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04 Feb 2019

Effect on the enforcement of arbitral awards in the UAE

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Until last year, the provisions and rules of Arbitration in the UAE were incorporated in Chapter Three of the UAE Federal Civil Procedures Law No 11 of 1992. In mid 2018 (3 June), the new UAE Federal Arbitration Law No 6 of 2018 (the "UAE Arbitration Law") came into force to provide comprehensive and distinctive guidance on arbitration in the UAE, including recognition and enforcement of foreign arbitral awards. 

Applicability

The provisions of the new UAE Arbitration Law shall apply to:

  1. Any arbitration conducted inside the UAE, unless its parties have agreed to submit to the provisions of another arbitration law, provided that it does not conflict with the public policy and public morals of the state;
  2. Any International Commercial Arbitration conducted abroad, the parties to which agree expressly to submit it to the provisions of this Law ; and
  3. Any Arbitration arising out of a dispute concerning a legal relationship of a contractual or non-contractual nature, governed by the UAE law, except as expressly excluded by a special provision.

Recognition and enforcement of arbitral award

Previously, the enforcing party was required to initiate separate legal proceedings before the UAE Court to enforce such award, however, the UAE Arbitration Law has set out an expedited path for having the award recognised and enforced.  This is a significant change in procedure from the previous steps followed to apply for recognition and enforcement of arbitral awards in the UAE.

Pursuant to Article 55 of the UAE Arbitration Law, the party seeking to enforce the arbitral award shall submit an ex-parte application to the Chief of the Court of Appeal in the Emirates, where the award is sought to be recognised and enforced. Such request/application to be accompanied by the following documents:

a- The original award or a certified true copy thereof;

b- A copy of the Arbitration Agreement; and
c- A certified Arabic translation of the arbitral award from an accredited body in case the award was not made in Arabic.
d- A copy of the transcript of filing the award with the Court of Appeal.

The Chief of the Court of Appeal, or his delegate, is obliged to order the recognition and enforcement of the arbitral award within a period of (60) sixty days from the day the application is submitted to him, unless he considers that there is a reason for voiding the arbitral award based on any of the circumstances listed at Article 53.1 of the UAE Arbitration Law. These circumstances are as follows:

  • Absence of an Arbitration Agreement, or the Agreement is void, or terminated due to expiry of its term in accordance with the law to which the Agreement is subject by the parties or in accordance with this Law if there is no reference to a specific law;
  • One of the parties, at the time of enforcement thereof, lacks capacity or of diminished capacity in accordance with the law which governs its capacity;
  • The person lacked the legal capacity to take any action regarding the right, the subject matter of dispute, in accordance with the law governing his capacity, which is stipulated in Article (4) of this Law.
  • If one of the parties to the Arbitration is unable to present its case as a result of not being given proper notice of the appointment of an Arbitrator or of the arbitral proceedings, the Arbitral Tribunal's violation of the litigation principles or for any other reason beyond its control;
  • If the arbitral award fails to apply the law agreed upon by the parties to govern the subject matter of the dispute;
  • If the composition of the Arbitral Tribunal or the appointment of one of the Arbitrators is in conflict with the provisions of this Law or the agreement of the parties;
  • If the arbitral proceedings are invalid to the effect that impairs the award; or if the award is rendered after the due time limit; or
  • If the arbitral award deals with matters not falling within the scope of the Arbitration Agreement or exceeding the limits of this agreement. Nevertheless, when matters falling within the scope of the Arbitration can be separated from the parts of the award which contains matters not included within the scope of the Arbitration, the nullity affects exclusively the latter parts only.

Challenging the arbitration award

In the UAE Arbitration Law, the process of challenging the arbitration award has been set out in a clear manner, as opposed to the previous provisions of the UAE Civil Procedures Law.

Under the new law, the arbitration award can be challenged in any of the following circumstances, namely:

  1. Initiating legal proceedings before the competent court within 30 days from the date the arbitration award is served upon the respondent, to invalidate the arbitration award, pursuant to the provision of Article 53 of the UAE Arbitration Law.
  2. During the process of reviewing the request for recognition/ratification of the arbitral award, by the Chief of the Court of Appeal, or his delegated judge, where it appears to him that the arbitration award is vulnerable pursuant to Article 53 of the UAE Arbitration Law.

It is worth noting that any proceedings to invalidate the arbitration award, shall not necessarily stay the enforcement process. However, the court may accept (from case to case) and at its own discretion, to stay the enforcement proceedings if it appears that the challenging party has serious grounds to challenge the arbitration award, such as the award is obviously contradicting with the UAE Public Order and Sharia rules, or if the dispute is not arbitral. If the court accepts a request staying the enforcement of the arbitration award, it may require the party who objects to the recognition and enforcement of the award to place a security / cash guarantee at the court treasury pending the finalisation of the claim brought by him seeking to invalidate the award.

The court ordering the stay of the enforcement process is under an obligation to render its judgment regarding the recognition and enforcement request of the award within 60 days from the date that the stay the enforcement is ordered.

Practice note/ commentary

Whilst the UAE Arbitration Law came into force on 3 June 2018, various aspects of the law are yet to be tested by the UAE local courts, such as conclusive precedents from the higher courts in the UAE on whether the provisions of such law are applicable on foreign awards.

It should be noted that a local arbitration award has been ratified by the Dubai Court of Appeal in August 2018 pursuant to the provisions of the new UAE Arbitration Law.

On the other hand, substantive proceedings for recognition and enforcement of a foreign arbitral award, initiated by a bunker supplier before the Abu Dhabi Court of First Instance against Owners and Charterers of a vessel have been dismissed by Abu Dhabi Court of First Instance at the request of the Owners, pursuant to the UAE Civil Procedures Law as opposed to the new Arbitration Law.

The court did not rely upon the fact that the parties had not agreed to expressly submit to the provisions of the UAE Arbitration Law, but ruled that the claimants had failed to comply with the provisions under the Civil Procedures Law and the New York Convention. Thus, the UAE Arbitration Law was considered to be inapplicable by the court for the enforcement and the foreign award.

Accordingly, in future, where there is at least one UAE based counterparty, for arbitral recognition and enforcement purposes, the parties may wish to consider amending the dispute resolution clause to make it clear that the parties are submitting to the UAE Federal Arbitration Law no. 6 of 2018 in order to expedite the recognition and enforcement process of any award.

Stephenson Harwood Middle East LLP were acting on behalf of the successful Owners of the arrested vessel.

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