The Dubai International Financial Centre is involved in a legal confrontation with Brookfield, the Canadian developer, over alleged defects in the construction of The Gate building 13 years ago.
Part of the open space beneath The Gate – used for ceremonial and social events and as a public thoroughfare – has been closed since last October, when a marble slab fell from the building.
Brookfield has been an important partner for DIFC and for Dubai. In addition to The Gate building, which it built in 2003, it is currently developing the $1bn ICD Brookfield Place Tower in DIFC in a joint venture with Investment Corporation of Dubai, the emirate’s biggest investment group.
Details of the dispute emerged in a ruling by Justice Sir Jeremy Cooke, a judge at DIFC Courts, last month. The DIFC Court involvement came about after Brookfield Multiplex, the UAE subsidiary, sought an order there to stop DIFC taking further action in the Court of Dubai of First Instance, in the jurisdiction of the Emirate of Dubai.
Justice Cooke said in his ruling: “it was on 21 October 2015 that a stone slab fell from cladding on the south side of the Gate building. Subsequent investigation by the defendants [DIFC Investments and DIFC Authority] using the engineers ARUP led to the allegation that the incident was caused by defective workmanship which was ‘common and widespread.’ Brookfield denies liability.
“The defendants [DIFC] express concern that further stone slabs could fall from the building. The area around the building has been cordoned off,” he noted.
In February, DIFC wrote to Brookfield and the architects Gensler “seeking an acknowledgement of liability, proposals for remedying the alleged defects and stating that it intended to apply to the Dubai Courts for the appointment of an expert to inspect and report on the affected parts of the Gate building,” Justice Cooke’s ruling explained.
One lawyer said that DIFC applied to the Dubai Court, rather than its own legal arena, because it believed that was the appropriate jurisdiction as the contract between it and Brookfield was signed before the financial centre was set up in 2004.
Dubai Court appointed an expert who was due to report back by late June. The expert is believed to have sought an extension in order to complete the study.
Justice Cooke’s ruling says that in its claim before the Dubai Court, “DIFC pleaded the construction contract and the collapse of marble cladding on the south side of the Gate Building, ‘endangering the safety and lives of workers and visitors. This was due to various material defects in the works performed by Brookfield and furthermore constitutes negligence and error on the part of Gensler hired to design and oversee the project’.
“Furthermore, DIFCI alleged that ‘the defendants committed irregularities in technical and engineering works which caused substantial damage to the building and endangered the safety of the building and its workers’. “
Brookfield, advised by the Dubai office of British law firm Addleshaw Goddard, argued that the DIFC’s recourse to non-DIFC courts breached existing arbitration agreements between them, and raised issues of jurisdiction that required the “seat of the arbitration” to be determined.
Brookfield “sought a declaration that, subject to the arbitration agreement, the DIFC Courts have exclusive jurisdiction over the dispute between it and the two defendants and that the non-DIFC Courts of Dubai have no such jurisdiction.”
In his conclusion, Justice Cooke ruled that there is a binding arbitration agreement between DIFC and Brookfield, but declined to issue an interim anti-suit injunction against DIFC preventing it from taking action in the Dubai Court, as had been requested by Brookfield. He said that the DIFC Court does not have the jurisdiction to grant such an injunction.
“In essence DIFC have successfully resisted the granting of an interim anti-suit injunction but did not succeed on all the points it argued and Brookfield has succeeded in establishing that there is a binding arbitration agreement to which DIFC will adhere, which only became clear in the run up to the hearing and at the hearing itself,” he said.
He added: “The issue of the seat of the arbitration will await another day. The lion’s share of costs should, in my judgment, subject to any peculiarities of which I am not aware, fall to be paid by Brookfield.”
Nobody from DIFC, nor from their legal advisers Al Tamimi & Co, was prepared to comment on the ongoing legal case. The lawyers for Brookfield also declined to comment, as did a representative of Gensler.
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