This month, Clyde & Co succeeded in nullifying DIAC Arbitral
Awards relating to Article 3 of Law 13 of 2008 Regulating the
Interim Real Estate Register in the Emirate of Dubai (the Law).
The Dubai Court of Cassation holds that disputes concerning the
legal consequences of late registration of an off-plan sale
pursuant to the Law cannot be validly submitted to arbitration.
Clyde & Co acted for a major property developer in defending
arbitration proceedings commenced against the developer by a group
of investors. The investors had purchased a number of off-plan
properties from the developer but, due to the financial downturn,
decided to arbitrate with a view to terminating the respective Sale
and Purchase Agreements (SPAs) and obtaining a full refund.
In support of their claims for termination the investors sought
to rely on the alleged breach of Article 3 of the Law, which
required property developers to register SPAs for off-plan sales
with the Dubai Land Department (DLD) within 60 days of the date of
publication of the Law, or by the deadline of 30 October 2008.
In fact, the developer had registered the SPAs in April 2009
(after the deadline), as the DLD had been accepting late
registrations if a developer submitted sufficient reasons and
evidence as to why it had not complied with the deadline.
Notwithstanding the developer's registration and compliance
with the Law, the Arbitral Tribunal rendered three awards (one in
favour of each of the investors) concluding that, inter alia, the
SPAs were invalid because they had not been registered before 30
October 2008.
Ratification of the Arbitral Awards before the Dubai
Courts
On behalf of the developer, Clyde & Co challenged the
enforcement of the awards before the Dubai Courts of First
Instance, Appeal and Cassation, on the basis that:
the Tribunal had made a significant error of law;
the application of Article 3 of the Law was a matter of public
order; and
ratification of the awards would give rise to public order
concerns because the awards are inconsistent with the principles
recently set out by the Dubai Court of Cassation in respect of the
registration of sales and other dispositions pursuant to Article 3
of the Law.
Despite the above arguments, the lower courts refused to set
aside the awards and found in favour of the investors.
Developer's Success!
On appeal and final consideration of the issues, the Dubai Court
of Cassation agreed with the arguments raised by Clyde & Co on
behalf of the developer, overturned the judgments of the lower
courts and ruled that:
'disputes concerning Article 3 are matters of
"public order" (public policy) and that, accordingly,
such disputes cannot be submitted to
arbitration.'
Legal implications
Following the Dubai Court of Cassation's final judgments, if
arbitral awards have been rendered in similar matters or arbitral
proceedings are ongoing involving reliance on Article 3 of the Law
for termination of an SPA or of another disposition subject to
registration, developers have reasonable grounds to argue that the
award should be nullified, or to challenge the jurisdiction of the
Tribunal in ongoing arbitral proceedings.
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.
Specific Questions relating to this article should be addressed directly to the author.
A recent ruling of the Dubai Court of First Instance questions de novo the UAE courts’ compliance with their obligations under international enforcement instruments in the enforcement of foreign arbitral awards.
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Commercial disputes before the State Courts in the UAE are characterised by exchanges of written submissions with little, if any, taking of witness evidence or oral advocacy.
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