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ADGM Court of Appeal upholds English law as providing certainty and predictability

Lord David Hope, sitting as Chief Justice of the Abu Dhabi Global Market Court of Appeal, has given an important ruling which confirms the advantages of certainty and predictability of the ADGM jurisdiction, which applies English law, in contrast to the DIFC.

In its judgment on 17 November 2023 in AC Network Holding Ltd v Polymath Ekar SPV1 (ADGMCA-2023-01), the ADGM Court of Appeal (Lord David Hope CJ, HH Justice Kenneth Hayne and HH Justice Sir Peter Blanchard) said that ADGM judges “are not sitting as English judges. But they are bound to apply the rule laid down by the Article.”  The Article in question is Article 1(1) of the Application of English Law Regulations 2015, which says: “The common law of England (including the principles and rules of equity), as it stands from time to time, shall apply and have legal force in, and form part of the law of the Abu Dhabi Global Market”.  There are very narrow exceptions to this Article (in effect, to reflect any special factors peculiar to the ADGM), but it was agreed that none of these applied in the present case.

Lord Hope contrasted this with the DIFC: “The position in the Dubai International Financial Centre is different. Common law rules in various areas have been codified, and it is only if those rules or the laws of other relevant legal systems do not provide an answer that the laws of England and Wales are applied.”

The case concerned Ekar Holding Ltd, a start-up car sharing company registered in the ADGM.  The shareholders entered into an agreement which gave the majority shareholders the right to serve a drag-along notice requiring the minority to join in a sale of the share capital to a bona fide purchaser who made an offer on arm’s length terms.  The majority shareholders served a notice requiring the minority to sell their shares for a total of USD 1.

The trial judge, Justice William Stone SBS KC, concluded that the majority shareholders and the purchaser were both controlled by the Defendant Ali Hashemi, that the purchaser was not bona fide and that the offer was not on arm’s length terms.  However, although he held that the majority shareholders had acted in breach of the shareholders’ agreement, he dismissed the claim against Mr Hashemi for the tort of “unlawful means” conspiracy on the ground that Mr Hashemi had relied on legal advice.

In reaching that conclusion, Justice Stone considered a line of English cases culminating in The Racing Partnership v Done Bros Ltd [2021] Ch 233.  In that case the majority of the Court of Appeal held that liability for conspiracy by unlawful means, where the unlawful means involved a breach of contract, did not require the claimant to prove that the defendant knew that his actions would amount to a breach of contract.  However, Justice Stone held that English law was not settled on this point and that he was entitled to follow the reasoning of the minority judgment, which concluded that knowledge was required.  He recognised the importance of the issue as to the role of precedent and he gave permission to appeal.

On appeal, Lord Hope restated the importance of precedent in English law, which provides certainty and predictability.  He analysed the very limited circumstances in which a judge applying English law is entitled to depart from a previous decision on the same point.  He said that it was not necessary for him to say whether or not he agreed with the majority decision in The Racing Partnership.   What mattered was that the majority decision had been reached after an exhaustive consideration of the earlier law.  It could not therefore be said to be per incuriam and did not fall within any of the limited exceptions to the operation of precedent. “It may be that some of the reasoning can be criticised. But we do not need to pursue that point, as faulty reasoning does not bring the case within the exception.”

This judgment is likely to enhance still further the attractiveness of the ADGM Court as forum for dispute resolution.

David Halpern KC of 4 New Square Chambers acted for the successful Appellants, instructed by Al Tamimi & Co.

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David Halpern KC

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