NARCISO v NASH [2024] DIFC ARB 009 — Anti-suit injunctions and the seat of arbitration (20 June 2024)

The DIFC Court of First Instance confirms its supervisory authority over arbitration agreements, granting an anti-suit injunction to restrain proceedings in Sharjah despite jurisdictional challenges following the enactment of Dubai Decree No. 34 of 2021.

Does the DIFC Court have jurisdiction to grant an anti-suit injunction where neither party is a DIFC Establishment in Narciso v Nash [2024] DIFC ARB 009?

The dispute centers on a construction subcontract for a residential project in Sharjah, where the Claimant (Narciso) and the Defendant (Nash) entered into an agreement containing an arbitration clause designating the DIFC as the seat. Following the termination of the contract, the Defendant initiated proceedings in Sharjah, prompting the Claimant to seek an anti-suit injunction from the DIFC Court. The core of the conflict involves the Defendant’s assertion that the DIFC Court lacks the requisite jurisdiction to intervene in a dispute between non-DIFC entities.

The Defendant’s position was grounded in a strict interpretation of the DIFC’s jurisdictional reach. As noted in the court’s records:

The Defendant contends that that DIFC court has no jurisdiction to try the application for the Anti-Suit Injunction because neither of the parties is a DIFC Establishment.

The Claimant, however, argued that the choice of the DIFC as the seat of arbitration conferred supervisory jurisdiction upon the DIFC Courts, regardless of the parties' corporate status or physical presence within the Centre. The stakes involve the integrity of the agreed-upon dispute resolution mechanism and the prevention of parallel proceedings in Sharjah courts. Further details on the broader implications of this jurisdictional battle can be found in the deep editorial analysis at: Narciso v Nash [2024] DIFC ARB 009: The Limits of Jurisdictional Challenges in the Shadow of Anti-Suit Injunctions.

Which judge presided over the Narciso v Nash [2024] DIFC ARB 009 hearing in the Arbitration Division?

Justice Michael Black KC presided over the matter in the DIFC Court of First Instance, Arbitration Division. The proceedings involved a series of orders, beginning with a without-notice injunction on 20 May 2024, followed by a return date hearing on 27 May 2024, and culminating in the final order with reasons issued on 20 June 2024.

What were the specific legal arguments advanced by Narciso and Nash regarding the validity of the arbitration agreement?

The Claimant argued that the arbitration agreement remained valid and binding, asserting that the parties’ explicit selection of the DIFC as the seat of arbitration necessitated the Court’s intervention to prevent the Defendant from breaching that agreement by litigating in Sharjah. The Claimant maintained that the transition from the DIFC-LCIA to DIAC under Decree 34 did not invalidate the underlying agreement to arbitrate.

Conversely, the Defendant challenged the Court’s jurisdiction, arguing that the absence of a DIFC nexus—specifically the lack of a DIFC Establishment—precluded the Court from exercising authority. The Defendant further sought to discharge the interim injunction, contending that the arbitration agreement was either abandoned or rendered ineffective by the legislative changes introduced by Dubai Decree No. 34 of 2021.

What is the doctrinal issue regarding the proper law of the arbitration agreement that Justice Michael Black KC had to resolve?

The Court was tasked with determining the proper law of the arbitration agreement to resolve three distinct issues: the validity of the agreement, the identification of the seat, and the principles governing whether the agreement had been abandoned. As the court noted:

It is necessary to determine the proper law of the Arbitration Agreement in order to consider (1) the validity of the Arbitration Agreement and in particular to identify the seat of the arbitration, (2) the principles applicable to question as to whether or not the Arbitration Agreement has been abandoned, and (in any event) (3) whether to grant an anti-suit injunction (which will, at least in part, also depend on the location of seat).

This required the Court to reconcile the parties' choice of law (Abu Dhabi and Federal UAE law) with the procedural implications of selecting the DIFC as the seat of arbitration.

How did Justice Michael Black KC apply the American Cyanamid test to the request for an interim anti-suit injunction?

Justice Black KC utilized the American Cyanamid test to determine whether the interim injunction should be continued pending the final determination of the Part 8 proceedings. The judge focused on whether there was a "serious issue to be tried" regarding the Claimant's right to enforce the arbitration agreement.

Given that, at this stage, I am considering an interim anti-suit injunction pending the hearing of the Claimant’s claim under Part 8 for a permanent injunction, as Gee emphasizes, I need only consider matters on the American Cyanamid basis. That is to say, am I satisfied that there is a serious issue to be tried?

The Court reasoned that the choice of the DIFC as the seat of arbitration carried with it the implicit choice of the DIFC Courts as the supervisory courts, thereby establishing the necessary jurisdictional basis to grant the injunction.

Which specific statutes and RDC rules were applied by the Court in Narciso v Nash?

The Court relied on Article 5(A)(1) of the Judicial Authority Law, which outlines the jurisdiction of the DIFC Courts, and Article 32 of the DIFC Arbitration Law. Additionally, the Court considered the impact of Dubai Law No. 5 of 2021, specifically Article 22(b), and the implications of Dubai Decree No. 34 of 2021 regarding the transition of arbitration centers. The procedural framework for the injunction was governed by the Rules of the DIFC Courts (RDC).

How did the Court utilize English and DIFC precedents to support its decision on anti-suit injunctions?

The Court drew upon a robust line of authority to confirm its power to grant anti-suit injunctions. It cited Brookfield Multiplex v DIFC Investments LLC [2016] DIFC CFI 020 and Ledger v Leeor [2022] DIFC CA 013 to affirm that the DIFC Courts possess the inherent power to restrain parties from pursuing foreign proceedings in breach of an arbitration agreement. Furthermore, the Court referenced English authorities such as Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2019] EWHC 3568 (Comm) and U&M Mining Zambia Ltd v Konkola Copper Mines PLC [2013] 2 Lloyds Rep 218 to clarify the principles of seat-based supervision and the enforcement of arbitration agreements.

What was the final disposition and relief granted by the DIFC Court in Narciso v Nash?

The Court dismissed the Defendant’s application challenging jurisdiction and ordered the continuation of the interim anti-suit injunction. The Defendant was ordered to take all necessary steps to maintain the adjournment of the Sharjah proceedings until the final determination of the Part 8 proceedings. Costs were reserved for the final hearing.

How does Narciso v Nash change the practice for litigants seeking to challenge DIFC jurisdiction in arbitration matters?

This judgment reinforces the principle that the selection of the DIFC as the seat of arbitration is a powerful jurisdictional anchor that the DIFC Court will protect through anti-suit injunctions. Practitioners must anticipate that the Court will prioritize the parties' choice of seat over arguments regarding the lack of a DIFC Establishment. Litigants should be aware that the transition from DIFC-LCIA to DIAC under Decree 34 does not provide a "get-out-of-jail-free" card for parties seeking to avoid arbitration by initiating proceedings in onshore courts.

Where can I read the full judgment in Narciso v Nash [2024] DIFC ARB 009?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/arbitration/arb-0092024-narciso-v-nash or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/arbitration/DIFC_ARB-009-2024_20240620.txt.

Cases referred to in this judgment:

Legislation referenced:

• Article 32 of the DIFC Arbitration Law
• Article 5(A)(1) of the Judicial Authority Law
• Dubai Law No. 5 of 2021, Article 22(b)
• Dubai Decree No. 34 of 2021 Concerning the Dubai International Arbitration Centre