When an Abu Dhabi Royal sues in England: Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Kent

Royal Courts of Justice

Author Anthony M

Source Wikipedia

Creative Commons Licence

In the United Kingdom, as in many other countries, the unsuccessful party in civil litigation usually has to contribute substantially to the solicitors and counsel's fees of the successful party. The amount that the unsuccessful party has to pay is known as "costs" in England, Wales and Northern Ireland and "expenses" in Scotland. If there is serious doubt as to whether a claimant could or would pay such costs or expenses the courts if those jurisdictions have power to require him or her to give security (or in Scotland caution) for the costs. That typically takes the form of a deposit of money into an interest bearing account managed by the court but it could be a bank guarantee, insurance bond, escrow fund or other arrangement.

In England and Wales the power to order security for costs is governed by Section II of Part 25 of the Civil Procedure Rules. CPR 25.13 enables the court to make an order for security for costs if:

"(a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and
(b) (i) one or more of the conditions in paragraph (2) applies, or
(ii) an enactment permits the court to require security for costs."

This is a very powerful weapon for defendants as it can stop a claim in its tracks.  The usual reason for an order is that:

"the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so."

However, there are other grounds one of which is that the claimant is:

"(i) resident out of the jurisdiction; but
(ii) not resident in a Brussels Contracting State, a State bound by the Lugano Convention, a State bound by the 2005 Hague Convention or a Regulation State, as defined in section 1(3) of the Civil Jurisdiction and Judgments Act 1982."

It was on that ground that Mrs Justice Nicola Davies expressed willingness in  Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Kent [2016] EWHC 623 (QB) (21 March 2016) to make a security for costs order (albeit limited in scope) against the sixth in line to the throne of Abu Dhabi who is a very wealthy man.

In this action the claimant claimed £2 million under an agreement with the defendant to invest in an hotel business. His claim form was issued on 8 July 2013 and a request was made for interim security on 10 Jan 2014. That was not provided to the defendant's satisfaction so he applied on 28 July 2015 for security in the sum of £1 million payable as follows:

"i) £400,000 within 35 days of the date of the court's order;
ii) £250,000 by no later than 35 days after the hearing of the restored CMC;
iii) £350,000 by no later than 2 days before the date fixed for the trial in the action."

The defendant's application notice provided for the claim to be struck out and judgment to be given to the defendant if such security was not given.

The defendant submitted that:

1. He would face serious and substantial difficulties in seeking to enforce any costs award in his favour against the claimant having regard to the claimant's status as a senior member of the ruling family of Abu Dhabi and for position generally with respect to the enforceability in the UAE of judgments of the court of England and Wales.
2. If the court were to ignore the standing of the claimant and concerns about the judicial system in the UAE, expert evidence before the court demonstrated that a costs order from the courts in England and Wales would not be enforced by the courts in the UAE.

In support of his first submission, the defendant relied on a report on the UAE by the United Nations Special Rapporteur on the Independence of Judges and Lawyers. The rapporteur found that:

"The justice system in the UAE has developed into an elaborate and complex court system in a relatively short time frame. Despite commendable progress and achievements the Special Rapporteur is concerned that the challenges and shortcomings she has identified are serious and negatively affect the delivery of justice, the enjoyment of human rights and the public's confidence in the judiciary. …"

 She found at para [28] of her report that:

"The federal system of the United Arab Emirates is complex and can be difficult to understand, in particular for non nationals, who constitute the majority of the population. During a visit, the Special Rapporteur was told that because of the complex superposition of federal and local laws, it is sometimes difficult for the public to know where the boundaries lie between the federal and local justice systems. There also appears to be a lack of consistency between the applications of federal laws between the Emirates. The Special Rapporteur is concerned about reports that it is difficult for people to know which legal provisions are applicable to them depending on where they are in the Federation, and that laws are sometimes applied in an arbitrary manner, that creates ambiguity and mistrust with both law enforcement authorities and the justice system."

There were also concerns about the independence of the judiciary, the absence of a formal distinction between the judiciary and the executive and particularly that the attorney-general was one of the 7 members of the federal supreme court and 3 others represented the executive.

In support of his second submission, the defendant relied on the evidence of a senior UAE lawyer  that it would be extremely difficulty and expensive to enforce a costs order against the claimant in the UAE.

At para [29] of her judgment, Mrs Justice Nicola Davies found no objectively justified grounds upon which to conclude that this defendant was unlikely to successfully obtain enforcement of a costs judgment against the claimant in the civil or commercial courts of the UAE but she did accept at [30] that the defendant would be likely to have to embark upon a legal process which could be lengthy and thus costly in order to attempt to obtain enforcement of a costs order. She formed the view that those difficulties would be better protected by a security for costs order tailored to the additional costs that the defendant would incur in enforcing a costs order. She made it clear that such an order would be limited in its amount and would not preclude this claimant from pursuing his claim.

As the defendant's application did not include such a claim and as no quantification had been provided, Her Ladyship left it to the parties to state in writing whether they could agree terms and to return for a second hearing if they could not.

An order of the kind proposed by the judge is unusual and would not have been made if the claimant had substantial assets in the United Kingdom. In expressing willingness to make it, she impliedly accepted at least some of the criticisms that had been made of the UAE and Abu Dhabi legal systems by the defendant. No doubt that is one of the reasons why the authorities in Dubai and Abu Dhabi have established special common law jurisdictions in their financial districts (see Jane Lambert Abu Dhabi Global Market - Yet Another Common Law Enclave in the Gulf 22 Feb 2016).

Should anyone wish to discuss this case or any of the issues raised in it he or she should call me on +44 (0)207 404 5252 during office hours or send me a message through my contact form. I should like to thank Mr Abdul Hafeezi of Freeman Harris for bringing this case to my attention.

Pursuing Expatriates in England and Wales

Oxford Combined Court Centre

Author Kaishu Tai

Source Wikipedia

Creative Commons Licence

According to such web forums as the Consumer Action Group, Getoutofdebtfree, LegalBeagles and World Law Direct, banks and other financial institutions in Dubai have been chasing returning expatriates in this country for unpaid bank loans, credit card balances and other debts that they are alleged to have incurred in the Emirates. Much of the advice that is posted to those forums is helpful but some of it is not. One or two posts are downright dangerous. Here are some tips for handling such claims.

1.  Foreign debts can be pursued here

As a general rule the courts in England and Wales will enforce foreign debts and other causes of action. Those courts will apply the law of the place where the debt or other cause of action occurred.  Thus, if you have borrowed money from a Dubai bank or credit card company the court will construe and enforce the loan or credit card agreement in accordance with UAE and Dubai law rather than that of England and Wales. There are a number of exceptions. For example, the English courts will rarely entertain a claim where the parties have agreed to resolve their dispute in the courts of some other country or by arbitration. However, that would not prevent the English courts from enforcing a foreign judgment or arbitration award.

2.  Foreign Limitations Periods 

Every legal system sets a time limit for bringing a claim. That is known as "the limitation period." In England and Wales the limitation period for most other claims is 6 years.  In the United Arab Emirates it is much longer.  Art 473 of the Civil Code provides:

"A right shall not expire by the passage of time but no claim shall be heard if denied after the lapse of fifteen years without lawful excuse, but having regard to any special provisions relating thereto."

For many years the English courts applied the English limitation period even if the law of the place where the contract was made provided a different limitation period but our law was changed by the  Foreign Limitation Periods Act 1984. S.1 (1) of that Act provides:

"Subject to the following provisions of this Act, where in any action or proceedings in a court in England and Wales the law of any other country falls (in accordance with rules of private international law applicable by any such court) to be taken into account in the determination of any matter—

(a)  the law of that other country relating to limitation shall apply in respect of that matter for the purposes of the action or proceedings subject to section 1A; and
(b) except where that matter falls within subsection (2) below, the law of England and Wales relating to limitation shall not so apply."

However, that section is subject to s.2 (1) and (2)  of the Act:

"(1)   In any case in which the application of section 1 above would to any extent conflict (whether under subsection (2) below or otherwise) with public policy, that section shall not apply to the extent that its application would so conflict.
(2)   the application of section 1 above in relation to any action or proceedings shall conflict with public policy to the extent that its application would cause undue hardship to a person who is, or might be made, a party to the action or proceedings."

There have been cases where very short foreign limitation periods have been overridden on the ground that they are contrary to public policy in that they cause undue hardship to the claimant but I have found no case where an exceedingly long limitation period has been overridden by an English court. However, it is at least arguable that s.2 (1) and (2) were inserted to enable the English courts to consider lengthy limitation periods like that of the UAE and to override them if need be. I am aware of at least one recent case where an application for summary judgment by a foreign creditor was dismissed on that ground.

Try to settle quickly

Because costs can mount up quickly for all parties the sooner you settle your dispute the better.  The longer you leave it the more expensive settlement will become because you will have to take account of your own and probably the other side's costs.

Practice Direction - Pre-Action Conduct and Protocols

Paragraph 3 of the Practice Direction - Pre-Action Conduct and Protocols provides:

"Before commencing proceedings, the court will expect the parties to have exchanged sufficient information to—
(a)  understand each other’s position;
(b)  make decisions about how to proceed;
(c)  try to settle the issues without proceedings;
(d)  consider a form of Alternative Dispute Resolution (ADR) to assist with settlement;
(e) support the efficient management of those proceedings; and
(f) reduce the costs of resolving the dispute."

The first step is for the creditor's solicitors to write a letter before claim. It is imperative to acknowledge that letter at once. It is unlikely to be a try on even if it is the first communication you have received from the other side in many years. You then have a very short time in which to seek legal advice in order to answer the letter before claim in full.

Getting the Right Legal Advice

Claims by foreign creditors to enforce foreign contracts involve difficult points of foreign as well as English law and not every law firm or barrister has experience of this kind of litigation. Consumer advice services and websites are even less likely to have all the answers. Ask your legal advisor whether he or she has experience of the sort of claim that you are facing and how such previous claims were resolved. Specialist legal advice does not come cheap but it is a lot less expensive than litigation which is likely to result from bad advice or no advice at all. Remember that there are lots of deals that can be done to reduce or spread the cost of legal advice.

Be prepared for Hard Bargaining

The other side are likely to be represented by law firms with years of experience of this kind of litigation and they can be expected to drive a very hard bargain. There is nothing personal in this. They are just doing their job. The best way to deal with them is to follow the Practice Direction and seek and follow the best advice that is available to you.

Further Information

If you want to discuss this article or any related matter, call me on 020 7404 5252 during office hours or use my contact form.

Sky High Costs

Burj Khalifa

Photo Wikipedia

In 2010 Hogan Lovells published "At what cost?" , a multi jurisdictional guide to litigation costs. A series of questions was presented to lawyers in each jurisdiction on the amount and recoverability of costs which were defined as

"the costs incurred by a party during the course of litigation in connection to that litigation, and which include, but are not limited to, costs that the party has paid to its lawyers (including solicitors, counsel and advocates) to agents, to courts, to process servers and in respect of disbursements (for example, photocopying, expert witness, travel, translation, notarial services and witness attendance etc.)."

Two of the jurisdictions it compared were the Dubai International Financial Centre ("the DIFC") and the rest of Dubai and the United Arab Emirates.  The information on both jurisdictions in Dubai was contributed by Hadef & Partners.

As I explained in DIFC Courts 7 Jan 2014, the Centre has its own legal system based on the common law where proceedings are conducted in English before judges who have already held high judicial office in the United Kingdom and other Commonwealth countries. The rest of Dubai is a civil law jurisdiction where proceedings are conducted in Arabic. One of the most striking differences between the two systems is costs. In both jurisdictions the unsuccessful party pays the costs of the litigation which are unlimited in the DIFC. In the rest of Dubai they are generally limited to between 1,000 and 2,000 dirhams (£173 to £346 at current rates of exchange).

The high cost of litigation in England and Wales has been a matter of concern in that country for many years. A recent report by the Legal Services Consumer Panel warned lawyers in England and Wales that they are not indispensable and risk being priced out of the market:

"The core challenge ahead is to extend access to justice to those currently excluded from the market because they cannot afford legal services. This need and other forces, including government policy, consumer empowerment, technology and the effects of liberalisation, will combine to result in less involvement by lawyers in many of the tasks that until now have made up their staple diet. Consumers will seek alternatives to lawyers or use them in different ways. In place of lawyers will be greater self-lawyering, online services, entry by unregulated businesses, and also by regulated providers, such as accountants and banks, who will diversify into the law. Calls will grow for more radical solutions that cut lawyers out, such as an
inquisitorial style of justice and online dispute resolution, which are better suited to the new funding realities. The consumer interest will lie in resolving the tension between cost and quality, and determining when a lawyer is needed and when alternatives can safely suffice. Regulated lawyers should be viewed as a small part of an increasingly diverse ecosystem of legal services delivery; improving access will require looking at how the whole system will work in future around consumer need."

Those costs compared to the cost of litigation in the rest of Europe appear to be one of the reasons why the UK lags behind other European countries in the number of applications for European patents (see Jane Lambert UK slumps to Ninth Place in European Patent Applications 25 July 2014 NIPC Inventors Club). It is significant in that regard that the DIFC courts have never heard an intellectual property case (Why has no IP case come before the DIFC Courts? 19 March 2012).

One of the justifications for the DIFC courts is that the adversarial system and the quality of the judges ensure high quality judicial decision making. While that is undoubtedly true where both parties are well resourced, disparity of means can sometimes defeat that objective - at least in England and Wales. For instance, a large retailer facing a copyright or design infringement action by a small company can apply for an order requiring the claimant to deposit money or give some other security for its costs of defending the claim under CPR 25.12. If the claimant fails to do so within the time specified in the order the claim is stayed and any interim injunction against the defendant is discharged. There is a similar rule under Part 25 of the DIFC Court Rules.  According to Hadef & Partners there is no equivalent rule in the rest of Dubai; but if the average award of costs is between 1,000 and 2,000 dirhams there would be no need for one.

Should anyone wish to discuss this article or civil litigation generally, he or she should call me on +44 20 7404 5252 during office hours or send me a message through my contact form.