SYSTECH SOLICITORS LEGAL UPDATE

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The most prevalent form of contract in the construction industry in the UAE is FIDIC. Despite the recent emphasis on amicable resolutions to disputes, if parties are not able to reach a universally acceptable conclusion, arbitration provides an alternate means of settling issues. Therefore, it is of great importance and practicality to be familiar with every stage of the arbitration process, especially where the likelihood of disputes is high. This article will focus mainly on the enforceability of an arbitral award as it is clear that an unenforceable settlement has no value. Dubai International Financial Centre (DIFC) is one of the Free Zone in Dubai, which unlike the rest of the UAE, has its own legislation on arbitration. Settlement awards made in the Financial Centre are often given the same weight as court judgements within the Free Zone jurisdiction and therefore binding on the parties. Due to the relatively small size and low volume of construction, it will be sufficient to add that judgements made by the DIFC Courts can be enforced in Dubai courts outside the Free Zone. The UAE does not have comprehensive legislation dedicated to arbitration. However, despite the limitation that its primary purpose was to regulate domestic legal proceedings, the UAE Civil Procedure Code 1 (CPC), has provisions, which set out the rules to be followed in the arbitration process. Articles 203- 218 are concerned with the award and enforcement of arbitration decisions made domestically while Articles 235-238 deal with the application of foreign arbitration decisions in the UAE courts. Procedural rules for execution of decisions are set out in Articles 239-243. For a domestic arbitration award to be enforceable, the following requirements specified in Article 203 have to be met: • The arbitration agreement has to be in writing • The subject matter of the dispute must be clearly indicated in the agreement. • It has to be signed by the arbitrator • Material facts of the case and the legal explanation for the decision has to be stated clearly • It must be supplemented by the written arbitration agreement Once the criteria above have been satisfied, the final stage of enforcing an arbitral award is to have it ratified by a court in the UAE. Article 215 of CPC dictates that the application process for ratification by the court be same as that for commencing legal action in the Court of First Instance. As an award can only be enforced after successful ratification in the court and agreement by both parties to accept the award. This requirement can be an opportunity for a disadvantaged party to challenge the ratification in the court. If challenged, a court hearing will be held in which a decision can only be made on account of procedural grounds. The historical trend of the UAE courts not enforcing arbitral awards is illustrated in the 2004 case of International Bechtel v Department of Civil Aviation of Dubai 2 . As had generally been the pattern, the award was rejected on the basis of minor procedural technicalities. In the Bechtel case, the arbitrator had failed to comply with Article 41(2) of CPC pertaining to the swearing in of witnesses. Recent cases seemingly show UAE Courts taking a more favourable approach on the subject of award ratifications. However, some anomalies bring this general trend into question. When the judgment was made in 2012 for Case No.: 180/2011, the Court of Cassation rejected the arbitral award on the grounds that in matters of public policy an arbitrator lacks the authority to adjudicate. Under UAE law, ‘public policy’ is given a liberal interpretation; even commercial matters can be argued to fall under public policy as it affects the distribution of wealth and freedom of commerce. Moreover, given the Civil Law system of the jurisdiction, previous court decisions may provide persuasive arguments but do not guarantee a consistent outcome. The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards came into effect in the UAE on 19th November 2006. Under Article 5 of the Convention, a signatory state has the obligation to enforce an arbitral award made in another signatory nation unless specified exceptions apply. In order to enforce a foreign arbitral award in the UAE, an authenticated original of the award or its certified copy must be submitted to the court along with the authenticated original arbitration agreement or its certified copy. Additionally, where the documents to be submitted are in a foreign language, they are required to be translated into Arabic. Article V (1) of the Convention sets out scenarios where a foreign award can be refused for not meeting the procedural requirements of the awarding state. Article V (2) allows refusal on the grounds of public policy. However, the greatest obstacle to enforcing foreign awards in the UAE is domestic legislation. Article 235 (a) – (e) of CPC provides a checklist that must be satisfied for enforcement of foreign awards. Paragraph (e) deals with public policy, which is given the same wide interpretation as when trying to enforce domestic awards. The fact that ‘public policy’ is not defined in legislation means that 1 Federal Law No.11 of 1992 (CPC) 2 300 F. Supp. 2d 112 8 www.systech-int.com
virtually any matter can be argued to fall under this heading. The traditional reluctance of the local courts in complying with the Convention duties was challenged by the case of Airmech Dubai LLC v Macsteel International LLC 3 . The Court of Cassation cited Article 238 CPC in its decision that domestic rules on foreign awards do not prejudice the obligations rising from an international convention to which UAE is a signatory. The Court of Cassation Case 156/2013 seemed to revert to the traditional stance. However it can be distinguished in that the court refused enforcement as neither party was domiciled in the UAE. Moreover, the verdict may have been influenced by the fact that the award had already been refused in other jurisdictions. UAE Courts are becoming comfortable with following the Convention duties in enforcing foreign awards and the mainstream opinion is that Articles 235- 238 CPC are set aside in favour of the Convention. However, in the enforcement of both foreign and domestic awards the greatest obstacle remains the challenges made at the ratification stage, especially under Article 216 CPC for domestic awards. This means that entire process becomes very long and drawn out, adding further financial burden. There is no doubt that parties seeking enforcement can mitigate risks by strictly following all procedural requirements and being aware of additional factors that may render an award vulnerable to challenges. However, the core of the issue can only be resolved by input from the UAE Legislature by streamlining the bureaucratic requirements and redefining the scope of ‘public policy’ in the enforcement of arbitral awards. 3 Court of Cassation of Dubai, 18 September 2012 www.systech-int.com 9
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Page 3 and 4: CONTENTS 4 7 10 13 16 19 22 26 John
Page 5 and 6: The first question to ask is: is re
Page 7: CLIENT’S GUIDE TO ENFORCING ARBIT
Page 11 and 12: It is a fairly common scenario in t
Page 13 and 14: CHERRY PICKING IN ADJUDICATION Phil
Page 15 and 16: from the responding party from sums
Page 17 and 18: When it comes to construction and s
Page 19 and 20: PROTECTING COMMERCIALLY VALUABLE IN
Page 21 and 22: can be fiercely negotiated and rang
Page 23 and 24: The SICC confirms Singapore as a Di
Page 25 and 26: Summary While arbitration as an alt
Page 27 and 28: The question as to whether the Sing
Page 29 and 30: Systech Solicitors offers a truly u

SYSTECH SOLICITORS LEGAL UPDATE

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