In this second article in our three-part series, we discuss the enforcement of DIFC-LCIA arbitral awards within the DIFC, and "on shore" in the Dubai Courts.
Introduction
The DIFC-LCIA Arbitration Centre (the "Centre") was
founded in February 2008 as a partnership between two institutions,
the relatively new Dubai International Financial Centre
(established in 2004) and the long-established London Court of
International Arbitration (which can trace its origins back to
1883).
The Centre was established under the DIFC Arbitration Law No. 1 of
2008 ("Arbitration Law") which replaced the previous DIFC
arbitration legislation (DIFC Law No. 8 of 2004).
The objective of the Arbitration Law was to provide the DIFC with a
modern arbitration service based on the international UNCITRAL
model.
Significantly, the Arbitration Law removed restrictions on
conducting arbitrations in the DIFC allowing contracting parties
without a connection to DIFC, whether foreign or domestic, to
arbitrate disputes under the auspices of the Centre.
One question that was debated widely by legal practitioners at the
time the Centre was established was whether a DIFC/LCIA arbitral
award would be enforceable.
Enforcement of the Award
Within DIFC
Enforcement of a DIFC-LCIA award within DIFC is relatively
straightforward. The party relying on an award or applying for its
enforcement must supply to the DIFC Court the original award (or a
duly certified copy) and the original Arbitration Agreement (or a
duly certified copy).
Pursuant to Article 41 of the Arbitration Law, recourse to the DIFC
Court against an arbitral award made in the Seat of the DIFC may be
made only by an application for setting aside in accordance with
paragraphs (2) and (3) of Article 41.
Once the award has been ratified by the DIFC Court, it will be
enforceable within DIFC, pursuant to Article 42(1) of the DIFC
Court Law.
Under the Arbitration Law, the circumstances in which a DIFC
arbitral award can be overturned are limited to a small number of
specific procedural grounds.
An arbitral award may be set aside only if the applicant can prove
that:
- a party was under some incapacity;
- the arbitration agreement was invalid;
- the party making the application was not given proper notice of the arbitration;
- the award deals with a dispute not contemplated by or not falling within the arbitrators' terms of reference;
- the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties;
- the subject matter of the dispute is not capable of settlement by arbitration under DIFC law; or
- the award conflicts with public policy in the UAE.
Accordingly, successful applications to set aside a DIFC/LCIA award are likely to be relatively rare. This is consistent with the DIFC's desire to provide a modern arbitration centre similar to the international models of the London Court of International Arbitration in London and the International Chamber of Commerce in Paris where arbitral awards are final and binding on the parties.
Onshore
Since the Centre was established, there has been much debate as
to the enforceability of DIFC/LCIA awards "onshore" in
the UAE (i.e. outside the DIFC).
In Dubai at least, the situation has been clarified under a
protocol - the Protocol of Enforcement between Dubai Courts and
DIFC Courts (the "Protocol") – which was issued
in 2010 by the DIFC Courts and the Dubai Courts. Pursuant to the
terms of the Protocol, DIFC Court judgments can be enforced through
the execution department of the Dubai Courts, provided that a
number of procedural requirements are met.
In order to enforce a DIFC-LCIA arbitral award onshore, the award
is first converted into a DIFC Court judgment and then presented
(with an Arabic legal translation) to the execution judge at the
Dubai Courts, under cover of a letter from the DIFC Court Registrar
to the Chief Justice of the Court of First Instance requesting
enforcement.
Pursuant to Article 7(3) of Dubai Law No. (12) of 2004, "the
execution judge at the Dubai Courts has no jurisdiction to review
the merits of a judgment, award or order of the DIFC Courts."
Therefore the execution judge should, without interference, convert
the DIFC judgment into a judgment of the Dubai Court. Such a
judgment is then enforceable not only in Dubai, but throughout the
rest of the UAE.
The significant advantage of this procedure is that it avoids the
need to go through the ratification procedure under the Civil
Procedure Code which can often delay the enforcement of an award
anywhere between six months to several years.
In Dubai, therefore, a DIFC/LCIA award should be able to be
enforced without going through the ratification process. In Abu
Dhabi and the other Emirates, however, the position is less clear.
While the DIFC Arbitration Centre is in discussions with the Courts
in Abu Dhabi and the other Emirates with a view to agreeing a
protocol with each of those jurisdictions, no formal agreements
have been made yet. Accordingly, there remains some doubt as to
whether a DIFC-LCIA arbitral award will be able to be enforced
immediately in those jurisdictions, or will remain subject to the
ratification procedure under the Civil Procedural Code.
Conclusion
Although DIAC has been the preferred institution in Dubai for a
number of years, we may see a shift in the coming years to
DIFC-LCIA arbitrations, as contracting parties become more aware of
its existence. Where it is anticipated that the enforcement of any
arbitral award may be sought against a party in the Middle East
region, then DIFC-LCIA offers a modern arbitration service based on
a recognised international model with the added benefit of ease of
enforceability not only in the DIFC, but also in Dubai.
As for the enforceability of DIFC-LCIA arbitral awards in the other
Emirates, it remains to be seen will as to whether the Courts in
the other Emirates will follow the lead of the Dubai Courts.
Contracting parties considering inserting a DIFC/LCIA arbitration
clause in their contracts should therefore think carefully about
the enforcement issue if there is a possibility they may need to
enforce the award outside of the DIFC or Dubai.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.