The Dubai-based Clyde & Co team, led by Leonard Soudagar, successfully resisted a challenge of jurisdiction by the DIFC Court of Appeal in a major case in the UAE insurance market.
Al Buhaira National Insurance Company (ABNIC) to Dubai International Finance Corporation (Dubai International Financial Center) the court asked to declare the marine (hull and war) insurance policy avoided and not liable to the insured Horizon Energy LLC (horizon).
Horizon files $70m claim after tanker ‘disappears, m/t’Beta”, challenging the jurisdiction of the DIFC courts and seeking to treat ABNIC’s claim as an abuse of process.
Jurisdictional disputes involve disputes filed by the parties in the policy to the “Exclusive jurisdiction of the courts of the United Arab Emirates“.
ABNIC’s position is that the DIFC Courts have jurisdiction under Article 5A(2) of Dubai Law No. 12 of 2004, which states: “The Court of First Instance may hear and adjudicate any civil or commercial claim or action provided that the parties have agreed in writing to bring such claim or action against it either before or after the dispute has“.
Horizon argued that the parties had agreed to submit disputes relating to insurance contracts to the “onshore” UAE courts (operating civil law in Arabic) rather than the DIFC courts (operating common law in English), with two reasons:
First, phrases in the contract such as “dubai court“has previously been ruled to confer jurisdiction on the DIFC courts with which there is a substantial and sufficient link. In this case, there is no such link.
- ABNIC’s insurance activities in the UAE are regulated by the Insurance Business Regulation Law, Federal Law No. 6 of 2007 (as amended) ( insurance law), and its dispute resolution procedures in Section 110.
- Article 110 procedures require the UAE Central Bank Insurance Dispute Resolution and Resolution Committee (the CBUAE) before you can use the “Competent Court of First Instance“.
- DIFC insurers are prohibited from underwriting business directly in the UAE and as insurers in the UAE (onshore) and DIFC (offshore) are subject to different regulatory regimes, disputes relating to policies issued by UAE onshore insurers should be settled in Trial by domestic courts.
- it is”incredible“The DIFC courts should be chosen as offshore courts.
The argument for Horizon’s abuse of process is based (broadly) on: (i) the DIFC proceedings attempted to sidestep the dispute resolution procedures under the Insurance Act; (ii) they were initiated following Horizon’s complaint to the CBUAE. Horizon therefore argued that the DIFC’s proceedings were an attempt to defeat bona fide claims. There is also a risk of parallel litigation in proceedings between the CBUAE and the DIFC courts.
At the first instance court, Judge Roger Giles flatly rejected Horizon’s submission. Where the parties agree to refer the dispute to the UAE courts, this includes the DIFC courts – no link required – any restriction on insurance business within or from the DIFC shall have no effect on the ability of the parties to agree to submit the dispute to the UAE courts of the DIFC courts. Article 110 does not “Coverage“, the parties to an insurance contract may agree on other methods to resolve disputes. The Article 110 procedure is also an administrative (rather than judicial) procedure and does not apply to all disputes between the insurer and the insured.
Decision of the Court of Appeal
The appeal ultimately concerned whether Judge Roger Giles erred in finding that the DIFC court constituted a “Competent Court of First Instance“Parties to a contract of insurance within the meaning of Article 110 and/or governed by the Insurance Act may elect”competent court” in any case.
On April 19, 2023, the Court of Appeal (Js Shamlan Al Sawalehi, J Lord Glennie and J Justice Robert French) found in favor of ABNIC and held that:
- Article 110 has a limited scope of application; it applies only in certain circumstances.
- Section 110 creates an asymmetric dispute resolution mechanism that insureds can invoke.
- Article 110 does not preclude the insurer from seeking legal remedies for insurance contract disputes.
- the term”competent court” includes courts of relevant jurisdiction to which the parties have agreed to submit their disputes.
- The Insurance Law does not prevent parties to an insurance contract from agreeing to submit to the jurisdiction of the UAE courts (including the DIFC courts) in the event of a dispute without going through a committee procedure.
- It is not an abuse of power for an insurer to seek declaratory relief in the DIFC courts, and such relief is not available either through administrative committee proceedings or by challenging decisions resulting from such proceedings.
- Insurance companies are entitled to seek legal remedies in DIFC, unless UAE law expressly denies DIFC courts jurisdiction in such cases. There is no such statement.
The judgment will be of interest to all insurance companies operating in the UAE.
It underscores the importance of knowing what has been agreed when jurisdiction is conferred under an insurance policy, including whether the parties choose to submit to the jurisdiction of the DIFC courts, especially where the interplay between the different dispute resolution forums in the UAE can play a subordinate role in In negotiations between the insured, broker and underwriter.
Going forward, the dispute resolution provisions of the policy should be carefully considered. This includes whether parties are allowed to freely bring their claims in any court in the UAE, or whether to choose one or exclude other UAE courts.
The procedures and remedies in UAE civil law courts and common law courts are quite different. This includes the routine of common law courts, including the disclosure of documents, citing fact witness evidence, cross-examining witnesses and conducting detailed oral submissions, and recovering legal fees; all of which are not generally available (to the same extent) in civil law courts .
This judgment is especially important for those policies governed by foreign law. As in the present case, where the policy is governed by English law (as is often the case with marine policies drawn up in the UAE), it may be preferable to hear the dispute in a common law court based primarily on the principle of English and international character ( eg DIFC courts).
The case also shows that insurance companies are free to bring claims to competent courts that do not fall within the scope of Article 110, such as avoidance of claims and refund or payment of insurance premiums.
If you would like more information on this case or our dispute resolution practice in the Middle East, please contact Leonard Sudag.
* Nicholas Craig KC of 3VB is lead counsel for ABNIC in the Courts of First Instance and Court of Appeal.
** Horizon recently filed an application to have the Court of Appeal judgment brought to the Federal Supreme Court of the UAE, which is in progress.