United Arab Emirates

Alec Emmerson and Keith Hutchison of Clyde & Co LLP share with us some of
the implications and effects of the recent ruling on the recognition and
enforcement of foreign awards in Dubai. Here, they highlight the importance of
the decision and indicate that whilst an element of uncertainty still remains,
clarity is within reach.


Dubai’s Cassation Court (the final court of appeal) recently delivered an unequivocal judgment that the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) applies and not the UAE Civil Procedure Code (CPC) to the enforcement of foreign awards.

A long awaited ruling
Set against a background of problematic enforcements in the UAE, a strong pro-enforcement judgment from the Court of Cassation is precisely what arbitration practitioners and users have been waiting for.

The Dubai Court of First Instance has also recently ruled in a case applying the NYC to foreign award enforcement in circumstances where neither party advanced arguments based upon it, and the pleadings focused on the provisions of the CPC. It may be that the well-publicised ruling in the Cassation case influenced the Court in making this further pro-arbitration ruling.

While these cases demonstrate an increasing judicial recognition of the importance of arbitration, enforcement of domestic awards in the UAE can still be a frustrating exercise. Difficulties remain where the Courts apply a very narrow interpretation of the domestic provisions in the CPC and focus on form over substance. In a recent example of this approach, the Dubai Court of Cassation upheld an appealed judgment refusing to ratify and enforce a domestic award on a literal application of the CPC requirement that, in the case of an award of a three-member tribunal, a dissenting opinion must be referred to in the majority award. The dissenting opinion of one arbitrator was not directly referred to in the majority award of the tribunal and the award was also not signed by him. The separately written dissenting opinion (which that arbitrator did sign) was enclosed with and referred to in the tribunal’s letter to the Dubai Courts enclosing the majority award!

Sparking a legal debate
Another domestic award enforcement case has sparked a legal debate surrounding the Court of Cassation’s refusal to enforce awards on ‘public policy’ grounds under the CPC. That case involved a claim to enforce three Dubai awards in relation to a private real estate dispute, including consideration of the application of a Dubai law regulating the registration of off-plan property sales. The Court nullified the awards on grounds that the application of the relevant property law is a matter of public policy which cannot be resolved through arbitration. Our detailed commentary on this ruling, including our views on comments made by some legal practitioners as to the negative impact of the ruling for Dubai’s arbitration credentials, can be read found on our website. We consider that some commentators have exaggerated the significance of a judgment that is actually very narrow in its scope.

Set against the bigger picture, each of these cases should be viewed on their own merits and they do not in our view detract from Dubai’s increasingly prominent position in international arbitration. Dubai also benefits from the UAE’s bilateral treaty with India which includes award enforcement provisions. One result of the differing treatment of foreign versus domestic awards may be that more local users of arbitration choose a foreign or Dubai International Financial Centre (DIFC) seat for their arbitration for the advantages that this will bring over domestic awards at the enforcement stage.


Steering a course in the right direction
In terms of the treatment of arbitration in the DIFC Courts, two recent cases have addressed an inconsistency between DIFC law and the UAE’s treaty obligations under the NYC. The earlier case highlighted the issue, while the later case provided a solution pending possible legislative reform.

In International Electromechanical Services v Al Fattan the DIFC Court ordered a stay of proceedings for a foreign (non-DIFC seated) arbitration to proceed between the parties in accordance with an arbitration agreement. The Court declined to follow its earlier ruling in Injazat v Denton Wilde Sapte & Co where it had held that it was not bound by the DIFC Arbitration Law (or other DIFC statute) to stay proceedings brought in breach of an arbitration agreement for foreign arbitration, nor did it have an inherent jurisdiction to order a stay of proceedings in favour of foreign arbitration. The Court in Al Fattan agreed with Injazat that that there was no statutory obligation on the Court to stay proceedings for foreign arbitration, but it held that it had an inherent jurisdiction to order a stay of the case.

Al Fattan has been widely received as a positive judgment from the DIFC Courts steering a path around the drafting error in the DIFC Arbitration Law. We expect legislative revision will remove the problem and settle the position more satisfactorily than reliance by the judiciary on its inherent jurisdiction.

For arbitration and more generally for the reputation of Dubai’s legal system and its status as a significant arbitration centre, these recent judgments of Dubai’s civil and common law courts show that things are moving in the right direction.

alec.emmerson@clydeco.com
keith.hutchison@clydeco.com
www.clydeco.com

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