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Bank's hybrid jurisdiction clause upheld

In a DIFC Court case where Allen & Overy is acting for the claimant bank against a defaulting borrower, the DIFC Court upheld the validity and enforceability under UAE law of a dispute resolution clause which provided for disputes to be referred to the English courts but gave the bank a unilateral option to litigate in any other courts (commonly known as a hybrid jurisdiction clause).

The defendant borrower had challenged jurisdiction on the basis that the dispute resolution clause was invalid under French law and contrary to public policy under UAE law. In rejecting the challenge, H.E. Justice Shamlan Al Sawalehi held that the clause was valid under UAE law and that it was not contrary to UAE public policy. 

Given the widespread use of hybrid jurisdiction clauses in finance agreements in the UAE, this decision provides some comfort to banks doing business there. However, uncertainty will remain until there is a decision from the onshore UAE courts which reaches the same conclusion.

Further information

This case summary is part of the Allen & Overy Legal & Regulatory Risk Note, a quarterly publication.  For more information please contact Karen Birch – karen.birch@allenovery.com, or tel +44 20 3088 3710.

Legal and Regulatory Risk Note
Middle East