Claim No. CA 002/2011
THE DUBAI INTERNATIONAL FINANCIAL CENTRE
COURTS
Court
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum,
Ruler
of DubaiRuler
IN THE
COURT
OF APPEALCourt
BEFORE
CHIEF JUSTICE
MICHAEL HWANG SCChief Justice
JUSTICE SIR JOHN CHADWICK
H.E. JUSTICE ALI AL MADHANI
Between
CORINTH PIPEWORKS SA
Appellant/ Claimant
Claimant
and
BARCLAYS BANK PLC
Respondent/ Defendant
Defendant
Hearing: 18 July 2011
Counsel: Michael Black, QC appearing on behalf of Ince & Co Middle East LLP for Appellant/Claimant
James Abbott, Clifford Chance LLP for Respondent/Defendant
Judgment: 22 January 2012
JUDGMENT
Summary of Judgment
|
This summary is not part of the Judgment and should not be cited as such
Chief Justice
Michael Hwang:Chief Justice
(1) This is an Appeal from the Appellant against thejudgmentof the learned Deputy Chief Justice dated 8 February 2011 granting the Respondent's application for a declaration that the DIFC Courts have no jurisdiction to hear this claim.
(2) The Appellant is a Greek company which carries on business in Athens. The Respondent is a bank incorporated in England with an unincorporated branch office registered in the DIFC as a "
Recognised Company
" within the meaning of Article 115 of DIFC Law No.2 of 2009 (the"DIFC Companies Law 2009") and which has been granted a Commercial Licence as well as a
DFSA
Licence.
Recognised Company
DFSA
(3) The Appellant seeks damages of some US$24 million representing the loss it has suffered as a result of a series of allegedly false and misleading oral and emailed representations made by one of the Respondent's employees, Mr Joseph Figueredo, in the course of which the Appellant was allegedly reassured that funds due from a customer (a company called AFRAS) for the sale of steel pipes which had already been supplied were safely contained in accounts with the Respondent and were being processed for transmission to the Appellant.
(4) As a result of the alleged false representations, the Appellant allegedly refrained from taking steps to secure the assets of AFRAS and ensure that the sums were not dissipated. The Appellant contends that the Respondent permitted AFRAS (or one of its directors) to withdraw the money which had been promised to the Appellant, which has accordingly not been paid to the Appellant.
(5) The Appellant brings its claims against the Respondent in deceit, unlawful conspiracy and/or negligence.
(6) It is not disputed that the events giving rise to the Appellant's complaints against the Respondent arose as a result of the alleged acts or omissions of an employee who was (at the material time) employed at the Jebel Ali Branch of the Respondent in Dubai. There is no complaint against the DIFC Branch of the Respondent.
(7) Before the Deputy Chief Justice, the Respondent argued that the DIFC Courts have no jurisdiction to hear this action because the Appellant could not bring itself within any of the heads of jurisdiction under Article 5(A) of Dubai Law No. 12 of 2004 in respect of The Judicial Authority at Dubai International Financial Centre ("Law No. 12"). On the other hand, the Appellant argued that the Respondent is a "Centre's Establishment" within the meaning of Article 5(A)(1)(a) of Law No. 12, which provides that the DIFC Courts will have exclusive jurisdiction over any of the "Centre's Establishments", which term (expressed as "
Centre Establishments
") is defined in Article 2 as:
Centre Establishments
"Any entity or business duly established or carrying on business in the Centre, including any Licensed Centre Establishments".Licensed Centre Establishments
(8) For convenience I will use the term"Centre Establishment"in the singular form and without the apostrophe in this judgment to include "Centre's Establishments".
(9) The term"Licensed Centre Establishments"is defined in Article 2 as:
"Any entity licensed, registered or otherwise authorised to carry on financial or banking business including those activities and businesses referred to in Article 9 of the Centre Law" (which is not material for present purposes).
(10) The Appellant further argued that the Respondent company as a whole (and not just its DIFC branch) has been designated a "Licensed Centre Establishment" and thereby a "Centre Establishment" within Article 5(A)(1).
(11) The Deputy Chief Justice rejected the arguments of the Appellant and found that the DIFC Courts had no jurisdiction. Accordingly, he allowed the Respondent's application.
(12) In the course of this judgment, I will be referring to Law No. 12, which was amended recently by Dubai Law No. (16) of 2011 Amending Certain Provisions of Law No. (12) of 2004 Concerning Dubai International Financial Centre Courts. However, the citations from Law No. 12 are from Law No. 12 as it stood before its amendment since this case has been argued on the basis of the pre-amended Law No. 12.
(13) Since this judgment was prepared in draft, the Court of Appeal (differently constituted) has delivered its judgment inRafed Al Khorafi v Bank Sarasin[CA 003/2011]. In his judgment in the present Appeal, Justice Sir John Chadwick (whose judgment I have seen in draft) has explained that the substitution, by Dubai Law No. 16 of 2011, of new provisions for those formerly in Law No. 12 does not affect the outcome of this Appeal. I agree with that view
Reasoning of the Court Below
(14) The reasoning of the learned Deputy Chief Justice was as follows.
(15) The argument advanced by the Appellant would, if correct, have potentially far-reaching consequences. The suggestion that an international company incorporated and having its head office in (say) the United Kingdom, but with a branch registered and licensed to carry on business in the DIFC, could start proceedings in the DIFC Courts or could be sued in those Courts in respect of a claim wholly unconnected with the DIFC or the business of its DIFC branch would, on the face of it, seem distinctly improbable.
(16) The Deputy Chief Justice concluded that, if that were the case, the scope of the DIFC Courts would have an international dimension which had not hitherto been generally perceived.
(17) The differences between the English Commercial Court and the DIFC Courts were discussed and, in particular, the fact that, in the DIFC Courts, extra-territorial jurisdiction is not derived from a discretionary framework of the kind found in the English legal system in
CPR
6.37 (read with Practice Direction 6B). The framework in the English Courts precludes service of English proceedings outside the jurisdiction of the English Courts where the claim falls outside the Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (which the Deputy Chief Justice abbreviated as the "European Judgments Regulation" in his judgment), unless permission is first obtained from the Court upon an application without notice to the intended defendant, which must demonstrate to the
Judge
that the claim falls within at least one of the many categories listed in paragraph 3.1 of Practice Direction 6B. The Judge then exercises discretion to grant permission. Once permission is granted and service outside the jurisdiction has been effected, the defendant can then challenge the Court's jurisdiction, including the exercise of the judge's discretion, on the grounds offorum non conveniensor the existence of a foreign jurisdiction clause.
CPR
Judge
(18) In contrast, in the DIFC Courts, service on a defendant outside the jurisdiction can be effected anywhere in the world provided that the claimant can bring himself within Article 5(A)(1) of Law No. 12. It is then open to a defendant to challenge the jurisdiction and apply to
set aside
service on the grounds that the claim is not covered by Article 5(A)(1). However, like in English law, a defendant can also rely on the principle offorum non conveniens, or the applicability of a clause choosing another Court.
Set aside
(19) Article 5(A)(1) is comprised of four distinct kinds of connecting factors for jurisdictional purposes.
(20) First, in (a), the connecting factor is defined by reference to the description of the party involved in the dispute who, on clear authority in this Court, must be a party to the proceedings in question: seeDhir v Waterfront Property Investment LtdCFI 011/2009[2006-09] DIFC. C.L.R. 243perHwang DCJ at paragraphs [63]–[64]. "
The Centre
", any of the "Centre's Bodies" and any of the "Centre Establishments" are three kinds of entities whose participation in the proceedings as a party would give the DIFC Courts jurisdiction.
The Centre
(21) Second, in (b), the connecting factor is defined by reference to the nature of the substance or subject matter of the dispute, i.e."civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been conducted, in whole or in part, in the Centre or an incident that has occurred in the Centre".
(22) Third, in (c), objections against the Centre's Bodies again refer to the substance of the dispute, but with the connecting factor identified as the decision of a Centre Body.
(23) Fourth, in (d), the applications can be found which are specifically reserved to the DIFC Courts by the DIFC legislation rather than by Article 5(A).
(24) Construing these four jurisdictional gateway provisions, the assumption must be that the purpose of dividing up the provisions in this way is to bring within the DIFC Courts distinct kinds of dispute in line with the various paragraphs above. For example, it would be reasonable to assume that the jurisdictional gateway defined by (b) would confer jurisdiction in respect of disputes that might not already be covered by (a) andvice versa.
(25) There is nothing in the express words or in the words within their context which would confine the meaning of "involving" to involvement only as a defendant. Indeed, the concept of "involvement" must apply in the same way, not only to claimants, but to each of the three possible parties covered by (a),viz.the Centre, the Centre's Bodies (as defined by Article 2 of the Law No. 12) and the Centre Establishments.
(26) Article 2 defines "Centre's Bodies" as;
"Those bodies established pursuant to paragraph 3 of Article 3 of the Centre Law and any other bodies created by those bodies or by the President."
(27) Article 3(3) ofDubai Law No 9 of 2004in respect of the Dubai International Financial Centre ("the DIFC Law") provides:"The following bodies are established within the Centre:
(a) the Dubai International Financial
Centre Authority
, to be known as "
DIFCA
";
Centre Authority
DIFCA
(b) the Dubai Financial Services Authority, to be known as "DFSA" and
(c) the Dubai International Financial Centre Judicial Authority."
(28) By way of example, DFSA could be sued in the DIFC Courts in respect of a breach of contract or duty by a corporation that is not a "Centre Establishment" and was incorporated outside the DIFC and, it follows, could sue such a corporation in the DIFC Courts itself, subject to the DIFC Courts' discretion in the application of theforum non conveniensprinciple.
(29) Applying the same principle to the "Centre Establishments", they can sue and be sued in the DIFC Courts as parties to a civil or commercial case or dispute no matter that the opposite party is outside the DIFC. The only express qualification is that the subject matter of the dispute should be of a civil or commercial nature. Further, there is nothing in Article 5(A)(1) which expressly or impliedly introduces into the jurisdictional gateway in sub-paragraph (a) any further subject-matter qualifications and, in particular, any of those identified in sub-paragraph (b) (set out at paragraph 37 below).
(30) The Deputy Chief Justice, in considering whether the DIFC Courts should have jurisdiction, continued by saying that, where the entity is a division or part of a corporation incorporated outside the DIFC, proceedings in respect of the business carried on by the entity have to be brought in the name of the corporation. This is because the entity is not a legal person and cannot sue or be sued as a separate corporate body: its only corporate identity being that of which it is a part. Therefore, when a "Centre Establishment" is registered and granted a licence to conduct business in the DIFC, the registration can only be to the legal person identified by the corporate name.
(31) The Deputy Chief Justice was of the view that it must have been appreciated that at least some of those entities were likely to be divisions or parts of international corporations such as banks or insurance companies, which might wish to locate an arm of their business to be carried on in the DIFC; and it followed that it must have been envisaged that such DIFC-based entities might engage in transactions of an international nature involving performance outside the DIFC which might have been entered into outside the DIFC. By including in Article 5(A)(1)(a) a specific reference to "Centre Establishments", the purpose of the legislator was clearly to enable the DIFC Courts to provide a dispute resolution service for such transactions, regardless of the absence of those features essential for the Court's subject-matter jurisdiction identified under sub-paragraph (b).
(32) The Deputy Chief Justice expanded his reasoning to hold that, if an international corporation maintained a branch authorised to carry on certain kinds of business in the DIFC, and the Respondent (through that branch in the course of such business) entered into a transaction outside the DIFC which was required to be performed outside the DIFC, the jurisdiction of the DIFC Courts would be wide enough to entertain disputes about performance of that transaction, even though the dispute would not fall within any of the subject matter jurisdictional gateways in sub-paragraph (b). Therefore, where the authorised business was to be carried out through a branch of a larger (and corporate) body, the Court would be available as a dispute resolution facility in respect of all commercial and civil disputes and claims to which the business authorised to be conducted in the DIFC might give rise. The Deputy Chief Justice accordingly concluded that the assumption must be that the "Centre Establishments" were included so that, if claims and disputes arose involving their DIFC function, such claims might be entertained by the DIFC Courts.
(33) The Deputy Chief Justice then went on to consider the fundamental question whether the jurisdictional scope of the DIFC Courts extends to cover, not only claims and disputes connected with the business of an international corporation conducted through its DIFC branch, but with any claims and disputes to which the international corporation is a party connected with any business wherever conducted.
(34) In particular, the Deputy Chief Justice considered the argument in favour of the DIFC Courts having jurisdiction in the present case: namely that, when in the process of registration of a business and the granting of the necessary licenses, a "Centre Establishment" is created, it is the entire corporate body to which that registration and those licenses are granted. Moreover, when the corporation enters through its DIFC branch (or any other branch) into a commercial transaction, it is the corporation as a whole that does so. Accordingly, a dispute arising out of a transaction entered into through a branch of the corporation located outside the DIFC is as much a dispute involving a "Centre Establishment" as a dispute arising out of a transaction entered into through a branch of that same international corporation within the DIFC.
(35) The Deputy Chief Justice rejected this argument on the basis that, in his view, it was flawed. The flaw lay in according to the entire business of the corporation that characteristic which only the DIFC-authorised part of the business possessed. He took the view that the fact that all branches of the corporation may be part of a single legal person with a single corporate name emphatically does not result in all the branches of the corporation being part of a "Centre Establishment". The international corporation, he concluded, is a "Centre Establishment" only to the extent to which its branch is authorised to conduct business in and from the DIFC, and a claim or dispute only "involves" a "Centre Establishment" when that claim or dispute is connected with or arises out of the activities of the corporation conducted through its DIFC branch or division. The requirement that a corporation as a whole must be a party to the proceedings and in its corporate name is simply a procedural consequence of its branch or division having no separate legal personality by which it can be sued or sue. The Deputy Chief Justice concluded that the DIFC Courts did not have jurisdiction on the basis that what matters as regards jurisdiction under Article 5(A)(1)(a) is that it is the conduct of the DIFC-authorised business with which the cause of action is connected. The function of the DIFC Courts is to provide a justice system for the DIFC itself, and to adjudicate on disputes connected with the commercial and civil activities of its organs (Centre's Bodies) and its population of those who are authorised to conduct a business in the DIFC in respect of which disputes have arisen.
Appellant's Case
(36) The Appellant's case is that, despite there being no complaint in respect of any conduct of, or facts affecting, the Respondent's DIFC Branch, and despite its case being based on allegations of tortious conduct by an employee employed at the Respondent's Jebel Ali Branch (which is outside the DIFC) the DIFC Courts nevertheless have jurisdiction because the whole of the Respondent, and not just its DIFC Branch, has been designated a "Licensed Centre Establishment" under Article 2 of Law No. 12 and therefore is to be regarded as a "Centre Establishment".
(37) The central issue before the Deputy Chief Justice was therefore whether the dispute is one involving one of the "Centre Establishments" in the sense used in Article 5(A)(1)(a) of Law No. 12. By Article 8(4) of the DIFC Law, which applied at the relevant time, the DIFC Courts have exclusive competence to interpret the DIFC Law. Article 5(A)(1) provides as follows:
(A) The Court of First Instance:
(1) Without prejudice to paragraph 2 of this Article, the Court of First Instance shall have the exclusive jurisdiction over:
(a) civil or commercial cases and disputes involving the Centre or any of the Centre's Bodies or any of the Centre's Establishments.
(b) civil or commercial cases and disputes arising from or related to a contract that has been executed or a transaction that has been concluded, in whole or in part, in the Centre or an incident that has occurred in the Centre.
(c) objections filed against decisions made by the Centre's Bodies, which are subject to objection in accordance with the Centre's Laws and Regulations.
(d) any application over which the Courts have jurisdiction in accordance with the Centre's Laws and Regulations;
(38) The word "involving" in paragraph (a) means involved as a party to the proceedings in question:Dhir v Waterfront Property Investment Limited(CFI 011/2009 at [63]–[64]).
(39) Counsel for the Appellant argues that Article 5(A)(1)(a) confers an"in personam"jurisdiction over all civil and commercial cases and disputes to which any of the "Centre Establishments" is a party, while Article 5(A)(1)(b) focuses on the subject-matter of the dispute. It would therefore be wrong to import into Article 5(A)(1)(a) any additional requirement that the subject matter of the dispute must be connected with the DIFC.
(40) Article 2 of the DIFC Law provides:
"Licensed Centre Establishments":Any entity licensed, registered or otherwise authorised to carry on financial and banking business including those activities and businesses referred to in Article 9 of this Law.
...Centre Establishments:
Any entity or business duly established or carrying on activity in the Centre, including any LicensedCentre Establishment."
(41) Article 9 of the DIFC Law provides:
"Licensed Centre Establishments may carry on financial and banking businesses, including Islamic financing and business, and other activities, as permitted by their licenses or registration, including the following:(1) Financial and banking services including the business of investment and commercial banks, financing companies, wholesale trading and electronic banking."
(42) Article 10 of the DIFC Law reads (in part):
"Centre Establishments shall carry out their activities in accordance with the Centre's Laws, Centre's Regulations and the licenses issued to them"
(43) Accordingly, the Appellant submits that the starting point in the exercise of interpreting a rule concerned with the licensing of entities must be a strong presumption that the rule in question is aimed at entities that might become licensed: bodies which might properly be sanctioned or sued in a Court — i.e. legal entities. The presumption must be all the stronger when reading a rule concerned with the jurisdiction of the Court to entertain proceedings.
(44) It must, therefore, be wrong to read the word "entities" as being able to encompass a division, department or branch of a company.
(45) It follows that it is beyond argument that the Respondent is a "Licensed Centre Establishment". Before the Deputy Chief Justice, the Respondent submitted that "Barclays Dubai and Barclays DIFC are separate legal entities, being branches of the same principal, Barclays Bank pic." The Appellant submits that, on the facts, this submission is simply wrong; the Respondent could have set up two subsidiaries of the English parent to operate separately in the DIFC and in the Emirate of Dubai outside the DIFC but, for whatever reason, it chose not to do so.
(46) There is and can only be one legal entity involved: the Respondent. It is the Respondent which has obtained the licence to carry on its business in Dubai (at Jebel Ali) and it was the Respondent which obtained another licence to carry on (slightly different) banking business in the DIFC. The employees in both branches have the same corporate employer, and it matters not at all that they might report to different line managers, as ultimately it would be the board of the directors in London to whom they would report.
(47) The Appellant, therefore, argues that the error into which the Respondent led the Deputy Chief Justice was to equate branches with legal entities. A branch is no more a legal entity than a division, a department or a sub-committee: these are mere internal distinctions made by the entity itself for its own convenience. The law need not and must not concern itself with such internal distinctions when considering questions such as licensing and parties to litigation.
(48) According to the Appellant, it is for these reasons that the Deputy Chief Justice erred when he said:"The international corporation is a Centre's Establishment only to the extent to which its branch is authorised to conduct business in and from the DIFC and a claim or dispute only 'involves' a Centre's Establishment when that claim or dispute is connected with or arises out of the activities of the corporation conducted by its DIFC branch or division".There is no justification for restricting the natural reading of the words "Centre Establishment" to the internal division which carries on activities authorised to be conducted from the DIFC. The characteristics of such an internal division are arbitrary. There is no way to identify the DIFC"branch or division"as a separate entity — it may or may not have premises or staff separate from another branch or division carrying on other activities that may or may not be in the DIFC, it may or may not have separate management, it may or may not physically carry on activities in the DIFC and it may or may not hold all or any of its assets in the DIFC.
(49) In summary, the Appellant seeks a determination that (i) the Respondent is a "Recognised Company" within the meaning of Article 115 of the DIFC Companies Law 2009; (ii) once a company attains the status of "Recognised Company", it becomes a "Centre Establishment" within the meaning of the DIFC Law; (iii) the Respondent, as a company, is a "Licensed Centre Establishment" within the meaning of Article 9 of the DIFC Law; (iv) a "branch or division" cannot be licensed under DIFC law as such, nor can it be considered an "entity" unless it has separate legal personality; (v) Article 5(A)(1)(a) of Law No. 12 confers exclusivein personamjurisdiction of the DIFC Courts over the Respondent as a matter of Dubai law as well as DIFC Law (Law No. 12 is re-enacted in DIFC law in Article 19(1) of the DIFC Courts Law No. 10 of 2004); (vi) it is wrong as a matter of Dubai and DIFC law to attempt to elide the subject-matter jurisdiction under Article 5(A)(1)(b) of Law No. 12 with thein personamjurisdiction under Article 5(A)(1)(a) of Law No. 12; (vii) the "narrow jurisdiction" cannot be justified and is wrong in law; (viii) the "exclusive" jurisdiction is only "exclusive" as against the jurisdiction of the municipal Courts of Dubai; and (ix) there is no good policy reason why such "exclusivity" should not be recognised and enforced by the DIFC Courts even if the DIFC Courts had a discretion in the matter.
(50) The Appellant accordingly argues that the Appeal should be allowed, that the claim form should be reinstated and that the Respondent should pay the costs of the Appeal and the application in the Court below.
Respondent's Case
(51) The Respondent adopts the reasons set out in the Deputy Chief Justice's judgment and argues that the DIFC Courts have no jurisdiction over the claim under Article 5(A)(1)(a) of Law No. 12 and that the proper defendant to the claim is the branch of Barclays Bank plc in Dubai (Barclays Dubai) and not the branch of Barclays Bank plc established in the DIFC (Barclays DIFC).
(52) The Respondent asserts that the Deputy Chief Justice correctly construed Article 5(A)(1)(a) of Law No. 12 and the true meaning of "Centre Establishment" in accordance with DIFC law and that the judgment appreciated the distinction betweenin personamand subject-matter jurisdiction under Article 5(A)(1)(a) and Article 5(A)(1)(b) of Law No. 12, and clarified that claims brought under thein personamjurisdiction under Article 5(A)(1)(a) must be connected to the conduct of the Respondent's authorised business in the DIFC.
(53) The Respondent contends the argument that the jurisdiction of the DIFC Courts is carefully defined in Article 5(A) of Law No. 12, and argues that the jurisdiction was made statutory rather than contractual in order to restrict matters that can be determined by the DIFC Courts. The Respondent submits that to exceed this jurisdiction would be to encroach on the jurisdiction of the Dubai Civil Courts, and argues that this cannot have been the legislative intention when the DIFC was established and when the Protocol of
Jurisdiction
was issued.
Jurisdiction
(54) The Respondent places great reliance on the argument that, if the DIFC Courts took jurisdiction of this matter, it would open the floodgates for claims against a number of other corporations in Dubai with similar corporate structures who also have branches in the DIFC. The Respondent points out that it is presently not known whether further similar Protocols of Jurisdiction providing for the exclusive jurisdiction of the DIFC Courts may be entered into with other Emirates in the
UAE
. If so, this would only increase the ambit of the "floodgates" argument.
UAE
(55) The Respondent concludes by saying that Barclays Bank plc was not incorporated in the DIFC; rather, it is a "Recognised Company" under Article 115 of the DIFC Companies Law 2009. The definition of a "Recognised Company" is a Foreign Company registered pursuant to Article 115, and a Foreign Company, is defined as "a company incorporated in any jurisdiction other than the DIFC".
(56) The Respondent therefore submits that the Deputy Chief Justice correctly construed both the DIFC and Dubai Law, and that he did not misdirect himself in law or err in making his decision, and that consequently there are no grounds upon which to allow an Appeal.
DISCUSSION
(57) The core of the learned Deputy Chief Justice's reasoning is set out at paragraphs 15 to 35 above. I agree with his reasoning as set out in paragraphs 15 to 29 above. However, I respectfully disagree with his reasoning that a "Centre Establishment" can be identified as an unincorporated entity which is permitted to conduct business within the DIFC in accordance with the terms of its license and registration with the DIFC. If the entity is a division of an international company, it can carry on business in the DIFC, provided that it is properly licensed and otherwise registered to do so. Barclays Bank plc was registered as a "Recognised Company" to carry on business within the DIFC. In addition, the Respondent had a commercial license as well as a license from the DFSA. The Deputy Chief Justice commented that, in the case of each of these documents, what was being authorised was the conduct by the London-registered company of the business of providing, at the address specified in the DIFC, the financial services which were specified in those documents, i.e. "Arranging Credit or Deals in Investments" and "Advising on Financial Products or Credit". The Deputy Chief Justice went on to hold (wrongly in my view) that it followed that the part of the company which conducted that business thus authorised was therefore the "entity" which constituted the "Centre Establishment".
(58) The remarks I make below are expressed to be applicable to banks, but they are intended also to apply to any corporation incorporated outside the DIFC which has established an unincorporated licensed branch in the DIFC.
(59) "Centre Establishment" must be a legal entity because that is the only way in which the term "entity" used in Article 2 of Law No. 12 can be understood. Where a bank is licensed to carry on business in a place outside its country of incorporation, it is necessary for that bank to carry on business either through an unincorporated branch of the bank or through a separate legal entity which is a subsidiary of the bank. Bank regulators frequently, if not typically, require foreign banks to carry on mainstream banking business through a branch rather than a local subsidiary. However, it would be uncommon for an unincorporated branch of a foreign bank to be treated under local law as a legal entity separate and distinct from its head office unless it has been separately incorporated as a subsidiary. I cannot therefore accept the proposition advanced by the Deputy Chief Justice that a "Centre Establishment" can be an entity which may be (to use the learned Judge's words) "within the corporation". A branch is no different in law from a division, and a division of a corporation is part of that corporation, and has no legal entity of its own (although it may be treated as an accounting entity for certain purposes). The position of partnerships or sole proprietorships owned by a corporation are not relevant to the present scenario, and need not be discussed, but I do not immediately consider that they would be treated as legal entities distinct from the partners of a partnership or the proprietor of a sole proprietorship.
(60) It follows that I cannot agree with the Deputy Chief Justice's finding that what was licensed by the DSFA was an independent division of the Respondent which is capable of being treated as a legal entity for the purposes of Article 2 of Law No. 12 separate and distinct in law from the Respondent itself. In my view, a division of a company is not a separate entity, and it would be wrong to interpret the legislation defining a "Centre Establishment" to mean something less than a legal entity.
(61) The branch of the Respondent in the DIFC contains two units called "Barclay's Capital" and "Barclay's Wealth". The registered office for both units, as can be seen from their respective letterheads, remains in London, with "Barclay's Capital" being the investment banking division of Barclay's Bank plc and "Barclay's Wealth" being its wealth management division.
(62) The legal status of "Barclays Capital" and "Barclays Wealth" in the DIFC is that the Respondent has created two business units in the DIFC with distinctive names, but those businesses would still (under English law as well as DIFC law) be regarded as part of the Respondent, which is the owner of these two business units. To be precise, the correct legal description of those businesses would be "Barclays Bank plc trading under the name and style of Barclays Capital and "Barclays Bank plc trading under the name and style of Barclays Wealth". If the assets respectively of "Barclays Capital" or "Barclays Wealth" located in the DIFC were insufficient to meet obligations incurred in the DIFC (or indeed elsewhere), the assets of the Respondent, wherever located, would be available to be seized in settlement of the liabilities of either of those business units.
(63) That is the natural and legal consequence of operating a branch or division of a bank,vizthat there is no separation of entity between an unincorporated branch of a foreign bank and the foreign bank itself. It is a fundamental principle of company law that the only way for a company to create another entity under its control (and yet legally separate from it) is to incorporate a subsidiary. In the present context, no other form of legal existence is known to
the law
.
the Law
(64) The Deputy Chief Justice succinctly summarised the argument for the Appellant in paragraph 53 of his judgment as follows:
"The argument in favour of that jurisdiction is very simple. When by the process of registration of a business and the granting of the necessary licenses a Centre Establishment is created, it is the entire corporation body to which that registration and those licenses are granted because the process involves registration and grant in the name of that corporation alone and not in the name of any other exclusively DIFC legal person. Moreover, when the corporation enters through its DIFC branch into a commercial transaction it is the corporation as a whole that does so. Therefore, a dispute arising out of a transaction entered into by a branch of the corporation located outside the DIFC is as much a dispute involving a Centre's Establishment as a dispute arising out of a transaction entered into by a branch of that same international corporation authorised to carry on business within the DIFC."
(65) He then went on to reject that argument in the following terms:
"I have no doubt that this argument is fundamentally defective. The flaw is in according to the entire business of the corporation that characteristic which only the DIFC-authorised part of the business has. The fact that all the branches of the corporation may be part of a single legal person with a single corporate name emphatically does not result in all the branches of the corporation being part of a Centre's Establishment. The international corporation is a Centre's Establishment only to the extent to which its branch is authorised to conduct business in and from the DIFC and a claim or dispute only "involves" a Centre's Establishment when that claim or dispute is connected with or arises out of the activities of the corporation conducted by Its DIFC branch or division. The requirement that the corporation as a whole must be a party to the proceedings and in its corporate name is simply a procedural consequence of its branch or division having no separate legal personality by which it can sue or be sued. What matters as regards jurisdiction under Article 5(A) (I) (a) is that it is with the conduct of the DIFC-authorised business that the cause of action is connected. The function of the DIFC Courts is to provide a justice system for the DIFC itself and to adjudicate on disputes connected with the commercial and civil activities of its organs (Centre's Bodies) and its population of those who are authorised to conduct a business in the DIFC in respect ofwhich disputes have arisen.For these reasons the Defendant is entitled to the declaration for which it applies and this claim must be struck out. This Court has no jurisdiction over claims arising out of the conduct of the Bank's Dubai Branch, any more than it would have over claimsarising out of the conduct of the Bank's Head Office in London."
(66) I respectfully disagree with this line of reasoning. Once it is established that an unincorporated DIFC branch of a foreign bank cannot be regarded as an independent entity for purposes of qualifying as a "Centre Establishment", it follows that this term can only be interpreted to mean the Respondent and its various branches, wherever located. Accordingly, the DIFC Courts do have jurisdiction over the conduct of the Respondent's Dubai branch, as it would have over any other branch of the Respondent, wherever located.
(67) This is not an exercise of exorbitant jurisdiction by the DIFC Courts over banks outside the DIFC because that universal jurisdiction over foreign banks with an unincorporated branch in the DIFC would be subject to the doctrine offorum non conveniens. Indeed, in many jurisdictions, a local Court may assumeprima faciejurisdiction over a foreign company which carries on business within its territory even if the matter complained of has limited or tenuous connections with the territory in question, and the principle offorum non convenienswill normally resolve competing jurisdictional claims over the same dispute. There is therefore nothing unusual about this Court having jurisdiction over a foreign company with a branch office in the DIFC in respect of a claim that has no immediate connection with the DIFC other than the presence of the branch office. Indeed, the experience in England, as shown in the cases ofSouth India Shipping Corp v Export-import Bank of Korea[1985] 1 WLR 585 andRome and Another v Punjab National Bank (No. 2)[1989] 1 WLR 1211, demonstrates that English Courts allow for service of writs on English branches of overseas companies in respect of claims that do not have a real nexus with England. The relevant English legislation is not identical to the equivalent DIFC legislation, but the point is that there is precedent in international practice for a local court to exercise jurisdiction over a foreign company which is registered to carry on business in that local court's territory.
(68) The "floodgates argument" submitted by the Respondent can be rejected on the following grounds (most of which have been advanced by the Appellant).
(a) It is entirely within the control of banks and other enterprises carrying on business in the DIFC and the wider Emirate of Dubai as to whether they choose to subject their business within the wider Emirate to the jurisdiction of the DIFC Courts — if they do not wish to do so, they can either trade through separate corporate vehicles in the DIFC and the wider Emirate or (even more simply) include jurisdiction clauses in their contracts choosing where they allocate jurisdiction over any disputes.
(b) There may well be good reasons why banks and other enterprises carrying on business in both the DIFC and the wider Emirate of Dubai should choose to subject their business within the wider Emirate to the jurisdiction of the DIFC Courts — their business may (as in the present case) be carried on in the English language, and/or their transactions may be subject to a substantive law other than that of the Emirate.
(c) The situation under consideration will clearlynotarise where the "Centre Establishment" is a company incorporated and carrying on business in the UAE outside the Emirate of Dubai or elsewhere. The principles of private international law limit the powers and discretion of the DIFC Courts so as to prevent the exercise of exorbitant jurisdiction, and the DIFC Courts possess the discretion to decline jurisdiction on grounds offorum non conveniens.
(69) I leave open the question of the applicability offorum non conveniensin a case which isprima faciewithin the jurisdiction of both the Dubai Civil Courts as well as the DIFC Courts by virtue of Article 5(A)(1) as neither party has, before this Court, addressed us as to whether that doctrine should apply to the facts and circumstances of the present case. Accordingly, theobiter dictaof the Deputy Chief Justice on this point (at paragraph 56) remain for consideration by a future Court.
(70) It is true that the effect of this decision is that cases which would otherwise have been heard in the
Dubai Courts
will now be heard in the DIFC Courts, but this has always been the potential consequence of the setting up of the DIFC Courts, because every conferment of exclusive jurisdiction on the DIFC Courts in Dubai necessarily means a reduction of jurisdiction of the Dubai Courts to that extent. This decision has simply clarified the extent of the jurisdiction of the DIFC Courts and has not expanded its nature.
Dubai Courts
(71) I must also emphasise that the decision in this case does not necessarily imply that a "Recognised Company" in the DIFC can sue any party outside the DIFC in respect of any matter which has no connection with the DIFC. That question will have to be separately analysed when the occasion arises, and may also be a question that will have to be considered when the appropriate authorities review the implications of this decision in the light of Law No. 12 as it now stands.
(72) In the circumstances, I would allow the Appeal with costs here and below, such costs to be assessed on the standard basis if not agreed.
Justice Sir John Chadwick:
(73) I agree that this Appeal should be allowed. I add a short judgment of my own in the circumstances that (i), since the hearing of the Appeal, His Highness Sheikh Mohammad bin Rashid Al Maktoum, Ruler of Dubai, has issued Law No. 16 of 2011, amending certain provisions of Law No. 12 of 2004 concerning Dubai International Financial Centre Courts and (ii) this Court (differently constituted) has handed down its judgment in the Appeal CA 003/2011 (Rafed Al Khorafi and others v Bank Sarasin-Alpen (ME) Limited and another).
(74) Article 5(A)(1) of Law No 12 of 2004 ("the Original Law") provided, so far as material, that the Court of First Instance should have exclusive jurisdiction over "civil or commercial cases and disputes involving the Centre or any of the Centre's Bodies or any of the Centre's Establishments". "Centre Establishments" was defined by Article 2 of the Original Law — re-enacting Article 2 of Law No 9 of 2004 — to mean "Any entity or business duly established or carrying on an activity in the Centre, including any Licensed Centre Establishments". "Licensed Centre Establishments" was defined (ibid) to mean "Any entity licensed, registered or otherwise authorised to carry on financial and banking business including those activities and businesses referred to in Article 9 of this Law [No 9 of 2004]". The Claimant's contention that the Court of First Instance had jurisdiction in the present case was advanced in reliance on those provisions.
(75) As the Chief Justice has pointed out, the Claimant's argument in the Court of First Instance was summarised by Sir Anthony Colman, Deputy Chief Justice, at paragraph 53 of his judgment:
"The argument in favour of that jurisdiction is very simple. When by the process of registration of a business and the granting of the necessary licenses a Centre Establishment is created, it is the entire corporation body to which that registration and those licenses are granted because the process involves registration and grant in the name of that corporation alone and not in the name of any other exclusively DIFC legal person. Moreover, when the corporation enters through its DIFC branch into a commercial transaction it is the corporation as a whole that does so. Therefore, a dispute arising out of a transaction entered into by a branch of the corporation located outside the DIFC is as much a dispute involving a Centre's Establishment as a dispute arising out of a transaction entered into by a branch of that same international corporation authorised to carry on business within the DIFC."
(76) As the Chief Justice has also pointed out, that argument was rejected in the Court of First Instance. Sir Anthony Colman, Deputy Chief Justice, said this, at paragraph 54 of his judgment:
"I have no doubt that this argument is fundamentally defective. The flaw is in according to the entire business of the corporation that characteristic which only the DIFC-authorised part of the business has. The fact that all the branches of the corporation may be part of a single legal person with a single corporate name emphatically does not result in all the branches of the corporation being part of a Centre's Establishment. The international corporation is a Centre's Establishment only to the extent to which its branch is authorised to conduct business in and from the DIFC and a claim or dispute only 'involves' a Centre's Establishment when that claim or dispute is connected with or arises out of the activities of the corporation conducted by its DIFC branch or division."
(77) The Deputy Chief Justice recognised that the corporation itself - and not an unincorporated branch of the corporation through which its business was conducted in the Dubai International Financial Centre ("the DIFC") — was the necessary and proper party to proceedings arising out of such business; because, as he explained, "the requirement that the corporation as a whole must be a party to the proceedings and in its corporate name is simply a procedural consequence of its branch or division having no separate legal personality by which it can sue or be sued". But, he went on (ibid):
"What matters as regards jurisdiction under Article 5(A)(l)(a) is that it is with the conduct of the DIFC-authorised business that the cause of action is connected."
(78) In support of that view he observed:
"The function of the DIFC Courts is to provide a justice system for the DIFC itself and to adjudicate on disputes connected with the commercial and civil activities of its organs (Centre's Bodies) and its population of those who are authorised to conduct a business in the DIFC in respect of which disputes have arisen."
(79) The short question raised by this Appeal — as the law stood at the time when the Appeal was filed and argued in this Court — was whether the Deputy Chief Justice was correct to hold that (leaving aside cases involving "the Centre or any of the Centre's Bodies") access to the jurisdiction of the Court of First Instance through the gateway provided by paragraph (a) of Article 5(A)(1) of the Original Law was restricted to cases where the case or dispute was connected with (or, perhaps, arose out of) the conduct by the entity or business identified as the relevant "Centre Establishment" of business which it was authorised to carry on in the DIFC.
(80) Since the Appeal was filed and argued in this Court, Articles 2 and 5 of the Original Law as issued (and other Articles not material in the present context) have been superseded by provisions in Law No. 16 of 2011. In particular, Article 5(A)(1) of the Original Law now reads (in translation from the Arabic text):
"The Court of First Instance shall have exclusive jurisdiction to hear and determine: (a) Civil or commercial claims and actions to which the DIFC or any DIFC Body, DIFC Establishment or Licensed DIFC Establishment is a party; ..."
(81) The definitions of "DIFC Establishments" and Licensed DIFC Establishments" now read, respectively:
"Any entity or enterprise established, licensed, registered or authorised to carry on business or conduct any activity within the DIFC pursuant to DIFC Laws, including Licensed DIFC Establishments.""Any entity or enterprise licensed, registered or authorised by the Dubai Financial Services Authority to provide financial services or conduct any other activities in accordance with the DIFC Laws."
(82) InRafed Al Khorafi and others v Bank Sarasin-AIpen (ME) Limited and another(CA/003/2011) this Court (differently constituted) took the opportunity to consider whether, on an Appeal from a decision of the Court of First Instance as to its jurisdiction under Article 5(A)(1) of the Original Law, the applicable provisions were those in the Original Law as it stood at the time of that decision or those in the Original Law as it stood following the issue of Law No 16 of 2011. The Court concluded that the Appeal, being concerned with matters of procedure and jurisdiction, must be determined by reference only to Law No 16 and not to the Original Law as issued.
(83) Adopting that approach in the present case, the determinative question becomes: "whether access to the jurisdiction of the Court of First Instance through the gateway provided by paragraph (a) of Article 5(A)(1) of the Original Law is restricted — where reliance is placed on the fact that a party to the proceedings is a Licensed DIFC Establishment — to cases where the civil or commercial claim is connected with (or, perhaps, arose out of) the provision or conduct by the entity or enterprise identified as the relevant "Licensed DIFC Establishment" of financial services or other activities in accordance with the DIFC Laws which the entity or enterprise was licensed, registered or authorised by the Dubai Financial Services Authority ("the DFSA") to provide or conduct?"
(84) In my view the answer to that question is "No": access to the jurisdiction of the Court of First Instance through the gateway provided by paragraph (a) of Article 5(A)(1) of the Original Law as amended by Law No 16 of 2011 is not so restricted. Whatever may have been the position before the issue of Law No 16 of 2011 — and I should not be taken as indicating any disagreement with the view expressed by the Chief Justice in his judgment on this Appeal — the position following the issue of that Law seems to me free from doubt. Access through the gateway provided by paragraph (a) of Article 5(A)(1) is available in the case of civil or commercial claims and actions to which a Licensed DIFC Establishment is a party. Once it is shown that the party by or against whom the civil or commercial claim is brought is an entity or enterprise licensed, registered or authorised by the DFSA to provide financial services or to conduct any other activities in accordance with the DIFC Laws, the requirement under paragraph (a) is met. The jurisdiction existsad hominem: there is no further "transaction-based" requirement, comparable to those imposed under paragraphs (b) and (c) of Article 5(A)(1).
(85) In the present case, the relevant party to the proceedings is "Barclays Bank PLC", a corporate body incorporated in England and Wales. For the reasons explained by the Chief Justice Barclays Bank PLC, the corporate body incorporated in England and Wales, is the entity licensed or authorised by the DFSA to provide financial services. There is no other entity — relevant to the circumstances in the present case — which has been licensed or authorised by the DFSA to provide financial services or conduct any other activities. In particular, it seems to me impossible — on the facts in the present case — to reach the conclusion that the entity or enterprise licensed or authorised by the DFSA is the unincorporated branch through which Barclays Bank PLC provides services or conducts activities within the DIFC. Nor do I think it possible to reach the conclusion that Barclays Bank PLC is somehow only to be treated as an entity licensed or authorised by the DFSA to provide financial services to the extent that it does, in fact, provide such services through its DIFC branch.
(86) As the Chief Justice has pointed out, the Appeal was argued — necessarily, in the circumstances that Law No 16 of 2011 had not been issued when the Appeal was heard — on the basis of the provisions in the Original Law as issued. In those circumstances it would be open to the Court to invite further argument on the basis of the law as it now stands following the issue of Law No 16 of 2011 and the decision in theAl Khoraficase. I am satisfied, however, that no useful purpose would be served by taking that course. The question whether, on an Appeal from a decision of the Court of First Instance as to its jurisdiction under Article 5(A)(1) of the Original Law, the applicable provisions are those in the Original Law as it stood at the time of that decision or those in the Original Law as it stood following the issue of Law No 16 of 2011 has been authoritatively determined by the Court of Appeal in theKhoraficase; and, in any event, it is clear from the judgments in this case that the outcome of this Appeal would have been the same on the basis of the law as it stood before the issue of Law No 16 of 2011.
H.E. Justice Ali Al Madhani:
(87) Upon discussion with Chief Justice Michael Hwang and Justice Sir John Chadwick and, upon reviewing the draft Judgment, I agree that the Appeal should be allowed and I agree to the reasons given by Chief Justice Michael Hwang and Justice Sir John Chadwick.
Date of Issue: 22 January 2011