ABRAAJ INVESTMENT MANAGEMENT LIMITED v KPMG LOWER GULF [2023] DIFC CFI 041 — Lifting an indefinite stay of proceedings (24 November 2023)

The DIFC Court of First Instance has affirmed its inherent power to lift an interim stay of proceedings, even where such a stay was originally granted by consent, when the stay has become indefinite and prejudicial to the administration of justice.

What is the nature of the dispute between Abraaj Investment Management Limited and KPMG Lower Gulf Limited and what is the financial stake?

The litigation arises from allegations of systemic audit failures brought by the Claimants, Abraaj Investment Management Limited and Abraaj Capital Limited (both in official liquidation), against the Respondents, KPMG Lower Gulf Limited, KPMG (a firm), and KPMG LLP. The Claimants allege that these audit failures resulted in massive financial losses for the companies.

The dispute is characterized by a complex jurisdictional interplay between the DIFC Courts and the onshore Dubai Courts. The Claimants seek damages estimated at approximately $600 million. The core of the conflict involves the First Claimant’s pursuit of the First Respondent in the DIFC, while the First Respondent simultaneously initiated proceedings in the onshore Dubai Courts seeking declarations of non-liability. The potential for prejudice to the Claimants due to the prolonged suspension of their claims was a central factor in the Court's decision to intervene. As Justice Wayne Martin noted:

It is clear that prejudice in being kept out of a very substantial claim, a claim of more than USD 600 million, for a lengthy period is prejudice in itself. 40.

Which judge presided over the application to lift the stay in CFI 041/2021 and in which division was the matter heard?

The application was heard by Justice Wayne Martin in the DIFC Court of First Instance. The reasons for the order, which were published on 24 November 2023, followed an oral hearing held on 8 September 2023, during which the Court determined that the stay of proceedings—originally imposed by a consent order on 18 January 2022—should be lifted.

What were the positions of the parties regarding the continuation of the stay pending the Joint Judicial Committee’s determination?

The Claimants argued that the stay, which was intended to be temporary while the Joint Judicial Committee (JJC) considered the jurisdictional conflict, had effectively become indefinite due to the JJC's inactivity. They contended that the continued suspension of the $600 million claim caused significant prejudice and that the Court should exercise its inherent jurisdiction to manage its own docket.

Conversely, the Respondents sought to maintain the stay, relying on the procedural history and the pending petition before the JJC. They maintained that the DIFC Court should defer to the JJC process to avoid any potential conflict of jurisdiction under Decree No. 19 of 2016. The Respondents emphasized the existence of parallel onshore proceedings and argued that the DIFC Court was precluded from proceeding until the JJC had definitively resolved the competence of the respective courts.

What was the precise legal question the Court had to answer regarding its power to lift a stay granted by consent?

The Court was required to determine whether it possessed the legal authority to lift an interim stay of proceedings that had been granted by the consent of the parties, particularly when the conditions triggering the stay—the resolution of a jurisdictional challenge by the JJC—had not been met after a significant period of time. The doctrinal issue centered on whether an interim stay, once agreed upon, becomes a permanent bar to the litigation or remains subject to the Court’s supervisory power to ensure the interests of justice are served, notwithstanding the absence of a final decision from the JJC.

How did Justice Wayne Martin apply the doctrine of interim stays to the circumstances of this case?

Justice Martin reasoned that an interim stay is, by its very nature, a temporary measure intended to preserve the status quo, not to indefinitely paralyze litigation. He held that the Court retains the inherent power to lift such a stay when the circumstances that necessitated it have changed or when the delay has become unreasonable. He specifically rejected the notion that a consent order could permanently divest the Court of its duty to manage its own proceedings.

The Court emphasized that the delay in the JJC process did not justify the continued denial of access to justice for the Claimants. Justice Martin clarified that the Court’s power to lift the stay is consistent with its broader case management obligations under the Rules of the DIFC Courts (RDC). As stated in the judgment:

I consider that the observations which I made in Credit Suisse apply to interim stays of all kinds, including for a fixed period or for an indefinite period. [Q6]

Which specific statutes and RDC rules were central to the Court’s determination on jurisdiction?

The Court’s analysis was primarily governed by the RDC, specifically RDC 4.7, which relates to the Court's power to manage cases and grant stays. Additionally, the Court considered the implications of Decree No. 19 of 2016, which establishes the Joint Judicial Committee for the resolution of jurisdictional conflicts between the DIFC Courts and the onshore Dubai Courts. The Court also referenced its own prior ruling in November 2021, where it had already established its jurisdiction over the claims, noting:

As already noted, in November 2021, I decided that this Court has jurisdiction to entertain all the claims in these proceedings, and permission to appeal from that decision was sought. [Q2]

How did the Court distinguish the present case from previous precedents regarding jurisdictional conflicts?

Justice Martin relied on a line of DIFC jurisprudence, including Credit Suisse AG v Emirates Hospitals Group [2021] CFI 060, to establish that interim stays are inherently temporary. Furthermore, the Court distinguished the current situation from cases where a "conflict of jurisdiction" is actually active. Citing Lakhan v Lamia [2021] DIFC CA 001/2021 and Mashreqbank PSC v Infinite Partners Investments LLC [2020] CFI 063, the Court held that a conflict of jurisdiction under Decree 19 requires positive, express decisions from both courts asserting jurisdiction. Because the onshore Court had not made a positive determination to exercise jurisdiction over the specific claims in a manner that created a direct conflict, the DIFC Court was not precluded from proceeding.

What was the final disposition of the Court and what orders were made regarding the stay?

Justice Martin ordered that the stay of proceedings be lifted, effectively allowing the litigation to resume. The Court also issued consequential directions for the future conduct of the proceedings, including a timeline for the First Claimant to file submissions in response to the application for permission to appeal. The Court emphasized the necessity of moving the case forward:

In my view, the sooner these proceedings are put back on the rails the better, provided of course there is no impediment to that course by reason of the existence of a conflict of jurisdiction. 42.

What are the wider implications of this decision for DIFC practitioners dealing with JJC-related stays?

This decision serves as a critical reminder that the DIFC Court will not permit the JJC process to be used as a tool for indefinite delay. Practitioners must anticipate that even where a stay is granted by consent, the Court will scrutinize the duration of that stay against the interests of justice. If a party cannot demonstrate active progress before the JJC or a clear, ongoing jurisdictional conflict, the DIFC Court is prepared to exercise its inherent powers to lift the stay and resume proceedings. This reinforces the Court's commitment to efficient case management and prevents the "freezing" of substantial claims due to procedural inertia in external forums.

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

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0412021-1-abraaj-investment-management-limited-official-liquidation-2-abraaj-capital-limited-official-liquidation-v-1-kpmg-l-3

Cases referred to in this judgment:

Legislation referenced:

• RDC 4.7 (Court’s power to manage cases and grant stays)
• RDC 44.14 (General case management powers)
• Decree No. 19 of 2016 (Concerning the formation of the Joint Judicial Committee)