This case involved a company, Ekar Holding Limited, which was a car sharing company registered in the ADGM.

In 2020, in line with a Shareholders’ agreement, the company’s minority shareholders were issued with a ‘Drag Along Notice’ by its majority shareholders, which would have had the effect of forcing the minority shareholders to sell their shareholding to a third party purchaser.

The minority shareholders challenged the validity of this Drag Along Notice, arguing that the purchaser was not a ‘bona fide purchase’ but was actually the majority shareholder, who was acting through another company.

The minority shareholders claimed that this was a breach of the shareholders’ agreement and was conspiracy by unlawful means to breach the agreement.

The judge in the Court of First Instance decision held, after hearing the evidence, that the majority shareholder lacked knowledge that their conduct was unlawful and therefore dismissed the claim.

The judge declined to follow a 2021 decision of the Racing Partnership v Done Bros [2021] Ch 233, which was a decision by the courts in England and Wales in which the claimant did not have to prove the defendant knew his actions would be a breach of contract.

The judge at first instance held that English Law was not settled on this issue and that although the case was relevant, the ADGM was not bound by it.

The case was then appealed to the ADGM Court of Appeal on the grounds that the Court had erred in law in holding that it was not bound by a decision of the English Court of Appeal.

The Court had erred in law in holding that it was not bound to follow the decision of the majority of the Court of Appeal in the Racing Partnership case. In addition, it had erred in law in holding that liability for ‘unlawful means’ conspiracy was dependent on the Claimant proving that the tortfeasor knew that the proposed acts would amount to a breach of contract.

Article 1(1) of ADGM Application of English Law Regulations 2015 stated: “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”.

DECISION

The ADGM Court of Appeal decided the Drag Notice issued on 27 April 2020 was invalid.

The expert witnesses retained by the Claimants and the Defendants (with the exception of the Seventh Defendant) were ordered to reconvene, and if possible agree, their further assessment of the value of the Claimants’ individual shareholdings in Ekar Holding Limited as at 27 April 2020.

The Court of Appeal disagreed with the Court of First Instance and held that Article 1(1) of ADGM Application of English Law Regulations 2015 required the ADGM Courts to directly apply English law principles, including the doctrine of precedent and that the decision in the Racing Partnership case was indeed binding authority on the ADGM.

WHY WAS IT IMPORTANT?

This case confirms the direct enforceability of English common law in the ADGM.

The decision is significant as it strengthens the ADGM Court’s global position as a court of certainty and predictability as it is required to apply English law set by precedent.

This gives foreign investors and businesses a sense of confidence in the ADGM Courts as a dispute resolution forum and will likely attract further investment within this financial freezone in the future.

On 3 October 2022, the UAE enacted Federal Decree-Law No.42, which will come into effect as of 2 January 2023, the new UAE Civil Procedures Law (the “New Law”).

The New Law amends certain procedures in civil/commercial courts, with the purpose of making the litigation process a more streamlined and efficient.

Below is a summary of the key changes of the New Law:

Official Language of Court Proceedings:

The official language of UAE Courts is still Arabic language. However, the New Law provides an exception where cases may be held in the English language in certain circumstances:

• Where the Vice-President of the Federal Judicial Council or the supervising judge of the local judicial authority issues a decision to direct specific judicial circuits to hold the case proceedings in the English language, including the written submissions;
• If so directed, all court proceedings, decisions, parties and witness statements, statement of claims, court memoranda, supporting evidence/documents, and verdicts shall be in the English language;
• In case the Court decides to hear parties’ or witnesses’ statements whose language is not the English language, it must be under oath and through a certified interpreter according to the rules of the decision issued by the Vice-President or the supervising judge.

Abu Dhabi’s Court of First Instance New Jurisdiction:

The New Law gives the Abu Dhabi’s Courts exclusive jurisdiction over all cases where a ministry or any federal entity is a party to the case.

Experts:

The process of appointing an expert by the Court during case management has changed. The New Law provided that during the case management stage, the supervising judge may request the assistance of one of the local or international experts to prepare or review the reports submitted to the court as part of the case. The court will discuss the outcome of such reports with the appointed expert and have the right to instruct them to amend or add further points to their reports.

It is expected that further regulations will be issued to deal with this in more detail, for example who would bear the costs of appointing experts.

Court of Appeal Council Chambers:

 Similar to Cassation Court, Courts of Appeal will have the right to review the Appeal challenges in the Council Chambers upon referral to them without the need for the legal representatives to attend or require the submission of any oral/written pleadings.

The Appeal Courts will have the authority to either issue a decision or schedule hearings for the Appeal on the merits.

Cassation Appeal Period:

One of the significant amendments of the New Law is that appealing before the Court of Cassation shall now be within 30 days, instead of 60 days, from the issuance date of the Appeal judgment.

Cassation Judgements Revocation:

As of 2 January 2022, the Court of Cassation may rescind their decisions or verdicts at their sole discretion or following a request submitted by one of the parties.

Article 190 of the New Law stated that the Court of Cassation may rescind its own decisions/judgments in one of the following situations:

• If the Court or its associated entities made a procedural error that affected the final result of the decision/judgment;
• If the decision/judgment was issued based on a revoked law and applying the applicable law will change the final result of the decision/judgment; and
• If the judgment contradicts any of the judicial principles set out by the Court of Cassation Chambers or is contrary to the principles established by the Court of Cassation.

The rescindment request shall be submitted to the relevant Court (Federal Supreme Court or Court of Cassation) with a deposit of AED 20,000, which will be reviewed by a committee that consists of five (5) judges.

Provisional Attachments:

The New Law grants those who have First Instance Judgements in their favor the right to proceed with preventive procedures such as provisional attachment.

The New Law provided a new time restriction on applying for provisional attachment. The party who has a provisional attachment in their favor is now obliged to commence executing the appeal judgment within a timespan of Thirty (30) days of the attachment’s issuance. Otherwise, the imposed provisional attachment shall be void by law.

Execution Grace Period:

According to the New Law, the debtor has a grace period of seven (7) days (instead of 15 days) from the date of a successful notification in order to amicably clear the debt to avoid any provisional attachment procedures.

In summary, the New Law has been introduced in order to make the process more efficient. Time will tell how these amendments will work in practice.