INTRODUCTION

While arbitration is a frequently used and popular dispute resolution mechanism in the United Arab Emirates, there is a perception that the law in the UAE can be exploited by an unsuccessful party to an arbitration to frustrate the recognition and enforcement of the arbitral award. That perception ignores the fact that arbitration awards are frequently recognised and enforced in the UAE, and done so without undue delay. However, the lack of a substantive and modern legislative framework for arbitration does little to support the arbitration process, or alter that perception.

The importance of having an arbitral award recognised in a UAE court is that it is only once it has been recognised by the UAE courts and 'converted' into a court judgment that a party may seek to execute and enforce in the UAE.

The process of recognition in the UAE of a domestic arbitral award is not without its issues, as is the case in many other jurisdictions. It is not unknown for the recognition of an arbitral award to be refused by a UAE court on the basis of a technical procedural error; for example, should each member of the arbitral tribunal merely initial (as opposed to signing with a full signature) each page of the arbitral award, or an incorrect oath is taken by a witness. As a result, one of the purposes of arbitration (a speedy dispute resolution process) can be defeated.

In this article we will summarise the practice of the UAE courts towards recognition of domestic arbitral awards, suggest an alternate approach, and conclude with some comments on steps that the parties can take to avoid the annulment of an arbitral award.

THE PROCESS FOR ENFORCING DOMESTIC ARBITRATION AWARDS IN THE UAE

The statutory framework for arbitration in the UAE is set out in Articles 203 to 218 of the UAE's Civil Procedure Code (CPC).

The party seeking to have an award recognised must make an application to the appropriate civil court for ratification of the arbitral award (Article 215(1) CPC). In terms of initial procedural steps, this involves filing a civil suit in a Court of First Instance. An original of the arbitral award and any annexes to it must be filed with the application. The arbitral award and annexes must be in Arabic (unless the parties have agreed that the arbitration proceedings are in different language), in which case it must, when filed in the court, be accompanied with an official Arabic translation by an authorised translator.

The application for ratification is then served on the other party to the arbitration (now called the defendant, or indeed the defendants if there are more than one), with the defendant having an opportunity to respond, and the matter proceeds thereafter as would a normal civil claim in the court. The final decision of the Court of First Instance on the application can then be appealed to the Court of Appeal, and thereafter there is a right of further appeal to the Court of Cassation. It is not unusual for all three stages to be taken up.

Although the UAE courts should not consider the merits of the arbitral award (Article 217(1), CPC), an unsuccessful party in the arbitration may try just that under a number of guises, but the more frequent approach is to focus on the grounds for annulment of the arbitral award as set out in Article 216(1) of the CPC.

THE GROUNDS FOR ANNULLING A DOMESTIC ARBITRATION AWARD

Pursuant to Article 216(1) of the CPC a party may seek an order annulling an arbitral award, and an application for annulment is the frequent response by the defendant to an application for recognition. Article 216(1) sets out in three sub-clauses the grounds for annulment; the UAE court shall annul the arbitral award if1:

  1. it is given without an agreement to arbitrate or is based on an invalid agreement to arbitrate, or
  2. it is void because a time limit has been exceeded, or
  3. the arbitral tribunal have exceeded the limits of the agreement to arbitrate (i.e. they had no jurisdiction in respect of the matter decided), or
  4. has been given by arbitrators not appointed according to the law, or
  5. it was given by some member of the arbitral tribunal without being so empowered in the absence of the others, or
  6. purportedly given under an agreement to arbitrate in which the subject of the dispute is not stated, or
  7. given by someone not competent to agree to arbitration or by an arbitrator who does not fill the legal requirement (the former point frequently gives rise to issues concerning the terms of a power of attorney used to sign documents, or the authority of a signatory to the agreement to arbitrate or terms of reference), or
  8. there is something invalid in the ruling or in the procedures affecting the ruling.

Neither party can waive their right to challenge an arbitral award if the grounds for annulment are based on one of the Article 216(1) grounds (Article 216(2) ). Parties are entitled to raise such a challenge even if they have purported to have waived their rights during the arbitration process.

A POSSIBLE ALTERNATE ROUTE: DUBAI INTERNATIONAL FINANCIAL CENTRE COURT

In an attempt to avoid the issues that may be encountered in the civil courts in the UAE some parties are now turning first to the courts of the Dubai International Financial Centre (DIFC) to seek recognition there of their arbitral award, and then take the resulting DIFC court judgment recognising and 'converting' the arbitral award in to a judgment to the civil courts of the UAE for execution.

The DIFC Courts are a common law based court system in the DIFC with its own procedural rules, and which conducts proceedings in English. The judges of the DIFC Courts have impressive credentials: the bench includes retired English High Court Commercial Court judges as well as a number of leading and retired judges from Commonwealth jurisdictions, as well as a highly regarded Emirati judge. In addition to its own legal system, the DIFC has its own civil laws in respect of a number of disciplines – those specific DIFC laws replacing in the DIFC the laws otherwise applying in the Emirate of Dubai.

Judicial Authority Law of 2004 establishes the DIFC Courts and sets out their jurisdiction; Article 5(A)(1)(e) of that law provides that the DIFC Courts have jurisdiction over any claim or action in accordance with DIFC Laws. Article 42(1) of the DIFC's Arbitration Law of 2008 provides for the recognition and enforcement of an arbitral award, "irrespective of the State or jurisdiction in which it was made". On that basis, the DIFC courts have jurisdiction to recognise and enforce on arbitral award, including one made in the UAE. In recognising and enforcing an award, the DIFC courts do not therefore apply the CPC.

In brief, the grounds upon which the DIFC Courts may refuse to recognise an arbitral award are limited and largely follow those provided by the 1958 New York Convention, and in respect of which there is now much judicial authority from the many jurisdictions that are signatories to and have ratified the 1958 New York Convention.

However, the DIFC Court's jurisdiction does not extend to enforcement or execution outside the geographical area of the DIFC, and thus it is necessary to turn to the civil courts in the rest of the UAE in order to enforce a judgment outside the DIFC.

In accordance with the Protocol of Enforcement between the DIFC courts and Dubai courts, judgments of the DIFC courts should therefore be regarded, for these purposes, as judgments of the Dubai courts. As such, it means that other courts in the UAE should approach the DIFC judgment as they would a judgment of the Dubai courts, and enforce it. In theory, this should mean that the UAE civil courts cannot set aside the judgment of the DIFC courts on the arbitral award, and must enforce that judgment.

CONCLUSION

The civil courts in the UAE do recognise and enforce arbitration awards, something that is overlooked as it seems that for the most part only the failed attempts to obtain recognition get publicised.

Having said that, parties embarking on arbitration proceedings in the UAE should be cognisant from the outset of potential technical enforcement issues in the UAE. However, these issues can, armed with knowledge of the requirements of the CPC and the workings of the courts, be managed.

For example, parties should consider having as arbitrator, or at least one of the appointed arbitrators, someone familiar with the UAE law on arbitration, and who is then in a position to ensure that the arbitral award fulfills the requirements of the CPC and the practice of the UAE courts.

At the risk of stating the obvious, it also helps if the parties' legal advisors are also familiar with those requirements.

*For the purposes of this article, the fact that the Emirates of Dubai and of Ras Al Khaimah each have a court system outside the UAE's federal court system can be left to one side, as the approach of the civil courts throughout the UAE is essentially the same. By 'domestic arbitral awards' we mean an arbitral award issued in an arbitration when the place and legal seat of the arbitral tribunal is in the UAE, and the parties are resident in the UAE. The enforcement of non-domestic awards (that is, an international arbitration award), gives rise to different issues.

1 We have broken those clauses down, and the translation of the Arabic into English has been modified in part, in order to aid an understanding of the original three Arabic sub-clauses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.