P.R.I.M.E. Finance Panel of Recognized International Market Experts in Finance The role of experts in complex financial cases: DIFC Court case study (Al Khorafi v Bank Sarasin) Presentation by PD Dr. Thomas Werlen 2016 P.R.I.M.E. Finance Annual Conference 25 & 26 January, Peace Palace, The Hague

I.The Dubai International Financial Centre (DIFC) Court … II.… heard a dispute involving alleged misselling of investment instruments to a retail customer. III.The multifaceted factual and legal pattern required involvement of foreign law experts … IV.… raising a number of issues, including … V.… expert accountability, … VI.… rights of the parties and the Court’s discretion, … VII.… and collaboration between experts of opposing sides, … VIII.… exposing advantages and risks of the DIFC regime. Agenda 2

I. The Dubai International Financial Centre (DIFC) Court … DIFC is an economic zone with its own legal system and courts Activities of banking and financial institutions in the DIFC are regulated by the Dubai Financial Services Authority (DFSA) Legislative system is consistent with English Common law; laws and regulations are written in English and defer to English law in the event of ambiguity DIFC courts have exclusive jurisdiction over Civil or commercial disputes involving the DIFC or any entity or business established in the DIFC Civil or commercial disputes arising out of or related to a contract that has been executed in the DIFC 3

In late 2009, the Al Khorafi family (Claimants) brought proceedings against Bank Sarasin & Co Ltd. (Swiss entity) and Bank Sarasin-Alpen ME Ltd. (DIFC entity) (Defendants) to recover substantial losses after structured products Claimants had bought were liquidated. Claimants alleged that (1) Sarasin’s DIFC entity was in breach of contract, negligent and guilty of misrepresentation in advising Claimants that the products sold were suitable for their investment objectives, and in breach of the DFSA regulations under which it was authorized to offer financial services; and (2) that Sarasin’s Swiss entity acted in breach of DIFC regulatory law in carrying on an unauthorized financial services business within the DIFC, and was itself in breach of contract by operation of Swiss law and vicariously liable for Sarasin’s DIFC entity’s negligence and misrepresentation under DIFC law. The Court held that Sarasin’s DIFC entity had been in breach of its regulatory obligations and was liable to pay compensation to Claimants, and that the Swiss entity had acted in breach of the regulatory law and was also liable to pay compensation to Claimants. Defendants have been ordered to pay a total sum of USD 70m to Claimants II. … heard a dispute involving alleged misselling of investment instruments to a retail customer. 4

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“119. On balance, however, we have come to the conclusion that this is one of those exceptional cases where the court should exercise its discretion against enforcing the jurisdiction clause and should permit the proceedings against Sarasin Switzerland to continue in this Court which we consider to be the appropriate forum in the interests of justice, convenience and fairness. To the extent that there will need to be consideration by the DIFC Court of relevant principles of Swiss Law, expert evidence can be called to enable the court to give effect to the choice of Swiss Law in the contracts.” Decision of 5 January 2012, CFI 026/2009 and CA 003/2011 Swiss law expert for Claimants: PD Dr. Thomas Werlen Swiss law expert for Defendants: Prof. Dr. Peter Nobel III. The multifaceted factual and legal pattern required involvement of foreign law experts … 6

Involvement of experts is governed by Part 31 of the DIFC Court Rules Parties are further referred for guidance to the “Protocol for the Instruction of Experts to give evidence in civil claims” issued by the English Civil Justice Council IV. … raising a number of issues, including … 7

Court Rules – Overriding duty to the Court 31.3 It is the duty of an expert to help the Court on the matters within his expertise This duty overrides any obligation to the person from whom he has received instructions or by whom he is paid Expert evidence should be the independent product of the expert uninfluenced by the pressures of litigation. V. … expert accountability, … 8

Court Rules – Court’s power to restrict expert evidence Expert evidence shall be restricted to that which is reasonably required to resolve the proceedings No party may call an expert or put in evidence an expert’s report without the Court’s permission Any application for permission to call an expert witness or serve an expert’s report should normally be made at the Case Management Conference. VI. … rights of the parties and the Court’s discretion, … 9

Court Rules – Discussions between experts The Court will normally direct a meeting or meetings of expert witnesses (including any Court-appointed expert) before trial. Sometimes it may be useful for there to be further meetings during the trial itself. The Court may, at any stage, direct a discussion between experts for the purpose of requiring the experts to: 1)identify and discuss the expert issues in the proceedings; and 2)decide, with the benefit of that discussion, on which expert issues they share or can come to share the same expert opinion and on which expert issues there remains a difference of expert opinion between them (and what that difference is) The Court may specify the issues which the experts must discuss Neither the parties nor their legal representatives should seek to restrict the freedom of experts to identify and acknowledge the expert issues on which they agree at, or following further consideration after, meetings of experts The content of the discussion between the experts shall not be referred to at the trial unless the parties agree. VII. … and collaboration between experts of opposing sides. 10

Conflict of interest between party and Court regarding allocation of costs Obligation of expert towards party and Court By agreeing among themselves, experts can prevent the Court from learning about and taking into consideration certain issues Proceedings expose key role of experts in complex international disputes VIII. … exposing advantages and risks of the DIFC regime. 11