Article 45 of the UAE Federal Arbitration Law (FAL), which entered into force on 16 June 2018, addresses the question of how arbitration proceedings conducted under the FAL are terminated. Despite taking inspiration from the UNCITRAL Model Law, the FAL contains a number of provisions, including article 45, that are not of Model Law origin. Given the importance of the question of termination to the proceedings and its comparatively unprecedented nature in both the Model Law and most domestic arbitration legislation, article 45 of the FAL deserves further scrutiny.
Essentially, article 45 of the FAL (relying on the translation provided by Westlaw) imposes a mandatory obligation, “shall”, upon the tribunal to terminate the arbitral proceedings in a number of circumstances. As such, it is not subject to party autonomy, that is, cannot be contracted out of by the parties (albeit that the principle of party autonomy is accounted for in the application of article 45 in the terms contemplated below).
Article 45(1) of FAL
Article 45(1) of the FAL, pursuant to which “the arbitral proceedings shall be terminated by rendering the final award ending the dispute by the arbitral tribunal”, prescribes termination of the arbitration proceedings by publication of a final award. This is the most common way of terminating arbitral proceedings, a final award being the natural outcome of an arbitration, both anticipated and desired by the parties.
This article appears to place a mandatory obligation, “shall be terminated”, on the tribunal to terminate the proceedings by a final award. Such an award could take the form of a:
- Final award on jurisdiction, whereby the tribunal declines jurisdiction, for example, by application of article 19(1) of the FAL, which codifies the tribunal’s kompetenz-kompetenz powers.
- Final award on the merits, whereby the tribunal determines the substantive merits of the parties’ dispute in a way that is final and binding upon the parties.
The mandatory nature of this provision is explained by the fact that once the arbitration has commenced under article 27(1) of the FAL, pursuant to which “unless otherwise agreed by the parties, the arbitral proceedings commence on the day following the date when the composition of the arbitral tribunal is completed”, or by operation of a corresponding provision of the applicable institutional rules, only the arbitrator will be able to declare the arbitration proceedings terminated either upon issuance of a final award on jurisdiction or through a final award on the merits following determination of the merits of the parties’ dispute.
That said, the wording of article 45(1) of the FAL raises the question as to whether the proper termination of the arbitral proceedings under the FAL requires the adoption of an award, as opposed to a simple order for termination. For the avoidance of doubt, alternative English translations of article 45(1) are less prescriptive, stating that arbitration proceedings “are terminated by an award of the arbitral tribunal ending the whole dispute” (translation provided by Al Tamimi on their official web portal). It is therefore questionable whether the mandatory nature of this provision extends to the form of the instrument to be adopted for termination, an order for termination being arguably sufficient, especially in the circumstances that qualify for termination under article 45(2) of the FAL, which do not require the tribunal to find on jurisdiction or the merits.
Article 45(2) of FAL
Article 45(2) provides a further list of circumstances in which the tribunal has a mandatory obligation, “shall terminate the proceedings in the following circumstances”, to terminate the arbitration proceedings.
Article 45(2)(a) provides for termination “if the parties agree to terminate the arbitral proceedings in accordance with the provisions of the FAL”. The reference to “the provisions of the FAL” lacks precision. That said, for the avoidance of doubt, this subparagraph codifies the role of party autonomy within the context of the termination of arbitration proceedings under the law.
Article 45(2)(b) envisages the termination of the arbitration proceedings in the event that the claimant abandons the arbitration:
“…if the claimant abandons the arbitration case, unless the arbitral tribunal decides, upon the respondent’s request, that the latter has a genuine interest in the continuation of the arbitral proceedings until the dispute is decided on.”
This will be the case where the claimant, for example, falls silent over the course of the proceedings or fails to make payment of attendant arbitration fees, as a result of which its claims will be considered withdrawn from the arbitration, or where the claimant intentionally withdraws its claims from the arbitration for any number of reasons. A further instance in which the FAL calls for the termination of the proceedings in the present context is where the claiming party submits its statement of claim with unwarranted delay, such that the safeguarding of the respondent’s right to a fair hearing is placed at risk (article 32(1), FAL).
In deciding whether to terminate the proceedings in any of these circumstances, the tribunal will have to determine, upon the respondent’s request, whether the respondent has any legitimate interest in continuing with the proceedings despite the claimant’s silence or withdrawal. This will typically be the case where the respondent has advanced counterclaims in the arbitration, which require determination in their own right. However, the tribunal does not appear to have any power to interfere with the claimant’s decision to withdraw its claims from the arbitration. In other words, under the FAL, a party is arguably free to withdraw its claims, subject, at worst, to adverse cost orders in favour of an aggrieved respondent. This will, for example, be the case in circumstances where a claimant realises over the course of the arbitration that it has failed to comply with attendant conditions precedent prior to commencement of the arbitration, as a result of which the arbitration will, bar the withdrawal of the claims, be considered premature with respect to the claims in any event. In such circumstances, the claimant might be well-advised to withdraw its claims once it becomes aware of the instance of non-compliance in order to adopt a course of rectification.
Article 45(2)(c) provides a residual ground for the tribunal to terminate the arbitration proceedings by reason of necessity, that is, where the tribunal considers it unnecessary or impossible to continue with the arbitration:
“…in case the arbitral tribunal, for any other reason, comes to the conclusion that it is of no use or impossible to continue the arbitral proceedings.”
The scope of this residual ground is strictly limited by the test of necessity, which applies on a case-by-case basis. For the avoidance of doubt, the application of any such test will have to take into account the nature of the parties’ claims and counterclaims and whether there are conflicting proceedings pending before other fora, such as parallel proceedings in court.
There is presently no case law precedent to assist on the proper construction of article 45 of the FAL in context. It will be interesting to see what the local courts make of it once first cases start to emerge.