Limeo Investment & Real Estate LLC v Landia Educational Services S.A.L [DIFC] 2019 ARB 012

Claim No. ARB 012/2019

THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai

IN THE COURT OF FIRST INSTANCE
BEFORE HIS EXCELLENCY JUSTICE SHAMLAN AL SAWALEHI

BETWEEN

LIMEO INVESTMENT & REAL ESTATE LLC

Claimant

and

LANDIA EDUCATIONAL SERVICES S.A.L

Respondent

AMENDED JUDGMENT OF H.E. JUSTICE SHAMLAN AL SAWALEHI

UPON the Claim Form and documents filed in support of the claim filed by the Claimant on 9 June 2019 (the “Claim”)

AND UPON the Respondent’s evidence in response to the Claim filed on 25 July 2019

AND UPON the Respondent’s further evidence in response to the Claim filed on 11 March 2020

AND UPON considering the documents on the court file

AND UPON hearing counsel for both parties at a teleconference hearing on 17 March 2020

IT IS HEREBY ORDERED AND DECLARED THAT:

1. The arbitration between the Claimant and the Respondent in DIFC-LCIA Case No. 678 had not been commenced by the Respondent in the wrong arbitral forum nor under rules other than those agreed by the parties.

2. The Claimant is to pay the Respondent’s costs of the Claim to be assessed, by a Registrar or Judge, if not agreed.

Issued by:
Nour Hineidi
Deputy Registrar
Date of issue: 12 April 2020
Date of re-issue: 14 April 2020
At: 4pm

Introduction

1. The parties are in agreement that there is a single issue for determination now before the Court, namely the proper construction of clause XVI of a contract for the provision of educational services (the “Contract”) between the Claimant, Limeo Investment & Real Estate LLC (“Limeo”), and the Respondent, Landia Educational Services SAL (“Landia”). Clause XVI is the Contract’s dispute resolution clause and constitutes an arbitration agreement (the “Arbitration Agreement”). It could have been drafted more clearly, however, and is now the subject of dispute itself.

2. The Arbitration Agreement provides:

Any dispute shall be finally settled in accordance with the rules of the London Court of International Arbitration (“LCIA”) (which rules are deemed incorporated by reference in this MOU). The arbitration shall take place in the LCIA Arbitration Centre in Dubai International Centre, in Dubai, the UAE. Arbitration shall be conducted in the English Language.

3. In short, Limeo submits to the Court that the Arbitration Agreement provides for arbitration under the LCIA Rules. Landia, on the other hand, submits that the DIFC-LCIA Rules are the arbitration rules referred to in clause XVI. This disagreement is important as on 3 June 2018, Landia filed a Request for Arbitration in respect of a dispute that had arisen between the parties in accordance with the DIFC-LCIA Rules. Limeo says that the arbitral proceedings were thereby not properly commenced and that the arbitrator subsequently appointed (the “Arbitrator”) does not have jurisdiction to hear and determine the dispute. The parties have asked the Court to interpret the Arbitration Agreement and in particular to decide which arbitration rules it designates. Below is my decision.

Procedural history

4. The dispute’s wider background is of little importance for present considerations insofar as the matter for determination is, again, limited to the construction of the Arbitration Agreement. As such, I will only briefly outline the most immediate part of the dispute’s background, being as it is sufficient to set the scene for the below discussion. This part of the dispute’s background is its procedural history.

5. To proceed, after Landia had filed its Request for Arbitration, the DIFC-LCIA Arbitration duly referred the request to the LCIA Court. On 19 June 2018, the LCIA Court determined there was prima facie jurisdiction for the DIFC-LCIA to register the Request and, accordingly, on 4 November 2018, it appointed Arbitrator as the sole arbitrator for the dispute, being the aforementioned Arbitrator.

6. Limeo opposed the reference, contended that any reference for arbitration under the Arbitration Agreement ought to have been to the LCIA in London and not to the DIFC-LCIA in the Dubai International Financial Centre (the “DIFC”) and that, as a result, the the Arbitrator lacked jurisdiction to conduct the proceedings. Accordingly, Limeo lodged a jurisdiction objection. This objection was determined on the papers as a primary issue by the Arbitrator and was dismissed in his Partial Award on Jurisdiction dated 3 May 2019 (the “Partial Award”).

7. On 9 June 2019, Limeo issued proceedings in this Court, asking the Court to determine whether the Arbitrator appointed in the DIFC-LCIA proceedings had jurisdiction over the dispute. Limeo made this application under Article 23(3) of the DIFC Law No. 1 of 2008 (the “Arbitration Law”) which provides:

The Arbitral Tribunal may rule on a plea [by a respondent or other party that the Arbitral Tribunal does not have Jurisdiction] either as a preliminary question or in an award on the merits. If the Arbitral Tribunal rules as a preliminary question that it has jurisdiction, any party may request, subject to any process agreed between the parties, within thirty days after having received notice of that ruling, the DIFC Court of First Instance to decide the matter, which decision shall not be subject to appeal; while such a request is pending, the Arbitral Tribunal may continue the arbitral proceedings and make an award. (emphasis added)

8. By issuing these proceedings, Limeo seeks for the determination of the Arbitrator to be set aside and it seeks, too, a declaration that the Arbitrator lacked jurisdiction, an order that the arbitration proceedings be dismissed and an order for costs (the “Application”).

The Application

9. Needless to say, Landia defends against each element of the Application. The parties’ contrary positions will be discussed below. There is, however, agreement between them in three important areas. For the purposes of this Application only, it is agreed that firstly, this Court has jurisdiction to hear these proceedings and that secondly, DIFC Law is the applicable law for the purposes of determining them. Moreover, thirdly, the parties are in agreement that the Court should determine the matter de nova, pursuant to Article 23(3) of the Arbitration Law which requires this Court to “decide the matter [of jurisdiction],” that is, itself, as opposed to conducting a review of an arbitral tribunal’s previous decision. Accordingly, in this decision I will consider, afresh, the Arbitration Agreement before determining its construction under DIFC law. Towards this end, I will first outline the parties’ submissions in the Application.

Limeo’ submissions

10. Limeo’ case is a simple one: the Arbitration Agreement refers to the LCIA Rules, not to those of the DIFC-LCIA – “…settled in accordance with the rules of the [LCIA]” – and so any arbitration proceedings commenced pursuant to the Arbitration Agreement must be commenced under the LCIA Rules, not those of the DIFC-LCIA; accordingly, when Landia filed its Request for Arbitration to the DIFC-LCIA in the DIFC and not in the LCIA in London, it did so incorrectly.

11. There is, however, an obvious “challenge,” as Limeo has put it, that confronts Limeo when advancing the above argument. For while a close reading of the passage of the Arbitration Agreement which Limeo focuses on may suggest, prima facie, that arbitration under the LCIA Rules and not those of the DIFC-LCIA was agreed by the parties, the same Arbitration Agreement provides that any arbitration “shall take place in the LCIA Arbitration Centre in Dubai International Centre, in Dubai, the UAE.” Engaging this challenge, Limeo submits that this reference to the “LCIA Arbitration Centre of the [DIFC]” in the Arbitration Agreement is not inconsistent with the arbitration being conducted in accordance with LCIA Rules. Limeo contends that the reference to the LCIA Arbitration Centre in the DIFC is “potentially” to the physical venue where the arbitration hearings would take place or “potentially” to the juridical seat of the arbitration. Limeo maintains that for the purposes of the Application, it does not matter which potentiality is correct and that it will be for a tribunal, once properly formed under the LCIA Rules, to decide this question.

12. Limeo further submits that the text of the Arbitration Agreement clearly demonstrates the common intention of the parties when they had entered into it, but that even if it did not, reasonable persons or companies like Limeo and Landia would interpret the Arbitration Agreement as providing for arbitration under the LCIA Rules. These two submissions are important as they engage Article 49 (1) and (2) of DIFC Law No.6 of 2004 (the “Contract Law) which provide the principal rules that govern the interpretation of contracts under DIFC law:

13. In particular, Limeo submits that business common sense dictates that the parties would have wanted to have any arbitration issued to be conducted in accordance with the Rules of the LCIA. In written submissions, Limeo elaborated on this point thus:

is an institution that has been in existence in London since 1892, more than a 100 years longer than the DIFC-LCIA. The Applicant assumes it will not be contested that this – London-based – Institution is well known throughout the arbitration world, including to commercial parties in Lebanon (the Defendant) and Saudi Arabia (the Applicant). Indeed, at the time the parties entered into the Contract, the DIFC-LCIA had been in existence for only four years, and there were questions as to the scope of its jurisdiction (a matter that was resolved some years after the parties entered into the Contract). It would make perfect sense for the parties to subject their arbitration to a well-established set of rules and institution (LCIA) but to have their hearings conducted in a neutral location closer to and more convenient for the parties to access (LCIA Arbitration Centre in the DIFC).

Landia’ submissions

14. This argument in the alternative in Limeo’ case and in particular its historical and contextual considerations provide a good entry into that of Landia.’ While equally as straightforward as Limeo’ case, Landia instead asks the Court to primarily give consideration to the context of the Arbitration Agreement as opposed to its text. In particular, Landia submits that in the status of the LCIA in the DIFC at the date of the execution of the Arbitration Agreement, being 24 September 2012, there is a relevant consideration which the Court must have regard to in determining its construction. In written submissions, Landia has stated:

15. Landia asks the Court to interpret the Arbitration Agreement against the factual background at the time of its execution and then ask whether the changes which occurred in 2014 have the result of changing the operation of the Arbitration Agreement. If it did, Landia then asks the Court to determine what that changed operation is. Landia submits that given that the LCIA had a presence in the DIFC in 2012, it cannot be seriously disputed that the Arbitration Agreement was referring to the then existing arrangements, that is, the DIFC-LCIA joint venture, as the arbitral authority for the purposes of the agreement. Accordingly, Landia argues, it becomes necessary to determine what the consequence of the 2014 changes were:

16. Needless to say, Landia submits that the current DIFC-LCIA Arbitration Centre stands in the place of the DIFC-LCIA joint venture for the purposes of the Arbitration Agreement. And it submits that the LCIA and DIFC-LCIA have taken the same view: the LCIA announced at the time what it described as the centre’s “relaunch” and, moreover, 28 arbitrations and other ADR procedures underway prior to the changes were continued under the auspices of the centre. As such, Landia submits, the DIFC-LCIA does have jurisdiction to determine the dispute between it and Limeo.

Discussion

17. As mentioned at the start of this decision, there is only a single question before the Court. Moreover, under Article 23(3) of the Arbitration Law, this decision cannot be the subject of an appeal: “…the DIFC Court of First Instance…decision shall not be subject to appeal.” Accordingly, brevity is warranted. With this in mind, and without further ado, in my judgment, the Arbitration Agreement provides for arbitration under the rules of the DIFC-LCIA. I have come to this position for the following reasons.

18. As stated at the start of this decision, the Arbitration Agreement could have been drafted more clearly. Indeed, there is a lot more it could have stated. Generally, the Arbitration Agreement provides for much uncertainty. In written submissions, Limeo has enumerated the usual contents of an arbitration agreement:

An arbitration agreement referring disputes to institutional arbitration would usually contain a reference to (a) the rules of arbitration and (b) the seat of arbitration and, sometimes, (c) the venue in which the hearings are to be held. Other matters usually included in an arbitration agreement are the number of arbitrators, the language of the proceedings and, if not set out elsewhere, the governing law.

19. Yet much of this usual content is missing from the Arbitration Agreement between Limeo and Landia. In my regard, it is not, therefore, far fetched to infer that information in respect of the arbitration rules might have been missing from the Arbitration Agreement, too – this would not be inconsistent with the general uncertain character of the agreement. If the whole Arbitration Agreement has a somewhat abbreviated form, perhaps it would not be appropriate to insist that the details of the arbitration rules are complete. I do not say that this inference is anywhere near conclusive. I do think, however, that it finds support elsewhere, for example, in the text of the Arbitration Agreement itself.

20. As stated above, Limeo has submitted that the reference to “the LCIA Arbitration Centre in the [DIFC]” is potentially a reference to the physical venue where the arbitration hearings were to take place or to the juridical seat of the arbitration. Limeo further submits that this reference is, in any case, unimportant for the purposes of this Application. I disagree with both constructions and with the final proposition.

21. As for the first construction, the reference in the Arbitration Agreement to “the LCIA Arbitration Centre” is a reference, in my view, to a centre already in existence, not to a prospective venue to be secured for arbitration in the instance that arbitration proceedings were issued. To the extent that a strict reading of “the LCIA Arbitration Centre” should be departed from, it is unclear why a strict reading of other aspects of the Arbitration Agreement should not be departed from, too. But insofar as there is no need to depart from a plain reading of “the LCIA Arbitration Centre,” this reference must be to an LCIA arbitration centre which existed in the DIFC at the time that the Arbitration Agreement was entered into. This can only have been the DIFC-LCIA Arbitration Centre.

22. Regarding the second construction, this construction relies on quite a significant degree of abbreviation which only serves to undermine Limeo general position that the true construction of the Arbitration Agreement is established upon the plain text of the agreement. This construction is, in my view, to be dismissed at once.

23. Regarding Limeo’ position that the reference in question is unimportant to the present Application, in my view this should be dismissed, too. It will be noted that both the choice of rules and centre provided for by the Arbitration Agreement are those of “the LCIA.” As such – and leaving aside the reference to the centre as being “in the DIFC” for a moment – there is no reason to suppose that the Arbitration Agreement provides for arbitration rules other than those of the arbitration centre also stipulated therein. In other words, the choice of rules and centre provided for in the Arbitration Agreement pertain, prima facie, to one and the same institution, namely “the LCIA.” Yet as has been shown above, the arbitration centre is referred to in the Arbitration Agreement as “the LCIA Arbitration Centre in the [DIFC],” while this could only have been the DIFC-LCIA Arbitration Centre. If, again, the choice of rules and centre provided for by the Arbitration Agreement pertain to one and the same institution, it follows that the rules which are the analogue of the DIFC-LCIA Arbitration Centre can only be those of the DIFC-LCIA. As such, far from being unimportant to the present Application, in my regard, the reference to “the LCIA Arbitration Centre in the [DIFC]” provides some of the clearest evidence that that the rules provided for in the Arbitration Agreement are those of the DIFC-LCIA.

24. The position is strengthened when regard is had to Landia’ submissions on the 2014 changes. At the time the Arbitration Agreement was entered into, the DIFC-LCIA was a joint venture within the DIFC, and so the LCIA still had a separate existence. In such circumstances, it can be argued that a reference to only the LCIA in an Arbitration Agreement that intended the DIFC-LCIA would not be, strictly speaking, deficient. While such a reference could indeed have been clearer, again, the LCIA had a separate existence and so it was capable of being referred to separately.

25. For me, the above is sufficient to demonstrate the common intention of the parties at the time of concluding the Arbitration Agreement for the purposes of Article 49 (1) of the Contract Law. The same observations would be made, I think, by reasonable persons or companies of the same kind as Limeo and Landia and in the same circumstances for the purposes of Article 49 (2) of the Contract Law, too.

26. Landia has asked the Court to consider how the 2014 changes might have changed the operation of the Arbitration Agreement: did the DIFC-LCIA Centre or the LCIA Centre in London replace the centre referred to in the Arbitration Agreement? That the LCIA itself considered the DIFC-LCIA to be a “relaunch” of the centre that preceded it is, for me, somewhat conclusive. And if the matter is to be resolved by reference to the presumed intention of the Parties pursuant to Article 49(2) of the Contract Law, I think it is hardly to be supposed that reasonable parties of the same kind as the Limeo and Landia in the same circumstances would not have chosen to adopt the DIFC-LCIA as the centre for their arbitration. That would have produced the result closest to their original agreement and engaged supervisory and enforcement arrangements which were unchanged. This is quite clearly the case due to the continuing institutional links between the DIFC-LCIA Arbitration Centre and the LCIA, the fact that the seat would, on Limeo’ view, change to London and the virtual identity of the rules of the respective bodies.

Conclusion

27. For the reasons stated above, I find that the reference in the Arbitration Agreement to “the rules of the [LCIA]” was a reference to the rules of the DIFC-LCIA and that the agreement is to be interpreted as still referring to the DIFC-LCIA. As such, when Landia filed the Request for Arbitration in accordance with the DIFC-LCIA Rules on 3 June 2018, it did so properly and the Arbitrator, therefore, had and has jurisdiction to hear and determine the parties’ dispute.

IT IS HEREBY ORDERED AND DECLARED THAT:

28. The Arbitration Proceedings have not been commenced by Landia in the wrong arbitral forum nor under rules other than those agreed by the parties.

29. Limeo is to pay Landia’ costs of the Claim to be assessed, by a Registrar or Judge, if not agreed.

Issued by:
Nour Hineidi
Deputy Registrar
Date of issue: 12 April 2020
Date of re-issue: 14 April 2020
At: 4pm