CREDIT SUISSE AG v EMIRATES HOSPITALS GROUP [2021] DIFC CFI 060 — Lifting the stay on banking litigation (09 August 2021)

The DIFC Court of First Instance clarifies that an application to the Joint Judicial Committee (JJC) does not trigger an automatic stay of proceedings, emphasizing the necessity of a substantive jurisdictional conflict before halting litigation.

What was the nature of the dispute between Credit Suisse AG and the Emirates Hospitals Group entities, and what was at stake regarding the enforcement of guarantees?

The litigation, initiated in July 2020, involved a consortium of eight international and regional banks—including Credit Suisse AG, Mashreq Bank PSC, and the State Bank of India—seeking to recover substantial funds advanced under various facility agreements. The defendants comprised the principal borrower, Emirates Hospitals Group LLC, alongside two personal guarantors (Khaleefa Butti Omair Yousif Ahmed Al Muhairi and H.E. Saeed Mohammed Butti Mohammed Khalfan Al Qebaisi) and 15 corporate guarantors. The core of the dispute centered on the banks' efforts to enforce both corporate and personal guarantees against these entities.

The situation became complex when the personal guarantors initiated separate proceedings in the Dubai Court of First Instance, alleging that their signatures on the relevant guarantee documents had been forged. This move was intended to challenge the validity of the underlying obligations. The stakes were high, as the banks sought to proceed with their claims in the DIFC Court, while the personal guarantors attempted to utilize the Joint Judicial Committee (JJC) to create a jurisdictional deadlock. As noted in the court's reasoning regarding the necessity of distinguishing between the various parties:

For these reasons, in assessing whether there is a conflict of jurisdiction, it is appropriate and indeed necessary to give separate consideration to the differing positions of the Personal Guarantors on the one hand, and the Principal Borrower and the Corporate Guarantors on the other.

Which judge presided over the application to lift the stay in CFI 060/2020, and in which division of the DIFC Courts was the matter heard?

The application to lift the stay was heard by Justice Wayne Martin in the DIFC Court of First Instance. The order was issued on 9 August 2021, following a hearing held on 6 July 2021, which addressed the administrative stay that had been in place since 3 November 2020.

What were the respective positions of the Claimant banks and the Defendants regarding the maintenance of the stay pending the JJC’s determination?

The Claimant banks argued that the stay, which had been imposed administratively without a full hearing, was no longer justified. They contended that the mere filing of an application with the JJC did not constitute a valid legal basis to halt the DIFC proceedings, particularly concerning the corporate defendants who had clearly submitted to the jurisdiction of the DIFC Courts. The banks maintained that the allegations of forgery by the personal guarantors were a tactical maneuver to delay enforcement and that the DIFC Court remained the appropriate forum for the contractual claims.

Conversely, the Second and Third Defendants (the personal guarantors) argued that the existence of parallel proceedings in the Dubai Courts, coupled with their pending application before the JJC, necessitated a continued stay to avoid the risk of inconsistent judgments. They relied on the assertion that the JJC process under Dubai Decree No. 19 of 2016 should take precedence, effectively freezing the DIFC litigation until the JJC determined which court held proper jurisdiction over the dispute.

What was the precise doctrinal question the court had to answer regarding the interplay between the JJC application and the DIFC Court’s power to stay proceedings?

The court was required to determine whether an application to the Joint Judicial Committee (JJC) regarding an alleged conflict of jurisdiction between the DIFC Courts and the Dubai Courts triggers an automatic stay of proceedings under the prevailing legal framework. Specifically, the court had to decide if the administrative stay granted on 3 November 2020 could be sustained in the absence of a proven, substantive conflict of jurisdiction, or if the court retained the discretion to lift the stay despite the pending JJC application.

How did Justice Wayne Martin apply the test for jurisdictional conflict and the principles established in Lakhan v Lamia to the facts of this case?

Justice Martin emphasized that the DIFC Court must conduct a rigorous assessment of whether a genuine conflict of jurisdiction exists before allowing a stay to persist. He clarified that the mere existence of parallel proceedings does not automatically necessitate a stay, nor does the filing of an application with the JJC. Relying on the Court of Appeal’s guidance in Lakhan v Lamia, the court held that the DIFC Court must actively determine whether it is appropriate to exercise its jurisdiction.

The court found that the Dubai Courts had not exercised jurisdiction over the corporate defendants, who had submitted to the DIFC Court. Therefore, there was no conflict regarding those parties. Regarding the personal guarantors, the court noted:

For the reasons given above, it is clear that the Dubai Courts have never exercised jurisdiction in respect of defendants other than the Personal Guarantors, and because the DIFC Courts have not exercised or determined whether to exercise jurisdiction against the Personal Guarantors, the stay must be lifted whatever the position of the Dubai Courts.

Which specific statutes and rules were applied by the court to determine the validity of the stay?

The court primarily relied on Dubai Decree No. 19 of 2016, specifically Article 5, which governs the role of the Joint Judicial Committee. The court also referenced RDC Part 23, which outlines the procedural requirements for applications to the court. The judge clarified that the administrative stay had been granted without an application pursuant to RDC 23.2 or 23.3, and that such an administrative approach was no longer consistent with the court's refined understanding of its jurisdictional obligations.

How did the court utilize the precedents of Lakhan v Lamia and Five Holding Limited v Orient UNB Takaful PJSC in its reasoning?

The court utilized Lakhan v Lamia to establish that an application to the JJC does not, of itself, give rise to an automatic stay of proceedings. This was a critical departure from the previous administrative practice. Furthermore, the court cited Five Holding Limited v Orient UNB Takaful PJSC to reinforce the principle that the mere commencement of proceedings relating to the same dispute in both courts does not create a conflict of jurisdiction that mandates a stay. These cases were used to demonstrate that the DIFC Court must evaluate the specific circumstances of each defendant rather than applying a blanket stay to the entire action.

What was the final disposition of the court, and what orders were made regarding the costs of the application?

Justice Martin ordered that the stay on proceedings granted on 3 November 2020 be lifted immediately. The court concluded that the banks' application to set aside the stay was well-founded. Regarding costs, the court ordered:

The Defendants shall pay the Claimant’s costs of the Application to be assessed by a Registrar if not agreed within 14 days of the making of the order.

What are the wider implications of this ruling for practitioners dealing with jurisdictional conflicts between the DIFC and Dubai Courts?

This decision serves as a significant warning to litigants who attempt to use the JJC as a "shield" to delay proceedings in the DIFC Courts. Practitioners must now anticipate that the DIFC Court will conduct a granular analysis of the parties involved. If a defendant has submitted to the DIFC jurisdiction, the court is unlikely to grant or maintain a stay simply because a parallel claim has been filed in the Dubai Courts. The ruling reinforces that the DIFC Court will not abdicate its jurisdiction without a clear, substantive demonstration of a conflict that would lead to irreconcilable judgments.

Where can I read the full judgment in Credit Suisse AG v Emirates Hospitals Group [2021] DIFC CFI 060?

The full judgment can be accessed via the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-060-2020-1-credit-suisse-ag-2-al-ahli-bank-kuwait-kscp-3-mashreq-bank-psc-4-arab-banking-corporation-bsc-5-national-bank-oma-3

Cases referred to in this judgment:

Legislation referenced:

• Dubai Decree No. 19 of 2016, Article 5
• Rules of the DIFC Courts (RDC) Part 23
• RDC 4.7
• RDC 23.2, 23.3, 23.86