This article was written by Joanne Strain (partner) and Edmund Northcott (trainee solicitor).
The legal landscape of the UAE is increasingly favourable to arbitration:
- A growing trend of pro-enforcement judgments from the local Arabic speaking courts is palpable.
- The English speaking common law Dubai International Financial Centre (DIFC) Courts, which exist alongside the Arabic Courts, and which adopt the UNCITRAL Model Law (designed to assist States in reforming and modernizing their laws on arbitral procedure) provide a modern legal framework for enforcement.
- The DIFC Courts have issued decisions confirming jurisdiction beyond its territorial borders, making the DIFC Courts a popular alternative option for parties seeking to enforce awards against parties and assets in onshore Dubai.
Before an arbitral award can be enforced in the UAE, it must first be ratified by the Courts, so that it carries the same weight as a locally-rendered judgment. Thereafter, an Order for Execution is required to enforce against assets in the UAE.
An order for ratification can be obtained through the local Arabic speaking Courts. Any challenge to ratification, or claim for annulment, can be advanced under the limited grounds set out in Article 216 of the UAE Civil Procedure Code (Federal Law 11 of 1992) (the “CC”). Grounds for challenge include nullity in the award or nullity in the proceedings, or if the arbitration instrument has lapsed by effluxion of time.
An order for recognition can similarly be sought through the English speaking common law Courts of the DIFC. An order for recognition can only be challenged under the grounds set out in Article 42 of the DIFC Arbitration Law which mirror the defences to enforcement found at Article V of the New York Convention (the “NYC”). If the assets for enforcement are in on-shore Dubai, rather than the DIFC, then an Order for Execution from the Dubai Courts will still be required.
Enforcement of New York Convention Awards: Recent decisions with a positive trend
Abu Dhabi and Dubai judgments
Despite the UAE’s accession to the NYC, historically there were hurdles to enforcement, and certain decisions from the Courts gave rise to real concern.
However, increasingly decisions from the Courts reflect a pro-enforcement approach, in line with the expectations of the NYC.
Application of NYC as mandatory internal law confirmed: Dubai Court of Cassation Case No. 132/2012 Airmec Dubai, LLC v. Maxtel International, LLC
Airmec Dubai sought nullification of three NYC awards for a number of reasons arising under Article 216 of the UAE Civil Procedure Code, including: failure of the arbitral tribunal to apply the mandatory provisions of UAE law on oath-taking for witnesses; lack of capacity of the signatory of the arbitration agreement to sign on behalf of the defendant; and lack of terms of reference to arbitration.
The Dubai Court of Cassation rejected Airmec’s objections, confirming that: (i) the NYC was to be construed as mandatory internal law and applied within the UAE; (ii) the Court's jurisdiction over foreign arbitral awards is limited to ensuring such awards do not breach the Federal Decree of accession and ensuring that the awards meet the legal requirements of Articles IV and V of the NYC.
Straight forward approach to enforcement: Dubai Court of Cassation Case No. 434 of 2014 - Al Reyami Group LLC v BTI Befestigungstechuk GmbII & Co of KG
In 2014, the Dubai Court of Cassation took a very straightforward approach to applying the NYC to the enforcement of an ICC arbitral award rendered in Stuttgart, Germany.
The Dubai Court of Cassation dismissed the Respondent’s arguments concerning breaches of procedural law and confirmed the award did not infringe public policy.
Recent pro-enforcement stance bolstered: Dubai Court of Cassation Commercial Appeal No. 693 of 2015
The UAE courts’ pro-arbitration stance was further bolstered by a decision handed down by the Dubai Court of Cassation in Commercial Appeal No. 693/2015.
The Respondent sought to appeal the Order for Ratification of English arbitral awards in the UAE Court of Cassation, on the grounds that he had not been properly served with the arbitration notice and that the signatory to the agreement was not authorised.
The Court of Cassation dismissed the appeal, and held that: (i) the Respondent’s attendance at the hearings constituted sufficient notice of the arbitration; and (ii) the Respondent had failed to adduce any evidence before the trial court that the signatory lacked capacity to bind him when entering into the agreement in question.
Notwithstanding the above, a note of caution should be sounded. There remains some measure of uncertainty, particularly as the civil law system does not apply stare decisis (i.e. case law precedent). By way of example, a recent Dubai Court of Appeal decision in 2016 bucked the trend of the mandatory application of the NYC to foreign awards, when the Court questioned whether there was sufficient evidence before it that the UK, where the award came from, was a signatory to the NYC, and refused to enforce on that basis. However, this decision was soon overturned by the Court de Cassation a few months later.
In another such example, in Dubai Court of First Instance Case No. 531 of 2011, the Court refused recognition and enforcement of an award issued by the Singapore International Arbitration Centre on the basis that the award was not ratified in the country of origin and could therefore not be executed under Articles 235 and 236 of the CC.
The DIFC Courts
The decisions of the DIFC Courts can be expected to follow a pro NYC approach at all times – the DIFC arbitration law is based on the UNCITRAL Model Law.
The DIFC Courts have made plain, in accordance with DIFC Laws, that the Courts will recognise an arbitral award, irrespective of where it was made, as binding within the DIFC, subject only to limited defences.
The DIFC Courts order enforcement of a foreign award against a debtor in “on-shore” Dubai, outside the DIFC: Egan & Eggart v. Eava & Efa (ARB 002 of 2013) (“Egan v Eava”)
Egan & Eggart (companies incorporated outside of Dubai) sought an order from the DIFC Courts for enforcement of a foreign arbitral award against Eava & Efa located in “on-shore” Dubai (i.e., outside the DIFC free-zone), pursuant to Articles 42 and 43 of the DIFC Arbitration Law.
Finding in favour of Egan & Eggart, the DIFC Courts noted that the DIFC is an autonomous jurisdiction, and that the provisions of the CC list not apply. Article 5(1)(A)(e) of the Judicial Authority Law provides that the DIFC Courts have jurisdiction over any claim in accordance with DIFC Laws and Article 42 of the DIFC Arbitration Law provides that “an arbitral award, irrespective of the State or jurisdiction in which it was made, shall be recognised as binding within the DIFC and, upon application in writing to the DIFC Court”.
This judgment of the DIFC Courts has been relied upon in a number of other cases, including Fiske & Firmin v Firuzeh, ARB 001 of 2014.
However, while the DIFC Courts have been willing to enforce foreign and domestic awards against “local” award debtors, in circumstances where the assets of the award debtor are in Dubai (on-shore), it remains to be seen how local courts will treat the DIFC Courts’ orders for enforcement. We understand that a number of execution cases are open in the Dubai courts but none have had a judgment rendered at the time of writing. Watch this space.
Enforcement of domestic UAE arbitral awards
Reports indicate that the UAE courts have increasingly taken a favourable approach to the enforcement of UAE domestic arbitral awards.
However, any award can be challenged (i) pursuant to the grounds for nullifying awards (Article 216 of the CC, in particular sub-clause 216(1)(c), including being contrary to public policy or morals); and (ii) for failure to comply with the technical requirements required for a valid award, such as the award must be physically signed within the UAE; the legal representative of each party must possess a valid power of attorney to act in the proceedings; and witnesses should not be present in the evidentiary hearing except when they are giving evidence (though this is often relaxed by agreement of the parties allowing witnesses to attend the hearing after they have given evidence).
Whilst public policy grounds can be asserted as a challenge to both NYC and domestic awards, the approach of the UAE Courts indicates that a more expansionist interpretation of “public policy” might apply to domestic awards.
Public Policy defined widely: Baiti Real Estate Development v. Dynasty Zarooni Inc.
In Baiti Real Estate, the underlying arbitration involved a property transaction whereby the owner had failed to register the property following sale, and the arbitrator held the sale to be null and void, and the contract terminated, applying Article 3 of Law No. 13 of 2008.
This award was successfully challenged under public policy grounds. The Court of Cassation held that the arbitrator did not have the power to rule on matters involving Article 3 of Law No. 13 of 2008 as they pertained to the “rules of private ownership and the circulation of wealth”, which are matters of public policy and consequently set aside the award.
Banyan Tree v Meydan Group LLC
For the first time, in 2013, the DIFC Courts, in a landmark judgment, Banyan Tree v Meydan Group LLC (“Banyan Tree”), held that the DIFC Courts have jurisdiction to enforce a UAE (a non-NYC award) award, irrespective of the presence of assets and/or connection of the parties with the jurisdiction of the DIFC.
The reasoning adopted by the Court was similar to Egan v Eava – Article 5(1)(A)(e) of the Judicial Authority Law and Article 42 are the gateway to jurisdiction of the DIFC Courts.
Additionally, the Court held that:
- the doctrine of forum non conveniens only applies in the DIFC where the alternative court is a foreign court (as opposed to a UAE court); and
- the NYC is not applicable to the enforcement or recognition of UAE awards in the DIFC, as they are deemed to be “domestic” awards.
As with NYC awards recognised by the DIFC Courts, but with assets in on-shore Dubai, it remains to be seen how local courts will treat the DIFC Courts’ orders regarding recognition and enforcement of UAE awards.
Legal Update: Conflicts of Jurisdiction between Courts and Decree 19 of 2016
As the DIFC Courts have held that they have jurisdiction to consider on-shore UAE awards, not connected with the DIFC, notwithstanding that the ratification of those awards would typically fall to the local courts, there has emerged real areas of potential overlapping competence, and jurisdictional conflicts between courts.
In June of this year, the Ruler of Dubai, by Decree 19 of 2016 (the “Decree”), proposed the creation of a new Committee to review matters of conflict.
In general, prior to the Decree, all matters regarding conflict, whether negative or positive, were referred to the Union Supreme Court. In a recent DIFC Court judgment, the Deputy Chief Justice Sir David Steel considered the impact of the Decree, noting it was designed to "eliminate the jurisdiction of the Union Supreme Court in respect of conflicts of jurisdiction between the courts of Dubai". However, he declined to rule on the application of the Decree and in particular its retroactive effect, as no conflict on jurisdiction was found to exist on the facts. It therefore remains to be seen how the Decree will function when put into practice by courts and tribunals.
Within the last few years there has definitely been a positive shift towards enforcement of both foreign and domestic awards within the UAE. It appears that this trend is set to continue, and strengthen.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed in New York on 10 June 1958.
An award made in a foreign country which is a signatory to the NYC, hereafter a “NYC award”.
Judgment dated 23 November 2014.
Case No 384 of 2016, judgment dated 19 June 2016.
Previously referred to X1 and X2 v Y1 and Y2.
Appeal No. 14/2012, Real Estate Cassation.
Case No. ARB 003-2013.
Standard Chartered Bank and Investment Group Private Limited, Claim No. CFI 026/2014 dated 1 August 2016.