This blog post was contributed by Dr Manos Maganaris, Module Convenor for Conflict of laws.
In its decision in Abu Dhabi Commercial Bank PJSC v Shetty & others [2022] EWHC 529 (Comm), the Hight Court ordered a stay of proceedings initiated by a bank against a number of the shareholders (and some members of the management group) of a company, in respect of a claim for fraud and conspiracy. The case is of interest, because Pelling J invoked retained Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (“Rome II”), in order to establish the governing law of the claims, as well as the confirmation by the court that the principle of forum non conveniens provides a robust and effective mechanism for ensuring that claims which do not have their closest connection with England will not be heard in English courts.
ADCB alleged “a massive fraud” within NMC Plc (a company operating private medical facilities), its main UAE based subsidiary and its other subsidiaries. NMC was listed on the London Stock Exchange, but the majority of its business was in the UAE. In April 2020 the company was placed in administration on the application of ADCB, at which point an undisclosed debt of almost USD5 billion was discovered. In November 2020, ADCB brought proceedings in England against six shareholders and officers of the group.
The defendants contended, inter alia, that England was not the most suitable forum for the resolution of this dispute, which in their view should be resolved by the UAE courts. They also maintained that the governing law of the dispute was UAE law.
In terms of the governing law issue, the court noted that, as the dispute was non-contractual:
‘the governing law of this dispute is to be determined applying Regulation (EC) No 864/2007 Of The European Parliament and of The Council of 11 July 2007 on the law applicable to non-contractual obligations (“Rome II”). (at 65)
Article 4 of retained Rome II provides:
- Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.
- However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.
- Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.
Accordingly:
‘The governing law that applies is the law of the country in which the damage occurs, not that of the country in which the event giving rise to the damage occurred. Assuming for present purposes that all that ADCB says summarised in the previous paragraph is correct, it may well be that England was the country in which the event giving rise to some of the alleged damage occurred because the or at least some of the Core Facilities were contained in or evidenced by contracts made and completed in London that are subject to English law and a London arbitration clause, but that is nothing to the point because the damage occurred when a UAE based company drew down against or otherwise benefitted from the Core Facilities offered by a UAE based bank.’ (at 68)
Therefore, the direct damage could not have occurred in England. Additionally, according to the court, even if that was the case, as all the shareholders and ADCB were habitually resident or had their central place of administration in the UAE at the time the damage occurred, the tort was not manifestly more closely connected to England. As such, UAE law should govern the dispute.
When it came to the question of whether the English court was the forum conveniens to hear the dispute, the judge was satisfied that:
‘(a) there is another forum which is clearly and distinctly more appropriate than the English forum namely Abu Dhabi and (b) that there are no circumstances by reason of which justice requires that this claim be tried here rather than Abu Dhabi.‘ (at 183)
The judge relied on Cairo (Nile Plaza) LLC v Brownlie [2021] UKSC 45, Spiliada Maritime Corp v Cansulex Ltd [1986] UKHL 10 and Lungowe v Vedanta Resources plc [2019] UKSC 20, in order to develop the argument that the shareholders were more closely connected to Abu Dhabi. ADCB was incorporated in the UAE and had no connections to England apart from its engagement of London solicitors to prepare some of the documentation against which it was prepared to lend in the UAE. The alleged wrongdoing took place in the UAE and ADCB’s loss was suffered in the UAE, where the credit facilities were drawn down against by UAE domiciled entities. The shareholders were either UAE citizens or Indian nationals and long-time residents in Abu Dhabi with substantial business interests and assets in the UAE. Finally, the governing law of the dispute was the law of the UAE, and the evidence also suggested that the costs faced by each party would be significantly less if the case was litigated in the UAE over the costs of litigating a similar dispute in London.
As such, the decision of the judge in respect of the appropriate forum for the dispute was that:
(a) there is another forum which is clearly and distinctly more appropriate for the trial of this claim than England namely Abu Dhabi and (b) there are no circumstances by reason of which justice requires that this claim be tried here rather than Abu Dhabi. In those circumstances, I am satisfied that I should accept the undertakings offered by the defendants and stay these proceedings with liberty to ADCB to apply to lift the stay and make any consequential applications in the event that the undertakings offered are breached. (at 188)