The Fujairah Federal Court of First Instance could claim the
prize for UAE Arbitration-friendly Court of the Year. By its recent
decision in Commercial Claim No: 35/2010, it may indeed be the
first court in the UAE to recognise and enforce a foreign
arbitration award pursuant to the New York Convention since the
nation boarded that international commercial arbitration ship in
2006 (Federal Decree no 43/2006 ).
This ruling ratified for execution an arbitral award of a sole
arbitrator seated in London who determined a charter party dispute
under London Maritime Association Arbitration Rules in 2007. The
parties are not described but it can be inferred that the
respondent is domiciled and/or established in Fujairah. The Award
comprises two parts - an award for the substantive demurrage claim
plus an award for the costs of arbitration.
The application to the Court to "ratify" the Award was
not challenged and thus the Court was not called upon to deal with
any arguments which might otherwise have obstructed or unreasonably
delayed the due recognition and enforcement of a foreign award.
Nevertheless, the procedure took 4 months to reach judgment.
The Court commented that the Articles of the Civil Procedures Law
prescribing "validation" of domestic arbitral awards and
those issued in the UAE do not apply; instead the applicable rules
are those set out in the New York Convention regarding the
recognition and enforcement of foreign awards.
In short, the Court stated it would not entertain a review of the
merits of the arbitrator's decision but instead required only
prima facie proof of the arbitration agreement and the final award
of the arbitrator thereunder.
By implication, the Court also appears to have excluded from
application Section 4 (Articles 235, 236 and following) of the
Civil Procedures Law regarding enforcement of foreign judgments and
foreign arbitral awards generally. These rules tend to require the
applicant to re-litigate substantive issues of jurisdiction in any
event and to bear the burden of establishing that no impediment
exists to preclude enforcement under UAE law.
Fate of future awards – still at
sea?
Arguably, the grounds to challenge and resist recognition and
enforcement of a foreign award under Article 5 of the New York
Convention are narrower with the burden falling to the respondent
to establish them.
Thus, under the New York Convention a Court may refuse to enforce a
foreign arbitral award if an opposing party proves:
- The parties to the arbitration agreement were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
- The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
- The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced; or
- The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
- The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
Also, the UAE Court may refuse to enforce the award if it decides that
- The subject matter of the award is not capable of settlement by arbitration under UAE law (ie is non-arbitrable), or
- If the recognition or enforcement of the award would be contrary to public policy.
Given that most trading nations are party to the New York
Convention, there will likely be few foreign arbitral awards sought
to be enforced in the UAE under the Civil Procedure Rules
henceforth. But it remains to be seen just how
"pro-enforcement" the Courts of the UAE will be in
practice when applying the law of the New York Convention if
subject to challenge by a recalcitrant respondent.
It may also be anticipated that such respondents will invite the
Court to interpret the public policy exception expansively, so as
to operate as a shield if public morals or Sharia are offended or
even to protect what some foreigners might regard as purely local
commercial interests.
Costs of arbitration
Another interesting aspect of this decision is the apparent
recognition and enforcement of a foreign arbitral award for the
costs of arbitration including the successful party's own
legal/attorney fees. Unlike the LMAA and other international
arbitration centres, UAE ad hoc & institutional arbitrations
(including those seated in Dubai under DIAC Rules) arguably do not
entitle arbitrators to award inter partes legal costs (as opposed
to the arbitrator's fees, certain specified disbursements and
the costs of the arbitration infrastructure) unless there is an
underlying agreement between the parties to allow for such cost
shifting.
In other words, "costs of arbitration" depend on the
definition ascribed in the applicable rules of arbitration and/or
arbitral law. The Civil Procedures Law severely limits the recovery
of inter partes legal costs. Whereas a domestic award (including
those made in an international commercial arbitration seated in the
UAE) which purports to shift a successful claimant's
legal/attorney costs to the losing party could be potentially
invalid, a foreign award favouring such costs is less likely to
suffer from the same adverse scrutiny.
Meanwhile, this Court decision albeit uncontested provides a long
awaited "precedent" and gives a modicum of comfort to
those engaged in international trade and commerce who might seek to
enforce foreign arbitral awards in the UAE. The UAE may not yet be
the safest port in the arbitration world, but the law seems to be
steering in the right direction.
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.