In this blog, Spencer Turner considers the recent decision of Ridley v Dubai Islamic Bank PJSC  EWHC 1213 (Comm). The background to this case is unusual, extensive and interesting. The key points are these:
- What happens when (i) the claimant gets permission to serve abroad; (ii) the defendant challenges the grant of permission; but (iii) it turns out that no permission was needed at all? This was the question raised by the judge in this case (presumably to the relief of the Claimant) while writing his judgment. Generally, a party will be entitled to assert the true basis for jurisdiction rather than having to start all over again.
- Perhaps an obvious point, but parties must take great care when drafting contractual jurisdiction clauses. A jurisdiction clause which covers “all” disputes relating to a particular subject matter means what it says. It even covers disputes that were unforeseen at the time.
The starting point is that the Claimant, Mr Ridley, was found guilty of a fraud committed in Dubai.
The English Proceedings
- The bank entered into an agreement with Mr Ridley (and others). That agreement was for the bank to provide finances for a separate company to enter into trade finance contracts with third parties.
- The bank discovered that millions of dollars provided for this purpose had been diverted elsewhere. Mr Ridley was a party to the fraud.
- The discovery of the fraud led to a restructuring agreement (‘the Agreement’), under which the company to whom the finances had been paid agreed to repay them. The repayment was guaranteed by Mr Ridley, and others, who provided that they would disclose their assets and provide security.
- In return the bank agreed to waive and compromise any claims it had against them. The Agreement was governed by English law and was subject to an English jurisdiction clause. The jurisdiction clause read as follows:
“The parties submit to the exclusive jurisdiction of the English Courts with respect to all disputes arising out of or in connection with the terms of this Restructuring Agreement. The parties agree that the courts of England are the most appropriate and convenient courts to settle disputes and accordingly no party to this Restructuring Agreement will argue to the contrary.”
- Ultimately, the full payments required under the Agreement were not made and an action was commenced by the bank in England in October 2010 seeking monies that were owed under the agreement.
- The bank made an application for summary judgment in those proceedings but that was rejected by Hamblen J. The trial in the proceedings was heard in September and October 2013 before Flaux J and judgment was given in favour of the bank for Mr Ridley and his co-guarantors to pay the full sums due on the guarantees.
The Dubai Criminal Proceedings
- Meanwhile in Dubai criminal proceedings started in March 2009 against Mr Ridley and others. The bank was joined to those proceedings as a partie civile which would allow them access to compensation for losses caused by a criminal act.
- On 27 December 2009, Law 37 of 2009 was promulgated in Dubai which provided that a party who failed to pay an amount owed could be sentenced to imprisonment pending repayment.
- In April 2011 the Dubai Court of First Instance sentenced Mr Ridley to ten years imprisonment and ordered him to pay fines amounting to 501 million dollars and compensation in the like amount. The Dubai Court of Appeal reduced the amount to be refunded by Mr Ridley to match the amount still due under the Agreement in November 2014. In August 2017 the Dubai Court and Cassation dismissed a further appeal by Mr Ridley.
- In March 2018 the bank the served a notice under Law 37 invoking the obligation to repay the sums owed under the Agreement. Mr Ridley contended that that the notice under Law 37 was in breach of the Agreement.
- Subsequently, hearings took place in Dubai following the notice and Mr Ridley was committed to a further 20 years in prison for failing to repay the sums owed.
- Mr Ridley then lodged a claim for an injunction in the English courts in December 2018. In February 2019 he sought permission to serve out of the jurisdiction and for permission to serve by an alternative method (on the bank’s solicitors). The orders sought by Mr Ridley were made in February 2019 by Carr J and the bank then sought to set aside those orders in March 2019.
- The court was therefore required to deal with the bank’s application to (i) set aside the order of Carr J allowing service out of the claim form, (ii) to set aside the order of Carr J giving leave to serve the claim form by alternative means and (iii) Mr Ridley’s application to amend his particulars of claim.
The Exclusive Jurisdiction Clause
At paragraph 30 of the judgment, Christopher Hancock QC set out the various questions he had to answer in order to determine the applications. The first question he asked himself was whether ‘Mr Riley required permission to serve his claim form out of the jurisdiction and, if not, what is the relevance of this fact?’
This question arose from the judge’s concerns about the applicability of Article 25 of the Brussels Recast Regulation on jurisdiction clauses, which provides that appropriately drafted jurisdiction clauses will give jurisdiction to the courts of a chosen Member State. It is reflected in CPR r. 6.33(2)(v), which provides that service can be made without the need for permission in such cases.
Mr Ridley had in fact originally sought (and was given) permission. The grant of permission was challenged by the bank. Mr Ridley now said that his claim came within Article 25, so that no permission was in fact required at all.
The bank argued, firstly, that it was too late for Mr Ridley to raise this point, relying on Ketteman v Hansel  AC 189, and secondly that the claim for injunctive relief in the Claim Form and the claims in the Amended Particulars of Claim for orders seeking to require the Bank to take steps to desist from the actions being taken in Dubai which were alleged by Mr Ridley to be in breach of contract were not within Article 25.
The judge rejected both of the arguments made on behalf of the bank.
The judge noted that, where a claim form has been served on an incorrect basis in circumstances where there is as a matter of fact a valid basis for subjecting the defendant to the jurisdiction, then usually the court will allow an amendment to assert jurisdiction on the correct basis: NML Capital Ltd v Argentina  UKSC 31 at ; Carlyle Capital Corporation Limited v Conway (Guernsey Judgment 11/2012) at ; JSC VTB Bank v Skurikhin  EWHC 3863 (Comm) at –.
The judge said that the jurisdiction clause had been drafted widely and included reference to all disputes arising out of or in connection with the Agreement. On this basis, the judge held that Article 25 was engaged so that no permission was in fact need to serve out of the jurisdiction.
However, since permission had been sought and granted, the judge went on to consider whether that permission should be set aside. A key factor in refusing to set aside was a practical one:
if the original order were set aside, then a new claim form with Particulars of Claim could be issued for service outside the jurisdiction without leave, as I have indicated. In such circumstances, no question of forum non conveniens would arise. I take the view that to require the setting aside of an order on a ground which would be irrelevant on an immediately subsequent application would be contrary to the overriding objective, and I reject the suggestion.
Mr Ridley also sought permission to amend the Particulars of Claim to include new allegations under the law of Dubai. The bank made various objections to the application to amend.
For the purposes of this blog the most relevant was that the bank sought to argue that England was not the forum conveniens in relation to at least one of the ways in which the claim was put forward. It argued that it had not waived the right to raise forum conveniens arguments because the introduction of the relevant law post-dated the contract and was unforeseen at the time.
This argument was described by the judge as ‘ill founded’. He concluded that the exclusive jurisdiction clause in the Agreement related to all disputes, foreseen and unforeseen, and that the parties should be held to their bargain as regards the forum non conveniens part of the Agreement. The judge further noted that it would be undesirable for ‘this particular contention to be litigated in Dubai and all of Mr Ridley’s other arguments dealt with in this jurisdiction, with obvious risks of duplication, inconsistent judgments and superadded costs.’
The Gateway Provisions and Forum Non Conveniens
The court asked itself whether the order granting permission to serve out should be set aside on the basis that the claim lacked a real prospect of success on the merits.
The court firstly considered the relevant approach to applications under CPR r. 6.36. The test is set out in Altimo Holdings and Investment Ltd v Kyrgzy Mobil Tel Ltd  1 WLR 1804 by Lord Collins (and reiterated in terms in Brownlie v Four Seasons Holdings Inc  UKSC 80 by Lord Sumption):
“On an application for permission to serve a foreign defendant (including an additional defendant to counterclaim) out of the jurisdiction, the claimant (or counterclaimant) has to satisfy three requirements: Seaconsar Far East Ltd. v Bank Markazi Jomhouri Islami Iran  1 AC 438 , 453–457.
First, the claimant must satisfy the court that in relation to the foreign defendant there is a serious issue to be tried on the merits, i.e. a substantial question of fact or law, or both. The current practice in England is that this is the same test as for summary judgment, namely whether there is a real (as opposed to a fanciful) prospect of success: e.g. Carvill America Inc v Camperdown UK Ltd  EWCA Civ 645,  2 Lloyd’s Rep 457, at .
Second, the claimant must satisfy the court that there is a good arguable case that the claim falls within one or more classes of case in which permission to serve out may be given. In this context “good arguable case” connotes that one side has a much better argument than the other: see Canada Trust Co v Stolzenberg (No 2)  1 WLR 547 , 555–7 per Waller LJ, affd  1 AC 1; Bols Distilleries BV v Superior Yacht Services  UKPC 45,  1 WLR 12 , -.
Third, the claimant must satisfy the court that in all the circumstances the Isle of Man is clearly or distinctly the appropriate forum for the trial of the dispute, and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction.”
The judge said that ‘the relevant test was whether Mr Ridley could show a real (as opposed to a fanciful) prospect of success on his claim, on the merits. The language of good arguable case is applicable to the question of whether the claim falls within one of the jurisdictional gateways. Here, the claim is on a contract governed by English law and thus there can be no doubt that this test is satisfied.’
The court turned to consider whether Mr Ridley’s claim had any real prospect of success. The court considered a number of points raised by the bank and concluded that the case was not suitable for summary determination and that the bank’s application to set aside the judgment giving permission to serve out of jurisdiction was rejected.
This case, which has a long and interesting history, provides a useful summary of the relevant principles concerning the gateway provisions, forum non conveniens and permission for alternative service. It also contains a salutary reminder that in the context of exclusive jurisdiction clauses, parties will be held to their bargain even in cases where clauses are drafted very widely to include all disputes – even those which are, at the time, unforeseen.