“Procedural irregularities” are increasingly being used as the basis for resisting domestic arbitral awards in the UAE. For any party who is or may be involved in an arbitration in the UAE, it is critical to understand the procedural requirements contained in the UAE’s Civil Procedure Code (CPC) and how this is being interpreted by the UAE courts. This is because, to those unfamiliar with the CPC, the grounds for resisting enforcement may seem to be based on minor and insignificant technicalities.
Arbitration law in UAE
There is still no stand-alone arbitration law in the UAE. While this has been mooted for several years (the most recent iteration of the draft being released in February 2012), the arbitration law relating to domestic awards is contained in Articles 203-218 of the CPC. That is just 15 Articles which barely cover four sides of paper. These Articles are not harmonised with other jurisdictions that have enacted specific legislation to deal with arbitration and enforcement of arbitral awards. Combined with the UAE courts’ inconsistent interpretation of these Articles, this continues to cause uncertainty in relation to the enforcement process. It can also provide losing parties with ammunition to advance procedural arguments for annulment of the award even when these arguments seek to stretch the legislation to (and beyond) its limit, making arbitration in the UAE a procedural minefield.
Award ratified by the court
Before a successful party can enforce a domestic arbitral award, the award must be ratified by a UAE court. New court proceedings are commenced and, once the claim is filed, it is up to the court to either ratify or annul the award.
When examining the award, the court will consider its validity according to the general provisions contained in Articles 215 and 216 of the CPC. While the court cannot reconsider the merits of the case, it will treat procedural irregularities as a recognisable ground for annulment.
Our experience is that it is becoming increasingly common for losing parties to challenge awards on procedural grounds that are only loosely connected to the CPC and which may appear to be spurious and unjust.
By way of example
One of our clients has had first-hand experience of these issues recently in seeking to enforce its arbitral award in the UAE.
By way of a brief summary, in 2006 the parties entered into a contract. As their preference was for disputes to be dealt with by way of arbitration, the contract included the appropriate arbitration clause. The contract was signed on each page by both parties’ representatives.
Following a dispute, in February 2010 arbitral proceedings began in the UAE. The hearing was held in December 2011 and an award was handed down in September 2012.
The proceedings lasted approximately 2.5 years before the award was delivered. Proceedings had been hard fought and were costly to our client in terms of resources, time and money, but at least it was successful and had an award in its favour. However, the respondent did not comply with the award, forcing our client to commence ratification and enforcement proceedings. It was at this stage that the respondent advanced the following arguments:
- The respondent’s signatory to the original contract did not have authority to enter into the contract. The respondent provided no evidence in support of its allegation and the signatory was the chairman of the respondent company.
- The Terms of Reference document was not signed by an authorised signatory. Again, no evidence was provided to support this, but in this case the signatory was the respondent’s general counsel.
- The arbitrators did not sign the award while they were all in the UAE. Again, no evidence was provided, but the respondent argued that, even though the award stated that it had been signed in the UAE, the fact that two of the three arbitrators were based in Europe meant that it was likely that the award was signed in the arbitrators’ own jurisdictions, not in the UAE, and then sent-on in a round robin format. Furthermore, having not been able to source any evidence to support this allegation, the respondent asked leave of the court to approach the border control authorities. It was granted an adjournment to do so and, when this did not yield any results, it asked the court for leave to apply to the ICC to check if it had copies of the arbitrators passports. Again, despite there being very little chance that the ICC would have such information, the court granted a further adjournment to do so.
- A copy of the award was not issued to the parties within five days of the date it was issued by the arbitrators. This was an ICC award. The procedure was that the arbitrators signed the award on day one and it was checked by the ICC on day three. The ICC then sent the award to the parties and the respondent received a copy on day six. The respondent argued that the date of issue of the award was the date it was signed by the arbitrators and not the date the ICC issued the award.
- Not all of the pages of the award were signed. Although not an express legal requirement, it is customary in the UAE for all pages of contracts and other legal documents to be signed. The respondent argued that because the arbitrators only signed the final page of the award and not the reasons for their decision, the award was invalid and should be annulled.
What are the practical implications?
Arbitration remains the most common form of dispute resolution for English-speaking companies in the UAE and disputes and arbitrations in the region are on the rise. As a result, companies operating in the UAE are likely to be subject to the UAE arbitration procedure at some point.
All of the procedural challenges that our client experienced are based on CPC provisions, but a number of them sought to stretch the wording of the CPC far beyond what it was intended to guard against. However, the UAE courts seem to be prepared to hear these arguments. Furthermore, it is clear from reported case law that the courts interpret the CPC provisions inconsistently and have been known to annul awards on a pure technicality. Any party involved in arbitral proceedings in the UAE must be aware of this so that those with conduct of the arbitration (both counsel and the tribunal) can take steps throughout the arbitral process to mitigate the potential for such challenges. Forewarned is most definitely forearmed.