Background
CVE, a Dubai-incorporated construction company, retained Kennedys Dubai LLP, a UK-regulated law firm with a Dubai office, to pursue a claim against Emaar Properties PJSC for losses allegedly arising from a large residential construction project. The engagement letter, sent on 21 February 2013, included a liability cap of £3 million and contained the statement: “I do not anticipate that there is any great likelihood of disagreement arising out of these terms and conditions, but if any aspect of them is unclear, please let me know.”
CVE successfully recovered AED 22.68 million (approximately £4.5 million) plus interest at 9% in the underlying Emaar Claim trial in 2014. However, CVE pursued subsequent appeals and claims seeking recovery of an additional £15.8 million. CVE now alleges that Kennedys Dubai breached its retainer obligations by failing to recover these additional sums and claims that the £3 million liability cap is unenforceable.
The case raises four preliminary issues, with the first concerning whether section 27 of the Unfair Contracts Terms Act 1977 (UCTA)—which disapplies UK consumer protections where a contract is governed by foreign law by choice of the parties—operates to exclude UCTA’s application to this retainer.
The Court’s Holding
The court’s decision addresses whether Kennedys Dubai constitutes a “branch” within the meaning of Article 19(2) of the Rome I Regulation (EU Regulation 593/2008). This determination is critical because if Kennedys Dubai is a branch, its habitual residence is Dubai (the location of the branch), meaning Dubai law would apply absent the parties’ choice of English law, thereby triggering section 27 of UCTA and excluding UK protective provisions.
Caroline Shea KC, sitting as Deputy Judge, undertook a comprehensive analysis of European Court of Justice authority on what constitutes a “branch, agency or other establishment” under EU conflict of laws instruments. The court identified two essential criteria: (1) a centre of operations with the appearance of permanency, management, and material equipment to negotiate business with third parties; and (2) operations that relate to the management of the branch or commitments entered into on behalf of the parent body.
The court noted that the phrase “branch, agency or other establishment” in Rome I must be interpreted autonomously according to principles of legal certainty, and that the derogation from the basic rule establishing habitual residence must be interpreted strictly. The opinion extensively reviewed ECJ case law from Somafer, Blanckaert & Willems, Gefion, and Mahamdia to establish interpretive frameworks for determining when an entity qualifies as a branch under conflict of laws provisions.
Key Takeaways
- The enforceability of liability caps in cross-border legal services agreements turns critically on conflict of laws principles and whether foreign protective legislation applies
- A UK law firm’s foreign office may not constitute a “branch” for Rome I purposes merely because it has an address and engages in legal work; the determination requires proof of permanency, management infrastructure, and negotiating capacity as an extension of the parent body
- Statements in engagement letters regarding the clarity and review of terms may constitute actionable misrepresentations if they induce a client not to carefully review restrictive clauses (a claim CVE advances as Issue (4))
- The Rome I Regulation’s autonomous interpretation doctrine ensures that conflict of laws standards are applied consistently across EU Member States’ jurisprudence, even as UK courts develop independent application post-Brexit
Why It Matters
This decision addresses a critical intersection between cross-border legal services, international consumer protection, and conflict of laws. For law firms operating internationally, the case illustrates that liability caps may not be enforceable against clients if UK protective legislation (UCTA) applies. The outcome will determine whether UK courts can enforce UCTA’s reasonableness test against international law firm retainers or whether choice-of-law clauses can strip clients of these protections by invoking foreign law.
The case also raises important questions about professional responsibility in cross-border engagements. CVE’s misrepresentation claim—based on the statement that no disagreement over terms was anticipated—signals that courts may scrutinize how law firms present engagement terms to sophisticated international clients. If successful, this theory could establish liability for statements in engagement letters that discourage careful review of restrictive provisions, fundamentally affecting how international law firms draft and communicate client engagement terms.