REUTERS | Ahmed Jadallah

The UAE Federal Arbitration Law: an initial verdict (Part 2)

This is the second part of a blog on the adoption and entry into force of the new UAE Federal Arbitration Law. Part 1 was published last month and discussed some of the procedural framework conditions of the new law. This Part 2 continues that discussion, providing a deeper insight into how the new law continues or differs from the arbitral practice and procedure established by the UAE Arbitration Chapter, which has been repealed by the new law. Particular focus will be on the issuance and recognition and enforcement of the arbitral award, a subject that is of particular importance given the globally coveted finality of arbitral awards. The most relevant points to note on the subject in the light of the new law are considered below.

Issuance of the award

The award is deemed issued at the seat of the arbitration, there being no requirement for arbitrators, for example, from outside the UAE, to be present in the UAE for valid execution of the award (Article 41(6)). This is different from the situation that prevailed under the UAE Arbitration Chapter, which required the physical signing of a domestic award in the UAE to ensure that it would not qualify as a foreign award instead (and possibly attract a challenge of extra petita, the tribunal having been mandated to render a domestic, not a foreign arbitral award).

Partial and interim awards

The new law confers upon the tribunal an express power to render interim and partial awards (Article 39). Only interim awards are stated to be enforceable before the UAE courts (Article 39(2)). This raises the question as to whether partial awards are intended to receive the same enforcement-friendly treatment. Given that interim awards are of a temporary nature only and partial awards are res judicata in terms of the findings they make, it is likely that Article 39(2) was intended to cover partial awards also (or that partial awards are regarded as enforceable for the stated reason in any event, there being no need to single them out as enforceable).

Content requirements of the award

Article 41(5) of the new law expressly requires the arbitrators’ nationality to be listed in the text of the award. This is in addition to the content requirements under the UAE Arbitration Chapter, which persist under the new law, that is:

  • A summary of the arbitration agreement.
  • A summary of the parties’ respective cases.
  • The tribunal’s reasoning.
  • A dispositive part.
  • Date and place of issuance.
  • The tribunal’s signature.

Tribunal’s power to award party costs

Under the new law, the tribunal does not have a power to award party costs, these being expressly “at [a party’s] own expense” (Article 33(4) read together with Article 46), thus confirming the position taken under the UAE Arbitration Chapter (see Dubai Court of Cassation Case No. 282/2012).

Time limit for rendering an award

Article 42 of the new law requires a tribunal to render an award “within six months from the date of the first session in the arbitration”, subject to extension by the arbitrator by an additional six months and to party agreement to any further extensions (further extensions without party agreement being subject to approval by the UAE courts). This essentially confirms the cumbersome provisions on time limits under the UAE Arbitration Chapter.

Recognition and enforcement

Even under the new law, the enforcement and onward execution of an award still requires the completion of a ratification (or validation) process before the UAE courts (Article 52) in terms similar to those under Article 215(1) of the UAE Arbitration Chapter. This is despite the stipulation in Article 52 that the award “shall have the same self-executing force as if it were a judgment”. Importantly, that Article also provides that “to enforce such awards, a decision to confirm it shall be obtained from the court.”

An action for nullification must be brought within 30 days from the date of service of the subject arbitral award upon the applicant (Article 54(2)). This, no doubt, will assist the role of the Dubai International Financial Centre (DIFC) Courts as a conduit for the recognition and enforcement of domestic (non-DIFC) awards for onward execution in onshore Dubai, in situations where no onshore nullification proceedings have been brought in time (see my previous Practical Law blogs on the subject). In essence, a recalcitrant award debtor will not be able to create a situation of parallel onshore nullification and offshore enforcement proceedings, which would prompt a referral by the DIFC-Dubai Joint Judicial Tribunal, the JT, to the onshore courts. For the avoidance of doubt, under Article 54 of the new law, a supervisory court ruling ratifying an award as well as a ruling setting aside an arbitral award can be appealed.

Equally, under the same Article, a ruling on an action for annulment generally remains subject to appeal. In this sense, the new law will be no more enforcement-friendly with respect to domestic awards than the UAE Arbitration Chapter. Further, unlike the present situation under the UAE Arbitration Chapter (see, for example,UAE Federal Court Case No. 166/Judicial Year 15), the underlying arbitration agreement remains valid and the parties will have to pursue the resolution of their pending dispute in an arbitral forum. Article 54 also provides for the award to be remitted to the arbitrator to avoid nullification in the terms prevailing under Article 214 of the UAE Arbitration Chapter (see, for example, Dubai Court of Cassation Case No. 173/2013).

The grounds for challenge of an arbitral award under the new law are similar to those of the UNCITRAL Model Law and hence perceived as more arbitration-friendly, even though this is not necessarily the case in practice, given the UAE courts’ interpretation of the corresponding provisions in favorem arbitrandi. Importantly, an application for annulment does not automatically suspend the execution of the award (Article 56). For the avoidance of doubt, under the new law, like the position under the UAE Arbitration Chapter, both a decision by the UAE court to execute an award and one to set aside can be appealed (Article 57). That said, any appeal process is shortened by one stage, any application for enforcement or nullification being initiated before the competent court of appeal, subject to further appeal only to the competent court of cassation. This compares favourably to the situation under the UAE Arbitration Chapter, which required challenges to be filed with the court of first instance in a first step, followed by a two-stage appeal process before the competent court of appeal and court of cassation.

Conclusion

By way of conclusion, even though the new UAE Federal Arbitration Law creates new incentives for foreign direct investment into one of the leading economies in the Middle East, the changes that the new law brings are not as far-reaching as one would have hoped. No doubt, the changes introduced to the recognition and enforcement of arbitral awards are encouraging: as has been seen, they significantly streamline the ratification process of awards and also create welcome opportunities for the revival of the DIFC as a conduit. That alone makes the new law worth its while!

DWF LLP Dr Gordon Blanke

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