ABRAAJ INVESTMENT MANAGEMENT LIMITED v KPMG LOWER GULF [2023] DIFC CFI 041 — Dismissal of permission to appeal jurisdictional ruling (02 November 2023)

What is the specific nature of the dispute between Abraaj Investment Management Limited and KPMG Lower Gulf regarding the audit retainer agreement?

The litigation arises from the high-profile collapse of the Abraaj Group, specifically involving claims brought by Abraaj Investment Management Limited (AIML) and Abraaj Capital Limited—both currently in official liquidation—against KPMG Lower Gulf Limited, KPMG (A Firm), and KPMG LLP. The core of the dispute centers on the professional conduct of the auditors during their engagement with the Abraaj entities. KPMG Lower Gulf sought a declaration that the DIFC Court lacked jurisdiction to hear the claims, primarily relying on an alleged exclusive jurisdiction clause contained within the Audit Retainer Agreement.

The claimants, conversely, argued that the DIFC Court maintains jurisdiction through multiple statutory gateways. The jurisdictional battle hinges on whether the contractual language in the audit agreement effectively ousted the Court’s authority and whether the nature of the professional services provided creates a sufficient nexus to the DIFC. As Justice Wayne Martin noted in his dismissal of the appeal application:

After considering the competing contentions of the parties, I have concluded that the Application for Permission must be dismissed with costs, for the reasons which follow.

The stakes involve the potential for the multi-million dollar professional negligence claim to proceed within the DIFC’s specialized commercial framework rather than being relegated to another forum, as KPMG had contended. Further details on the background of the dispute can be found in the full judgment.

Which judge presided over the application for permission to appeal in CFI 041/2021?

The application for permission to appeal the Order dated 30 November 2021 was heard and determined by Justice Wayne Martin in the DIFC Court of First Instance. The order dismissing the application was issued on 2 November 2023.

What were the primary legal arguments advanced by KPMG Lower Gulf in their application for permission to appeal?

KPMG Lower Gulf (KPMG LG) advanced five distinct grounds of appeal to challenge the initial jurisdictional finding. Their primary contention was that the Court erred in its interpretation of Clause 44 of the Audit Retainer Agreement, which they argued constituted an agreement to exclude the jurisdiction of the DIFC Courts. Furthermore, KPMG LG challenged the Court’s finding that it possessed the discretion to decline to enforce such an exclusion agreement.

The remaining grounds focused on the Court's application of the jurisdictional gateways under the Judicial Authority Law (JAL). KPMG LG argued that the Court incorrectly applied Article 5(A)(1)(b) of the JAL, asserting that the claim did not sufficiently arise out of or relate to a contract performed within the DIFC. The claimants opposed these arguments, maintaining that the initial ruling correctly identified multiple, independent pathways to jurisdiction that remained valid regardless of the specific contractual clauses cited by the defendants.

What was the precise doctrinal issue the Court had to resolve regarding the "real prospect of success" test for permission to appeal?

The Court was required to determine whether the applicant, KPMG LG, had met the threshold for permission to appeal under the Rules of the DIFC Courts (RDC). The doctrinal issue was not whether the initial reasons provided by the Court were perfect, but whether the final order—the conclusion that the Court has jurisdiction—was "wrong." Justice Martin emphasized that an appeal is directed at the decision itself, not the specific reasoning process. Consequently, the Court had to assess whether any of the five grounds of appeal, if successful, would fundamentally undermine the jurisdictional finding.

How did Justice Wayne Martin apply the "real prospect of success" test to the five grounds of appeal?

Justice Martin conducted a granular review of the five grounds, concluding that the majority lacked merit. He noted that even if one ground regarding the joinder of parties or specific jurisdictional gateways had some force, it would not be sufficient to overturn the overall jurisdictional finding, as the Court had established multiple alternative gateways. He explained:

I consider that there is some force in this argument, which would have a real prospect of success. However, as already noted, success on this ground alone would not result in the appeal being upheld, unless grounds 3 and 4 were also upheld.

The Court further clarified that because the initial decision relied on multiple independent pathways to jurisdiction, the applicant was required to demonstrate that the Court of Appeal would likely find all those pathways invalid. As Justice Martin stated:

It follows that before I can grant permission to appeal, I must conclude that the appeal would have a real prospect of success, in the sense that the Court of Appeal will conclude that the Court has no jurisdiction with respect to the claim by AIML against KPMG LG.

Which specific statutes and RDC rules were central to the jurisdictional analysis in this case?

The Court’s analysis was anchored in the Judicial Authority Law (JAL), specifically Article 5(A)(1)(b), which governs jurisdiction over claims arising from contracts performed within the DIFC. The Court also considered Article 5(A)(1)(c) and 5(A)(1)(e), which provide alternative gateways for jurisdiction. Furthermore, the Court referenced RDC 20.7, which relates to the joinder of parties and the procedural mechanisms for establishing jurisdiction over defendants. The Court also addressed the absence of specific legislative provisions regarding the enforcement of agreements to exclude jurisdiction, noting:

There is no express provision within that Article relating to the enforcement of agreements to exclude the jurisdiction of the Court.

How did the Court utilize precedents like Al Khorafi v Bank Sarasin-Alpen and Nest Investment Holdings v Deloitte & Touche?

The Court relied on Al Khorafi v Bank Sarasin-Alpen (NE) Ltd to address the principles surrounding the enforcement of agreements that purport to exclude the jurisdiction of the DIFC Courts. This precedent was essential in evaluating whether the Audit Retainer Agreement’s clause 44 could effectively oust the Court’s authority. Additionally, the Court referenced Nest Investment Holdings Lebanon S.A.L v Deloitte & Touche (m.e.) to clarify the pathway to jurisdiction through the combined operation of Article 5(A)(1)(e) of the JAL and RDC 20.7. These cases provided the framework for determining whether the professional services provided by KPMG created a sufficient nexus to the DIFC to justify the Court’s exercise of jurisdiction.

What was the final disposition of the application and the order regarding costs?

The Court dismissed the Application for Permission to appeal in its entirety. Justice Martin ordered that KPMG LG must pay the claimants' (AIML) costs associated with the application. These costs are to be assessed by the Registrar in the event that the parties cannot reach a mutual agreement on the amount. The decision effectively maintains the status quo, allowing the substantive litigation to proceed in the Court of First Instance. As stated in the order:

After considering the competing contentions of the parties, I have concluded that the Application for Permission must be dismissed with costs, for the reasons which follow.

What are the practical implications for litigants seeking to challenge DIFC jurisdiction based on exclusion clauses?

This decision reinforces the high threshold for obtaining permission to appeal jurisdictional rulings in the DIFC. Practitioners should note that the Court prioritizes the finality of the jurisdictional order over the specific reasoning used to reach it. Because the DIFC Court often identifies multiple, overlapping gateways to jurisdiction under the JAL, an appellant must demonstrate that all identified gateways are flawed to succeed. Furthermore, the Court’s willingness to exercise discretion regarding the enforcement of exclusion clauses suggests that such clauses are not absolute. Litigants must anticipate that the Court will look beyond the four corners of a contract to determine if the underlying dispute has a sufficient connection to the DIFC, as emphasized by the Court's reliance on the RDC:

It is significant to note that the Rules of the DIFC Courts (the “RDC”) expressly provide that an appeal is an appeal from a decision of the lower court, rather than from the reasons given by the lower court.

Where can I read the full judgment in Abraaj Investment Management Limited v KPMG Lower Gulf [2023] DIFC CFI 041?

The full text of the order can be accessed via the official DIFC Courts website: CFI 041/2021 Order. A copy is also available via the CDN: CDN Link.

Cases referred to in this judgment:

Legislation referenced:

• Judicial Authority Law (JAL) Article 5(A)(1)(b)
• Judicial Authority Law (JAL) Article 5(A)(1)(c)
• Judicial Authority Law (JAL) Article 5(A)(1)(e)
• Judicial Authority Law (JAL) Article 5(A)(3)
• Rules of the DIFC Courts (RDC) 20.7