Arbitration is an investment and, like any investment, one must assess the risks against the benefits. Such an evaluation often focuses upon the merits of the legal and commercial issues in dispute.
A recent case heard by the Court of Appeal in Dubai (Case No. 371-203) provides a reminder that on top of the over-arching merits of a claim, parties to an arbitration have to put procedural requirements and the form of the arbitration at the top of their list of priorities to ensure that their investment is not squandered by subsequent ratification and enforcement issues.
Arbitration in the UAE
Arbitration in the United Arab Emirates (UAE) is governed by articles 203 to 218 of Federal Law (11) of 1992, as amended (the Civil Procedure Code (CPC)).
Case No. 371-203
In Case No. 371-203, the Tribunal granted an award in favour of the claimant under the Dubai International Arbitration Centre (DIAC) rules. The award was successfully challenged during enforcement proceedings and was annulled by the Court of First Instance. Upholding the annulment, the Court of Appeal found that the Tribunal failed to sign the award in accordance with articles 212(7) and 212(5) of the CPC.
Following this decision, the ramifications of Article 212(7) of the CPC are that an award will be invalid if the arbitrators fail to sign both the section setting out the reasoning for the decision and the section containing the decision itself. The logistical exception is if parts of the two sections are on the same page and if the signatures are also on that page, the court will assume that the signature is applicable to both sections.
The second reason the Court of Appeal gave for annulling the award was that it was only signed by two of the three arbitrators. Article 212(5) of the CPC states that if one or more arbitrators refuse to sign the award, then this shall be stated in the award. Given that the main award did not specifically describe why the dissenting arbitrator had not signed the award, despite the implication being quite obvious, then the award could be annulled.
Adhering to administrative requirements is key
The reasons for annulment that the Court of Appeal upheld highlight how simple, administrative issues can have a devastating effect on an arbitration award. Under article 212 of the CPC, the award must also comply with the following 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 reasons for the award.
- It must state the date and place of issue.
- Unless otherwise agreed by the parties, the award must be in Arabic.
The importance of these simple steps should not be underestimated. As Case No. 371-203 demonstrates, a Tribunal’s failure to follow these requirements can be used as a ground to challenge the ratification and enforcement of the award. In contrast to England where the arbitral award will be enforced unless it was made without jurisdiction, there is clear evidence of bias or a fundamental procedural irregularity, the UAE courts will insist on all procedural requirements being complied with.
Such procedural issues are avoidable. Parties and their legal advisers should work with the Tribunal and the governing administrative body, such as DIAC, to ensure that all procedural requirements are identified and precisely complied with. This case highlights that without getting “the simple things” right, the investment in an arbitration may be wasted.