Arbitration in Dubai and the United Arab Emirates (UAE)
In our previous newsletter issue, we addressed the legal aspects of arbitration under the UAE Civil Code and further understanding legislature’s intention in developing arbitration as alternative means of resolving disputes. The article clarified that parties choosing to opt for arbitration would avoid the lengthy court procedures in addition to long-drawn appeal procedures adopted by courts across the United Arab Emirates. The earlier article also aimed at examining the role of the national judiciary in certifying an arbitration award and instances where courts may consider applications as to the invalidity of arbitration claims.
The legislature has and continues to promote, foster and develop arbitration system to lower the burden of courts. To this effect, Article 3 (d) of the DIAC Statute Rules (as amended) impose an obligation on Dubai International Arbitration Centre to promote awareness of methods of alternative dispute resolution through conferences, symposia, workshops, training courses, specialist publications as well as printed materials. Arbitration in Dubai and the UAE continues to develop and apply to commercial and civil matters except for certain matters that may be referred exclusively to state courts.
In deciding the validity of an arbitration award in Dubai and/or the UAE, a judge cannot in any manner discuss arbitrator’s understanding of the facts and laws. This precedent rule, however, is not absolute since the legislature allows Judge while considering the aspect related to the nullification of an arbitration award to reasons provided under Article 216 (1) of UAE Civil Procedure Code, Federal Law No. (11) Of 1992.
Article (216/1) states: “The parties to a dispute may, at the time of consideration of the arbitrator’s award, request the nullification of the same in the following events:
a. If the award was issued without or was based on invalid terms of reference or agreement which has expired by time prescription, or if the arbitrator has exceeded his limits under the terms of reference.
b. If the award was issued by arbitrators who were not appointed in accordance with the law, or by only a number of the arbitrators who were not authorized to issue the award in the absence of the others, or if it was based on terms of reference in which the dispute was not specified, or if it was issued by a person who is not competent to act as an arbitrator or by an arbitrator who does not satisfy the legal requirements.
c. If the award of the arbitrators or the arbitration proceedings become void and, such voidness affected the award.”
The Dubai Court of Cassation (case 32 of 2009 and dated 29 March 2009) has held that
“The UAE Civil Procedure Code contains limited articles that define the scope and extent to which the judge can discuss the nullification of an arbitration award. The basis and limit to which parties may dispute or challenge nullification of an arbitral award are contained in Article 216 of the Civil Procedure Code”.
This Article now considers two main issues that one must consider before challenging nullification of an arbitration award.
Issue I: Arbitration awards are final and binding and consequently cannot be challenged.
The prevailing judicial system in the United Arab Emirates follows a federal court structure with a final court (Court of Cassation in Abu Dhabi) with the exception of Dubai and Ras Al Khaimah that do not form part of the federal judicial system. The court structure in Dubai is comprised of Court of First Instance, the Court of Appeal and the Court of Cassation.
With regards to arbitration, the UAE currently does not have a formal legislation dealing with Arbitration. Accordingly, the UAE Civil Procedures Code governs the arbitration. Article 217 of the Civil Procedures Code confirms that ‘the award of arbitrators may not be contested by any manner of appeal.' That said, it is pertinent to clarify that an application for nullification of an arbitration award is not considered as an appeal. This has also been upheld by the apex court citing Article 213 (3), Article 216 (1) and Article 217 (1) of the Civil Procedures Code explicitly citing that ‘arbitration award may not be contested in any manner of appeal decided by law.’ (Case 387 of 2007 and Case 414 of 2001 dated 17 February 2001).
It is clear from above that legislature’s intention was to ensure timely enforcement of arbitration award in light of very objectives of the arbitration system that aims at quicker means of dispute resolution.
Issue II: When can a Party claim nullification of an arbitral award?
The legislature’s decision under Article 216 of the Civil Procedure Code suggests that a party to arbitration dispute may at the time of consideration of arbitration award request the nullification of the award. This principle means that a party can request nullification of the arbitral award during ratification. Perhaps the reason behind binding the ratification demand and the nullification of award request together is because the need to nullify an award does not usually arise unless a request for ratification and execution is demanded.
However, there is nothing that prevents a party from challenging nullification without or prior to an award being ratified. This has been confirmed by Court of Cassation (Case 387 of 2001 and 404 of 2001 dated 17 February 2002) which sets out “Application for nullification of arbitration award could be either by filing a claim for nullification or by and opposition filed against the original request for ratification.”
This article now examines situations where arbitral awards can be set aside. Consistent with the provisions contained in the civil law, a claim for nullification of arbitration award can be based on two aspects – a) the arbitration agreement itself and; b) claim based on arbitration proceedings.
A. Claim to set aside arbitration award based on arbitration agreement: Such claim generally arises:-
i. If the award was issued without a valid arbitration agreement between the parties;
ii. The award is based on arbitration agreement that is invalid for instance, contract that has not been signed or cases where contract does not refer to arbitration;
iii. If the award is based on agreement that is no longer valid on account of lapse of time or is ultra vires;
iv. If the arbitrator exceeded its authority in addressing or deciding matters that were outside the arbitrator’s scope; or
v. Award violates public order.
B. Claim to set aside arbitration award based on arbitration proceedings: Such claim generally arises:-
1- If the award results from an irregular composition of arbitral tribunal or cases where arbitrators are not appointed in accordance with the law, for instance, act of arbitrator to unilaterally proceed with arbitration proceeding with arbitration despite an objection being filed against his appointment.
2- If the award was issued by one arbitrator in the absence of the other(s) without having any authorization to decide solely.
3- If the award fails to define terms of dispute.
4- If the award issued by a person who is not competent to act as an arbitrator.
5- Failure the by the arbitrator to afford an opportunity of being heard to a party to arbitration claim.
6- Lack of capacity to enter into the arbitration agreement.
7- If the arbitration proceedings become void or cases where failure the by the arbitrator to adopt correct procedures affects the award.
To conclude, arbitral awards can only be challenged on grounds discussed above.
The next article will address a range of key issues that are beyond the scope of arbitration, and in specific, the author will continue to discuss arbitration in Dubai with particular emphasis on mediation and conciliation. Get in touch with one of our arbitration lawyers in Dubai today. Also, read more about STA Law Firm's arbitration and dispute resolution practice here.
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