Posts Tagged ‘Middle East’

“Between Iraq and a Hard Place”: The problem of non-ratification of the New York Convention in Baghdad

by Noor Kadhim

Queen Mary University of London,
for YIAG

Setting the scene

Iraq currently ranks with Libya and Yemen amongst those recalcitrant Arab states that have thus far failed to ratify the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention or Convention). This state of affairs and the inadequacy of the country’s domestic and international arbitration legal regime have been addressed numerous times by academics, politicians and lawyers over the last thirty years.

However, the subject of Iraq’s non-ratification of the Convention has recently achieved a heightened significance, for two reasons:

(1) This month, it is understood that on-site workshops to train senior members of Iraq’s judiciary in Baghdad, on arbitration and other matters have been organised by the Iraqi government. In the context of the creation of the new specialised “Commercial Courts”, delivering education on the effectiveness of international private methods of dispute settlement is understood to be one of the Iraqi government’s priority tasks.

(2) In late 2013, anecdotal evidence revealed that a law had been passed by the Iraqi Parliament permitting Iraq’s ratification of the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States of 1965 (ICSID). Although this could not be confirmed with the ICSID Secretariat, the unofficial understanding is that the news is correct.

The Convention is arguably more relevant and less controversial for Iraq, legally and politically, than signing up to ICSID. Against this backdrop, the absence of concrete progress on the ratification of the Convention becomes pertinent. Below, I will briefly consider:

(A) the current regime under international law for foreign commercial arbitration awards in Iraq;
(B) the Iraqi domestic law applicable to the enforcement of international awards; and
(C) the reasons that have apparently been communicated for failing to ratify the Convention.

In seeking to address the concerns in (C), I will not address the position of investment arbitration, or foreign awards concerning Iraqi parties or state-owned entities where Iraq is the seat of arbitration.

A. The international regime for enforcement of foreign awards.

On the international level, Iraq has ratified one protocol and three treaties on the recognition and enforcement of foreign judgments and awards. These are:

(i) The Arab Convention on the Enforcement of Foreign Judgments and Arbitral Awards of 1952 (Arab League Convention).

(ii) The Riyadh Convention on Judicial Cooperation of 1983 (Riyadh Convention).

(iii) The Arab (Amman) Convention on Commercial Arbitration of 1987 (Amman Convention).

(iv) The Geneva Protocol on Arbitration Clauses of 1923 (Geneva Protocol).

The Arab League and Riyadh Conventions are regional treaties, relevant only within the Middle East context. The Riyadh Convention, which superseded that of the Arab League, prevents examination of the merits of arbitrated disputes whose awards are submitted for enforcement to the courts of signatory states. It was a progressive treaty for Arab states at the time, but given that a significant majority of Middle Eastern states have now acceded to the Convention, the Riyadh Convention is no longer as relevant.

According to my understanding, the Amman Convention has never been operative. To date, its signatories have failed to establish the Arbitration Centre in Rabat, Morocco as initially envisaged. To my knowledge, no arbitration case has been decided under its auspices since its entry into force.

Finally, under the Geneva Protocol, Iraq agreed merely to recognise the “validity of an arbitration agreement”, as opposed to guarantee the enforcement of an award made pursuant to it, under Article 1. Under Article 3, it undertakes to “ensure the execution” of awards made on its territory only “in accordance with the provisions of its national laws”. As I mentioned above, Iraq’s arbitration laws are far from satisfactory or clear. In any event, the Geneva Protocol and the Geneva Convention of 1927, to which Iraq is not a party, were overtaken by the regime under the Convention.

B. The national regime for enforcement of foreign awards.

Where one of the regional enforcement treaties or a bilateral enforcement treaty do not apply, enforcement of foreign arbitration awards must be carried out under Iraqi federal law. As a civil law jurisdiction, the majority of Iraq’s laws are codified. Those forming the backbone of the system are the Civil Code of 1951 (the Civil Code) and the Code of Civil Procedure of 1969 (the CPC). Although many laws were amended or repealed during Paul Bremer’s administration following the 2003 intervention, including the investment laws, the Civil Code and CPC were not amongst these.

Articles 251 to 276 of the CPC govern arbitration proceedings. The CPC makes no distinction between domestic and international arbitration. In the absence of provisions in relation to enforcement of foreign arbitral awards, and where the regional treaties do not apply, the Enforcement of Foreign Judgments Act, No. 30 of 1928 (the EFJA) has been adapted for the function. Indeed, the consensus amongst long-practising Iraqi lawyers is that the EFJA is the only avenue for enforcement of foreign awards. This means that the award must first be converted into a foreign judgment in the courts of the seat. An ICC award cannot, for example, directly be enforced in the Iraqi courts, even if it has been approved by the ICC Court in Paris as is required.

If the Iraqi courts continued to apply the EFJA to arbitral awards, the practice would be problematic in relation to foreign awards that do not come from a state that is accepted under the EFJA. Article 11 of the EFJA states that the act applies only to foreign judgments coming from countries that have a bilateral agreement with Iraq, which countries must specifically be named in regulations issued by the Iraqi government. Finally, the EFJA is subject to a condition of reciprocity.

To my knowledge, there is neither a definitive recent statement from the courts on the issue, nor adequate clarification in the Iraqi law, as to the EFJA’s application. To add an extra layer of ambiguity, the EFJA’s potential interaction with the CPC and the Civil Code is unclear. Therefore, parties cannot be certain that the provisions of Iraq’s domestic arbitration laws shall not be applied to the enforcement of a foreign arbitral award in addition to the EFJA.

In any event, even if the Iraqis were to ratify the Convention, this may not solve the potential scenario of misunderstanding of a judge who incorrectly applies domestic law provisions to the foreign enforcement process. Taking a recent example, a decision from Qatar’s Court of Cassation, in September 2013, betrayed the judge’s misunderstanding of the limited nature of the grounds for refusal of an award under Article V of the Convention. The court denied validity of a foreign-seated award approved by the ICC Court, because the arbitrators who signed the award had failed to declare that it was being rendered “in the name of the Emir of Qatar”. This procedural condition would have been required for domestic Qatari awards, but not under the Convention (see Minas Katchadourian’s post in Kluwer Blog, entry of 23 September 2013: “Controversial Ruling of the Qatari Court of Cassation Regarding Arbitral Awards“). Other decisions in the Gulf region, including in the Dubai courts, have disappointingly gone the same way, nullifying foreign awards for procedural deficiencies that should have been applicable only for domestic-seated awards.

Overall, the Iraqi courts retain significant power in relation to the international enforcement process. Enforcement is ultimately subject to the national court’s discretion, which may approve or refuse an award either in whole or in part, send it back to the arbitration tribunal for a recast decision or even take it upon itself to decide the case on its merits. This creates problems of legal certainty and affects the tribunal’s decision, which should have binding effect.

Furthermore, an Iraqi court decision that purports to ratify an international arbitration award is itself subject to appeal, under Article 275. In other words, an award does not even achieve finality when it passes the first hurdle at the judicial recognition stage.

C. Iraq’s concerns about ratifying the New York Convention.

I am aware of three main areas underlying the Iraqi government’s concerns about ratifying the Convention. These are as follows:

(i) The Convention would retroactively apply to causes of action arising prior to its ratification.

(ii) Iraq suffers from a lack of experience arbitrators and judges.

(iii) There is a perceived bias in “Western” international arbitration against Arab states.

These issues are addressed below.

(i) Retroactivity

The fear is that the Convention will open the floodgates to allow claims under arbitration agreements signed before the date of accession. The permissibility of a non-retroactivity reservation is not settled. However, it has not prevented other states from applying it, perhaps relying on Article 20(2) of the Vienna Convention on the Law of Treaties of 1969 for justification. For example, the Democratic Republic of the Congo used the “retroactivity” condition when it acceded in 2013.

(ii) Lack of “specialist arbitration” judges and practitioners in Iraq

The concern is that Iraq’s judges are likely to be required to assess the validity of an award from the perspective of a foreign legal system with which they may be unfamiliar. That is true. But so what? Iraq’s judiciary and legal profession should be in no more difficult a predicament here than, for example, judges and lawyers in foreign systems faced with the interpretation of specific aspects of an obscure religious or secular law, or even another unfamiliar foreign law. The practice of arbitration is international, and specialists from whom an expert opinion may be sought may be based anywhere in the world.

Second, that few arbitration specialists exist in Iraq makes it vital that the Convention be ratified. The CPC, as highlighted above, does not distinguish between domestic and foreign arbitral awards. Moreover, it is uncertain, and contains gaps for judges or lawyers who attempt to apply or rely on it. The EFJA is archaic, and is unsuitable for international arbitration awards. In this respect, the need for ratification of the Convention is, in my view, self-explanatory.

(iii) Perceived bias

This concern may go back to some of the unfavourable decisions rendered in relation to oil concession disputes, in the Gulf region. An often-cited case is that of Petroleum Development (Trucial Coast) Ltd v Sheikh of Abu Dhabi,1 where English law was applied to a dispute, apparently in violation of the parties’ agreement to apply the Sharia law. However, the regressive attitude towards arbitration is changing in the Arab states, as they are gradually adapting to the needs of international trade. Since the Sheikh of Abu Dhabi decision, and the famous Aramco case,2 there has been a rise in arms-length commercial exchange of goods and services between tWestern and Eastern-based parties. Decisions of the Iraqi executive should not be affected by a handful of decisions many years ago that seemed to go the wrong way.

Conclusion

In setting the scene for ratification of the Convention, Iraq’s government is edging towards the application of accepted international standards and norms in the arbitration field. A new arbitration law that is apparently based on the UNCITRAL Model Law of 1985 is currently under discussion at the Iraqi executive level. Creating valid and credible institutions will also assist in addressing concerns in relation to bias and the lack of expertise. In Kurdistan, for example, a project is currently in process to establish the semi-autonomous region’s first ‘Kurdish Arbitration Centre’. As for Iraq as a whole, the ratification of the Convention simultaneously represents both the sine qua non and the final step in the gradual process towards an arbitration-friendly climate.


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  1. International Law Reports, I.L.R. (18) 149 (1953).
  2. Saudi Arabia v Arabian American Oil Company (Aramco) ARAMCO-Award, I.L.R. (17) 117 (1963).

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Amendment to DIFC Arbitration Law brings DIFC into line with the New York Convention

by Gordon Blanke

Baker & McKenzie Habib Al Mulla

A recent amendment to Dubai International Financial Centre (DIFC) Law No. 1 of 2008, the DIFC Arbitration Law, brings the DIFC into line with the New York Convention (on the recognition and enforcement of foreign arbitral awards, done in New York on 10 June 1958). DIFC Law No. 6 of 2013, the Arbitration Law Amendment Law (the “Amendment Law”), which implements the amendment, was adopted on 15 December 2013. In the terms of the DIFC Authority’s own coverage, “[t]he amendments to the Arbitration Law 2008 have been made to ensure alignment of DIFC to the New York Convention, which require[s] a court of a member state to have the obligation to dismiss or stay an action, upon request of a party, in a matter which is the subject of a valid arbitration agreement.” (see http://www.difc.ae/news/difc-authority-announces-enactment-difc-laws-amendment-law-2013). More specifically, the introduced amendments focus on Article 7 of the DIFC Arbitration Law and ensure that Article 13 of the DIFC Arbitration Law also applies “where the Seat of Arbitration is one other than the DIFC” (see subparagraph (2) of Article 7 of the Amendment Law) and “where no Seat has been designated or determined” (see subparagraph (3) of Article 7 of the Amendment Law). Article 13 in turn provides in pertinent part that “[i]f an action is brought before the DIFC Court in a matter which is the subject of an Arbitration Agreement, the DIFC Court shall, if a party so requests not later than when submitting his first amendment on the substance of the dispute, dismiss or stay such action unless it finds that the Arbitration Agreement is null and void, inoperable or incapable of being performed.”

Attentive readers of the present Blog will remember that the previous setting of Article 13, which did not expressly provide for the application of this Article to arbitrations seated outside the DIFC, provoked a stand-off between Justice Williams QC (see Claim No. CFI 004/2012 – International Electromechanical Services Co. LLC v. (1) Al Fattan Engineering LLC and (2) Al Fattan Properties LLC, ruling of 14 October 2012) and Sir David Steel J (see Claim No. CFI 019/2010 – Injazat Capital Limited and Injazat Technology Fund B.S.C. v. Denton Wilde Sapte & Co, ruling of 6 March 2012) in the DIFC Court of First Instance in 2012. To recap, at the time, Justice Williams QC and Sir David issued divergent rulings on the interpretation of the scope of application of Article 13 of the DIFC Arbitration Law: On Sir David’s interpretation, which was based on a literal reading of Article 7 of the DIFC Law, the DIFC Courts did not have the power to stay its own proceedings in favour of arbitration proceedings seated outside the DIFC; Justice Williams QC, however, saved the day by finding that the DIFC Courts had an inherent jurisdiction to stay in favour of arbitration outside the DIFC irrespective of the seemingly restrictive wording of Article 7. By way of explanation, it will be worth repeating what I stated in my previous blog on the subject-matter.

Article II(3) of the New York Convention imposes upon Convention countries – including the United Arab Emirates, which joined the Convention in 2006 – an obligation to recognize arbitration agreements and give to them precedence over pending litigation that has been brought in another Convention country in violation of an existing foreign arbitration clause, unless this latter is “null and void, inoperative or incapable of being performed”. Even though Sir David and Justice Williams QC coincided in their view that the terms of Article 13 of the DIFC Arbitration Law, which – read together with Article 7 – confine a DIFC Court’s obligation to stay in favour of domestic, i.e. arbitrations seated in the DIFC only, Justice Williams QC found – contrary to Sir David – that the DIFC Courts did retain a discretion to stay in the presence of foreign or non-DIFC arbitration proceedings on the basis of a surviving “inherent jurisdiction to stay”. According to Justice Williams, this inherent jurisdiction had not been displaced by Article 7(2), which did not contain any express wording to that effect, nor by Article 10 of the same Law, according to which “in matters governed by this law, no Court shall intervene except to the extent so provided in this Law.” As a result, the surviving inherent jurisdiction of the DIFC Courts could be invoked to stay in favour of non-DIFC arbitration and more specifically to comply with obligations to stay under international enforcement instruments, such as the New York Convention.

The present amendment to Article 7 has the salubrious effect of turning into an express power of the DIFC Court what previously could only be derived by implication from the “inherent jurisdiction to stay” of the DIFC Court as a common law court with English law heritage. As a result, the somewhat uncomfortable stand-off between Sir David and Justice Williams QC witnessed over the interpretation of the proper scope of application of Article 13 of the DIFC Arbitration Law in 2012 is likely to fade into the annals of history of the DIFC Courts as no more than an unfortunate incident of judicial disagreement. To be sure, going forward, international investors may rest assured that the DIFC Courts will stay their proceedings in favour of arbitration seated outside the DIFC in compliance with Article II(3) of the New York Convention, there remaining little (if any) margin for interpretation.


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The New ADCCAC Arbitration Rules: Evolution or Revolution?

by Gordon Blanke

Baker & McKenzie Habib Al Mulla

A lot of positive commentary has been lavished out on the new Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC) Arbitration Rules, which entered into force with effect from 1st September 2013. It is, of course, difficult to deny that the new Rules are a huge improvement on the old ADCCAC Regulations, as they were called in their now outdated form. The new Rules read more like a modern set of international arbitration rules, giving proper consideration to now widely-adopted modern thinking on party representation, the sequence of procedural milestones in an arbitration, the notion of the severability of the arbitration agreement, the constitution of the tribunal and the independence and impartiality of its members, the tribunal’s kompetenz-kompetenz and the tribunal’s powers more generally, the modalities for the issuance and rectification of awards and the costs of the arbitration. No doubt, taking these improvements together, they amount to more than a mere evolution of the former ADCCAC Regulations and may arguably have revolutionary potential: Essentially, the old Regulations have been entirely re-written, the title of the new Regulations being the only reminiscence of their outdated predecessor.

This being said, there are some disappointing semantic inconsistencies and procedural shortcomings in the new set of Rules, which – given the time the new Rules have taken to gestate and the expertise that should have and no doubt will have been invested into their re-drafting – are almost unforgivable.

As regards semantics, any modern user of arbitration will inevitably ask the question why on earth the new ADCCAC Rules have preserved a title that contains an antiquated reference to “procedural regulations” rather than being referenced under the more common and modern term “arbitration rules”. This discovery is so much the more surprising given that the Model Arbitration Clause set out at page 6 of the new Rules refers disputes to arbitration “in accordance with the Rules of Arbitration of Abu Dhabi Commercial Conciliation & Arbitration Centre (ADCCAC)”. Given that no such thing as the “Rules of Arbitration of Abu Dhabi Conciliation & Arbitration Centre” exist in practice (the new ADCCAC Rules officially being called the “ADCCAC Procedural Regulations of Arbitration” or the “Procedural Regulations of Arbitration of the Abu Dhabi Commercial Conciliation & Arbitration Centre”), the Model Arbitration Clause is, technically speaking, pathological. For the avoidance of doubt, the new Rules confusingly use “the Centre Rules” as a short form for the “ADCCAC Procedural Regulations of Arbitration” throughout, no reference to “Rules of Arbitration” being made anywhere in the new text. The use of the term “arbitration compromise” (possibly derived from the French “compromis”) instead of “submission agreement” in the definitions section of the new Rules in order to refer to a submission to arbitration ex post facto, i.e. after a dispute has arisen, is equally little supportive of the promotion of plain English in the practice of arbitration under the new Rules (vide Article 1 of the new Rules).

There is also no consistent use of the terms “Arbitration Tribunal” and “Arbitration Panel”. Whereas in accordance with the definitions section (vide Article 1 of the new Rules) “Arbitration Panel” is the chosen term for reference to an arbitral tribunal, the new Rules occasionally refer to “Arbitration Tribunal” instead, there being no definition in the Rules of the term “Arbitration Tribunal” (even though capitalised). A good example of this semantic inconsistency is Article 28 on issuing Arbitration Awards, which indiscriminately refers to both “Arbitration Panel” (vide Article 28.3) and “Arbitration Tribunal” (vide Article 28.5). This Article also appears to use the terms “president of the Arbitration Panel” and “Presiding Chairman of the Arbitration Tribunal” interchangeably, no definition being provided of either.

As regards procedural substance, one has to welcome – despite its obvious semantic pathologies – the introduction of an ADCCAC Model Arbitration Clause. This being said, a modern user of arbitration will find it difficult to hide his/her disappointment at the limited scope of the Model Arbitration Clause, which rather than referring “any dispute arising from or in relation to this contract” to arbitration confines any such reference to the disputes in relation to the “execution, interpretation or termination of this contract”. This wording places an unwarranted restriction on the scope ratione materiae of the Model Arbitration Clause and hence of arbitrations under that Model Arbitration Clause more specifically.

Despite the generally modern thrust of the new ADCCAC Regulations, it is a source of great disappointment that they seek to preserve the very impractical concept of “pleading sessions” (vide Article 24 of the new Rules). The concept of pleading sessions is understood to continue the practice of “open sessions”, which are the main mode of conducting proceedings before the UAE courts. It is to be hoped that modern practitioners under the Rules will interpret this Article to mean ordinary hearings within the meaning given to them in international arbitration practice.

A further source of confusion is the scope of application of the new Rules, which provides that “[t]he parties may agree upon arbitration at the Centre [i.e. the ADCCAC] in accordance with any other procedural rules, and in this case, the Centre Rules [i.e. the ADCCAC Regulations of Arbitration] shall be complementary to those agreed between the Parties.” (vide Article 2.2 of the new Rules) Essentially, this Article appears to empower the ADCCAC to administer arbitral proceedings under any other set of arbitration rules chosen by the parties in an individual reference, which – in and of itself – is not uncommon in the wider world of institutional arbitration. This being said, it also appears to impose the concurrent application of the new ADCCAC Regulation, i.e. in parallel with the set of arbitration rules chosen by the parties. This causes unpredictable difficulties in the event that the Parties’ chosen rules conflict with the provisions of the ADCCAC Regulations, raising the obvious question as to which set of rules is to prevail in the event of conflict. This being said, given their procedural detail, there would in any event seem to be little sense in the parallel application of the new ADCCAC Regulations and another set of institutional (or other) rules in one and the same arbitration proceeding.

As regards the language of the arbitration, in the event that there is disagreement between the tribunal members on the choice of language, the new Rules cryptically provide for the arbitration to be conducted in the Arabic language even if none of the members speaks Arabic. This may cause some unforeseen procedural difficulties and possibly discriminate against non-Arabic speakers in the future appointment as arbitrators in ADCCAC arbitrations.

Further, it is unfortunate that in particular in light of the recent Dubai Court of Cassation ruling on the limitations of reimbursable “costs of arbitration” within the meaning of the DIAC Arbitration Rules (vide my previous commentary of 23rd June 2013), the new Rules use the terms “arbitration costs” and “arbitration expenses” haphazardly and do not provide a definition of what type of costs it is that the Tribunal is ultimately empowered to award to a prevailing party (vide Articles 28(7) and 28(9) of the new Rules). This being said, the introduction of costs tables on arbitrator fees (vide Article 43 of the new Rules) is to be welcomed even though it remains uncertain from the wording of the Rules whether the administrative fees of the ADCCAC itself at the rate of 15% of the arbitrator fees are deductible from those fees or payable in addition (vide Article 38 of the new Rules).

To conclude on a more positive note, the Committee, which is defined as the “body in the [ADCCAC] which is in charge of administering commercial arbitration cases” (vide Article 1 of the new Rules), is empowered to rule on any procedural disputes prior to the constitution of the arbitration tribunal and subject to the tribunal’s review once constituted (vide Article 34 of the new Rules). This will most probably ensure that a party’s procedural manoeuvres to create delay prior to the constitution of the tribunal will remain of little avail. Further, the moderate registration fee of AED 1,000 for filing a claim (vide Article 36 of the new Rules) and the consideration as a “loan” of any substitute payment by a claiming party of the share of the advance on costs of a defaulting respondent (vide Article 39 of the new Rules) – thus giving credence to the respondent’s contractual obligation to pay – will no doubt provide an incentive to make reference to arbitration under the new ADCCAC Rules.

By way of conclusion, whether revolution or evolution, the new ADCCAC Procedural Regulations of Arbitration mark a sea change on the arbitration landscape of the Emirate of Abu Dhabi and the UAE more generally. It is to be hoped that the semantic and procedural shortcomings discussed above will not affect the practice of arbitration under the new Rules.


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Abu Dhabi Arbitration Centre Issues its New List of Arbitration Rules

by Khalil Mechantaf

Baker & McKenzie

On 27 August 2013, the Abu Dhabi Centre for Conciliation and Commercial Arbitration (the “Centre”), based in Abu Dhabi Chamber of Commerce and Industry, presented its new list of arbitration rules (the “Rules”) effective as of 1st October 2013, following an extension of one month from the date that was initially perceived under the Rules based on information provided by the Centre.

The previous rules were considered in many aspects as outdated and unable to cope with the latest arbitration developments taking place in the United Arab Emirates (“UAE”), i.e. court decisions applying the provisions of the New York Convention in force since 2006, highly recognised arbitration centres such as the Dubai International Arbitration Centre (“DIAC”) and Dubai International Financial Centre (“DIFC”). The Rules will undoubtedly upgrade the level of arbitration proceedings taking place in the Centre, noting that most transactions with governmental entities based in Abu Dhabi apply arbitration clauses referring to the Centre as their most preferred dispute resolution hub.

The Rules present a significant renovation of the prior version of the Centre’s list of arbitration issued pursuant to the Centre’s resolution No. (7) of 3rd January 1993, and bring changes that should be taken into account by the legal community.

Scope of Application

The Rules shall apply if the parties agree in writing to refer their current or future disputes to arbitration at the Centre (Article 2). The form of arbitration clause under the Rules is consistent with the regulatory approach under UAE Civil Procedures Code codifying the mandatory requirement of arbitration agreements being concluded only in writing and signed by contracting parties (Article 203(2)). The parties may agree to hold their arbitration proceedings at the Centre in accordance with any other procedural rules e.g. the arbitration rules of the International Chamber of Commerce (“ICC”). In this case the Rules shall be complementary to those agreed upon between the parties.

Party Representatives

The Rules allow the parties to select their representatives at any stage of the proceedings from among legal practitioners or any other representatives, without providing for a requirement to submit any proof of authority (Article 3). Thus, confirming the principle of party autonomy in allowing the parties to choose their own representatives.

Effect of Arbitration Agreement

In an entirely new provision, the Rules create a two step procedure for addressing challenges to the jurisdiction of the Centre, similar to the rules of arbitration recently implemented by various other international arbitral institutions. A committee in the Centre is now in charge of administering commercial arbitration cases (the “Committee”), and is empowered to conduct a prima facie review of the arbitration agreement and decide on preliminary jurisdictional objections raised by one of the parties regarding the existence or validity of the arbitration agreement, or in relation to its content or its scope of application.

The decision of the Committee to either continue the arbitration proceedings and formation of the arbitration tribunal, or decide not to proceed with arbitration can be appealed by a decision of the court originally competent to hear the case. In this event, the court will adjudicate upon the issue of whether arbitration can take place (Article 7).

Appointment, Challenge and Objection to Arbitrators

The new Rules provide for the appointment of one or more arbitrators depending on the agreement of the parties. In the absence of such agreement on the number of arbitrators, the Centre shall appoint a sole arbitrator unless the amount in dispute or the circumstances thereof entail the appointment of multiple arbitrators (Article 8).

The Committee shall issue a decision concerning any challenge or objection raised by one of the parties against an arbitrator’s neutrality and independence, or if the arbitrator proves to be lacking in qualifications required and jointly agreed upon by the parties (Article 11). In case the challenge is accepted by the Committee, the arbitrator shall be replaced by another in the course of arbitration proceedings.

Language of Arbitration

Similarly to the old rules applied at the Centre, the default language of arbitration proceedings shall be Arabic, unless the parties agree otherwise. The Rules now provide that in case the arbitral tribunal is entirely composed of arbitrators who are not fluent in Arabic and they don’t reach a consensus on the language of arbitration, the arbitration shall take place in Arabic (Article 18).

In all cases, the Rules provide that arbitral awards shall be issued in Arabic and in the other language adopted in the arbitration proceedings.

Interim and Conservatory Measures

The Rules expressly allow the arbitral tribunal to issue on its own motion, or upon a request made by one of the parties, a provisional or a precautionary measure related to the subject-matter of the dispute (Article 25). Such measures will depend on the tribunal’s evaluation of whether they are appropriate depending on the circumstances of the case.

The Rules further provide that provisional or conservatory measures shall be issued in the form of interim awards, thus submitting their issuance to certain formalities, notably the requirement of a reasoned decision.

Time Limits

Changes brought on the arbitrator(s) powers to extend the time limit for rendering the award are also important. The Rules explicitly allow the arbitration tribunal to extend by its own motion, or upon the request of one of the parties, the initial time period of 6 months for rendering the award up to a maximum additional period of 3 months. Any additional extension of the aforesaid time limit shall be decided by the Committee based upon a reasoned application by either the tribunal or the disputing parties (Articles 27.2 and 27.3).

Publication of Arbitral Awards and Confidentiality of the Proceedings

The Rules now specifically prohibit the publication of an award by the Centre without the consent of all the parties in dispute (Article 28.8). The principle of confidentiality of the entire proceedings is further stressed on by the requirement to maintain the confidentiality of awards, records, materials and documents, expert reports as well as witness statements submitted to arbitration, including the deliberations of the tribunal, unless disclosure is required by law or agreed upon in writing by the parties (Article 33).

Costs

Another entirely new addition is the schedule of costs that the Rules provide, allowing the determination of the arbitrator(s) fees depending on the amount in dispute (Article 37). Under the previous rules, the arbitrator(s) fees were to be negotiated on an ad hoc basis. The fees of the arbitration panel, in addition to a proportional fee of 15% collected by the Centre and calculated on the basis of the arbitrator(s) fees, shall be deposited by the parties with the Centre prior to the commencement of the arbitration proceedings (Articles 38 and 39). In addition, a none refundable lump-sum fee for registering an arbitration case is collected by the Centre upon the submission of the request for arbitration.

Based on information provided by the Centre, the table of fees listed under the Rules is not mandatory, and the parties can agree with the arbitration tribunal to apply a different scheme for calculating the costs of arbitration.


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Recent ruling of Dubai Court of First Instance on enforcement of foreign arbitral awards: Back to square one?

by Gordon Blanke

Habib Al Mulla & Co.

A recent ruling of the Dubai Court of First Instance (see Case No. 489/2012, ruling of the Dubai Court of First Instance of 18 December 2012) questions de novo the UAE courts’ compliance with their obligations under international enforcement instruments in the enforcement of foreign arbitral awards. Following the recent trend of consolidation of the UAE courts’ practice to abide by the terms of international enforcement instruments – foremost amongst them the New York Convention (see Convention on the recognition and enforcement of foreign arbitral awards, done in New York on 10 June 1958, as ratified and hence implemented in UAE law by UAE Federal Decree No. 43 of 2006), this ruling marks a sudden and unwelcome setback in what commentators had believed had become a turning-point in the UAE enforcement practice of foreign arbitral awards (see my previous report here).

In essence, the present application before the Dubai Court of First Instance relates to the enforcement of a trilogy of awards rendered under the Arbitration Rules of the International Chamber of Commerce (ICC) International Court of Arbitration in Paris (see ICC Case No. 5277/RP/BGD), one preliminary award in relation to a discrete finding of fact, a final award on the merits and an award on costs. In the final award, the ICC tribunal awarded the Claimant, la Compagnie Française d’Entreprises S.A (CFE), several million US$ for outstanding payments for works performed in the construction of the Canal de Jonglei in South Sudan. The award debtor, the Government of the Republic of Sudan, ultimately refused to perform the awards voluntarily, hence the present application for enforcement to the Dubai Courts.

Eschewing any reference to relevant provisions of potentially applicable international enforcement instruments binding on the UAE in the present context, the Dubai Court of First Instance simply pronounced in pertinent part as follows:

“Pursuant to articles 21 […] of the Civil Transactions Law, articles 19.1, 20, 21 and 42 of the Civil Procedures Law as well as practice of the Court of Cassation, it has been upheld that the international jurisdiction of Courts is a matter of the public policy. Further, the UAE Courts lack jurisdiction over the cases brought against any foreigner having no domicile or place of residence within the UAE, unless such case does relate to an obligation that has been concluded, carried out or has to be carried out in the United Arab Emirates or if a foreign company, located aboard, has a branch in the United Arab Emirates and the dispute relates to such branch …

In its rulings based on article 235 of the Civil Procedures Law, the Court of Cassation has established that for having a judgment rendered by a foreign Court enforced in the United Arab Emirates, the national Courts should not enjoy the jurisdiction over hearing the dispute decreed under such foreign judgment in pursuance of the principles of jurisdiction as set forth in the Civil Procedures Law…

Whereas the papers prove that the Ministry of Irrigation in the Republic of Sudan (the Defendant) does not have any domicile or place of residence within the United Arab Emirates and that the subject obligation has been concluded and carried out abroad, therefore the conditions stipulated in article 235 of the Civil Procedures Law have not been satisfied and hence the Court decrees lack of jurisdiction.”

With all due respect to the Dubai Court’s holding, its reasoning is entirely flawed. Even though the Court is right in pointing out that (i) Articles 19 to 24 of the UAE Civil Procedures Code set out the relevant principles for determining proper jurisdiction of the UAE Courts in international matters and over foreign persons, that (ii) Article 21 of the UAE Civil Transactions Code confers upon the UAE Courts the right to rely upon its own procedural laws in determining its own proper standing in international matters and that (iii) Article 235 of the UAE Civil Procedures Code applies to foreign enforcement actions brought in the UAE, the Dubai Court is wrong to rely on these provisions for present purposes. This is because the Dubai Court has completely ignored the text of Article 238 of the UAE Civil Procedures Code and Article 22 of the UAE Civil Procedures Code: The former exempts the application of the provisions governing the execution of foreign judgments and foreign arbitration awards under Articles 235 and 236 of the UAE Civil Procedures Code from the enforcement of foreign judgments and arbitration awards that fall within the scope of application of international conventions. In similar vein, the latter exempts the application of Article 21 of the UAE Civil Transactions Code from cases governed by international conventions binding on the UAE.

Under the New York Convention, enforcement of a foreign award is conditional upon presentation by the award creditor of (i) an original or officially certified copy of the foreign arbitration award (rendered in another Convention country) and (ii) an original or officially certified copy of the underlying arbitration agreement. Equally, under the Convention on Judicial Cooperation and the Recognition and Enforcement of Judgments in Civil and Commercial Matters between the United Arab Emirates and the French Republic, as ratified by UAE Federal Decree No. 31 of 1992, enforcement in either of the two countries of an award rendered in the respectively other is conditional upon (i) the existence of a valid arbitration agreement, (ii) confirmation that the subject-matter of the underlying award is arbitrable in the State of enforcement and (iii) presentation of a certified copy of the arbitrator’s mandate, a full certified copy of the award attested in the State of issuance and proof demonstrating that the award is final and hence not subject to appeal in the State of issuance. Under either of the two Conventions, enforcement does not depend – contrary to the terms implied by the Dubai Court of First Instance in its ruling – upon the award debtor having a geographical nexus (in the form of domicile or otherwise) with the country of enforcement.. The jurisdiction of enforcement of a supervisory court in a Convention country is entirely independent from any jurisdictional criteria apart from the authentication requirements listed in shorthand above. In other words, there is no requirement for subject-matter jurisdiction for a court to have jurisdiction of enforcement under either of the Conventions, provided the court in question is an emanation of a Convention country.

By way of illustration, in Case No. 764/Judicial Year No. 24 (ruling of the Federal Supreme Court of 7 June 2005), the UAE Federal Supreme Court confirmed that enforcement of an award rendered in France, including the instant ICC award issued in Paris, France, proceeds under the terms of the France-UAE Bilateral Convention, provided the formal authentication requirements set out in the Convention have been met. The Court emphasized that pursuant to Article 238 of the UAE Civil Procedures Code, the terms of international conventions concluded by the UAE with foreign countries prevail over the provisions of Article 235 read together with Article 236 of the UAE Civil Procedures Code in the enforcement of foreign awards. In the words of the Court:

“The provisions of Article 235, 236 and 238 of the Law of Civil Procedures are to the effect that the provisions of conventions between the United Arab Emirates and other foreign countries, and international agreements ratified by the UAE, will be applicable with regards to the enforcement of the judgments of foreign courts and the arbitral awards as being domestic law, irrespective of the conditions set out in Article 235 of the Law of Civil Procedures … The courts of the UAE must ascertain that the conditions set out in such international conventions and agreements have been met before ordering that such orders be ratified or enforced in the UAE.”

This ruling hence confirms the UAE Court’s deference to the terms of bi-lateral enforcement treaty between the UAE and France.

At present, this commentator is not aware of whether the Dubai Court of First Instance’s ruling has been appealed to the higher courts or not. If so, it is to be hoped that the Dubai Court of Appeal and the Court of Cassation in a final instance will overturn the ruling of the Dubai Court of First Instance, declare that the Dubai Courts have proper jurisdiction and proceed to the enforcement of the disputed ICC awards under the relevant applicable international enforcement instruments. In the event that the Dubai Court of First Instance’s ruling is not appealed, it is to be hoped that it will remain an isolated instance that will not be followed by future courts and be considered no more than an unfortunate accident in the recent more modern practice of the UAE courts in the enforcement of foreign awards, rather than going all the way back to square one …


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Dubai Court confirms jurisdiction to stay proceedings in favour of foreign arbitrations: Nothing more to fear … and further lessons to be learnt

by Gordon Blanke

Habib Al Mulla & Co.

Those who feared that following Sir David Steel J’s ruling in Injazat Capital Limited and Injazat Technology Fund B.S.C. v. Denton Wilde Sapte & Co before the Dubai International Financial Centre (DIFC) Court of First Instance (ruling of 6 March 2012 in Claim No. CFI 019/2010, for previous reporting see here), the DIFC Courts and by extension the United Arab Emirates more generally found themselves in a situation of de facto violation of Article II(3) of the New York Convention, may now utter a sigh of relief. In its most recent ruling in International Electromechanical Services Co. LLC v. (1) Al Fattan Engineering LLC and (2) Al Fattan Properties LLC (ruling of 14 October 2012 in Claim No. CFI 004/2012, for previous reporting see here), the DIFC Court of First Instance in the person of Justice Williams QC expressed its disagreement with Sir David Steel J’s previous ruling in Injazat and brought the interpretation of DIFC law back into line with terms proper of the New York Convention.

Article II(3) of the New York Convention imposes upon Convention countries an obligation to recognize arbitration agreements and give to them precedence over pending litigation that has been brought in another Convention country in violation of an existing foreign arbitration clause, unless this latter is “null and void, inoperative or incapable of being performed”. Even though Sir David and Justice Williams QC coincided in their view that the terms of Article 13 of the DIFC Arbitration Law (DIFC Law No. 1 of 2008), which – read together with Article 7 of the same Law – confine a DIFC Court’s obligation to stay in favour of domestic, i.e. arbitrations seated in the DIFC only, Justice Williams QC found – contrary to Sir David – that the DIFC Courts did retain a discretion to stay in the presence of foreign or non-DIFC arbitration proceedings on the basis of a surviving “inherent jurisdiction to stay”. According to Justice Williams, this inherent jurisdiction had not been displaced by Article 7(2), which did not contain any express wording to that effect, nor by Article 10 of the same Law, according to which “in matters governed by this law, no Court shall intervene except to the extent so provided in this Law.” As a result, the surviving inherent jurisdiction of the DIFC Courts could be invoked to stay in favour of non-DIFC arbitration and more specifically to comply with obligations to stay under international enforcement instruments, such as the New York Convention. Importantly, Justice Williams clarified that for present purposes, arbitrations seated in Dubai, i.e. outside the DIFC, did not qualify as foreign arbitrations within the meaning of the New York Convention and did therefore not trigger the UAE’s obligation to stay in favour of a foreign arbitration within the terms of the Convention. According to Justice Williams: “Whilst the DIFC and Dubai are separate legal zones, they are part of the same State, namely the United Arab Emirates. Hence, the State of the seat of the arbitration agreement [whether providing for arbitration in Dubai or the DIFC] is the United Arab Emirates … The New York Convention does not require a stay.” (see the DIFC Court’s ruling in International Electromechanical, at para. 122).

We agree in essence with the previous reporting on the above-referenced rulings on this site and will therefore not enter here into further detail on what has already been said elsewhere. Nevertheless, we would like to believe that in light of the common law origin of the DIFC Courts, the primary source of Justice Williams QC’s reasoning in finding in favour of the existence of an “inherent jurisdiction to stay” in favorem arbitrandi deserves emphasis. In essence, Justice Williams bases the existence of the DIFC Court’s inherent jurisdiction to stay on a reading of Article 33 of the DIFC Court Law (see Law No. 10 of 2004) and Rule 4.1 of the Rules of the DIFC Court (RDC) together with Article 8(2) of the Application of Civil and Commercial Laws (see DIFC Law No. 3 of 2004) and DIFC Rules 2.10, which permits reliance by the DIFC Courts on the English Civil Procedure Rules, where their application is considered appropriate. More specifically, Article 33 empowers the DIFC Court to “if it considers it appropriate: (a) stay any … proceeding”. RDC 4.1 clarifies that any powers expressly attributed to the DIFC Court in the RDC are in addition to “any other powers it may otherwise have”, thus intimating the existence of additional sources of power other than the RDC. Finally, Article 8(2)(e) of the DIFC Law No. 3 of 2004 provides for the default application of “the laws of England and Wales” where no other express specification on the governing law are contained in prevailing legislation of the relevant jurisdiction. All these provisions taken together, Justice Williams found that “it was clear that the DIFC Court possesses an inherent jurisdiction to stay proceedings, codified [in particular] in [Articles 33 of DIFC Law No. 10 of 2004 and RDC 4.1]”, but that “neither [of] those provisions nor any DIFC cases to date detail the scope or content of the jurisdiction.” (see para. 99 of the ruling) Given this lacuna, he then relied on the commentary on inherent jurisdiction provided in the White Book on English Civil Procedure as a codification of the relevant provisions of English law. Given the importance of this reference to the White Book, it warrants citation in extenso:

Inherent jurisdiction of High Court

The provision … that there shall be exercisable by the High Court ‘all such other jurisdiction (whether civil or criminal) as was exercisable by it immediately before the commencement of the Act’ of 1981, subsumes and incorporates ‘the inherent jurisdiction of the court’. Such jurisdiction has been exercisable by the superior courts from the earliest days of the common law ….

The court may exercise its inherent jurisdiction even in respect of matters which are regulated by statute or by rules of court …

An important practical illustration of the court’s inherent jurisdiction is the Court’s power to stay proceedings. The power may be exercised in various contexts (e.g. on abuse of process grounds) …” (see para. 101 of the ruling; bold in the original)

On this basis, Justice Williams concluded that “[i]t is clear that the DIFC Court’s inherent jurisdiction to stay proceedings is wide-ranging and fundamental.” (see para. 101 of the ruling) In light of the prevailing circumstances in the reference before him, Justice Williams exercised the DIFC Court’s discretion to stay in respect of both Defendants, finding – inter alia in reliance on authority of the English Court of Appeal (see Reichhold Norway ASA v. Goldman Sachs International [2000] 1 WLR 173) – that (i) such dual stay would eliminate any danger of inconsistent findings in concurrent yet divergent fora, (ii) a resolution of the dispute at hand would most likely ensue most readily from arbitration against the First Defendant and (iii) the Claimant was not prevented from pursuing its claims against the Second Defendant, a non-signatory to the underlying arbitration agreement, should proceedings against the First Defendant fail (with any delay in proceedings being adequately compensatable through an award of interest). Justice Williams concluded with a reminder to the Defendants that “an arbitration agreement, while placing a negative obligation on the parties not to litigate, also imposes a positive obligation to co-operate with all aspects of the arbiral procedure and to comply with the resulting award.” (para. 137 of the ruling) The approach taken by Justice Williams to the inherent jurisdiction to stay in favour of non-DIFC arbitration clearly confirms the overall arbitration-friendliness of the DIFC Courts and their unwavering support for arbitration both inside and outside the DIFC.

Apart from the DIFC Court’s proper jurisdiction to grant a stay, the DIFC Court of First Instance’s ruling in International Electromechanical Services v. Al Fattan addresses at least one further issue that is of relevance to arbitration in the DIFC and may set valuable lessons for UAE arbitration more generally, namely the validity and scope of the underlying arbitration agreement. In shorthand, the DIFC Court confirmed the validity of back-to-back clauses in relation to arbitration agreements in a FIDIC contractual setting. More importantly, the Court spelt out its deference to the principle of kompetenz-kompetenz of the competent arbitration tribunal in the following terms:

“[The Parties’] agreement is governed by Dubai law, a law technically foreign to this Court, so that the agreement is to arbitrate in a foreign seat under a foreign law. Therefore, this Court will not make a final finding as to the validity and scope of the arbitration agreement. Instead, this Court, if it finds it has jurisdiction, will order a stay if, on the evidence before it, it concludes that prima facie a valid arbitration agreement covers the present dispute and that a stay is appropriate. If the matter is submitted to arbitration, neither the DIAC [in accordance with Article 6.2 of the DIAC Arbitration Rules] nor the arbitration tribunal would be legally bound by this Court’s finding that the agreement is prima facie valid. They would be free to rule on the tribunal’s jurisdiction, no doubt paying some regard to the prima facie finding of this Court.” (at para. 35 of the ruling, original footnote omitted)

In concluding in favour of the prima facie validity of the arbitration agreement, Justice Williams relied on the requirement in writing of arbitration agreements in the terms of Article 203(2) of the UAE Civil Procedures Code and the judgment of the Dubai Court of Cassation in Case no. 164/2008 confirming the authority of a director of a limited liability company to bind that company to arbitration.

Apart from these further lessons to be learnt, Justice Williams QC’s ruling in International Electromechanical Services v. Al Fattan will, no doubt, in a first instance be remembered for confirming the DIFC Court’s inherent jurisdiction to grant a stay of litigious proceedings pending in the DIFC in favorem arbitrandi, both outside the narrower DIFC and outside the wider UAE, and for having taken the fear that the UAE may be in breach of its international obligations under Article II(3) of the New York Convention going forward.


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A quick course correction by a DIFC Court on the application of the New York Convention

by Khalil Mechantaf

Habib Al Mulla & Co.

On 14 October 2012, Justice David Williams of the DIFC Court of First Instance (Dubai International Financial Centre) applied a course correction by issuing a decision confirming the jurisdiction of the DIFC Courts to grant a stay in the presence of a valid arbitration agreement providing for a seat of arbitration outside the DIFC.

Justice Williams in his decision in International Electromechanical Services Co. LLC v Al Fattan Engineering LLC (First Defendant) and Al Fattan Properties LLC (Second Defendant), CFI 004/2012 – departed from a previous decision issued earlier this year by Justice Sir David Steel on 6 March 2012 in Injazat Capital Limited and Injazat Technology Fund ITF against Denton Wilde Sapte refusing to grant a stay of the proceedings brought before him in violation of a none DIFC seated arbitration agreement – A case note on the latter decision can be found here.

The two claims Al Fattan and Injazat are similar in many ways. Both contracts subject matter of the disputes included arbitration clauses providing for arbitration outside the DIFC, and the claimants in the two cases filed DIFC proceedings in violation of the arbitration clauses. The same defense was raised to grant a stay in application of article 13 of the DIFC Arbitration Law (Law No. 1 of 2008), and both Justices had to decide whether the Court can grant such a stay by each applying their own interpretation of that article and of the purpose of the DIFC as such. Concerns over the violation of article II(3) of the New York Convention of 1958 were taken into account in both cases as well, with the Injazat decision giving it a less favorable stance in face of the clarity and precision of article 13(1) of the DIFC Arbitration Law.

The latter article provides the following:

“If an action is brought before the DIFC Court in a matter which is the subject of an Arbitration Agreement, the DIFC Court shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, dismiss or stay such action unless it finds that the Arbitration Agreement is null and void, inoperative or incapable of being performed.”

However, article 7(1) on the scope of application of the same Law provides:

“Parts 1 to 4 and the Schedule of this Law shall all apply where the Seat of the Arbitration is the DIFC.”

In face of the clarity of the provisions of both articles above, Justice David Steel in Injazat decided that since article 13 is in Part 3 of the Law, there was no room for interpreting it consistently with the New York Convention. The Court therefore had no statutory jurisdiction to grant a stay since it did not apply to non-DIFC seated arbitration agreements, and thus its powers were confined to the bounds of the DIFC Arbitration law without any particular reference to the Court’s obligations to grant a stay under article II(3) of the New York Convention to which the UAE is a member State since 2006.

The response came quickly from Justice David Williams in Al Fattan case. In the matter at hand, the Court concurred with the Injazat decision that article 13 of the DIFC Arbitration Law is not applicable in this case as the seat of arbitration is not the DIFC. However, the Court declined to follow the ruling in Injazat and decided that it has an inherent jurisdiction to grant a stay.

On a true construction of the DIFC Arbitration Law, it considered that the latter does not exclude the established jurisdiction to grant stays or injunctions in support of arbitration seated outside the DIFC. In this line of argument, Justice Williams considered that where the purpose of articles 7 and 13 is to render it mandatory for the Court to stay proceedings in breach of arbitration agreements in the DIFC, the Court may stay proceedings brought in breach of a valid agreement to arbitrate outside the DIFC, but need not do so.

This contrast between mandatory stays and discretionary stays was also raised in Injazat decision, but the latter considered that the DIFC Arbitration Law would have expressly provided for discretionary stays in the case of an arbitration seated outside the DIFC. The Court in the present case rejected such reasoning and considered that discretionary stays are “allowed unless provided otherwise”.

The decision in Injazat raised several critics as to the respect of the DIFC Courts of the UAE international commitments arising from the New York Convention. In the present case, the Court considered that a decision such as the one in Injazat would “thwart the promotion of the DIFC as a jurisdiction supportive of arbitration.” The wordings of Justice Williams are clear enough to re-emphasize the envisaged role of the DIFC to ensure that companies in the region will have an expeditious and cost effective dispute settlement mechanism to Courts, making the system more attractive to the international community (DIFC consultation papers issued in February 2008).

Although the seat of arbitration in the present case is in Dubai, a domestic seat to which the provisions of article II(3) are not applicable, the seat of arbitration in Injazat was in London, thus putting the UAE in breach of the New York Convention. Article 5 of the Federal Law No. 8 of 2004 that created the DIFC provided for the respect of the Financial Free Zones of any international agreements to which the UAE is or shall be a party. As a clear response to the decision in Injazat, Justice David Williams decided that this cannot lead to finding that the intention of article 7 of the DIFC Arbitration Law is to remove the DIFC Court’s inherent jurisdiction to stay proceedings for arbitration agreements seated outside the DIFC.

This is a welcome decision that reminds the DIFC Courts of the requirement to comply with the UAE international obligations, and we hope that other decisions will follow the same.


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Dubai Court of Cassation confirms enforcement of foreign awards under New York Convention: The end of a beginning – Inshallah!

by Gordon Blanke

Habib Al Mulla & Co.

In a recent ruling of 18 October 2012, the Dubai Court of Cassation, the highest court in the Emirate of Dubai, against whose judgments lies no further appeal, confirmed the enforcement of a trilogy of DIFC-LCIA awards – one on liability and two on costs (all forming part of the same reference) – rendered by a Sole Arbitrator in London under the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards (see Appeal for Cassation No. 132/2012 Commercial – Airmec Dubai, LLC v. Maxtel International, LLC). As a result, Airmec Dubai’s attempts at setting aside the awards in its capacity as award debtor before the Dubai Court of Appeal finally failed.  As I reported in a previous post on the Blog, “despite the positive outlook provided by more recent UAE supervisory court case law, there remains some measure of uncertainty in the UAE judiciary’s proper commitment to the terms of the New York Convention” in the enforcement of foreign awards. The Dubai Courts’ take on the Maxtel cases at first instance (see Action No. 268/2010 Commercial Full Jurisdiction, ruling of the Dubai Court of First Instance of 12 January 2011) and on appeal to the Court of Cassation (see Appeal No. 126/2011 Commercial, ruling of the Dubai Court of Cassation of 22nd February 2012) in the wake of the Fujairah Court of First Instance’s ruling of 27 April 2010 (see Case No. 35/2010, ruling of the Fujairah Federal Court of First Instance), the first UAE court judgment ever to enforce a New York Convention award by reference to the Convention, inspired a modicum of hope that the UAE courts and in particular the Dubai judiciary would at long last own up to their enforcement obligations under the New York Convention, of which the UAE has been a member since 2006 (see Federal Decree No. 43 of 13 June 2006), and discard antiquated practices of enforcement of foreign awards by reference to the formalistic requirements of Article 235 read together with Article 236 of the UAE Civil Procedures Code.

In brief, in its ruling, the Dubai Court of Cassation found that the various reasons adduced by Airmec Dubai as grounds for the nullification of the awards – including in particular a combination of grounds based on Article 216 of the UAE Civil Procedures Code, as detailed in my previous blog – were of no avail given that Airmec Dubai had failed to meet the requisite burden of proof under the prevailing provisions of UAE law and the New York Convention itself. Instead, the Court of Cassation confirmed that it had no reason to doubt the findings of the previous courts on the subject-matter, no new evidence having been presented for consideration before it. More importantly for present purposes, the Dubai Court of Cassation was explicit in rejecting the application of the domestic ratification process in the terms of Article 215 of the UAE Civil Procedures Code and made express reference to Article 212(4) of the Code, according to which an arbitral award issued outside the UAE “shall be subject to the rules applicable to awards issued in a foreign country”. The Court of Cassation continued its reasoning in the following terms:

            ‘… it is … established pursuant to Article 238 of the UAE Civil Procedures Code that the international conventions that come into full force and effect in the United Arab Emirates by ratification shall be construed as internal law applicable in the State and as such, the judge shall be required to apply the provisions thereof to the disputes brought before him concerning the execution of judgments made by foreign courts and foreign arbitral awards. As it is established in Federal Decree No. 43 of 2006 … that the [UAE] approved to accede to the New York Convention …, thus its provisions shall be applicable to the dispute.’ (author’s translation)

Following explicit reference to Articles I through to V of the New York Convention, which are set out in full text in their corresponding counterparts in Federal Decree No. 43 of 2006, the Dubai Court of Cassation quoted with approval the following passages of the ruling of the Dubai Court of Appeal under scrutiny in toto:

          ‘ … whereas on the subject-matter of the original action, the arbitral awards which have been issued by the Sole Arbitrator are required to be recognized and enforced … are two foreign awards issued outside the [UAE]  … in London, pursuant New York Convention  … , which was ratified by the [UAE] by virtue of Federal Decree No. 43 of 2006 … whereas the court’s jurisdiction over the foreign arbitral awards shall, upon considering the request to recognize and enforce the same, be limited to ensure that such award does not involve breach of the Federal Decree under which the State had acceded to the New York Convention …, through complying with the award’s legal requirements in terms of form and subject-matter as dictated by Articles 4 and 5 of the said Decree [equivalent to Articles IV and V of the New York Convention]. Whereas the arbitral awards – subject-matter of this action – are duly authenticated, and since the original defendant (petitioner) failed to submit to the court evidence that contradicts and precludes the recognition of the arbitral awards – subject-matter of this action – as per the cases set forth in Article 5 of the aforesaid Decree … the arbitral awards – subject-matter of this action – have fulfilled the conditions set forth in the Decree and may not be undermined by the argument raised by the original plaintiff to invalidate the same, since it is established in law that the arbitration proceedings are deemed to have been observed, and any party alleging that the same are violated shall be required to provide evidence that what it is alleging is true, while due regard shall be given, in such a case, to the information recorded in the arbitral award. As such, the court hereby rules in favour of the plaintiff in the original action (respondent) to recognize the arbitral awards subject-matter of this action. … ’ (author’s translation)

The Dubai Court of Cassation’s ruling now clearly marks the end of a beginning of Dubai supervisory courts’ previously fledgling and uncertain enforcement practice of foreign awards under the New York Convention. Even though the Dubai Court of Cassation’s ruling in Airmec does not form binding precedent (remember that the UAE is a civil law jurisdiction, to which rules of stare decisis are alien), it will have persuasive force in the lower courts, in particular the Dubai courts of first instance and the courts of appeal. It can be expected that award creditors in other Emirates will also seek to rely on the Dubai Court’s precedents to convince the supervisory courts there to follow suit (in particular in light of corresponding enforcement obligations of supervisory courts in other Emirates in their capacity as emanations of the UAE under the New York Convention). It will be interesting to see how the case law on enforcement of foreign awards under the New York Convention will further develop at the hands of the UAE courts in the near future: Inshallah!


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Enforcement of New York Convention Awards in the UAE (Part II): THE DIFC as “host” jurisdiction?

by Gordon Blanke

Habib Al Mulla & Co.

As explored in some detail in Part I of this blog post, recent UAE supervisory court case law has heralded a new era of enforcement of international awards in strict compliance with the 1958 New York Convention on the Recognition and Enforcement of Foreign Awards (the “New York Convention”).

To recap, the Maxtel line of case law (see in particular Commercial Action No. 268/2010 – Maxtel International FZE v. Airmec Dubai LLC, ruling of the Dubai Court of First Instance, dated 12 January 2011, most recently affirmed by the Dubai Court of Appeal in Airmec Dubai LLC v. Maxtel International LLC, ruling dated 22nd February 2012), which originated a year earlier in the Fujairah Courts (see Case No. 35/2010, ruling of the Fujairah Federal Court of First Instance, dated 27 April 2010) has demonstrated the UAE courts’ incipient – yet long overdue – commitment to their enforcement obligations under the New York Convention. At the same time, it has, however, also been seen that there remains some skepticism within the UAE judiciary and that the incipient trend of enforcement under the New York Convention has not yet consolidated into established supervisory court practice (see Dubai Court of First Instance, case No. 531/2011, judgment dated 18 May 2011). Hence, the UAE courts’ current enforcement practice does not yet appear to be immune to occasional setbacks so that international award creditors cannot blindly rely upon the UAE courts’ unwavering commitment to enforcement of foreign awards against UAE-based award debtors in strict compliance with the terms of the New York Convention.

As suggested in Part I, pending these uncertainties, the Dubai International Financial Centre (the “DIFC”) may well serve as a viable – yet presently still untested – “host” or “intermediate” jurisdiction for enforcement of New York Convention awards in the UAE.

By way of reminder, the DIFC, which was established by the Government of Dubai in December 2004 (see Dubai Law No. 9 of 2004 (the “DIFC Law”)), is a geographic area carved out of the heart of Dubai and constitutes a unique autonomous jurisdiction within the UAE. It has an independent judicial system vested with its own courts modeled on the English common law. The DIFC is further governed by its own laws, including the DIFC Arbitration law of 2008 (the “DIFC Arbitration Law”), which is largely based on the UNCITRAL Model Law.

Importantly for present purposes, Article 42(1) of the DIFC Arbitration law provides that:

“An arbitral award, irrespective of the State or jurisdiction in which it was made, shall be recognized as binding within the DIFC […] For the avoidance of doubt, where the UAE has entered into an applicable treaty for the mutual enforcement of judgments, orders or awards the DIFC Court shall comply with the terms of such treaty”.

This is further supported by Article 24(2) of DIFC Law No.10 of 2004, the DIFC Court Law, which contains provisions to the same effect. Accordingly, “[w]here the UAE has entered into an applicable treaty for the mutual enforcement of judgments, orders or awards, the [DIFC] Court of First Instance shall comply with the terms of such treaty.” As a result, the DIFC Courts have jurisdiction to hear actions for enforcement of foreign awards under the New York Convention in the DIFC. This is in particular so as a court’s proper standing under the New York Convention is determined by the simple fact of membership of the State of which it is an emanation. In other words, the UAE being a Convention State and the DIFC courts being an emanation of the UAE, the DIFC courts are bound to hear any actions for enforcement of a foreign award brought before them (irrespective e.g. of whether the award debtor in question has any assets in the DIFC and whether there is any other jurisdictional link with the DIFC). This is also confirmed by Article 24(1)(d) of the DIFC Court Law, which unambiguously ascribes to the DIFC Court of First Instance jurisdiction to ratify any foreign arbitral award, as well as Article 5(A)(1)(e) of Law No. 12 of 2004 in respect of The Judicial Authority at Dubai International Financial Centre (as amended on 31st October 2011) (the “Judicial Authority Law”), which provides that “[t]he Court of First Instance shall have exclusive jurisdiction to hear and determine … [a]ny claim or action over which [it] ha[s] jurisdiction in accordance with DIFC Laws and DIFC Regulations”. Subject-matter jurisdiction does hence not appear to be required for the enforcement of foreign awards beyond the requirements laid down in the New York Convention proper. For the avoidance of doubt, neither does the New York Convention itself contain any particular jurisdictional requirements other than the presumption of Convention membership of the State of the competent supervisory court (see in particular Article IV of the Convention, which does not require an applicant party to submit proof of proper standing other than a duly authenticated original award and the original arbitration agreement or a duly certified copies thereof; and Article V, which does not provide for the potential lack of competence of the supervisory court as a ground of refusing recognition and enforcement of an award).

In light of the common law tradition and the general arbitration-friendliness of the DIFC judiciary, the enforcement of New York Convention awards before the DIFC Courts can be expected to be a matter of mere formality. Pursuant to Article 42(4) of the DIFC Arbitration Law, “[a]wards recognized by the DIFC Court may be enforced outside by the DIFC in accordance with the Judicial Authority Law and recognition under this Law includes ratification for the purposes of Article 7 of the Judicial Authority Law.” Article 7 of the Judicial Authority Law, in turn, provides that

“[w]here the subject matter of execution is situated outside the DIFC, the judgments, decisions and orders rendered by the Courts and the Arbitral Awards ratified by the Courts shall be executed by the competent entity having jurisdiction outside DIFC in accordance with the procedure and rules adopted by such entities in this regard, as well as with any agreements or memoranda of understanding between the Courts and these entities.” (emphasis added)

To note that the DIFC and Dubai courts more specifically have entered into a Memorandum of Understanding between the Dubai Courts and the DIFC Courts, which entered into force as from 16 June 2009, and the related Protocol of Enforcement between the Dubai Courts and the DIFC Courts (the “Protocol of Enforcement”), which in toto provide for the mutual recognition of judgments, orders and awards between the Dubai and the DIFC Courts (for a recent precedent, see the enforcement by the Dubai Courts of a DIFC-LCIA arbitration award under the Protocol as reported on the DIFC Court website on 29 March 2011, here. Essentially, the Protocol of Enforcement provides for the pro forma recognition by the Dubai Courts of a DIFC enforcement order of arbitration awards ratified in the DIFC, without the need for any additional measures of implementation, subject to the following cumulative conditions, which are enumerated both in Article 7 of the Judicial Authority Law and in Article 1 of the Protocol of Enforcement:

• The enforcement order must be final and executory (i.e. “appropriate for enforcement”);

• it must be translated into Arabic;

• it must bear the stamp of the DIFC Courts; and

• it must be accompanied by a letter to the Chief Justice of the Dubai Court of First Instance setting out the procedure to be followed as well as the requisite execution fees payable to the Dubai Courts.

Importantly, in this process, the Dubai Court execution judge is strictly prohibited from performing a review on the merits. This said, there is some residual doubt as to the proper meaning of the words “appropriate for enforcement”: i.e. whether appropriate for enforcement “before the DIFC Courts” or “before the Dubai Courts”. We submit that the former meaning would be somewhat meaningless as it would essentially deprive the Protocol of Enforcement and the execution provision of Article 7 of the Judicial Authority Law of their very purpose by importing through the backdoor the current uncertainties of enforcement of awards before the Dubai Courts into the enforcement practice of the DIFC Courts. The second meaning should therefore naturally prevail. Importantly, irrespective of the preferred and potentially prevailing second meaning, the notion of “public policy” as defined in the UAE arguably remains a necessary ground of consideration for the DIFC Courts in ratifying foreign awards under the New York Convention (see in particular Article 44(2)(b)(vii) of the DIFC Arbitration Law, which empowers the DIFC Courts to refuse recognition and enforcement of an award, irrespective of its country of origin, if it finds that “the enforcement of the award would be contrary to the public policy in the UAE”, read together with Article V(2)(b) of the New York Convention).

An order for enforcement issued by the Dubai Courts should, in turn, be enforceable in the other Emirates of the UAE by virtue of Article 11 of Federal Law No.11 of 1973 on Judicial Relationships Amongst Emirates, which provides for the mutual recognition of orders and judgments between the various Emirates. In the terms of Article 11, “[a]ny order deciding civil or commercial rights or damages [no doubt including an order for the enforcement of an award of damages by way of arbitration] … issued by a juridical body in one of the emirates member of the federation, shall, according to the rules of this law be executable in any other emirate member of the federation.” Out of an abundance of procedural caution, it is recognized that proper subject-matter jurisdiction of UAE courts is based on the existence of an (elected) address or place of residence or the presence of assets in the UAE (see Articles 20 and 21 of the UAE Civil Procedures Code), although this will likely be of secondary importance in relation to recognition of Dubai Court orders of enforcement of foreign awards, adopting reasoning analogical to that developed in relation to recognition process of the DIFC Courts.

Taking the above in the round, albeit not certain given the absence of supporting precedent, recourse to the DIFC Courts as an intermediate jurisdiction may arguably be a reliable way to circumvent the residual risk of the UAE judiciary’s reliance on the by now obsolete Article 235 of the UAE Civil Procedures Code in the enforcement of foreign awards in the UAE.


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Enforcement of New York Convention Awards in the UAE (Part I): Quo vadis?

by Gordon Blanke

Habib Al Mulla & Co.

International award creditors can now look with some measure of optimism to enforcing their awards against Middle Eastern stakeholders in the UAE. This is so following a recent spate of judgments of the UAE courts that have confirmed enforcement of foreign awards under the 1958 New York Convention on the Recognition and Enforcement of Foreign Awards (the “New York Convention”).

Prior to accession of the UAE to the New York Convention in 2006 (see Federal Decree No. 43 of 13 June 2006), the enforcement of foreign awards before the UAE Courts was – save the application of relevant bi- or other multi-lateral conventions – subject to Article 235 of Federal Law No. 11 of 1992 (the “UAE Civil Procedures Code”), which governs the enforcement of foreign judgments in the UAE. Pursuant to Article 235, UAE Courts were empowered to and did in fact refuse enforcement of foreign awards on grounds such as:

- the lack of proper jurisdiction of the tribunal at the place of arbitration;

- the deficient issuance of the arbitral award at the place of arbitration;

- the improper summoning or representation of one of the parties in the foreign arbitration proceedings; or

- the contradiction of the foreign award with a previous UAE judgment or its violation of public policy or bonos mores as understood in the UAE.

Despite the UAE’s accession without entering any reservations and its resultant wide obligations under the New York Convention, the UAE Courts were initially reticent to apply the terms of the Convention to the enforcement of foreign awards (see Dubai Court of Cassation, case No. 258/1999, judgment dated 2/10/1999; Dubai Court of Cassation, case No. 267/1999, judgment dated 27/11/1999; Dubai Court of Cassation, case No. 17/2001, judgment dated 10/03/2001). To the contrary, they persevered in the obsolete application of the requirements set out in Article 235 of the UAE Civil Procedures Code and used these as a pretext for a quasi review on the merits of foreign awards in order to refuse their enforcement. On repeated occasions, the UAE Courts even proved susceptible to formalistic procedural grounds, which are commonly invoked in the ratification process of domestic awards under the applicable provisions of the UAE Civil Procedures Code, for setting aside foreign awards. A flagrant example of the formalism applied to domestic awards is the infamous Bechtel case (International Bechtel v. Department of Civil Aviation of the Government of Dubai, Dubai Court of Cassation, petition No. 503/2003, judgment dated 15 May 2005), in which a Dubai award involving a foreign party was set aside by the Dubai Court of Cassation for failure by the arbitrators properly to follow the oath-taking procedure which is mandatory for the hearing of witnesses under the UAE Civil Procedures Code.

In a surprising volte face, a number of UAE Courts have most recently taken a more arbitration-friendly approach to the enforcement of foreign awards. In sum, being faced with one or the other of the traditional grounds for setting aside foreign awards, the UAE Courts – in reliance on the express terms of the New York Convention – have dispensed with any procedural matters of form and/or the requirements set out in Article 235 of the UAE Civil Procedures Code as valid grounds for non-recognition and/or nullification.

More specifically, in a ruling dated 27 April 2010 (Case No. 35/2010), the Fujairah Federal Court of First Instance enforced two awards, one on the merits and the other one on costs, issued by a Sole Arbitrator in London under the Rules of the London Maritime Arbitration Association (LMAA) following an application for enforcement by the award creditor in terms of the New York Convention. After noting that (i) the awards were duly certified and issued in the United Kingdom, (ii) that the UAE have ratified the New York Convention with effect from 19 November 2006, and (iii) that the awards were issued pursuant to English Law in the United Kingdom, which is a signatory to the New York Convention, the Fujairah Court held that the two underlying foreign awards were good for enforcement in the UAE. It is notable that the Court’s conclusions were prefaced by an express reference to the obligation to comply with international treaties and conventions, which under UAE law form part of the domestic law, in the enforcement of foreign award.

Most recently, in Maxtel International FZE v. Airmec Dubai LLC (Court of First Instance Commercial Action No. 268/2010, dated 12 January 2011), the Dubai Court of First Instance enforced two awards, one on the merits and one on costs, issued by a Sole Arbitrator in London under the DIFC-LCIA Arbitration Rules involving two Dubai-based companies, one free zone one limited liability, following an application for enforcement by the award creditor under the New York Convention. The award debtor objected to the enforcement of the awards, seeking nullification on a number of procedural grounds, including:

- lack of capacity of the signatory of the arbitration clause to sign on behalf of the defendant;

- invalidity of the formation and composition of the arbitral tribunal;

- lack of terms of reference to arbitration in violation of the provisions of Article 216 (a) of the UAE Civil Procedures Code and Article V (c) of the New York Convention;

- failure of the arbitral tribunal to apply the mandatory provisions of UAE law on oath-taking for witnesses; and

- failure to render the awards within the prescribed time-limit of 6 months in violation of the provisions of the UAE Civil Procedures Code.

After stating that (i) both awards are “undoubtedly foreign awards, were both issued outside the UAE in London in accordance with New York Convention” and that (ii) it was well established that the UAE have ratified the New York Convention by Federal Decree No. 43/2006, and having set out in full relevant provisions of the Decree, the Dubai Court of First Instance held:

“The Court’s supervisory role when looking to recognize and enforce a foreign arbitral award is strictly to ensure that it does not conflict with the Federal Decree under which the UAE acceded to the New York Convention on the recognition and enforcement of foreign arbitral awards and satisfied the requirements of Articles IV and V of the Decree in terms of being duly authenticated.”

Importantly, the Dubai Court of First Instance expressly discarded the application of Articles 235 and 236 of the UAE Civil Code to the enforcement of foreign awards in the UAE. This ruling was recently affirmed by the Dubai Court of Appeal in Airmec Dubai LLC v. Maxtel International LLC (judgment of 22nd February 2012).

Despite the positive outlook provided by more recent UAE supervisory court case law, there remains some measure of uncertainty in the UAE judiciary’s proper commitment to the terms of the New York Convention. By way of illustration, in a most recent ruling the Dubai Court of First Instance refused recognition and enforcement of an award issued by the Singapore International Arbitration Centre on the basis that the award concerned was not ratified in the country of origin and could therefore not be executed under Articles 235 and 236 of the UAE Civil Procedures Code even though clearly stating that the ratification process provided for under the UAE Civil Procedures Code applied only to UAE domestic – with the exclusion of foreign – awards, the Court only made fleeting reference to the existence and the UAE’s membership to the New York Convention (see Dubai Court of First Instance, case No. 531/2011, judgment dated 18 May 2011).

Taken in the round, these latest developments in the UAE Courts’ enforcement practice of foreign awards may give hope to international investors who are seeking to enforce a foreign arbitration award against award debtors in the UAE. Judging by the UAE Courts’ most recent case law on the subject-matter, the incipient trend of enforcement of foreign awards under the New York Convention appears to be consolidating swiftly. Provided the UAE judiciary stays on this firm course, the widely-criticized enforcement practice under the relevant provisions of the UAE Civil Procedures Code can confidently be relegated to the annals of history. In the meantime, however, the DIFC may well serve as a viable – yet presently still untested – “host” or “intermediate” jurisdiction for enforcement of New York Convention awards in the UAE. This idea will be further explored in Part II of this blog to be posted in August 2012.


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• Leave a comment on Enforcement of New York Convention Awards in the UAE (Part I): Quo vadis?
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