In Middle Eastern Oil LLC v National Bank of Abu Dhabi [2008] EWHC 2895 (Comm) the High Court of England and Wales stayed English proceedings after finding that a banking agreement conferred exclusive jurisdiction on the courts of the United Arab Emirates (UAE). Claimed loss sustained in England was not enough to circumvent the clause as such loss was foreseeable at the time of contract.

BACKGROUND

In 2002, Middle Eastern Oil (MEO) instructed the National Bank of Abu Dhabi to transfer U.S.$1.6 million to the account of Emir8, a company in which MEO held shares. The transfer was not made (due to intervention from the Central Bank of the UAE), pending an investigation into the source of the funds. Emir8 subsequently went into liquidation. MEO alleged this was due to non-payment of the funds and issued proceedings against the bank in the High Court for breach of contract (noncompliance with MEO’s instructions) and negligence, with around U.S.$6 million damages claimed for loss in value of the shares.

The bank sought a stay of the proceedings based upon Clause 9 of an agreement covering the parties’ relationship. The bank argued this was an exclusive jurisdiction clause only binding on MEO:

The Bank and the Customer submit to the jurisdiction of the Civil Courts of the United Arab Emirates but without prejudice to the Bank’s general right to take proceedings, where necessary, in any court wheresoever.

MEO argued it meant each party agreed to submit to the jurisdiction of the UAE if the other party commenced proceedings there, but they retained the right to commence proceedings elsewhere.

DECISION

The words from “without prejudice” onward were held to indicate that the draftsman intended MEO to be obliged to commence proceedings in the UEA. MEO could overcome this obligation, if there were strong reasons why the Court should not enforce the clause, in line with El Amria [1981] 2 Lloyd’s Rep. 199, and Donohue v Armco Inc. [2002] 1 Lloyd’s Rep 425.

  • Damage sustained in England was not a strong reason. Citing British Aerospace plc v Dee Howard Co [1993] 1 Lloyd’s Rep 368 and Metro v CSAV [2003] 1 Lloyd’s Rep 405 the Court held that although MEO’s loss claimed was sustained in England and this was a strong connecting factor with the English jurisdiction, loss occurring outside the jurisdiction of the UAE could have been foreseeable at the time that the contract was concluded.
  • The applicable law of Tort was held not to be English. It was found not to be a cause of action regarding damage to property (the shares had not been damaged, but simply ceased to exist) but one for negligent failure to transfer a sum of money. This occurred in the UEA.
  • Even if the findings on tort were incorrect, the Court found (under Section 12 of the Private International Law Act 1995) that after making a comparison of factors it was substantially more convenient to determine claim in the UEA.
  • MEO also relied upon quality of justice in the UAE. This was dismissed, in part, as the money laundering matter had ultimately been resolved in MEO’s favour, which indicated likelihood of a fair trial.

COMMENT

In light of this decision, the circumstances in which an exclusive jurisdiction clause can be circumvented are limited, requiring very strong reasons to justify going behind the wording of the agreement.