Insurance 2023 - the year ahead
A flurry of Covid-19 business interruption claims expected in the GCC
The Clyde & Co team in Dubai, led by Leonard Soudagar, successfully resisted a jurisdictional challenge before the DIFC Court of Appeal in a significant case for the UAE insurance market.
Al Buhaira National Insurance Company (ABNIC) filed a claim before the Dubai International Financial (DIFC) Courts seeking declarations that marine (hull and war) insurance policies were avoided and that it was not liable to the insured, Horizon Energy LLC (Horizon).
Horizon, who had presented a claim of USD 70 million following the ‘disappearance’ of an oil tanker, the m/t “BETA”, challenged the jurisdiction of the DIFC Courts and also sought to have ABNIC’s claim struck out as an abuse of process.
The jurisdiction battle concerned the interpretation of the parties’ agreements in the insurance policies to refer disputes to “the exclusive jurisdiction of the Courts of the United Arab Emirates”.
ABNIC’s position was that the DIFC Courts have jurisdiction under Article 5A(2) of the Judicial Authority Law, Dubai Law No 12 of 2004, which provides: “The Court of First Instance may hear and determine any civil or commercial claims or actions where the parties agree in writing to file such claim or action with it whether before or after the dispute arises, provided that such agreement is made pursuant to specific, clear and express provisions”.
Horizon contended that the parties had agreed to submit disputes in relation to the insurance contracts to the ‘onshore’ UAE Courts (which operate a civil law system in Arabic), not to the DIFC Courts (which operate a common law system in English), for two reasons:
Firstly, where phrases in contracts such as “Courts of Dubai” had previously been held to confer jurisdiction on the DIFC Courts, there had been a material and sufficient link with the DIFC. In this case there was no such link.
Horizon’s abuse of process argument was made (broadly) on the basis that: (i) the DIFC proceedings were an attempt to sidestep the dispute resolution procedure required under the Insurance Law; and (ii) they had been commenced after Horizon had made a complaint to the CBUAE. Horizon argued the DIFC proceedings were therefore an attempt to frustrate a bona fide claim. There was also a risk of parallel proceedings between those before the CBUAE and the DIFC Courts.
In the Court of First Instance, Justice Roger Giles roundly dismissed Horizon’s submissions. Where parties agree to refer disputes to the UAE Courts, this includes the DIFC Courts - no link is required - and any restriction on insurance business in or from the DIFC does not have any bearing on the ability of parties to agree to refer disputes to the DIFC Courts. Article 110 does not “cover the field” and parties to an insurance contract can agree other means of resolving disputes. The Article 110 procedure was also an administrative (rather than judicial) process which does not apply to every dispute between an insurer and an insured.
The appeal ultimately concerned whether Justice Roger Giles erred in finding that the DIFC Courts constituted “the competent court of first instance” within the meaning of Article 110 and/or that parties to insurance contracts governed by the Insurance Law can make a choice of the “competent court” in any event.
On 19 April 2023, the Court of Appeal (H.E. Justice Shamlan Al Sawalehi, Justice Lord Glennie and Justice Robert French) found in ABNIC’s favour and held that:
The judgment will be of interest to all insurers operating in the UAE.
It highlights the importance of understanding what is being agreed when conferring jurisdiction under an insurance policy, including whether the parties are opting in to the DIFC Courts’ jurisdiction, particularly where the interplay between the different dispute resolution forums in the UAE can take a subordinate role in negotiations between insureds, brokers and underwriters.
Going forward, careful consideration should be given to a policy’s dispute resolution provisions. This includes whether to allow the parties the freedom of pursuing claims in any of the UAE’s Courts, or whether to choose one or exclude other UAE Courts.
The procedure and remedies available in the civil law and common law Courts of the UAE are very different. This includes routine procedures in the common law Courts of disclosing documents, adducing factual witness evidence, cross-examining witnesses and making detailed oral submissions, as well as recovering legal costs; all of which are not generally available (to the same degree) in the civil law Courts.
The judgment is of particular interest to those policies governed by a foreign law. As in this case, where the policies were governed by English law (as is often the case for marine policies written in the UAE), it may be preferable for the dispute to be heard before a court with a common law system based predominantly on that of England and with international characteristics (such as the DIFC Courts).
The case also demonstrates that an insurer is free to advance claims which fall outside of the scope of Article 110 before a competent court, such as claims for avoidance and the return or payment of premiums.
If you would like more information on this case or on our dispute resolution practice in the Middle East please contact Leonard Soudagar.
* Nicholas Craig KC, of 3VB, was Lead Counsel for ABNIC in the Court of First Instance and Court of Appeal.
** Horizon has recently filed an application to refer the Court of Appeal’s judgment to the UAE’s Federal Supreme Court, which is ongoing.