The Small Claims Tribunal confirms that a jurisdiction clause contained within a tax invoice, when accepted and acted upon by the counterparty, constitutes a valid written agreement to opt-in to the DIFC Courts.
What was the nature of the dispute between Latrell and Lawahiz regarding the AED 65,690.56 claim?
The dispute arose from a commercial transaction involving the supply of diesel generators. The Claimant, Latrell, sought recovery of unpaid invoices totaling over sixty-five thousand dirhams, which it alleged were owed by the Defendant, Lawahiz, following the issuance of a Local Purchase Order (LPO). The core of the conflict centered on whether the DIFC Courts possessed the requisite authority to adjudicate the claim, given that neither party was a DIFC-registered entity.
As noted in the court record:
On 22 April 2022, the Claimant filed a claim in the DIFC Courts Small Claims Tribunal claiming payment in relation to unpaid invoices in the sum of AED 65,690.56 pursuant to a Local Purchase Order made by the Defendant to the Claimant (the “LPO”).
The Claimant maintained that the contractual relationship was governed by the terms set out in its tax invoices, which explicitly designated the DIFC Courts as the forum for dispute resolution. The Defendant, conversely, argued that the initial quotation and the LPO were silent on the matter of jurisdiction, thereby precluding the DIFC Courts from hearing the matter.
Which judge presided over the SCT 144/2022 jurisdiction hearing?
The matter was heard before H.E. Justice Nassir Al Nasser in the Small Claims Tribunal. The jurisdiction hearing took place on 9 May 2022, following the Defendant’s formal challenge to the court's authority. The resulting order, which denied the Defendant’s contest and affirmed the court's jurisdiction, was issued on 10 May 2022.
What were the specific arguments advanced by Latrell and Lawahiz regarding the validity of the DIFC jurisdiction clause?
The Defendant, Lawahiz, argued that because the initial quotation and the LPO lacked any reference to the DIFC Courts, there was no mutual consent to submit to the jurisdiction of the DIFC. They maintained that the absence of such a clause in the primary procurement documents meant that the parties had not agreed to resolve their disputes through the DIFC forum.
The Defendant therefore is of the view that the parties have not consented to resolve their disputes through the DIFC Courts.
The Claimant, Latrell, countered this by pointing to the tax invoices issued during the performance of the contract. These invoices contained a specific provision stating that "if any dispute will be subject to DIFC Courts." The Claimant argued that because the Defendant received and accepted these invoices, they had effectively consented to the jurisdiction.
As such, the Claimant submits that the Defendant’s acceptance of the Tax Invoice establishes acceptance of the DIFC Courts’ jurisdiction.
What was the central doctrinal question regarding the ‘opt-in’ jurisdiction under Article 5(A) of the Judicial Authority Law?
The court was required to determine whether a jurisdiction clause unilaterally introduced in a tax invoice—subsequent to the initial LPO—could satisfy the "written agreement" requirement for opting into the DIFC Courts' jurisdiction under Article 5(A) of the Judicial Authority Law (JAL). Specifically, the court had to decide if the act of accepting an invoice that contains a jurisdiction clause constitutes a "specific, clear and express" agreement in writing, even when the underlying purchase order was silent on the forum.
How did Justice Nassir Al Nasser apply the test for ‘opt-in’ jurisdiction to the facts of this case?
Justice Nassir Al Nasser focused on the conduct of the parties following the issuance of the tax invoices. The court reasoned that the inclusion of the clause in the invoice, combined with the Defendant's acceptance of that invoice and subsequent performance, created a binding agreement. The judge applied the principle that a party who accepts an invoice and acts upon it is bound by the terms contained therein, including those related to dispute resolution.
I find that the jurisdiction clause in the Tax Invoice is sufficient to establish that the parties have agreed to ‘opt-in’ to the jurisdiction of the DIFC Courts in cases where the Defendant has accepted the tax invoice and acted upon it.
The court concluded that the requirement for a written agreement under Article 5(A) of the JAL was satisfied because the invoice served as a written instrument that the Defendant had acknowledged. By accepting the document, the Defendant signaled its assent to the terms stipulated within it, thereby fulfilling the criteria for an express agreement to opt-in.
Which specific provisions of the Judicial Authority Law were applied in Latrell v Lawahiz?
The court relied primarily on Article 5(A) of the Judicial Authority Law (JAL). This provision outlines the scope of the DIFC Courts' jurisdiction, specifically the "opt-in" mechanism. The court highlighted the requirement that parties must agree in writing to file claims with the DIFC Courts, provided such agreement is made pursuant to "specific, clear and express provisions."
The court also referenced the general scope of Article 5(A), which covers civil or commercial claims arising out of contracts. By establishing that the tax invoice constituted a valid written agreement, the court brought the dispute within the ambit of Article 5(A)(e), which allows for jurisdiction where parties have agreed in writing to submit their disputes to the DIFC Courts.
How did the court interpret the ‘written agreement’ requirement for non-DIFC entities?
The court clarified that the status of the parties as non-DIFC registered companies does not preclude them from accessing the DIFC Courts, provided they satisfy the opt-in requirements. The judge emphasized that the form of the agreement—in this instance, a tax invoice—is sufficient to satisfy the statutory requirement for a written agreement, provided the clause is clear.
I find that the parties are not DIFC registered companies but have agreed in writing to ‘opt-in’ to the jurisdiction of the DIFC Courts by way of the Tax Invoice submitted by the Claimant to the Defendant.
This reasoning underscores that the DIFC Courts prioritize the parties' expressed intent to use the forum, even when that intent is manifested through commercial documentation exchanged during the performance of a contract rather than in a formal, standalone master services agreement.
What was the final disposition of the SCT regarding the jurisdiction challenge?
The Small Claims Tribunal denied the Defendant’s contest to the jurisdiction. Justice Nassir Al Nasser ruled that the DIFC Courts possess the necessary jurisdiction to hear and determine the claim for the unpaid sum of AED 65,690.56. The order confirmed that the jurisdictional challenge was unsuccessful and that the proceedings would continue within the DIFC SCT.
Therefore, I find that the Defendant has accepted the ‘opt-in’ to the DIFC Courts Jurisdiction by accepting the Tax Invoices.
What are the wider implications for commercial practitioners regarding jurisdiction clauses in invoices?
This case serves as a reminder that jurisdiction clauses included in commercial invoices can be highly effective in establishing "opt-in" jurisdiction, provided the counterparty accepts the invoice and acts upon it. Practitioners should be aware that the DIFC Courts may look beyond the initial LPO or quotation to determine the parties' agreed-upon forum. For those seeking to avoid DIFC jurisdiction, it is critical to explicitly object to any jurisdiction clauses contained in invoices upon receipt. Conversely, for claimants, ensuring that invoices contain clear and express language regarding the DIFC Courts can be a vital safeguard for securing a preferred forum in the event of a payment dispute.
Where can I read the full judgment in Latrell v Lawahiz [2022] DIFC SCT 144?
The full judgment is available on the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/latrell-v-lawahiz-2022-difc-sct-144. A copy is also available via the CDN at: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/small-claims-tribunal/DIFC_SCT-144-2022_20220510.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external precedents cited in the order. |
Legislation referenced:
- Judicial Authority Law (JAL), Article 5(A)