International arbitration in the United Arab Emirates ("UAE") has developed significantly in recent years, with both domestic and international parties increasingly drawn to many of its advantages over conventional court litigation.
A critical factor in the UAE's jurisdictional development as a credible hub for international arbitration is the introduction of a streamlined and efficient enforcement regime for both domestic and foreign arbitral awards.
This briefing will address the key steps and considerations parties should consider when seeking to proceed with the recognition and enforcement of either domestic or foreign arbitral awards.
Onshore and offshore enforcement
Legal landscape in the UAE
The UAE has a well-established civil law "onshore" court system as well as a common law "offshore" court system based in the Dubai International Financial Centre ("DIFC") and the Abu Dhabi Global Markets ("ADGM").
The DIFC and the ADGM are financial free zones within the UAE with their own civil and commercial laws. In particular, the DIFC has its own Arbitration Law (DIFC Law No. 1 of 2008) which governs arbitrations seated in the DIFC and is entirely separate from the UAE Arbitration Law (UAE Federal Law No. 6 of 2018) which governs arbitrations seated in onshore UAE.
The process by which a party will apply for the recognition and enforcement of an arbitral award in the UAE will depend on whether the arbitral award is "domestic" or "foreign". Domestic arbitral awards are those which are rendered by an arbitration institution in the UAE such as Dubai International Arbitration Centre ("DIAC") and Abu Dhabi Commercial Conciliation and Arbitration Centre ("ADCCAC"). Whereas foreign arbitral awards are those which are rendered by an arbitration institution outside of the UAE.
Domestic arbitral awards
Enforcement in onshore Dubai
The UAE Arbitration Law governs the recognition and enforcement of arbitral awards seated in onshore UAE and provides that that an arbitral award rendered in accordance with its provisions has the same binding force and enforceability on the parties as a court ruling.
The UAE Arbitration Law has streamlined the process by which a party can apply for the recognition and enforcement of a domestic arbitral award in onshore Dubai, and a successful party may do so directly before the UAE Federal or local Courts of Appeal rather than having to apply to the Court of First Instance for ratification, provided that it submits:
- the original award or a duly certified copy;
- a copy of the arbitration agreement; and
- an Arabic translation of the arbitral award certified by a duly recognised entity if the award is rendered in another language.
The UAE court will then order the recognition of the arbitral award and its enforcement within 60 days from the filing date of the request for recognition and enforcement.
Right of Challenge
An unsuccessful party may only challenge the recognition and enforcement of an arbitral award within 30 days from receipt of the application to enforce the arbitral award.
Article 53 (1) of the UAE Arbitration Law sets out eight grounds for challenging a domestic arbitral award. The unsuccessful party seeking to set aside the arbitral award must establish one of the following circumstances:
- that no arbitration agreement exists or such agreement is void or has lapsed under the law to which the parties have subjected it;
- that a party, at the time of conclusion of the arbitration agreement, was incompetent or under some incapacity under the law governing their capacity;
- that a person does not have the legal capacity to dispose of the disputed right under the law governing their capacity;
- that a party to the arbitration fails to present its case because it was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or because the arbitral tribunal breached due process or for any other reason beyond their control;
- that the arbitral award excludes the application of the parties’ choice of law for the dispute;
- that the composition of the arbitral tribunal or appointment of any arbitrator was not in accordance with the arbitration law or the agreement of the parties;
- that the arbitral proceedings were marred by irregularities that affected the award or the arbitral award was not issued within the specified time frame; and/or
- that the award contains decisions on matters not falling within the terms of the submission to the arbitration or was beyond its scope, provided that, if the decisions on matters submitted to the arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to the arbitration may be set aside.
A court will not automatically pause a ratification and enforcement proceedings if a party decides to file an application to challenge the arbitral award. A pause can only be ordered if requested by one of the parties if they have serious grounds to justify such action.
Enforcement in offshore Dubai (DIFC and ADGM)
With respect to the recognition and enforcement of financial freezone seated arbitral awards:
Right of Challenge
The right to challenge an arbitral award in the courts of the DIFC or the ADGM complies with the requirements of the New York Convention. However, the courts may refuse enforcement if the subject-matter of the dispute is not capable of settlement by arbitration under the relevant laws of either the DIFC or ADGM, or if the enforcement of the award would be contrary to public policy in the UAE.
Foreign arbitral awards
The UAE is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 which aims to ensure the enforcement of foreign arbitral awards worldwide.
The UAE is also party to the Riyadh Arab Agreement for Judicial Co-operation 1983 ("Riyadh Convention") and the GCC Convention for the Execution of Judgments, Delegations and Judicial Notifications 1996 ("GCC Convention").
Enforcement in onshore Dubai
It is important to note that the UAE arbitration law does not apply to the recognition and enforcement of foreign arbitral awards in onshore UAE.
The substantive law and procedure for the recognition and enforcement of foreign arbitral awards in onshore UAE is set out in Articles 85 and 86 of the Cabinet Regulations Number 57 of 2018 Concerning the UAE Civil Procedure Law ("Executive Regulations").
A party seeking the recognition and enforcement of a foreign arbitral award in onshore UAE will need to submit either an application for recognition if the foreign arbitral award or file an ex-parte petition directly with the execution court following which, the execution judge will render an order within three days.
Right of Challenge
However, for a foreign arbitral award to be recognised in the UAE, the conditions set out in Article 85 (2) of the Executive Regulations must be satisfied as these conditions can form the basis of any challenge. The conditions in Article 85 (2) are as follows:
- The UAE Courts do not have exclusive jurisdiction on the subject matter of the judgment;
- The judgment has been issued by a court having jurisdiction under the law of the country in which it was issued and was duly attested;
- The opposing parties in the case have been summoned to appear and were represented before the court or tribunal;
- The judgment or order acquired the force of res judicata under the law of the court where it was issued (proof may be required through a certificate or the judgment itself might prove such); and
- The judgment does not contradict with the public order or morals of the UAE.
Therefore, it is important for parties to ensure that the above conditions are met prior to submitting an application for enforcement as failure to do so may lead the application to be rejected.
Enforcement in offshore Dubai (DIFC and ADGM)
The process for the recognition and enforcement of foreign arbitral award in the DIFC and ADGM is the same as the process in respect of the recognition and enforcement of domestic arbitral awards seated in the free zones as set out above.
In the DIFC, there have been a number of cases in which foreign seated arbitral award creditors have attempted to use the DIFC as a "conduit jurisdiction" to take advantage of the streamlined procedure for the enforcement of DIFC Court judgments in the Dubai onshore courts, regardless of a nexus to the DIFC.
However, since the establishment of the Joint Judicial Committee, in situations where there is a conflict in jurisdiction between the DIFC and the Dubai onshore courts, the Joint Judicial Committee considers that the Dubai onshore courts have "general jurisdiction under general principles of law embodied in procedural laws". Accordingly, and since there is no long-running or established track record of creditors successfully achieving enforcement against assets held in onshore UAE via the DIFC courts, this route should be treated with caution.
Right of Challenge
The right to challenge a foreign arbitral award in the DIFC and the ADGM complies with the requirements of the New York Convention. However, the courts may refuse enforcement if the subject-matter of the dispute is not capable of settlement by arbitration under the relevant laws of either the DIFC or the ADGM, or if the enforcement of the award would be contrary to public policy in the UAE.
Conclusion
The ability to enforce a favourable arbitral award is of fundamental importance. A successful party should therefore think carefully about its enforcement strategy in order to maximise the prospects of getting "cash in the bank". For example, in problematic cases, successful parties may incur significant costs when proceeding with enforcement and it can take up to two years or more to have an arbitral award recognised. Only at this stage will a successful party be able to proceed to execution of an award which, depending on the nature of the losing party's assets can, in our experience, take an additional six to twelve months.
However, despite the fact enforcement remains a complex issue in the Middle East, the enforcement landscape in the UAE is certainly changing for the better. Stephenson Harwood LLP has successfully represented many clients on the recognition and enforcement of domestic and foreign arbitral awards in the UAE (including the Dubai Courts and the DIFC) and wider Gulf region.
Get in touch
Should you have any queries or require any specific advice, please contact a member of our international arbitration team who will be happy to assist you.