A recent decision by the Dubai International Financial Centre (DIFC) Courts offers important lessons for employers on the enforceability of non-compete clauses across the DIFC and onshore United Arab Emirates (UAE).
The dispute arose as David Lee Rapp and Prime Energy Markets FZCO sought to prevent a former employee from joining a rival firm by enforcing a suite of restrictive covenants.
On 18 March in an oral judgment the court of first instance refused the application by Rapp and Prime Energy Markets against former employee, Ahria Esphandiar Roushanbakhti, who joined Axis Limited, a DIFC-registered energy derivatives firm.
The judge rejected the request for an interim injunction to enforce non-compete clauses against the former employee and Axis, which were both represented by Pinsent Masons, finding that the non-compete in the shareholders’ agreement did not apply to the former employee as he had never been a shareholder.
The decision offers a number of important lessons on the enforceability of non-compete injunctions for employers operating across the DIFC and onshore UAE.
In this case, the shareholders agreement’s (SHA) non-compete clause required the relevant party to be, or to have been, a holder of B Shares. Since Roushanbakhti had never become a holder of B Shares, the covenant could not apply. The court said this was plainly unenforceable and disposed of this claim at the threshold of contractual construction, without needing to reach the balance of...
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