What was the nature of the AED 44 million dispute between Dr Othman Abdullah O Alswayeh and GII Islamic REIT?
The dispute originated from a Sale and Purchase Agreement (SPA) dated 22 September 2019, under which Dr Othman sold a property known as "Binghatti Horizons" in Silicon Oasis, Dubai, to GII Islamic REIT. The total purchase price was AED 110 million, split between a cash balance and a "Subscription Amount" of AED 44 million. This latter portion was satisfied through the issuance of 13,431,224 participating shares in GII to the Claimant.
The core of the litigation concerns Clause 17.13 of the SPA, which stipulated that if GII failed to list on a stock exchange within a specified timeframe, it would be obligated to pay Dr Othman AED 44 million in exchange for the transfer of the participating shares back to the company. The Claimant initiated proceedings in the DIFC Courts after GII failed to list by the extended deadline of 31 December 2021. As noted in the court documents:
The Subscription Amount was AED 44 million, “payable by way of issuance and allotment of the Subscription Shares to the Subscriber, such Subscription Shares to be issued on the Transfer Date”.
The Claimant argues that the failure to list triggered a contractual obligation to pay the AED 44 million, effectively converting his equity interest back into a cash debt. The Defendant, however, sought to characterize the claim as being inextricably linked to the underlying property transfer, thereby attempting to shift the forum to the onshore Dubai courts.
Which judge presided over the jurisdictional challenge in CFI 025/2022 and when was the order issued?
The application challenging the jurisdiction of the DIFC Courts was heard by Justice Lord Angus Glennie in the Court of First Instance. The hearing took place on 23 August 2022, and the formal order dismissing the Defendant's application was issued on 31 August 2022.
What were the competing legal arguments regarding the forum selection clauses in the SPA?
The Defendant, GII Islamic REIT, argued that the dispute fell under the jurisdiction of the onshore Dubai courts. They relied on Clause 18.1.1 of the SPA, which grants exclusive jurisdiction to Dubai courts for any dispute "arising out of or in connection with the transfer or registration of, or which is otherwise in connection to, the Property." GII contended that because the obligation to pay the AED 44 million was a component of the original purchase price for the property, the entire claim was "in connection with" the property.
Conversely, the Claimant, Dr Othman, argued that the dispute was fundamentally a shareholder matter. He relied on Clause 18.1.2 of the SPA, which grants the DIFC Courts exclusive jurisdiction over disputes "arising out of or in connection with the Subscriber as a unit holder (or shareholder or member of the Purchaser)." Dr Othman maintained that the claim arose specifically from his status as a shareholder and the failure of the company to fulfill its obligations regarding the listing of its shares, rather than any defect or issue regarding the transfer of the physical property itself.
What was the precise doctrinal question the court had to answer regarding the interpretation of Clause 18 of the SPA?
The court was tasked with determining the proper characterization of the dispute for the purposes of the jurisdictional carve-out in the SPA. Specifically, Justice Lord Angus Glennie had to decide whether the claim for AED 44 million—triggered by a failure to list shares—was a "property-related" dispute under Clause 18.1.1 or a "shareholder-related" dispute under Clause 18.1.2. The doctrinal challenge lay in the fact that the payment obligation was technically part of the "Purchase Price" for the property, yet the mechanism for the claim was entirely dependent on the Claimant’s status as a shareholder in the Defendant entity.
How did Justice Lord Angus Glennie apply the "status as shareholder" test to determine the court's jurisdiction?
Justice Lord Angus Glennie rejected the Defendant's attempt to conflate the origin of the payment (the property sale) with the nature of the current dispute (the share listing obligation). The judge reasoned that once the property transfer was completed in October 2019, the remaining obligations under the SPA—specifically those relating to the shares—became distinct corporate matters.
The court emphasized that the parties had explicitly drafted the contract to bifurcate jurisdiction based on the subject matter of the dispute. By failing to list the shares, the Defendant triggered a clause that directly implicated the Claimant’s rights as a shareholder. As the court held:
In my view, parties have agreed that the courts of the DIFC should have exclusive jurisdiction over non-property issues such as are before the court in this action.
The judge concluded that the dispute was not about the property itself, but about the contractual performance of the company regarding its equity structure, which falls squarely within the DIFC’s jurisdictional mandate.
Which specific clauses of the SPA and DIFC laws were central to the court's reasoning?
The court’s reasoning was anchored in the interpretation of Clause 18 of the SPA, which provides the framework for governing law and dispute resolution. Specifically, the court analyzed the interplay between:
- Clause 18.1.1: The jurisdictional grant to onshore Dubai courts for disputes connected to the "transfer or registration of" the Property.
- Clause 18.1.2: The jurisdictional grant to the DIFC Courts for disputes connected to the "Subscriber as a unit holder (or shareholder or member of the Purchaser)."
The court also referenced Clause 17.13, which established the specific timeline for the listing requirement and the subsequent obligation to pay the AED 44 million. The court noted that the parties had formally amended this timeline, confirming the ongoing nature of the share-related obligations:
On 17 December 2020 the parties agreed to extend the 18-month period mentioned in clause 17.13 (which would otherwise have expired in April 2021) to 31 December 2021.
How did the court use the factual context of the SPA to distinguish this case from property-related litigation?
The court utilized the factual history of the transaction to demonstrate that the property transfer was a completed event. Justice Lord Angus Glennie noted that the purchase price was satisfied and legal title to the property passed on 10 October 2019. Consequently, the dispute regarding the "Subscription Amount" was no longer a property dispute, but a corporate one.
The court highlighted the specific language of the SPA regarding the Subscription Amount:
GII was not listed on any stock exchange by 31 December 2021 (the revised date for the purposes of clause 17.13). Accordingly, so Dr Othman contends, GII is liable to pay Dr Othman a sum equal to the Subscription Amount (AED 44 million).
By focusing on the fact that the property had already been transferred, the court effectively neutralized the Defendant's argument that the claim was "in connection with the Property." The court reasoned that the "connection" to the property was historical, whereas the "connection" to the shareholder status was current and active.
What was the final disposition and the specific costs order made by the court?
The court dismissed the Defendant’s application in its entirety, confirming that the DIFC Courts possess the requisite jurisdiction to hear the claim. The court ordered the Defendant to pay the Claimant’s costs of the application on a standard basis. The costs were summarily assessed as follows:
The Defendant shall pay the Claimant his costs of the Application on the standard basis, summarily assessed in the sum of AED 180,000.
What are the wider implications of this decision for practitioners drafting complex real estate investment agreements?
This ruling serves as a critical reminder that jurisdictional clauses in hybrid agreements—those involving both real estate and corporate share components—must be drafted with extreme precision. Practitioners should anticipate that the DIFC Courts will look to the "substance" of the dispute rather than the "origin" of the contract. Even if a payment obligation is labeled as part of a "Purchase Price" for property, if the mechanism of the claim is tied to shareholder rights or corporate performance, the DIFC Courts are likely to assert jurisdiction. Parties should ensure that their dispute resolution clauses explicitly define which forum governs "post-transfer" corporate obligations versus "pre-transfer" property registration disputes to avoid costly jurisdictional challenges.
Where can I read the full judgment in Dr Othman Abdullah O Alswayeh v GII Islamic REIT [2022] DIFC CFI 025?
The full judgment is available on the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0252022-dr-othman-abdullah-o-alswayeh-v-gii-islamic-reit-ceic-limited
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | N/A |
Legislation referenced:
- Sale and Purchase Agreement (SPA) dated 22 September 2019, Clauses 4.1, 17.13, 18.1.1, 18.1.2.
- Lease Agreement (2019).
- Subscription Agreement (2019).