UK: Enforcement Of Arbitral Awards In The UAE - Part II: Enforcing DIFC-LCIA Arbitral Awards

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.

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