ALUCOR v ROHR REIN CHEMIE MIDDLE EAST [2021] DIFC TCD 001 — Jurisdiction and the limits of challenging onshore payment orders (07 October 2021)

The Technology and Construction Division clarifies the boundaries of DIFC Court jurisdiction when parties attempt to relitigate claims following an ex parte Payment Order issued by the onshore Dubai Courts.

What was the specific nature of the dispute between Alucor and Rohr Rein Chemie Middle East regarding the AED 5,171,465.24 Payment Order?

The dispute arose from a subcontract agreement dated 10 June 2018 concerning the Al Taweelah Alumina Refinery Project. Alucor Limited initiated proceedings in the DIFC Court seeking damages for breach of contract and breach of an exclusive jurisdiction clause (EJC) after Rohr Rein Chemie Middle East (RRCM) obtained an ex parte Payment Order in the Dubai Court of First Instance. RRCM had secured this order for AED 4,701,070.68, plus interest and compensation, totaling AED 5,171,465.24, without providing prior notice to Alucor.

Alucor’s subsequent attempt to challenge this in the Dubai Court of Appeal failed due to procedural time limits. Consequently, Alucor sought to recover the amount paid under the Dubai Payment Order as damages for breach of the EJC in the DIFC Court. The court addressed the tension between the EJC and the finality of the onshore judgment, noting:

To the extent that Alucor seeks to claim the amount of the judgment in the Dubai Court of First Instance as damages for breach of the EJC, it is, in my opinion, not open to it to do so.

Which judge presided over the Alucor v Rohr Rein Chemie Middle East [2021] DIFC TCD 001 hearing in the Technology and Construction Division?

Justice Robert French presided over the matter in the Technology and Construction Division of the DIFC Courts. The hearing took place on 30 August 2021, with the final judgment issued on 7 October 2021.

What were the specific legal arguments advanced by Marwan Sakr for Alucor and Patrick Dillon-Malone for RRCM regarding the DIFC Court's jurisdiction?

Marwan Sakr, representing Alucor, argued that the DIFC Court retained jurisdiction based on the EJC contained in the subcontract agreement, which mandated that disputes be referred to the DIFC Courts. Alucor contended that RRCM’s initiation of proceedings in the Dubai Courts constituted a breach of this clause, justifying a claim for damages, including the recovery of the amounts paid under the Dubai Payment Order.

Conversely, Patrick Dillon-Malone, for RRCM, challenged the DIFC Court’s jurisdiction, asserting that the claim was an abuse of process and that the matter was precluded by the onshore judgment. RRCM argued that the parties had effectively submitted to the jurisdiction of the onshore Dubai Courts. RRCM’s position was framed as follows:

In the alternative, the Claimant is estopped by reason of issue estoppel, or in the further alternative by reason of the rule in Henderson v Henderson, from pursuing the Claim or any element of it before the DIFC Court. 5.

What was the precise doctrinal issue the court had to resolve regarding the interplay between the EJC and the Dubai Court Payment Order?

The court had to determine whether the existence of a final, albeit ex parte, Payment Order from the Dubai Court of First Instance precluded the DIFC Court from exercising its jurisdiction under the EJC. The doctrinal challenge involved balancing the contractual obligation of the EJC against the principles of res judicata and the finality of onshore judgments. Specifically, the court had to decide if it could entertain a claim for "clawback" of the payment made under the Dubai order as damages for breach of the EJC, or if such a claim effectively constituted an impermissible collateral attack on a valid onshore judgment.

How did Justice Robert French apply the test for jurisdiction and the limits of recovery in Alucor v Rohr Rein Chemie Middle East?

Justice French applied a bifurcated approach to the jurisdictional challenge. He affirmed that the DIFC Court possessed the authority to hear the claim regarding the breach of the EJC, but he drew a firm line regarding the recovery of the specific amount paid under the Dubai order. He reasoned that while the breach of the EJC was a valid cause of action, the court could not effectively sit in appeal over the Dubai Court’s judgment by ordering the return of the funds paid pursuant to that judgment.

The court’s reasoning distinguished between the breach of contract/EJC claim and the attempt to reverse the onshore judgment:

In my opinion, this Court has jurisdiction to entertain distinct claims by Alucor: (1) For the recovery of costs incurred by reason of the alleged breach of the EJC.

Justice French further noted that while the Dubai Court had acted within its jurisdiction, the DIFC Court remained the appropriate forum for the underlying contractual dispute, provided the relief sought did not contradict the finality of the onshore payment order.

Which specific statutes and RDC rules were central to the court’s determination of its jurisdiction in this matter?

The court relied heavily on Article 5 of the Judicial Authority Law (JAL), which defines the jurisdiction of the DIFC Court of First Instance. Additionally, the court examined the Rules of the DIFC Courts (RDC) regarding challenges to jurisdiction. Specifically, the court referenced RDC 12.1(1) and 12.1(2) concerning the court's power to decline jurisdiction, and RDC 12.7(1) and 12.7(2) regarding the setting aside of claim forms. The court also clarified the procedural rights of a defendant, noting:

The defendant who files such an acknowledgment of service does not thereby lose any right to dispute the Court’s jurisdiction (RDC 12.3). 14.

How did the court utilize precedents like Lural v Listran to address the arguments of res judicata and issue estoppel?

The court referenced Lural v Listran to navigate the complex relationship between DIFC jurisdiction and onshore judgments. In that case, the DIFC Court of Appeal held that a judgment from the Abu Dhabi Court of Appeal, obtained in breach of an EJC, was not binding for the purposes of res judicata or issue estoppel within the DIFC. Justice French used this precedent to support the view that the DIFC Court is not automatically ousted by an onshore judgment, especially when that judgment arises from a breach of a DIFC-exclusive jurisdiction clause.

However, Justice French balanced this by acknowledging the validity of the Dubai CFI's process:

I accept that the Dubai CFI had jurisdiction to entertain the application for a Payment Order and that it exercised its jurisdiction validly and that ultimately the exercise of that jurisdiction gave rise to a judgment capable of recognition and enforcement in the DIFC.

What was the final disposition of the court, and how were costs apportioned between Alucor and RRCM?

The court dismissed RRCM’s application to set aside the claim for lack of jurisdiction, confirming that the DIFC Court could hear the claim for breach of the EJC. However, it explicitly ruled that it would not entertain the portion of the claim seeking to recover the AED 5,171,465.24 paid under the Dubai Payment Order. Alucor was permitted to proceed with its claim for costs incurred due to the breach of the EJC. Regarding costs, the court ordered:

As to costs, RRCM has not succeeded with its Application so far as it related to the jurisdiction of this Court generally and the operation of preclusionary doctrines, save for the claim for clawback of the Payment Order as an element of EJC damages. In my opinion RRCM should pay 50% of Alucor’s costs of the Application.

What are the practical implications for practitioners regarding the enforcement of EJC clauses in the presence of onshore payment orders?

This judgment serves as a critical reminder that while the DIFC Court will uphold an EJC, it will not act as an appellate body for onshore Dubai Court judgments. Practitioners must anticipate that even if a party breaches an EJC by filing onshore, the DIFC Court will likely refuse to "claw back" funds paid under a validly obtained onshore Payment Order. Litigants should focus their claims on damages resulting from the breach—such as legal costs incurred in the onshore proceedings—rather than attempting to relitigate the merits of the onshore judgment itself.

Where can I read the full judgment in Alucor Limited v Rohr Rein Chemie Middle East LLC [2021] DIFC TCD 001?

The full judgment is available on the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/technology-and-construction-division/alucor-limited-v-rohr-rein-chemie-middle-east-llc-2021-difc-tcd-001

Cases referred to in this judgment:

Legislation referenced:

• Judicial Authority Law, Article 5
• Judicial Authority Law, Article 7
• Rules of the DIFC Courts (RDC) 12.1(1), 12.1(2), 12.2, 12.3, 12.7(1), 12.7(2)
• UAE Civil Procedures Law (as amended by Cabinet Resolution No (57) of 2018)