UNION INSURANCE v INTERNATIONAL PRECIOUS METALS REFINERS [2023] DIFC CFI 064 — Jurisdiction and forum non conveniens in UAE insurance disputes (15 September 2023)

This order addresses the jurisdictional boundaries of the DIFC Courts in the context of insurance policies governed by UAE law, specifically clarifying the interpretation of "Courts of the UAE" clauses and the applicability of forum non conveniens to parallel proceedings within the Emirates.

What was the nature of the dispute between Union Insurance and International Precious Metals Refiners regarding the USD 37.8 million insurance claim?

The dispute centers on a claim for avoidance of an insurance policy following a significant industrial accident. Union Insurance PJSC (UIC) sought to avoid the "Gold Refinery Policy" issued to International Precious Metals Refiners LLC (IPMR) ab initio, alleging fraudulent concealment, misrepresentation, and breach of policy conditions. The underlying incident involved a forklift accident at IPMR’s refining facility in the Sharjah Airport International Free Zone, which resulted in the loss of gold solution valued at approximately USD 37,833,828.14.

The factual background, as noted by the Court, highlights the complexity of the loss:

The following summary of the factual background to the current Defendant’s Application is taken largely from the evidence adduced by IPMR in support of the Defendant’s Application.

The insurer, UIC, contends that the circumstances surrounding the loss and the subsequent recovery efforts justify the avoidance of the policy, while IPMR maintains that the loss is covered under the terms of the agreement. The case is significant due to the high value of the claim and the parties' conflicting views on the appropriate forum for resolving these allegations of fraud and non-cooperation.

Which judge presided over the jurisdictional challenge in Union Insurance v International Precious Metals Refiners?

Justice Wayne Martin presided over this matter in the Court of First Instance. The order was issued on 15 September 2023, following a series of applications by the Defendant, IPMR, which sought to contest the jurisdiction of the DIFC Courts, strike out the claim, or stay the proceedings in favor of the Sharjah Federal Court of First Instance.

What specific legal arguments did International Precious Metals Refiners advance to challenge the DIFC Court's jurisdiction?

IPMR argued that the DIFC Courts lacked jurisdiction because the insurance policy’s choice of law and jurisdiction clause—which referred to the "Courts of the UAE"—did not explicitly include the DIFC Courts. Counsel for IPMR contended that the dispute, involving a Sharjah-based entity and a loss occurring in a Sharjah free zone, should be adjudicated by the Sharjah Federal Court. They further argued that even if the DIFC Court possessed jurisdiction, it should be declined or stayed on the grounds of forum non conveniens, asserting that the Sharjah Court was the more appropriate forum given the location of the evidence and the parties' operations. Additionally, IPMR sought to stay the proceedings pending the outcome of the Court of Appeal’s judgment in CA-015-2022, which was then pending and expected to clarify the interpretation of "competent court" in insurance disputes.

What was the precise doctrinal question the Court had to answer regarding the interpretation of "Courts of the UAE" in insurance contracts?

The Court was tasked with determining whether a jurisdiction clause specifying the "Courts of the UAE" confers exclusive or concurrent jurisdiction upon the DIFC Courts. The doctrinal issue involved whether the DIFC Courts are, by definition, "Courts of the UAE" and whether the natural and ordinary meaning of such a clause encompasses the DIFC judicial system. Furthermore, the Court had to address whether the doctrine of forum non conveniens can be invoked to stay proceedings in the DIFC when parallel proceedings are already underway in an "onshore" UAE court, or if such a stay is precluded by the constitutional and legal framework governing the relationship between the DIFC and the wider UAE judiciary.

How did Justice Wayne Martin apply the test for interpreting jurisdiction clauses in the context of the DIFC?

Justice Martin applied a strict interpretive approach, emphasizing that the "Courts of the UAE" includes the DIFC Courts unless evidence suggests the parties intended otherwise. He rejected the notion that a connection between the DIFC and the dispute is a prerequisite for jurisdiction. Regarding the interpretation of the clause, the Court held:

Rather, the question is whether the party disputing the Court’s jurisdiction has established, by reference to other contextual provisions in the agreement containing the jurisdiction clause, or by the context and circumstances of the agreement, that the jurisdiction clause should not be given its natural and ordinary meaning.

The Court further reasoned that the Defendant failed to provide any compelling evidence to rebut the natural meaning of the clause. Justice Martin noted:

It follows that the first ground advanced in support of IPMR’s construction of the jurisdiction clause provides no support for its contention.

By aligning with the precedent set in CA-015-2022, the Court confirmed that the DIFC Courts are indeed "Courts of the UAE," and therefore, the jurisdiction clause was validly invoked by the Claimant.

Which specific statutes and DIFC rules were applied to determine the Court's authority in this matter?

The Court relied heavily on Article 5A(2) of the Judicial Authority Law, which defines the jurisdiction of the DIFC Courts. Justice Martin also referenced the principles established in Goel v Credit Suisse (Switzerland) Ltd, which clarified that Article 5A(2) does not mandate a specific nexus between the DIFC and the parties to the dispute. The Court also considered the implications of the Insurance Law and the procedural requirements under the Rules of the DIFC Courts (RDC) regarding the stay of proceedings and the assessment of costs.

How did the Court utilize the precedents of IGPL v Standard Chartered Bank and CA-015-2022 in its reasoning?

The Court utilized CA-015-2022 as the primary authority for the interpretation of "Courts of the UAE" jurisdiction clauses, confirming that such language is broad enough to include the DIFC Courts. Regarding the forum non conveniens argument, Justice Martin relied on IGPL v Standard Chartered Bank, which established that the doctrine of forum non conveniens has no application to parallel proceedings within the UAE. The Court reasoned that because the DIFC Courts and the Sharjah Courts are both part of the UAE judicial system, the traditional international forum non conveniens test is inapplicable. Justice Martin noted:

Accordingly, had I concluded that this Court has jurisdiction to stay proceedings on the basis of forum non conveniens, having regard to the proceedings in the Sharjah Court, I would not have exercised that jurisdiction.

What was the final disposition of the Defendant’s Application and the resulting order regarding costs?

The Court dismissed the Defendant’s Application in its entirety, affirming that the DIFC Court had jurisdiction to hear the claim. Consequently, the request to strike out the claim or stay the proceedings was denied. Regarding costs, the Court ordered IPMR to bear the financial burden of the application. The order stated:

The Defendant shall pay the Claimant’s costs of the Defendant’s Application, on the standard basis, to be assessed by a Registrar if not agreed.

The Court noted the significant expenditure involved in the application, observing:

UIC has filed four separate statements of costs incurred in relation to the Defendant’s Application, which total almost USD260,000.

The Court emphasized that there was no reason to depart from the standard rule that costs follow the event:

There is no reason why costs should follow the event, and it follows that IPMR should be ordered to pay UIC’s costs of the Defendant’s Application.

What are the wider implications of this ruling for practitioners handling insurance disputes in the DIFC?

This ruling reinforces the stability of "Courts of the UAE" jurisdiction clauses, providing certainty to insurers and insured parties that such clauses will be interpreted broadly to include the DIFC Courts. Practitioners must now anticipate that the DIFC Courts will not readily decline jurisdiction or stay proceedings in favor of other UAE courts based on forum non conveniens arguments. This decision effectively closes the door on attempts to use the location of a loss or the incorporation of parties as a basis for challenging DIFC jurisdiction when the contract specifies the "Courts of the UAE." Litigants should be aware that the DIFC Court’s status as a "Court of the UAE" is a robust jurisdictional anchor that is difficult to displace.

Where can I read the full judgment in Union Insurance PJSC v International Precious Metals Refiners LLC [2023] DIFC CFI 064?

The full judgment can be accessed via the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0642022-union-insurance-pjsc-v-international-precious-metals-refiners-llc

Cases referred to in this judgment:

Legislation referenced:

• Judicial Authority Law, Article 5A(2)
• Rules of the DIFC Courts (RDC)