Leonard Soudagar_ Nicholas Craig KC

Al Buhaira Insurance vs Horizon Energy in DIFC Court of Appeal  

Global law firm Clyde & Co has successfully defended marine insurers in a significant jurisdictional challenge before the Dubai International Financial Centre (DIFC) Court of Appeal. Led by Leonard Soudagar (pictured left), the Clyde & Co team achieved a favourable outcome in a case that carries significant implications for the insurance market in the United Arab Emirates (UAE). 

Nicholas Craig KC (pictured right) of 3VB served as Lead Counsel for ABNIC in both the Court of First Instance and the Court of Appeal. 

The case revolves around a claim filed by Al Buhaira National Insurance Company (ABNIC or Al Buhaira Insurance) before the DIFC Courts, seeking declarations that marine insurance policies were void and that it had no liability towards the insured party, Horizon Energy (Horizon).  

Horizon had made a claim of USD 70 million following the alleged disappearance of an oil tanker named “BETA.” In response, Horizon challenged the jurisdiction of the DIFC Courts and sought to have ABNIC’s claim dismissed as an abuse of process. 

The jurisdictional battle centered on the interpretation of the insurance policies, which stated that disputes would be referred to “the exclusive jurisdiction of the Courts of the United Arab Emirates.” ABNIC argued that the DIFC Courts had jurisdiction under Article 5A(2) of the Judicial Authority Law, Dubai Law No 12 of 2004, which allows parties to agree in writing to file claims before the DIFC Courts. 

Horizon contended that the parties had agreed to submit disputes to the onshore UAE Courts, rather than the DIFC Courts, based on phrases in the contracts and the application of the UAE’s Insurance Law. They argued that ABNIC’s insurance activities were subject to the regulatory regime of the UAE Central Bank, and disputes should be heard before the onshore Courts. 

Justice Roger Giles of the Court of First Instance dismissed Horizon’s submissions, stating that parties agreeing to refer disputes to the UAE Courts includes the DIFC Courts. He also noted that restrictions on insurance business in the DIFC did not impact the parties’ ability to choose the DIFC Courts. Additionally, he highlighted that Article 110 of the Insurance Law does not cover all disputes between insurers and insured parties. 

The Court of Appeal, comprising H.E. Justice Shamlan Al Sawalehi, Justice Lord Glennie, and Justice Robert French, upheld ABNIC’s position in their judgment. They ruled that Article 110 has limited application and does not prevent insurers from seeking legal remedies in the DIFC Courts. The court confirmed that the parties can agree to subject themselves to the jurisdiction of the Courts of the UAE, including the DIFC Courts, without the need for a committee process. 

The decision has significant implications for insurers operating in the UAE, emphasizing the importance of understanding jurisdictional agreements in insurance policies. Insurers should carefully consider their policy’s dispute resolution provisions, including whether to allow claims in any UAE Court or to choose a specific court. The judgment also highlights the procedural differences between civil law and common law courts in the UAE, particularly in terms of document disclosure, witness evidence, and oral submissions. 

The case further underscores the advantages of opting for a court with a common law system, such as the DIFC Courts, for policies governed by foreign law. Insurers are free to pursue claims falling outside the scope of Article 110, including avoidance and premium payments, before a competent court. 

Horizon has filed an application to refer the Court of Appeal’s judgment to the UAE’s Federal Supreme Court, and the proceedings are ongoing.