Insurance Dispute Resolution Committee (IDRC) upholds exclusive DIFC Courts jurisdiction clause and dismisses Insured’s complaint

Clyde & Co successfully represented an insurer in the UAE in proceedings brought by an insured before the UAE Central Bank’s Insurance Dispute Resolution Committee (IDRC). The proceedings represent a further step in the evolving landscape of where insurance claims can be litigated in the UAE.

The claim was made under a marine hull & machinery policy and concerned the alleged seizure of a vessel in the Middle East.

In its decision, the IDRC dismissed the claim for lack of jurisdiction due to the policy containing an exclusive jurisdiction clause in favour of the Courts of the Dubai International Financial Centre (DIFC).

A key feature of the decision is the IDRC’s treatment of jurisdiction as a threshold issue. Once the IDRC was satisfied that the DIFC Courts had exclusive jurisdiction, it issued a decision promptly without the need to consider the merits of the claim.

The IDRC referred to provisions of DIFC Law, UAE Federal Law and Dubai Court of Cassation judgments, in reaching its decision to uphold the jurisdiction agreement in the policy and determine that it was not competent to determine the dispute.

This decision is helpful for all market participants (insurers, insureds, brokers and reinsurers) operating in the UAE. It indicates that properly drafted jurisdiction provisions will be upheld by Sanadak / IDRC, including where the dispute is first brought within the insurance complaints framework.

From a market perspective, the ruling is a welcome confirmation that contractual dispute resolution provisions in insurance contracts matter.  Parties who choose the DIFC Courts often do so because of the DIFC’s established procedures and experience in handling complex commercial and insurance disputes.

Practical takeaways: 

• At the outset, careful consideration should be given to selecting the forum for any dispute by including a clear dispute resolution provision in the policy. The procedure, the remedies available and the recoverability of legal costs are very different between the ‘onshore’ UAE courts and the ‘offshore’ courts in the UAE (such as the DIFC courts), or arbitration. 
• Prior to bringing any claim under a policy, seek legal advice to ensure that the claim is made in the correct forum before investing in a process that may result in the dismissal of the claim on jurisdictional grounds. 
• Once a formal claim / complaint has been issued, insurers must raise any jurisdiction challenge promptly to avoid being deemed to have submitted to the jurisdiction.

If you have any questions regarding this decision, please contact Leonard Soudagar, Robert James or Shadi Kousa. You may also be interested in the following articles which concern similar issues: 

Clyde & Co represents marine insurers

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