Appellant

AMENDED JUDGMENT OF THE COURT OF APPEAL

Hearing :	13 March 2024
Counsel :	Prateek Bagaria instructed by Singularity Legal LLP for the Claimant/Respondent Zoe O’Sullivan instructed by Al Tamimi & Company LLP for the Defendant/Appellant
Judgment :	19 March 2024

UPON the Defendant’s Appeal Notice dated 10 October 2023 against the Order of H.E. Justice Shamlan Al Sawalehi dated 19 September 2023 (the “Permission Application”)

AND UPON the Order of H.E. Justice Shamlan Al Sawalehi dated 12 January 2024 granting the Permission Application

AND UPON hearing counsel for the Appellant and counsel for the Respondent at an appeal hearing held before Chief Justice Tun Zaki Azmi, Justice Sir Jeremy Cooke, and Justice Andrew Moran on 13 March 2024 (the “Hearing”)

AND UPON reviewing all relevant material added on to Court file

AND UPON reviewing the Rules of the DIFC Courts (the “RDC”)

IT IS HEREBY ORDERED THAT:

1. The Appeal is dismissed.

2. The Defendant/ Appellant must, within 21 days, pay the Claimant/ Respondent’s costs of the Appeal on the standard basis, such costs to be assessed by the Registrar if not agreed.

Issued by:
Delvin Sumo
Assistant Registrar
Date of Issue: 19 March 2024
Date of re-issue: 22 March 2024
Time: 9am

SCHEDULE OF REASONS

Justice Sir Jeremy Cooke gave the Judgment of the Court

Introduction

1. On 19 September 2023, His Excellency Justice Shamlan Al Sawalehi dismissed the Appellant’s application of 7 July 2023 in which he had disputed the DIFC Court’s jurisdiction and sought to set aside a previous order dated 20 January 2023 in which the Court had recognised and enforced a Provisional Award dated 16 November 2022 against him. Permission to appeal was granted by the same judge on 12 January 2024 on the basis that the issue raised was one of public importance for users of the DIFC Courts.

2. As stated in the judgement at first instance, a single question arises for determination: Does the DIFC Court have jurisdiction to enforce interim measures where the seat of the arbitration is not the DIFC, when those interim measures take the form of an award?

3. Counsel for the Appellant stated that the Appellant was not waving any challenge to jurisdiction, contending that the arbitral tribunal had proceeded to conduct the arbitration under the DIAC rules to which the appellant had not agreed. The Court was told that the Tribunal was likely to issue an award in relation to its own jurisdiction in the near future.

4. The seat of the relevant arbitration was London, England. The governing law of the substantive dispute was English law. The relevant arbitration agreement required disputes to be referred to arbitration under the DIFC – LCIA Rules, which by virtue of the Ruler’s Decree is to be taken, in this jurisdiction, now to refer to the DIAC Rules. That is the basis upon which the Arbitral Tribunal proceeded.

5. The relief granted in the award, which was entitled “Provisional Award on Interim Relief” (the “Provisional Award”), took the form of an order in the nature of a proprietary injunction, a freezing order and an order for ancillary disclosure. At paragraphs 102 – 111 of the Provisional Award, the Tribunal, faced with rival contentions as to whether its decision could be, or should be, made by way of an award as opposed to an order, determined that it should be by way of an award.

5.1. The Tribunal referred to the DIAC Rules which speak in Article 1.1 of Appendix II of issuing a preliminary order in support of interim measures but Article 34.1 of the Rules themselves provides:

“The Tribunal may issue preliminary, interim, partial, final, additional, supplemental or other awards as considered appropriate.”

5.2. Reference was then made to Section 39 of the English Arbitration Act 1996, which as part of the curial law of the law of the seat of the arbitration states, under the heading of“Power to make provisional awards”that:

“The parties are free to agree that the tribunal shall have power to order on a provisional basis any relief which it would have power to grant in a final award.”

5.3. The Tribunal considered that the DIAC Rules meant that the parties had agreed that all awards of all kinds could be issued including “interim” awards and took the view that an English textbook on arbitration (Russell on Arbitration) andBorn, International Commercial Arbitration(3rd edition 2021) supported its conclusion that it had power to issue a provisional award, which would be characterised as a form of “interim” award.

6. The issue before this Court is whether or not an award on interim measures can be enforced in this jurisdiction when the seat of the arbitration lies elsewhere. This turns upon the proper construction of the Arbitration Law, DIFC Law No. 1 of 2008 as amended by DIFC Law Amendment Law, DIFC Law No. 1 of 2013. It is common ground between the parties that the Arbitration Law is based upon the UNCITRAL Model Law as amended in 2006 but does not include all of its provisions.

The Arbitration Law

7. The Arbitration Law is in four Parts. Part 1 is entitled“General”;Part 2 is headed“Scope of Application”;Part 3 is headed“Arbitration”and consists of seven Chapters; and Part 4 is entitled“The Recognition and Enforcement of Awards”.In the view of this Court, the structure of the statute is important and must be taken into account in construing its provisions.

8. In Part 1, by Article 3, which is headed“Application of the Law”,this Law applies in the jurisdiction of the DIFC. In Part 2 which sets out the Scope of Application of the Law, Article 7 (1) provides that it shall apply where the Seat of the Arbitration is the DIFC,“subject to paragraphs (2) and (3)”.Article 7(2) provides that Articles 13, 14, 15 and Part 4 and the Schedule of this Law shall apply where the seat of Arbitration is located elsewhere than the DIFC and Article 7(3) provides that Article 13 shall also apply where no seat has been designated or determined. In the general provisions in Part 3, Article 10 limits the extent of the court intervention by saying that,“in matters governed by this Law, no DIFC Court shall intervene except to the extent so provided in this Law”.

9. Articles 13, 14 and 15, which therefore apply to non DIRC seated arbitrations as well as those seated within the DIFC, fall within Chapter 2 of Part 3 of the Law.

9.1. Article 13 relates to the compulsory stay of any action brought before the DIFC Court if it is the subject of an Arbitration Agreement and one party seeks such a stay (subject to the exception where the Arbitration Agreement is found to be null and void, inoperative or incapable of being performed).

9.2. Article 14 provides for the confidentiality of arbitral proceedings.

9.3. Article 15 is headed“Arbitration Agreement and interim measures by Court”and expressly states that:“it is not incompatible with an Arbitration Agreement for a party to request, before or during arbitral proceedings, from a Court an interim measure of protection and for a court to grant such measure.”The statute thus expressly provides that the Court is able to grant assistance in the form of the grant of interim measures of protection in support of an Arbitration Agreement where the seat is outside the DIFC, both before or during the currency of the foreign seated arbitration. The Court would exercise this power judicially forming its own judgement as to the appropriateness of the relief sought. This does not however provide for the enforcement by the Court of an arbitral order for interim measures of protection.

10. Part 4 of the Arbitration Law is headed“The Recognition and Enforcement of Awards”and also specifically applies, by virtue of Article 7(2) where the Seat of Arbitration is outside the DIFC. Articles 42 and Article 43 provide for recognition and enforcement of arbitral awards, whilst Article 44 provides that:“Recognition or enforcement of an arbitral award, irrespective of the State or jurisdiction in which it was made, may be refused by the DIFC Court only”on the grounds specified in that Article, none of which are relied on by the Appellant in this case, although the objection to the Tribunal’s jurisdiction could have been advanced as such a defence to enforcement.

11. Although the Schedule contains various definitions for the purposes of the Law, there is no definition of “Award”. There is however a definition, although not described as such, of“an interim measure”in Article 24 (b), which is to be found in Chapter 4 of Part 3 which deals with the Jurisdiction of the Arbitral Tribunal. Article 24 is headed“Power of Arbitral Tribunal to order interim measures”.Article 24 (1) (a) provides that, unless the parties expressly agreed in writing that the tribunal shall not have the power to order interim measures, it shall have such power. Article 24 (1)(b) then provides:

“An interim measure is any temporary measure, whether in the form of an award or in another form, made by the Arbitral Tribunal at any time prior to the issuance of the award by which the dispute is to be finally decided. For the purposes of this Article, reference to an interim measure includes orders that a party:

(i) maintain or restore the status quo pending determination of the dispute;

(ii) provide a means of preserving assets out of which a subsequent award may be satisfied or other means for securing or facilitating the enforcement of such an award;

(iii) take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to any party or to the arbitral process itself; or

(iv) preserve evidence that may be relevant and material to the resolution of the dispute

12. Thus, in Part 3 and Chapter 4 an express power is given to an Arbitral Tribunal seated in the DIFC to grant interim measures either in the form of an award prior to the issue of the award by which the dispute is to be finally decided (commonly entitled “Final Award” as contrasted with “Partial Award” or “Interim Award”) or in another form, which will obviously be an order or direction. The Arbitration Law therefore contemplates interim measures being granted by way of an “award”.

13. Under Article 24 (2),“with the written permission of the Arbitral Tribunal, a party in whose favour an interim measure has been granted, may request from the DIFC Court of at first Instance, an order enforcing the Arbitral Tribunal’s order or any part of it.”Because this provision forms part of Part 3, by the terms of Article 7 it only applies where the Seat of the Arbitration is in the DIFC. It cannot therefore apply to the Provisional Award with which this Court is concerned.

14. Furthermore, Article 24 (3) provides that:“the DIFC Court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their place is in the DIFC, as it has in relation to proceedings in courts. The DIFC Court shall exercise such power in accordance with its own procedures”.Whilst, at first blush, it might be thought that this provision would give the Court power to grant interim measures of its own (as opposed to enforcing interim measures ordered by the Arbitral Tribunal) in relation to non DIFC seated arbitrations, there is a decision at first instance, namelyDhir v Waterfront Property Investment Limited, [2009] DIFC CFI 011 ( 8 July 2009) where it was held that the word“place”in this Article referred to the venue of the hearing and not the legal seat of the arbitration. That conclusion has been doubted, but it is not the subject of challenge in this appeal and any such argument must await another day.

The Decision of H.E. Justice Shamlan Al Sawalehi.

15. The judge below decided that Article 24 (2) was not the only provision which gave the Court jurisdiction to enforce interim measures. He said that it could only apply, as is common ground, where the seat of the arbitration was in the DIFC. He rightly said that if the words“where the seat of the arbitration is the DIFC”were written into article 24 (2), which is the effect of Article 7, this would not, by its terms, exclude any other route for enforcement of interim measures. He referred to the different views expressed as to whether tribunal ordered interim measures were enforceable under the New York Convention, even when labelled as an interim award, and concluded that over time there was a trend towards broader recognition and enforcement of such interim measures.

16. Ultimately, he considered that it was simply a matter for the Court to interpret what“arbitral award“meant in Articles 42 – 44 of the Arbitration Law and as Article 24 of the Arbitration Law itself established that an interim measure could take the form of an award, and the statute must use the word“award”in a consistent manner, an award which granted interim measures must be an award which is enforceable under Part 4 of the statute. He then pointed out that there was nothing within the Arbitration Law itself which suggested that a measure in the form of an award within the meaning of Article 24 would not be an award for the purposes of Part 4. That was the essence of his decision.

17. He went on to observe that Article 24 (2) and 42 perform different functions because the former provides for a form of summary procedure for the enforcement of interim measures where the seat was within the DIFC. There was no need for “recognition” of the tribunal’s order or award as a judgement of the court, with the potential for challenge under section 44. It was open to a party in whose favour an interim measure had been ordered by the Tribunal, with the permission of the tribunal, to seek an order enforcing that order for interim measures by requesting the Court to do so, whereupon the court would give force to the Tribunal’s decision without considering whether enforcement was appropriate. He thus referred to this as an additional and more summary procedure for enforcement where the arbitration was seated in the DIFC, which would apply to an order or an award of the tribunal. He considered that this supported his conclusion as set out in the preceding two paragraphs of this judgement.

18. This Court observes that Article 24 (2) does not state that the DIFC Court must enforce the arbitral tribunal’s order in the circumstances outlined and although the provisions of Articles 42- 44 could only apply if the interim measures were enshrined in an award, where the provisions of Part 4 must come into play, on the face of the words used in Article 24(2), the Court’s powers are untrammeled in respect of an order for interim measures, so that it would have a discretion, to be exercised judicially, whether or not to enforce such an order which was not in the form of an award. That is consistent with the Court’s supervisory powers and the provisions of Article 15 which place the decision in the Court’s own hands, as appears below.

19. Putting that point to one side, however, we consider that the Judge’s fundamental reasoning was correct.

The essential debate

20. Ms Zoe O’Sullivan KC, who appeared for the Appellant, submitted that on the true construction of the Arbitration Law, interim measures ordered by an arbitral tribunal could only be enforced under Article 24, regardless of whether they were made by way of an award or order. That meant that such interim measures ordered by a tribunal could only be enforced by the DIFC Court if the seat of the arbitration was in the DIFC. She contended that Articles 42 and 43 provide for the enforcement of awards which are final on their merits, where ever made, but not for the enforcement of interim measures, even if made in the form of an award. That would therefore apply to partial and final awards but not interim or provisional awards.

21. There has, over the years, been an ongoing debate about the enforcement of interim measures and whether an award granting such measures constitutes an award under the New York Convention. Reliance was placed by Ms O’Sullivan on what was described as “the better view” expressed in 1998 that the Convention did not enforce arbitral interim measures but well known jurists and arbitrators have disagreed on the subject and there can be no doubt that life has moved on since 1998 and few would regard it as desirable that awards of this kind should not be enforceable. The Tribunal itself here considered the point expressly as to whether interim measures could constitute an award and must have had the issue of enforcement in mind when doing so.

22. Ms O’Sullivan also made the submission that, when the Arbitration Law was enacted, Articles 17H and 17I of the 2006 amended UNCITRAL model law were not expressly included, whereas many other provisions which directly reflected that amended model were incorporated. Article 17H and 17I appear in section 4 of the Amended Model Law headed“Recognition and enforcement of interim measures”.

22.1. Article 17 H (1) provides that an interim measure issued by an arbitral tribunal shall be recognised as binding and, unless otherwise provided by the arbitral tribunal, enforced upon application to the competent court, irrespective of the country in which it was issued, subject to the provisions of article 17I. No definition is given of “competent court” which is obviously left as a matter for the court where enforcement is sought. This provision applies to an interim measure, whether in the form of an order or an award.

22.2. Article 17I sets out the grounds for refusing recognition or enforcement, essentially by reference to Article 36 which is in materially identical terms to Article 44 of the DIFC Arbitration Law.

23. There is no equivalent provision in the Arbitration Law to article 17H, even though the Arbitration Law was based on the Model Law. Thus, it was argued that Arbitration Law deliberately conferred on the DIFC court an express power to enforce interim measures which was limited by Article 7 to cases where the seat of the arbitration is in the DIFC. It was said that other jurisdictions had made a similar choice and reliance was placed on an article by Castello and Chahine in the Global Arbitration Review in 2019 entitled “The Guide to Challenging and Enforcing Arbitration Awards”.

24. Ms O Sullivan’s argument is not without force but at the end of the day it is the terms of the Arbitration Law which fall to be construed on their own terms. Courts in other jurisdictions have construed the word “award” under their own legislation to include awards which provided for interim measures, regardless of the absence of the equivalent of Article 17H and 17I of the Model law in their own statutes.

25. In ordinary parlance and international commercial practice, an “award” is so described whether it is interim, provisional, partial or final. The very terminology used by the arbitral tribunal in this case (“Provisional Award on Interim Relief”) by well known arbitrators/ judicial figures illustrates the point. As already mentioned, there is no definition of an Award for the purposes of the Arbitration Law, but Ms O’Sullivan submitted that, in order to fall within Part 4, an award had to be “final and binding on the merits”. Yet, there is also nothing in Articles 42 – 44 of the Arbitration Law, or in any other part of the statute, which draws any distinction between these various types of award and Article 24 itself refers to interim measures in an award prior to the award which finally determines the dispute. It is self-evident that an award must be binding on the parties if it is to be enforced but that will be the case for any interim, partial or final award. There is no reason in principle why an award which is interim or provisional and therefore binding for a limited period of time until a further decision is made should not be treated as an award for the purposes of enforcement and, as a matter of policy, every reason why it should be.

26. When the structure and the terms of the Arbitration Law are examined, it can be seen that a distinction is drawn between provisions relating to the court’s supervisory jurisdiction which depends upon the seat of the arbitration being in the DIFC and provisions relating to its enforcement jurisdiction which expressly applies to recognition and enforcement of awards made in other states. The terms of Articles 42 – 44 do not suggest that there is any basis for concluding that a provisional or interim award falls into a different category from a partial or final award. There is no basis for importing a criterion of “finality” of determination of issues, once and for all, when it is the binding nature of the award which is critical. In one sense, any award is final for what it decides, even if that is temporary, for a limited period of time until review. In the meantime, it is binding and parties to an arbitration agreement who have agreed to be bound by decisions of the arbitral tribunal are obliged to comply and there is no good reason why they should not be compelled to do so.

27. Here, on the assumption that the DIAC Rules apply, the parties expressly agreed to the Tribunal making an interim award. Under Article 15 it is not incompatible with an arbitration agreement for a DIFC Court to grant an interim measure of protection, before or during arbitral proceedings, a provision which is expressly applicable where the seat of the arbitration is outside the DIFC, by reason of the terms of Article 7(2). It would appear anomalous if the DIFC Court was unable to enforce similar measures granted by the arbitral tribunal in an Award during the course of an arbitration.

28. Contrary to the argument of the Appellant that there was an asymmetry between the provisions of the statute if the DIFC Court could in a non DIFC seated arbitration enforce an award granting interim measures, but could not do so if the interim measures were made by the Tribunal in an order (since Article 24 (b) applies only to DIFC seated arbitral orders for interim measures), the difference between the treatment of an order and an award in these circumstances is explained by the ambit of the Court’s supervisory jurisdiction which can only extend to those arbitrations which are seated within its boundaries. An application for the Court to make an order, based on its own powers, is different from enforcing an order of a non DIFC seated tribunal for such measures, because the Court has no supervisory jurisdiction over the non DIFC seated Tribunal that makes the order, whereas it has such jurisdiction over a DIFC seated Tribunal which makes an order of this kind. That gives a logic to the provisions in Article 15 and Article 24(2), whilst enforcement of Awards of all kinds do not depend on the supervisory jurisdiction of the Court and the seat of the arbitration at all, as Awards are of a different character and fall into a separate category.

29. Ms O’Sullivan’s submissions effectively make the definition of “interim measure” the controlling feature for the court’s jurisdiction when the provisions relating to enforcement depend upon the existence of an Award. Once it is accepted that a provisional or interim award is indeed an award, this Court can see no good reason for not enforcing it as an award, whether it be an award for interim measures or otherwise, subject always to the possible challenges under section 44 which have not been advanced in this case.

30. In these circumstances and for these reasons, the appeal must be dismissed and, as agreed between the parties, costs must follow the event.

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Neal v Nadir [2024] DIFC CA 001