Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC & Ors (Rev 2)

An exclusive jurisdiction clause remains effective unless the other party’s conduct clearly and unequivocally demonstrates an intention to abandon it. Proceedings commenced in another jurisdiction for protective relief do not necessarily amount to repudiation, waiver or election, particularly where the contractual forum remains available for substantive proceedings. Parallel foreign proceedings do not, without more, constitute strong reasons to depart from an exclusive jurisdiction agreement. A transfer of security may give the security-holder full title against third parties while leaving it with only a security interest as against the debtor, including an obligation to account for any surplus. A freezing injunction may be maintained where objectively assessed non-compliance with disclosure and security obligations creates a real risk of dissipation.

The claimant bank alleged that the defendants were liable under a restructuring agreement following a substantial receivables fraud. The agreement was governed by English law and contained an exclusive English jurisdiction clause. The bank nevertheless commenced proceedings in Bahrain, principally to obtain protective relief over assets located there.

The bank then obtained worldwide freezing relief in England. The defendants applied to discharge that relief and, in the case of PSI and Mr Cornelius, challenged the jurisdiction or sought a stay because of the Bahraini proceedings. The central issues were whether the bank’s conduct repudiated, waived or varied the jurisdiction agreement; whether parallel proceedings supplied strong reasons for a stay; whether enforcement of security over Plantation discharged the underlying debt; and whether there was a real risk of dissipation.

1. Jurisdiction. The service-out requirements under CPR 6B PD 3.1 and CPR 6.37 were satisfied. The claim had a reasonable prospect of success, and the exclusive jurisdiction clause provided a strong basis for England as the proper forum.
2. Repudiation, waiver and estoppel. Commencing the Bahraini proceedings was a breach of the jurisdiction agreement, but not a repudiatory breach. Repudiation could not be inferred because the bank had a credible explanation for proceeding in Bahrain: it sought urgent protective relief over Bahraini assets. The conduct did not clearly and unequivocally demonstrate an intention to abandon the English forum. The defendants’ counterclaim was itself inconsistent with acceptance of any repudiation because it pleaded that further proceedings by the bank should be brought in England. The same reasoning defeated the waiver, election and estoppel arguments.
3. Stay. Under Donohue v Armco [2002] 2 Lloyds Rep 425, a party departing from an exclusive jurisdiction clause must show strong reasons. The existence and progress of the Bahraini proceedings were relevant, but did not suffice. A stay would not remove the multiplicity of proceedings, because claims against other defendants and PSI’s proprietary claim had to continue in England. The proceedings should also be capable of speedy determination.
4. Security and freezing relief. The transfer of Plantation gave the bank full title against third parties but was arguably only security as against the defendants. The RSA’s provisions requiring valuation, sale and repayment of any surplus were inconsistent with absolute ownership free of the debtors’ interests. The bank had shown a good arguable case, an objectively real risk of dissipation arising from non-compliance with disclosure and security obligations, and sufficient disclosure. The applications failed.