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Dubai World Tribunal (“DWT”) rules on establishment of a limitation fund in the UAE

News /

(1) Alize 1996, (2) CMA CGM SA v (1) DP World UAE Region FZE, (2) DP World Limited, (3) All other persons claiming or being entitled to claim damages for the incident, DWT-0001-2017 

In a landmark judgment, the DWT (a special tribunal established by Decree (57) of 2009 (“Decree 57”) to deal with insolvency proceedings relating to Dubai World and its subsidiaries), confirmed its jurisdiction over maritime disputes by or against Dubai World entities and acknowledged that a ship owner is entitled to establish a limitation fund under the Convention on Limitation of Liability for Maritime Claims 1976 (the “Convention”) by way of a P&I Club letter of undertaking (“LOU”). The matter was determined in accordance with UAE law.

Facts

On 4 May 2017, the M/V CMA CGM CENTAURUS (“Vessel”) allided with the quay and two gantry cranes at the Jebel Ali Container Terminal 1 whilst berthing. The owners and the disponent owners (“Owners”), filed a claim before the DWT against the operator of the port and its parent company, both of which were Dubai World subsidiaries (“DPW Defendants”) and against “all other persons claiming or being entitled to claim damages for the incident”.

The Owners sought:

      i.  damages arising from the negligence of the DPW Defendants in berthing the Vessel;

     ii.  a declaration for an indemnity from the DPW Defendants for any liability which Owners may have to third parties;

    iii.  declarations in respect of Owners’ ability to limit any alleged liability pursuant to the Convention; and

   iv.  directions for ascertaining the persons who may have claims and the establishment of a limitation fund.

The judgment arose from interim applications made by the parties:

      i.  Owners sought a declaration that they were entitled to constitute a limitation fund under the Convention by way of LOU, or directions as to how a limitation fund should be constituted; and

     ii.  The DPW Defendants sought an order to (i) set aside the claim for want of jurisdiction; and (ii) stay the claims and declare that, if the DWT did have jurisdiction, it would not exercise that jurisdiction.

In parallel to the proceedings in the DWT, the DPW Defendants issued claims in London and Hong Kong against the Owners for damages. Neither claim form was served. Both the United Kingdom and Hong Kong have adopted the 1996 Protocol and 2015 amendments to the Convention and therefore have higher limits of limitation than the UAE which has ratified the Convention but not the amendments.

Under the Convention, ship owners are entitled to limit their liability for damage to property and Owners’ liability under the Convention in the UAE would be limited to US$20.785million. However, the DPW Defendants alleged that their losses were in excess of the limitation amount under the Convention. It was therefore in the DPW Defendants’ interests to seek to reject the jurisdiction of the UAE in favour of jurisdictions which have adopted the higher limits.

There has been uncertainty in respect of the establishment of limitation funds in the UAE and there are no reported limitation funds established in the UAE.

Issues

The DPW Defendants argued that the DWT should not allow a limitation fund to be established or make a limitation decree under the Convention because:

(i)  Decree 57 did not confer jurisdiction on the DWT to hear the limitation application which involved maritime law and had international implications;

(ii)  the DWT had no jurisdiction to hear or determine claims made against Owners by the third party defendants (i.e. defendants who were not Dubai World entities); 

(iii)  Owners were not entitled to start pre-emptive proceedings invoking limitation of liability; and

(iv)  the DWT should refuse to exercise its jurisdiction, if any, to establish a limitation fund because of uncertainty concerning establishment of limitation funds in the UAE and forum non conveniens, a doctrine whereby the courts may refuse to take jurisdiction over matters where there is a more appropriate forum. The DPW Defendants argued that England was a more appropriate jurisdiction.

Judgment

The DWT confirmed that:

1.  Decree 57 provided that “all claims and demands by and against [Dubai World or any of its subsidiaries]” should be brought before the DWT which includes jurisdiction over maritime disputes.

2.  The DWT Rules enabled the DWT to resolve all matters in dispute, including issues involving persons who were not Dubai World entities if they were connected with the existing proceedings and it was desirable for them to be resolved in the same proceedings.

3.  The natural forum for the dispute was Dubai and Decree 57 required that claims against DP World be brought before the DWT.

4.  Owners were entitled to seek an order for the constitution of a limitation fund on a pre-emptive basis. The DWT was persuaded by the English law approach to interpretation of the Convention taken in The Western Regent; Seismic Shipping Inc v Total E & P UK Plc [2005] EWCA Civ 985 and the DWT’s view was that there is nothing in the Convention to warrant the implication of a restriction on Owners in making a pre-emptive application in a jurisdiction of their choice.

5.  There was no evidence to support there being no mechanism for the establishment of a limitation fund in UAE law. The DWT considered that whatever procedural difficulties exist in the local courts, they should not lead the DWT to refuse to give effect to the UAE’s obligations under the Convention, in allowing a limitation fund to be set up.

6.  A P&I Club LOU was sufficient to establish a limitation fund in the DWT. The DWT considered that Article 11.2 of the Convention requires only that the guarantee is “considered to be adequate” by the competent authority assessing the question of limitation. The DWT was not convinced that there was a settled practice in the UAE courts in respect of the appropriate form of the guarantee to establish a fund but the DWT highlighted that, had it been satisfied that there was an established practice, it would have followed that practice.

7.  The DWT considered Dubai to be the natural forum to try the case. The DWT indicated that it was “far from clear” whether it could refuse jurisdiction that it has on forum non conveniens grounds. The DWT considered the submissions advanced by the DPW Defendants in favour of the stay, which included:

  (i)  The Vessel was UK flagged;

  (ii)  The Marine Accident Investigation Board had already commenced an investigation, interviewed witnesses and reviewed the Voyage Data Recorder;

  (iii)The DPW Defendants were parties with claims for damages and their chosen forum was the English High Court;

  (iv)  If the proceedings before the DWT were not stayed, there would be two sets of proceedings, as the London proceedings would not be susceptible to a stay;

  (v)The claims brought by Owners in the UAE were an alleged “jurisdictional hook” used as an attempt to secure the lower UAE limitation provisions.

Owners submitted that all of the relevant events took place in Dubai, the applicable law for the purposes of determining liability was UAE law and witnesses were likely to be based in the UAE. In addition, it was argued that generally the Dubai courts do not recognise a power to stay proceedings on the grounds of forum non conveniens and where they have jurisdiction, the Dubai courts are bound to exercise it. The potential issues of enforcing an English judgment in Dubai were also raised.

In considering whether or not the English High Court was clearly and distinctly more appropriate for the trial of the action than the DWT itself, the DWT found that the answer to this question was “plainly “No””. The DWT considered that the natural forum for the dispute was Dubai and that Decree 57 requires that claims against DP World companies be brought before the DWT to the exclusion of all other courts in Dubai.

Comment

In circumstances where the position on limitation of liability and the ability to establish a limitation fund has been unclear for some time in the UAE, the judgment and guidance from the DWT is welcomed. The judgment is an important development regarding limitation of liability and establishment of limitation funds in the UAE. It is the first reported case in the UAE that acknowledges an owner’s ability to start pre-emptive limitation proceedings and establish a limitation fund under the Convention.

It remains to be seen how this decision will affect the practice of the onshore courts in the UAE, but the judgment paves the way to owners to seek to limit their liability in accordance with the Convention and rely on the lower limits in the UAE as opposed to those that exist in jurisdictions which have signed the 1996 Protocol and 2015 amendments and therefore have higher limits of liability.

Ince & Co acted for successful claimants in this case.

* This article was first published in Marasi News.

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