ARB 018/2023 (1) Nuriel (2) Naufil (3) Nishat v (1) Nuzhat (2) Nayaab [2024] DIFC ARB 018 (04 September 2024)

Claim No: ARB 018/2023

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

(1) NURIEL
(2) NAUFIL
(3) NISHAT

Claimants/Applicants

and

(1) NUZHAT
(2) NAYAAB

Defendants/Respondents

ORDER WITH REASONS OF H.E. JUSTICE SHAMLAN AL SAWALEHI

UPON the Claimants’ Application No. ARB-018-2023/3 dated 1 December 2023 seeking an order that the Interim Anti-Suit Injunction and Alternative Service of Justice Sir Jeremy Cooke granted on 27 November 2023 (the "Interim Order") be continued until the final determination of the Claimants’ Claim in ARB-018-2023

AND UPON the Order of Justice Sir Jeremey Cooke dated 5 December 2023 granting the Claimants’ application for Continuation of the Interim Order

AND UPON hearing Counsel for the Claimants and Counsel for the Defendants at the final determination of the Claimants’ Anti-Suit Injunction Hearing held on 12 December 2023

IT IS HEREBY DECLARED AND ORDERED THAT:

1. The Arbitration Agreements in the following Contracts and Related Agreements defined below are valid and binding on the Parties:

(a) "D&B Contract" meaning the Turnkey Design & Construct Contract for the Nasmi dated 22 December 2015 and subsequent amendments, namely, Amendment No. 1 to the Contract dated 22 December 2015, the Rectification and Amendment Agreement dated 20 March 2018 and Amendment No. 3 dated 1 March 2020;

(b) "MEQ Contract" meaning the Equipment Supply Contract for the Noreen dated 22 December 2015 and subsequent amendments, namely, Amendment No. 1 dated 22 December 2015, the Rectification and Amendment Agreement dated 20 March 2018 and Amendment No. 3 dated 1 March 2020;

(i) the Coordination Agreement dated 22 December 2015;

(ii) the Management Services Agreement dated 22 December 2015 and subsequent amendments, namely, Amendment Agreement No. 1 dated 4 January 2018 and the Rectification and Amendment Agreement dated 20 March 2018;

(iii) the Joint Venture Agreement dated 22 December 2015 and the subsequent amendment, namely the Amendment and Restatement Agreement dated 20 March 2018;

(iv) the Service Agreement No.: Nabah 01/2020 between the First Claimant and the First Defendant, dated 29 September 2020;

(v) the Service Agreement No.: Nabah 02/2020 between the First Claimant and the First Defendant, dated 29 September 2020;

(vi) the Service Agreement No.: Nabah 03/2020 between the Second Claimant and the First Defendant, dated 29 September 2020; and

(vii) the Trade Credit Agreement between the Second Claimant and the Second Defendant, dated 30 September 2020 (the "TCA");

2. The reference to the DIFC-LCIA Rules in the Arbitration Agreements shall be a reference to the DIAC Arbitration Rules 2022; and

3. A final injunction pursuant to Article 32(b) of DIFC Law No. 10 of 2004, as amended by DIFC Law No. 2 of 2022 (the "DIFC Courts Law"):

(a) The Defendants are prohibited from taking any further steps in the claims they have made against the Claimants in the Abu Dhabi Proceedings

(b) The Defendants are to immediately take all necessary steps to discontinue the Abu Dhabi Proceedings as defined in 3 (a) above;

4. The Parties are at liberty to apply in the event that either party needs the Court’s further assistance or clarification about what is or is not permissible under the terms of this Order.

5. The Defendants shall pay the Claimants' costs in this proceeding, to be assessed by the Registrar if not agreed.

Issued by:
Hayley Norton
Assistant Registrar
Date of issue: 4 September 2024
Time: 3pm

SCHEDULE OF REASONS

Background

1. There are three Claimants: Nuriel (the “First Claimant”); Naufil (the “Second Claimant”) and Nishat (the “Third Claimant”) (unless otherwise specified, collectively “Claimants”). There are two Defendants: Nuzhat (the “First Defendant”), and Nayaab (the “Second Defendant”) (unless otherwise specified, collectively “Defendants”).

2. The parties’ underlying disputes relate to two main Contracts and seven Related Agreements (“Contracts and Related Agreements”) between the Parties pertaining to the construction and operation of the Naufil in the UAE. Notwithstanding the Contracts and Related Agreements containing arbitration clauses, the Defendants commenced proceedings related to many of the Contracts and Related Agreements at the Abu Dhabi Courts.

3. By anex parteurgent application dated 22 November 2023, the Claimants sought an urgent interim Anit-Suit Injunction (“interim ASI Application”) and an order for service by alternative methods (“Alternative Service Application”) in connection with a Dubai International Arbitration Centre (“DIAC”) arbitration commenced on 30 October 2023 by the First and Second Claimants against the First Defendant.

4. The interim ASI Application sought to restrain the Defendants from (i) taking any further steps in the Abu Dhabi Courts; and (ii) from commencing any further proceedings in the Abu Dhabi Courts.

5. After hearing Counsel for the Claimants at the ASI Application and Alternative Service Application Hearing held on 27 November 2023, Justice Sir Jeremy Cooke granted the interim ASI and permission for alternate service (collectively the “Interim Order”). A Return Hearing Date was scheduled for 1 December 2023.

6. On 1 December 2023 the Claimants filed an application seeking to continue the Interim Order until their Claim in ARB-018-2023 is finally determined the (“Continuation Application”). After an inter partes hearing held on the same day, Justice Sir Jeremy Cooke granted the Continuation Application and continued the interim ASI (“Continuation Order”) pending final determination of the Claimants’ claims in ARB-018-2023.

7. A final hearing was held before me on 12 December 2023. The following are my Reasons for granting the Claimants’ ASI Application.

Discussion

8. The central issue on which this application turns is whether the arbitration clauses contained in the Contracts and the Related Agreements are valid since the Defendants’ basis for contesting the DIFC’s jurisdiction is based on the purported invalidity of the arbitration clauses.

9. There are two main contracts and seven related agreements. Except for two of the agreements being the Coordination Agreement (“CA”), which is governed by DIFC law and the Joint Venture Agreement (“JVA”) which is governed by English law, the governing law for the remaining contracts and agreements are the laws of the emirate of Abu Dhabi and the federal laws of the United Arab Emirates as applicable in the emirate of Abu Dhabi (collectively “UAE Law”).

10. To the extent the parties have agreed on UAE Law to govern their contractual relationship and the interpretation of the Contracts and Related Agreements, interpretation of the validity of the arbitration clauses in those Contracts and Related Agreement should also be done applying relevant UAE Law. The task at hand is for the Court to determine if the Contracts and Related Agreements contain a valid arbitration agreement that is binding on the parties.

11. It is not disputed by the parties that in determining the validity of an arbitration agreement, particularly in circumstances where an arbitration clause is incorporated into a contract, be it through a reference to an annex, an amendment, or in another written form, such references must adhere to the requirements of the UAE Arbitration Law to be binding.

12. One requirement is clarity, which is contained in Article 5(3) of the UAE Arbitration Law and which states that "Any reference made in a contract to any other document containing the arbitration ... shall be considered an agreement on arbitration provided that said reference is clear in treating such clause as an integral part of the agreement."

13. A second relevant criterion in determining the validity of an arbitration agreement under UAE law is that it be in writing. Article 7(2) of the UAE Arbitration Law states that the arbitration agreement shall be deemed to have met the writing requirement and it is in the following cases: (a) it was included in an instrument signed by the parties or in letters or other means of written correspondence between the parties or made in electronic mail; (b) if reference is made in a written contract or a model contract or an international agreement or any other document that includes arbitration clauses and the said reference is clear in treating such clause as an integral part of the contract.

14. With the foregoing criteria in mind, I now turn to address below the Contracts and Related Agreements in question.

The D&B Contract

15. This is the Turnkey Design & Construct Contract for the Nasmi dated 22 December 2015, containing three amendments. Amendment No. 1 to the Contract is dated 22 December 2015. The second amendment is the Rectification and Amendment Agreement (“RAA”) dated 20 March 2018. Amendment No. 3 is dated 1 March 2020.

16. It appears there are two issues relating to the validity of the arbitration agreement in the D&B Contract.

17. The first issue is whether clause 2 in Amendment No. 3 (“D&B Continuity Clause”) which states that:“The provisions of the Contract shall, save asamendedin the Amendment, continue in full force and effect, and shall be read and construed as one document with this Amendment”suffices to satisfy the test under Article 5(3) of the UAE Arbitration Law that reference to an arbitration agreement must be “clear” (the “Clarity Test”).

18. The Defendants contend a merelygeneralreference without [expressly] mentioning the arbitration clause contained in clause 20.4 of the D&B Contract is insufficient to pass the Clarity Test and the D&B Continuity Clause in Amendment 3 is not a clear reference to an agreement to arbitrate as required by the UAE Arbitration Law. (emphasis added)

19. Having carefully reviewed and considered the parties’ materials and submissions, I am satisfied even in the absence of an express reference to the 20.4 arbitration clause in Amendment 3, the Continuity Clause clearly contemplates and incorporates by reference Clause 20.4 of the D&B Contract and binds the parties.

20. In my view, it matters not, for the purpose of satisfying the Clarity Test under UAE Arbitration Law, whether the arbitration clause is incorporated through ageneralreference rather than an explicit reference. The requirement is that it be clear. Put another way would a reasonable person reviewing the contract as a whole interpret the said reference as amounting to an agreement to arbitrate.

21. In my view, the wording of the D&B Continuity Clause in Amendment 3 clearly confirms that all provisions of the D&B Contract, save as amended continue in full force and effect. Since Amendment 3, or for that matter any of the Amendments to the D&B Contract, did not amend or revoke the arbitration clause in the original D&B Contract it stands to reason that clause 20.4 in the D&B Contract continues to remain in full force and effect.

22. Moreover, even if it could be argued that the D&B Continuity Clause is insufficient to satisfy the Clarity Test, which I find it cannot, there is an express reference in the RAA to the arbitration clause in the D&B Contract which state that "the provisions of clause 20 shall apply to this agreement, as set out in full”. This further suffices to satisfy the Clarity Test under the UAE Arbitration Law.

23. I am also not persuaded by the Defendants’ position that a lack of express reference in Amendment 3 to Amendment 1 of the D&B Contract somehow invalidates the arbitration agreement. The D&B Continuity Clause is clear that the D&B Contract and its Amendments areto be read as one document.As such a piecemeal approach to contractual interpretation should be avoided. (emphasis added)

24. While I appreciate that the arbitration clause in the D&B Contract was signed by a party different to the party of the latest agreement between the parties, the subsequent amendments, namely the RAA contains the consent of the parties to the latest agreement to be bound by the terms of the D&B Contract and inextricably links the amendments to the D&B Contract.

25. The second issue is whether the reference to Naufil in item 1 of the preamble of the D&B Contact and the reference to Nuriel both in the signature line of the D&B Contract and as the employer invalidates the arbitration agreement.

26. On the evidence, I am not persuaded that the discrepancy invalidates the arbitration agreement because the RAA satisfactorily rectifies and addresses the discrepancy. Amongst others, the RAA explains the following. Nuriel, the employer and the First Defendant's predecessor originally entered into the D&B Contract. The dissolution of the First Defendant's predecessor when the First Defendant became the legal successor, assumed all the rights and obligations under the D&B Contract. Nuriel was formally established as a limited liability company under the laws of Abu Dhabi in 2016.

27. Moreover, in the RAA effective as of the rectification date it states: "The D&B contract shall remain in full force as though the employer had been validly established as a limited liability company from the signature date of the D&B contract, with full legal authority and capacity to enter into the D&B contract and had been referred to therein as the employer party." Further, "the rights and obligations of both contracting then shall been deemed to have arisen from the signature date of the original agreement."

28. The Continuity Clause 4.1 of the RAA states "the provision of the contract shall, save as rectified and amended, be continued in full force and effect and shall be read and construed as one document."

29. In the foregoing circumstances, it cannot be reasonably said that the agreement to arbitrate is invalid.

The MEQ Contract

30. This is the Equipment Supply Contract for the Noreen dated 22 December 2015 containing three amendments. Amendment No. 1 is dated 22 December 2015. The second amendment is the RAA dated 20 March 2018. Amendment No. 3 is dated 1 March 2020.

31. Similar to the D&B Contract, the MEQ Contract contains an arbitration clause at 20.1 which states “disputes shall be referred to and finally resolved by arbitration under the DIFC-LCIA Rules current as at the date of the Dispute, which shall be deemed incorporated by reference…the number of arbitrators shall be three…the seat, or legal place, of arbitration shall be the Dubai International Financial Centre in Dubia, United Arab Emirates.”

32. However, unlike Amendment 3 of the D&B Contract, Amendment 3 of the MEQ Contract is unsigned. The Claimants’ counsel took the position that since the amendments had been carried out and/or performed it cannot be said the amendment is null and void. On the other hand, the Defendants’ counsel while not expressly denying the performance of the amendments, expressed that performance is an issue to be determined on the merits, and regardless of performance, the unsigned Amendment is incapable of satisfying the UAE Arbitration Law that arbitration agreements be in writing.

33. Without the Defendants in fact contesting the performance of Amendment 3, they cannot then reasonably rely on purported non-performance as a basis for contesting the validity of Amendment 3 or the contents therein. Proceeding on the basis that Amendment 3 has been carried out/performed, I am unable to agree with the Defendants that the lack of a signature alone in Amendment 3 suffices to take it outside the scope of either the Clarity Test or written requirement in the UAE Arbitration Law. A purposive reading of Article 7(2) of the UAE Arbitration Law does not exclude unsigned documents from being deemed as meeting the written requirement or expressly require a signature. In circumstances where a written amendment incorporating an arbitration clause has been performed, it cannot be said that the arbitration clause is not deemed to have met the writing requirement or that such a clause fails to be an integral pat of the contract. I am satisfied that although Amendment No. 3 of the MEQ Contract is unsigned it is clear that arbitration clause 20.1 in the MEQ Contract is incorporated in writing by reference in Amendment No. 3 of the MEQ Contract.

The Management Services Agreement (“MSA”)

34. The original MSA is dated 22 December 2015 and contains two amendments. Amendment Agreement No. 1 is dated 4 January 2018. The second amendment is the RAA dated 20 March 2018.

35. The MSA’s Governing Law and Jurisdiction clause 32.1, identifies UAE Law as the governing law, the seat or legal place of the arbitration is the DIFC to be conducted using the DIFC-LCIA Rules.

36. The validity of the arbitration clause is questioned by the Defendants on the basis that the RAA while expressly referencing Clause 31 of the MSA being the “Dispute Resolution Procedure” clause does not expressly also reference Clause 32 of the MSA being the “Governing Law & Jurisdiction” clause, which stipulates a DIFC seated arbitration using the DIFC-LCIA Rules.

37. Having reviewed the MSA and the amendments, I am not persuaded that the absence of an express reference to Clause 32 of the MSA invalidates the arbitration agreement. First and primarily the Continuity Clause 4 in the RAA is clear that the provisions of the MSA “shall, save and except as rectified and amended in the RAA continue in full force and effect, and shall be read and construed as one document with this Agreement.” The RAA did not amend clause 32 of the MSA which confirms the parties’ intention to have disputes settled by DIFC seated arbitration. It follows, in my view, that clause 32 of the MSA remains validly incorporated by reference in the RAA.

Service Agreements

38. There are three service agreements, No. Nabah 01/2020, No. Nabah 02/2020 and No.: Nabah 03/2020 all dated 29 September 2020 with a “Special Conditions” annexture accompanying each service agreement. The services to be performed by the Service Provider are specified in the annexture (“annex”). There is a governing, applicable law and jurisdiction clause in the service agreements which states that the applicable law is the law specified in the annex, and disputes shall be exclusively settled by the ‘court of jurisdiction and in the place of jurisdiction’ specified in the annex.

39. The Choice of Law and Jurisdiction clause in the annex expressly and unequivocally states that disputes shall be resolved by arbitration under the DIFC-LCIA Rules, with a DIFC seat consisting of three arbitrators. No other dispute resolution forum such as a court is referenced in the annex.

40. I am satisfied that the arbitration provision in the annex to the service agreements which is inherently integrated into the service agreements cannot reasonably be considered as a separate contract. Consequently, a lack of explicit reference to arbitration in the service agreements itself or the use of the words “court of jurisdiction” under the governing law and jurisdiction clause in the service agreement detracts from the validity of the agreement to arbitrate disputes under DIFC-LCIA Rules with a DIFC seat. It is clear in my view that the parties intended a DIFC seated arbitration to be the dispute resolution forum related to the service agreements.

41. I am satisfied that each of the service agreements and the accompanying annex satisfactorily meets the Clarity Test under the UAE Arbitration Law and are valid and binding on the parties.

Trade Credit Agreement (“TCA”)

42. The TCA is dated 30 September 2020 and expressly states in clause 6.11 that disputes shall be referred to and finally resolved by DIFC seated arbitration under the DIFC-LCIA Arbitration Rules. Ther are no amendments, and it is clear, in my view, that the TCA contains a valid arbitration agreement that is binding on the parties.

Joint Venture Agreement (“JVA”)

43. The JVA is dated 22 December 2015, as subsequently amended by the Amendment and Restatement Agreement (“ARA”) dated 20 March 2018.

44. The JVA is governed by English law and thus the validity of the arbitration agreement in the JVA is not subject to the requirements of the UAE Arbitration Law. Nonetheless both the JVA and the ARA expressly state that disputes arising out of or in connection with those agreements, including any question of validity, shall be referred and finally resolved by DIFC seated arbitration under the DIFC-LCIA Arbitration Rules. The JVA’s arbitration clause is valid and binding.

Coordination Agreement (“CA”)

45. The CA is dated 22 December 2015. DIFC Law is the governing law and thus, the validity of the arbitration agreement in the JVA is not subject to the requirements of the UAE Arbitration Law. The CA provides a dual forum for dispute resolution. Clause 5 provides for dispute resolution through DIFC Court litigation and Clause 12 provides for a DIFC seated arbitration under DIFC-LCIA Rules.

46. The Claimants rely onLara Basem Musa Khoury v Mashreq Bank PSC [2022], and I accept that this Court in that case held previously that asymmetrical dispute provisions, ones which have different options available to different parties, are in principle valid.

47. The Claimants counsel submits that certain provisions in the CA relate to obligations of the Contractor, Supplier and Manager to each other and to the Claimants, and not obligations on the part of the Claimants to the Nuzhat and Nayaab entities, and concede that it is in that context that dual dispute resolution provisions make sense, because there is clear agreement that if there are disputes between the Nuzhat and Nayaab entities, they be resolved perhaps more expeditiously in DIFC litigation rather than through a DIFC seated arbitration. The Defendants contend the foregoing invalidates the arbitration clause.

48. The Defendants’ Counsel’s primary concern regarding the CA was as to why the Claimants included the CA in the ASI Application as it has nothing to do with the proceedings in question, and noted that the Defendants would not be able to bring any action under the CA.

49. Notwithstanding the reasons why the Claimants may have included the CA in this ASI Application, being a Related Agreement, the issue to be determined is whether the arbitration clause is valid. In my view, the DIFC seated arbitration clause is clear and valid.

50. Last but not least, the Defendants rely upon several UAE Court’s jurisprudence in support of its position that the arbitration agreements in the Contracts and Related Agreements are invalid. Having reviewed the Judgments of the Abu Dhabi Cassation Court, I am of the view that these cases reinforce the generally accepted principles underpinning UAE Arbitration Law when interpreting the validity of arbitration agreements, which are not disputed in this case.

51. It is relevant to note that many of the cited jurisprudence are, in my view, factually distinguishable from this case. It also appears, the UAE Court’s jurisprudence is mainly concerned about and contemplates circumstances that involve the incorporation by reference of arbitration clauses in independent and unrelated contracts. As was demonstrated earlier in these Reasons, the two Contracts and Related Agreements, and any amendments and/or annextures accompanying them are validly incorporated through the continuity provisions that also stipulate that they are to be construed as one document.

52. While I am mindful of the Defendants’ position that the arbitration agreements are also invalid on the basis that when entering into those Contracts and Related Agreements the parties intentionally opted for arbitration under the DIFC-LCIA rules over DIAC rules and thus there is no mutual and express agreement on DIAC arbitration proceedings and their reliance on the case ofBaker Hughes Saudi Arabia Co. Ltd. and Dynamic Industries, Inc. and its affiliatesdecided by the United States District Court for the Eastern District of Louisiana, it remains that the the DIFC Court is bound to apply Dubai Decree 34.

53. On the issue of the DIFC Courts‘ jursidcition, I adopt the same reasons articulated in the Claimants‘ skeleton artguments for the final hearing, as the basis for the Courts‘ jurisdiction to hear and determine the present Claim in accordance with the Judicial Authority Law and the Court of First Instance’s power to grant an anti-suit injunction, on a final basis, in support of (a) DIFC-seated DIAC Arbitration commenced by the Claimants; and (b) the arbitration agreements which provide for a DIFC seat but have not yet given rise to any arbitration proceedings, pursuant to Articles 22(2) and 32(b) of the DIFC Courts Law.

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ARB 018/2023 (1) Nuriel (2) Naufil (3) Nishat v (1) Nuzhat (2) Nayaab