Part I

Arbitration is a well known and popular form of dispute resolution in the commercial world.  However, there are traps and hurdles in enforcing arbitration awards in the UAE, whether the award is a local award, a DIFC award or a foreign award.

Enforcing Local Arbitration Awards in the UAE - Process and Pitfalls

In this first article of a three part series, we shall be looking at the enforcement of local arbitral awards in the UAE.  Article two will focus on the enforcement of foreign arbitral awards and article three will discuss the enforcement of DIFC/LCIA awards. 

Introduction

Arbitration is one of the fastest growing dispute resolution mechanisms in the world, and its popularity in the UAE is on the rise.  Commercial entities doing business in the UAE have, in the past five years or so, shown an increased willingness to include arbitration agreements in their contracts and refer disputes to local arbitration centres such as the Dubai International Arbitration Centre (or "DIAC") in Dubai or the Abu Dhabi Commercial Conciliation and Arbitration Centre in Abu Dhabi ("ADCAAC") rather than the Courts.  Cases in the DIAC alone have increased from just 77 in 2007  to over 300 in 2010.

The perception of arbitration is that it offers a fairer, more predictable process for the resolution of disputes which is more suited to the parties' commercial needs than Court proceedings.  However, it is important for commercial parties to realise that under UAE law there are a number of pitfalls in the procedure surrounding the issue and enforcement of a local arbitral award (being an award where the seat or legal place of the arbitration is the UAE) which can catch out the unsuspecting.  In this article, we look at some of the problems that can occur.

The issue of the Award

In terms of the legal framework, a standalone Federal Arbitration Law has been in the pipeline for some time and is expected to be enacted in the near future, however until such time, arbitration in the UAE will continue to be governed by Articles 203 to 218 of Federal Law (11) of 1992 issuing the Civil Procedure Code.

Under Article 210 of the Civil Procedure Code, if the parties do not stipulate in the arbitrator's terms of reference a period for issuing the final award, then the arbitrator must issue his award within six months of the date of the arbitration hearing, otherwise either party can refer the dispute to the Courts.  While is open to the parties to extend this period, the parties must ensure that the arbitrator extends the deadline for the issue of the award before the deadline expires, otherwise the award may be invalid and unenforceable.

Pursuant to Article 212 of the Civil Procedure Code, the award must also comply with the following further requirements:

  • it must include a copy of the arbitration agreement;
  • it must include a summary of the litigants' statements and documents;
  • it must state the grounds for the award;
  • it must state the date and place of issue;
  • if there is a three member Tribunal, the award must be signed by all the arbitrators (or in case of an arbitrator refusing to sign, this must be noted in the award, and the award shall be valid provided it is signed by the majority); and
  • unless otherwise agreed by the parties, the award must be in Arabic (in ADCAAC arbitrations, the parties can elect to have the Award issued in English, but in all cases there must also be an Arabic version).

It is important that the steps above are followed by the Tribunal as failure to do so can be used as a ground to challenge the ratification of the award by the losing party.  Unlike in jurisdictions such as the UK, where arbitral awards will be generally enforced by the Courts unless there is clear evidence of bias or a fundamental procedural irregularity, in the UAE, there have been many cases where arbitral awards have been successfully challenged because one or more of the relevant requirements has not been met.  We are aware of one case, for example, where the award was not ratified because the arbitrator had not signed the award on every page.  In that case, the award was annulled and the successful party had no further recourse through the Courts.

In light of the above, it is good practice for the parties themselves to ensure that the Tribunal is aware of these requirements, particularly where one or more of the arbitrators is unfamiliar with UAE law and practice (which is often the case).

Enforcement – the ratification and annulment procedure

Any arbitral award must be ratified by the Courts before it can be enforced in the UAE against the losing party. The application by the winning party to the Court to ratify an award is almost identical to the procedure for making a 'regular' claim in the courts.  It is commenced with a claim form and accompanied by supporting documents, and the losing party will have to be served with notice of the proceedings.

After the Court of First Instance has delivered its decision, either by ratifying the award or annulling it, the losing party has the automatic right to appeal to the Court of Appeal and from there to the Court of Cassation.  Only once the Court of Appeal (or Cassation) has given its decision ratifying the award (or if the losing party fails to appeal) can the award then be enforced as it becomes equivalent to a UAE court judgment. 

Enforcement of the ratified award is done by way of application to the Execution Court and the award will be enforced in the same way as a court judgment.  However it is important to bear in mind that the ratification and enforcement stage alone can take more than 18 months from start to finish (taking into account any appeals), so it is by no means a swift end to what will have already been a long slog in the actual arbitral proceedings.

Just as the winning party may apply to ratify the award, the losing party may make its own application to the court to annul an award.  In practice, it is quite common in the UAE for the losing party, once served with notice of the proceedings, to make a counter application for the annulment of the award.

Whilst the Courts are not supposed to re-examine the merits of the underlying dispute, this can occur in practice.  The losing party sometimes seeks to frustrate the ratification process by raising arguments before the Courts, which were previously made during the arbitration, and to challenge the validity of the award under Article 216(c) often on spurious procedural grounds.

It is not unknown for awards to be overturned by the courts for apparently insignificant technical faults such as the failure of the tribunal to sign each page of the award in full, as opposed to initialling each page, or the use of an oath to swear witnesses during the arbitration which did not follow to the exact letter a formula prescribed for UAE court hearings.  Accordingly, it is very important to ensure that the arbitral award satisfies all of the technical requirements of the Civil Procedure Code before any attempt is made to enforce it.

Conclusion

While arbitration is now a recognised part of the legal landscape in the UAE, it is important to bear in mind that the UAE has its own laws and procedures applying to the issue and enforcement of arbitral awards.  As the consequences for not observing the relevant laws and procedures may include the annulment of the award, with no further right of recourse, commercial parties are strongly advised to ensure that they seek representation from legal practitioners experienced in arbitration in the UAE so that the risk of an award being annulled is minimised.

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.