This order confirms the DIFC Court’s authority to restrain parallel proceedings in onshore UAE courts by upholding the validity of arbitration agreements incorporated by reference across a complex suite of construction and service contracts.
What was the specific nature of the dispute between Nuriel, Naufil, Nishat and Nuzhat, Nayaab that necessitated an anti-suit injunction?
The dispute centers on a series of construction and operational agreements pertaining to the "Naufil" project in the UAE. The Claimants—Nuriel, Naufil, and Nishat—sought to enforce arbitration agreements contained within two primary contracts and seven "Related Agreements" against the Defendants, Nuzhat and Nayaab. Despite these agreements containing clear arbitration clauses, the Defendants initiated litigation in the Abu Dhabi Courts, prompting the Claimants to seek an urgent anti-suit injunction to halt those proceedings.
The stakes involved the integrity of the parties' chosen dispute resolution mechanism. The Claimants argued that the Abu Dhabi proceedings were a breach of the arbitration agreements, which they contended were validly incorporated across the entire contractual suite. The court had to determine whether these agreements, which included various amendments and rectification agreements, collectively mandated a DIFC-seated arbitration. As noted in the judgment:
The TCA is dated 30 September 2020 and expressly states in clause 6.11 that disputes shall be referred to and finally resolved by DIFC seated arbitration under the DIFC-LCIA Arbitration Rules. Ther are no amendments, and it is clear, in my view, that the TCA contains a valid arbitration agreement that is binding on the parties. Joint Venture Agreement (“JVA”) 43.
[Source: https://www.difccourts.ae/rules-decisions/judgments-orders/arbitration/arb-0182023-1-nuriel-2-naufil-3-nishat-v-1-nuzhat-2-nayaab]
Which judge presided over the final determination of the anti-suit injunction in ARB 018/2023?
The final determination of the Claimants' application for a permanent anti-suit injunction was presided over by H.E. Justice Shamlan Al Sawalehi, sitting in the Arbitration Division of the DIFC Court of First Instance. The final hearing took place on 12 December 2023, with the formal Order with Reasons issued on 4 September 2024.
What were the primary legal arguments advanced by the Claimants and Defendants regarding the validity of the arbitration clauses?
The Claimants argued that the arbitration agreements were robust and binding, asserting that the various amendments and rectification agreements did not undermine the parties' original intent to arbitrate. They maintained that the "Clarity Test" under UAE Arbitration Law was satisfied even where arbitration clauses were incorporated by reference rather than explicitly restated in every amendment.
Conversely, the Defendants challenged the validity of these clauses, likely pointing to the complexity of the contractual suite, the presence of unsigned amendments, and alleged discrepancies between the original contracts and subsequent rectification agreements. The Defendants sought to justify the Abu Dhabi proceedings by questioning whether the arbitration agreements remained effective across the entire web of related service and supply contracts. The court ultimately rejected these challenges, finding that the contractual documentation, when read as a whole, clearly evidenced an intent to arbitrate.
What was the precise doctrinal issue the court had to resolve concerning the "Clarity Test" and incorporation by reference?
The court was tasked with determining whether a general reference to an arbitration agreement in a contract—or its incorporation through subsequent amendments and rectification agreements—suffices to satisfy the "Clarity Test" under UAE Arbitration Law. The core doctrinal question was whether the technical discrepancies or the absence of express, repetitive references to arbitration clauses in every amendment rendered those clauses invalid or unenforceable. The court had to decide if the parties' clear intent to arbitrate could survive the "complex contractual suite" and whether the DIFC Court could exercise its jurisdiction to protect that intent via an anti-suit injunction.
How did H.E. Justice Shamlan Al Sawalehi apply the "Clarity Test" to the various amendments and service agreements?
Justice Al Sawalehi adopted a pragmatic approach, focusing on the parties' underlying intent rather than formalistic perfection. He held that the incorporation of arbitration clauses by reference is sufficient, provided the intent is clear. Regarding the general versus explicit reference debate, the court held:
In my view, it matters not, for the purpose of satisfying the Clarity Test under UAE Arbitration Law, whether the arbitration clause is incorporated through a general reference rather than an explicit reference.
The judge further addressed specific contractual issues, such as unsigned amendments and discrepancies in the Rectification and Amendment Agreement (RAA). He concluded that the RAA effectively cured any potential ambiguities, stating:
On the evidence, I am not persuaded that the discrepancy invalidates the arbitration agreement because the RAA satisfactorily rectifies and addresses the discrepancy.
Which specific statutes and rules did the court apply to determine the validity of the arbitration agreements?
The court relied heavily on the UAE Arbitration Law to interpret the validity of the arbitration agreements. Additionally, the court exercised its powers under Article 32(b) of DIFC Law No. 10 of 2004 (as amended by DIFC Law No. 2 of 2022), which provides the DIFC Courts with the jurisdiction to grant anti-suit injunctions. The court also addressed the transition of rules, noting that references to the former DIFC-LCIA Arbitration Rules in the parties' contracts should be interpreted as references to the current DIAC Arbitration Rules 2022.
How did the court utilize precedent, specifically Lara Basem Musa Khoury v Mashreq Bank PSC, in its reasoning?
The court referenced Lara Basem Musa Khoury v Mashreq Bank PSC [2022] to support the principle that asymmetrical dispute resolution provisions are valid. This precedent was used to reinforce the court's broader stance on the enforceability of arbitration agreements, signaling that the DIFC Courts will uphold the parties' chosen dispute resolution mechanisms even when challenged on technical grounds. By aligning with this established jurisprudence, the court underscored its commitment to party autonomy and the stability of arbitration agreements within the DIFC legal framework.
What was the final disposition of the court regarding the Abu Dhabi proceedings and the costs of the application?
The court granted the Claimants' application for a final anti-suit injunction. It formally declared that the arbitration agreements in the D&B Contract, the MEQ Contract, and all seven Related Agreements were valid and binding. The court ordered the Defendants to immediately take all necessary steps to discontinue the proceedings they had initiated in the Abu Dhabi Courts. Furthermore, the Defendants were ordered to pay the Claimants' costs of the proceedings, to be assessed by the Registrar if not agreed between the parties.
What are the wider implications of this ruling for practitioners dealing with complex contractual suites?
This judgment provides significant clarity for practitioners, confirming that the DIFC Courts will take a commercially sensible approach to the "Clarity Test." It confirms that arbitration clauses incorporated by reference—even in complex, multi-layered contractual suites—will be upheld, provided the parties' intent is discernible. Practitioners must anticipate that the DIFC Court will not allow technical discrepancies or the absence of express references in every amendment to defeat an arbitration agreement.
For a deeper analysis of how this case refines the "Clarity Test" and addresses contractual discrepancies, see the deep editorial analysis at: Nuriel v Nuzhat [2024] DIFC ARB 018: The Clarity Test and the Limits of Contractual Discrepancy.
Where can I read the full judgment in Nuriel v Nuzhat [2024] DIFC ARB 018?
The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/arbitration/arb-0182023-1-nuriel-2-naufil-3-nishat-v-1-nuzhat-2-nayaab or via the CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/arbitration/DIFC_ARB-018-2023_20240904.txt.
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Lara Basem Musa Khoury v Mashreq Bank PSC | [2022] DIFC CFI 013 | To support the validity of dispute resolution provisions. |
Legislation referenced:
- DIFC Law No. 10 of 2004, Article 32(b)
- DIFC Law No. 2 of 2022
- UAE Arbitration Law (Federal Law No. 6 of 2018)
- DIAC Arbitration Rules 2022