Aug 13 2012
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Enforcement of New York Convention Awards: Are the UAE Courts coming of age?
The old approach
Prior to the UAE's accession to the New York Convention, the enforcement of foreign awards before the UAE courts was, save the application of relevant bi-lateral or other multi-lateral conventions, subject to the application of Article 235 of Federal Law No.11 of 1992 (the UAE Civil Procedures Code), which governs the enforcement of foreign judgments in the UAE. Pursuant to Article 235, UAE courts were empowered to, and in practice did refuse, the enforcement of foreign awards on grounds such as:
- the lack of proper jurisdiction of the tribunal at the place of arbitration
- the deficient issuance of the arbitral award at the place of arbitration
- the improper summoning or representation of one of the parties in foreign arbitration proceedings
- the contradiction of the foreign award with a previous UAE judgment or its violation of public policy or bonos mores as understood in the UAE.
Importantly, recognition and enforcement under Article 235 are based on a principle of mutual recognition, whereby the UAE courts will only apply the provisions of that Article in relation to judgments and awards issued in countries, which, in turn, recognise and enforce UAE judgments and awards. By contrast, it is now accepted that the UAE did not make any reservation to this or any other effect on entry into the New York Convention. As a result, the UAE courts are obliged to enforce any foreign award and not just those rendered in another New York Convention country in compliance with the strict terms of the Convention.
Despite the UAE's accession and its broad obligations under the New York Convention, the UAE courts were initially reluctant to apply the terms of the Convention to the enforcement of foreign awards. To the contrary, they continued to apply the obsolete requirements of Article 235 of the UAE Civil Procedures Code and used these as a pretext for a quasi review on the merits of foreign awards in order to refuse their enforcement. On repeated occasions, the UAE courts even proved susceptible to formal procedural grounds, which are commonly invoked in the ratification process of domestic awards under the provisions of the UAE Civil Procedures Code, for setting aside foreign awards. An example of the formalism applied to domestic awards is the Bechtel case, in which a Dubai award involving a foreign party was set aside by the Dubai Court of Cassation for the sole reason that the arbitrators failed to properly to follow the oath-taking procedure which is mandatory for the hearing of witnesses under the UAE Civil Procedures Code.
This approach was clearly symptomatic of the UAE courts' distrust of arbitration as a mechanism for dispute resolution, and more specifically of their discomfort to cede jurisdiction to foreign arbitrators. This old approach was further fuelled by the absence of a specific procedure for the enforcement of foreign awards under the Civil Procedures Code, which in turn incentivised the UAE courts to rely upon the ratification process put in place for domestic awards instead. This issue is expected to be resolved by the adoption of a new Federal Arbitration Law, which is currently being debated by the UAE legislature.
The new approach
In a surprising volte face, a number of UAE courts have recently taken a more arbitration friendly approach to the enforcement of foreign awards. In summary, when faced with one of the traditional grounds for setting aside foreign awards, the UAE courts, in reliance on the express terms of the New York Convention, have dispensed with any procedural matters of form and/or the requirements of Article 235 of the UAE Civil Procedures Code as valid grounds for non-recognition and/or nullification.
The New York Convention
By way of reminder, the New York Convention applies to all "foreign" awards, i.e. all awards made in a country other than that where enforcement is sought. The New York Convention provides in Article III that "each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon" provided that such awards satisfy the conditions set forth in the Convention. The Convention prohibits States from imposing "substantially more onerous conditions or higher fees or charges on the Recognition or Enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards". Under the Convention, to obtain the recognition and enforcement of a foreign award in another Convention country, the award creditor is required to supply a duly authenticated original award or a duly certified copy thereof and the original arbitration agreement and/or a duly certified copy thereof.
Provided these conditions are met, the courts of any Contracting State must enforce the award without amendment/review as if it was a judgment of its own.
The grounds for refusing recognition or enforcement are set out in Article V of the New York Convention. These grounds are as follows:
· the existence of an invalid arbitration agreement under the parties' agreed governing law or (if this cannot be established) under the law of the country where the award was made
- a breach of due process
- an award which fails to comply with the terms of the arbitration agreement
- irregularities affecting the composition of the arbitral tribunal or the arbitral proceedings.
The Convention provides that recognition and enforcement of the award may also be refused if the party resisting recognition or enforcement proves that "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".
Recognition and enforcement of an award may be refused by the competent authority of its own accord in the country where enforcement is sought if it decides that:
- The subject-matter of the dispute is not capable of settlement by arbitration under the law of that country or;
- The recognition and enforcement would be against public policy.
In more recent rulings, the UAE courts of First Instance and more importantly, the Dubai Court of Appeal, have based their decisions on the above provisions of the New York Convention for the enforcement of foreign awards.
Case study: Fujairah Federal Court of First Instance ruling
In a ruling dated 27 April 2010, the Fujairah Federal Court of First Instance enforced two awards, one on the merits of the case and the other on costs, issued by a Sole Arbitrator in London under the Rules of the London Maritime Arbitration Association (LMAA) following an application for enforcement by the award creditor under the terms of the New York Convention.
After noting that the awards were properly certified and issued in the United Kingdom, (ii) that the UAE ratified the New York Convention with effect from 19 November 2006, and (iii) that the awards were issued pursuant to English Law in the United Kingdom, which is a signatory to the New York Convention, the Fujairah Court ruled:
"Upon review of the arbitration clause pursuant to which reference was made to arbitration agreed on by the parties and the two awards the subject of the ratification claim, we found that there is no impediment for execution of the judgment."
It is notable that the court's conclusions were further prefaced by an express reference to the prohibition to review the merits of awards and the obligation to comply with international treaties and conventions, which under UAE law, form part of the domestic law for the enforcement of foreign awards.
In this case, the Fujairah Court clearly abandoned any reference to procedural formalities that debilitated the enforcement of foreign awards in the past, including most notably the rendition in absentia of the underlying awards, and instead paid deference to the criteria of enforcement of the New York Convention. Note that this ruling has not been subject to appeal and therefore remains unchallenged.
Case study: Maxtel International FZE v. Airmec Dubai LLC ruling
In a ruling dated 12 January 2011, the Dubai Court of First Instance enforced two arbitration awards, one on the merits of the case and one on costs, issued by a Sole Arbitrator in London under the DIFC-LCIA Arbitration Rules following an application for enforcement by the award creditor under the New York Convention. The case involved two Dubai based companies, one licensed as a free zone company and the other an LLC.
The award debtor objected to the enforcement of the awards, seeking nullification on a number of procedural grounds, including:
- lack of capacity of the signatory of the arbitration clause to sign on behalf of the defendant
- invalidity of the formation/composition of the arbitral tribunal
- lack of terms of reference/submission to arbitration in violation of the provisions of Article 216 (a) of the UAE Civil Procedures Code and Article V (c) of the New York Convention
- failure of the arbitral tribunal to apply the mandatory provisions of UAE law on oath-taking for witnesses, and
- failure to render the awards within the prescribed time limit of 6 months in violation of the provisions of the UAE Civil Procedures Code.
After stating that both awards were "undoubtedly foreign awards, were both issued outside the UAE in London in accordance with New York Convention" that (ii) it was well established that the UAE has ratified the New York Convention by Federal Decree No. 43/2006, and having set out in Articles 1, 3, 4 and 5 of the Decree, the Dubai Court of First Instance held:
"The court's supervisory role when looking to recognize and enforce a foreign arbitral award is strictly to ensure that it does not conflict with the Federal Decree under which the UAE acceded to the New York Convention on the recognition and enforcement of foreign arbitral awards and satisfied the requirements of Articles IV and V of the Decree in terms of being duly authenticated".
Importantly, the Dubai Court of First Instance expressly discarded the application of Articles 235 and 236 of the UAE Civil Code on the enforcement of foreign awards in the UAE.
The award debtor appealed this ruling before the Dubai Court of Appeal arguing that the "judgment is vitiated by the error in the application of the Law and insufficient reasoning". In its decision dated 22 February 2012, the Dubai Court of Appeal confirmed the judgment under appeal for the reasons outlined below.
Dubai Court of Appeal decision in Airmec Dubai LLC v. Maxtel International LLC
The award debtor reiterated before the Dubai Court of Appeal the argument in relation to lack of capacity of the signatory of the underlying agreement containing the arbitration clause and requested the Court of Appeal to order the award creditor to submit the original copy of the agreement.
After referring to well established principles of the Dubai Court of Cassation in relation to Article 216 of the UAE Civil Procedures Code to the effect that the judicial control on the award during the ratification process included the review of the formalistic requirements of the award and the capacity of the signatory of the arbitration agreement, the Court of Appeal expressly relied on the provisions of the New York Convention as follows:
"whereas it is established by the Law and according to Article 15 of the Federal Decree of the year 2006 concerning accession to the New York Convention and approve and execute foreign arbitration awards and that the courts may not reject the approval and execution of the awards on request of the party that such award is used against, unless that party submitted to the competent authority required to approve and execute the judgment evidence that proves : "that either party to the agreement set forth in Article 2 was, according to applicable Law, by a claim of incompetence, the said agreement is invalid by virtue of the Law applied to the parties to the agreement, or where there is nothing that signifies the same, according to the Law of the country it is issued in".
The Court of Appeal held that "the judgment under appeal is in line with the Law due to the validity of the reasons underlying it and its established grounds" and confirmed that it was satisfied with the reasoning of the Court of First Instance.
Residual uncertainties in the approach of UAE courts
In light of the above, one might wonder whether the UAE courts have been coming of age with regards to the enforcement of foreign arbitration awards in order to bring themselves into compliance with the strict terms of the New York Convention and with more streamlined arbitration-friendly jurisdictions. Or it may be that the cases highlighted are no more than a temporary diversion from the usual less arbitration-friendly approach.
Continued skepticism may be justifiable on the basis of the absence of binding precedent from the UAE court system and because of the independent existence of different Emirates within the UAE with their own separate jurisdictions, whose rulings may have no more than persuasive force in cross-border situations. In a recent ruling, the Dubai Court of First Instance refused to recognise and enforce an award issued by the Singapore International Arbitration Centre on the basis that the award was not ratified in the country of origin and could therefore not be executed under Articles 235 and 236 of the UAE Civil Procedures Code even though clearly stating that the ratification process under the UAE Civil Procedures Code applied only to UAE domestic awards (with the exception of foreign awards). The Court only made fleeting reference to the existence of, or the UAE's membership to, the New York Convention.
DIFC as host jurisdiction for the enforcement of New York Convention awards in the UAE
Given the residual uncertainties, the question arises as to whether the Dubai International Financial Centre (DIFC) courts may serve as a "host" or "intermediate" jurisdiction for the enforcement of New York Convention awards in the UAE.
The DIFC, which was established by the Government of Dubai in December 2004, is a geographic area carved out of the heart of Dubai which is a unique autonomous jurisdiction within the UAE. It has an independent judicial system with its own courts modeled on English common law. The DIFC is further governed by its own laws, including the DIFC Arbitration law of 2008 (the DIFC Arbitration Law), which is largely based on the UNCITRAL Model Law. Article 42(1) of the DIFC Arbitration law provides that:
"An arbitral award, irrespective of the State or jurisdiction in which it was made, shall be recognised as binding within the DIFC [...] For the avoidance of doubt, where the UAE has entered into an applicable treaty for the mutual enforcement of judgments, orders or awards the DIFC Court shall comply with the terms of such treaty".
This is further supported by Article 24(2) of DIFC Law No.10 of 2004, the DIFC Court Law, which contains provisions to the same effect. In other words, the DIFC Courts have jurisdiction to hear actions for enforcement of foreign awards under the New York Convention in the DIFC.
In light of the common law tradition and the general arbitration-friendliness of the DIFC judiciary, the enforcement of New York Convention awards before the DIFC Courts can be expected to be a mere formality. The DIFC enforcement order is likely enforceable in the wider UAE by reference to the 2009 Memorandum of Understanding between the Dubai Courts and the DIFC Courts, relating and the related Protocol of Enforcement between the Dubai Courts and the DIFC Courts, which in toto provide for the mutual recognition of judgments, orders and awards between the Dubai and the DIFC Courts.
An order for enforcement issued by the Dubai courts should in turn be enforceable in the other Emirates of the UAE by virtue of Article 11 of Federal Law No.11 of 1973 on Judicial Relationships Amongst Emirates, which provide for the mutual recognition of orders and judgments between the various Emirates. Hence, recourse to the DIFC Courts as an intermediate jurisdiction may arguably be a reliable way to circumvent the residual risk of the UAE judiciary's reliance on the old approach to enforcement of foreign awards in the UAE.
Given the present state of case law on the subject, it is not entirely certain whether the UAE courts have as yet fully come of age. This said, recent developments in case law have been encouraging and are hoped to consolidate into permanent court practice going forward. In the meantime, the DIFC may well serve as a viable, yet untested, host jurisdiction for the enforcement of New York Convention awards in the UAE.
Gordon Blanke, Counsel
Soraya Corm-Bakhos, Senior Associate
This material is intended for general information only and should not be considered as legal advice. For further information, please contact Edana Schul: Edana.firstname.lastname@example.org
 Federal Decree No. 43 of 13 June 2006.
 Article 238 of the UAE Civil Procedures Code which provides "The rules laid down in the foregoing articles [i.e. articles 235 to 237 on Execution of foreign judgments, orders and instruments] shall be without prejudice to the provisions of conventions between the UAE and other countries in this regard". To note that the UAE has entered into the Agreement for Judicial Cooperation and Recognition and Execution of Arbitral Award in Civil and Commercial Matters with France in 1991, the 1993 Arab Convention on Judicial Cooperation ("The Riyadh Convention"), and the Convention on the Settlement of Investment Disputes between Sate and Nationals of Other States in 1981. The UAE has also concluded a number of bilateral treaties with other countries in the MENA region including Somalia, Jordan, Egypt, Syria, Sudan and Morocco.
 Article 236 of the UAE Civil Procedures Code.
 Article 235 (1) of the UAE Civil Procedures Code which provides "An order may be made for the enforcement in the UAE of judgments and orders made in a foreign country on the same conditions laid down in the law of that country for the execution of judgments and orders issued in the UAE".
 Note that the reference on the official website of the New York Convention to the UAE's accession to the New York Convention as subject to the mutual recognition reservation has now been rectified by the removal of that reservation from the official website of UNCITRAL.
 Dubai Court of Cassation, case No. 258/1999, judgment dated 2/10/1999; Dubai Court of Cassation, case No. 267/1999, judgment dated 27/11/1999; Dubai Court of Cassation, case No. 17/2001, judgment dated 10/03/2001.
 International Bechtel v Department of Civil Aviation of the Government of Dubai, Dubai Court of Cassation, petition No. 503/2003, judgment dated 15 May 2005.
 Article 211 of the UAE Civil Procedures Code.
 To note that the process of ratification or nullification undertakes the form of a separate normal action before the UAE Courts. While the award is not subject to appeal, the judgment ratifying or nullifying an award may be appealed to the Court of Appeal and then to the Court of Cassation. This process could take up to 12 months.
 Article III of the New York Convention.
 Article IV(1) of the New York Convention.
 Case No. 35/2010.
 As per a previous ruling of the Dubai Court of Cassation in its judgment No. 556 dated 19 April 2005
 As per a previous ruling of the Dubai Court of Cassation in its judgment No. 774 dated 7 April 2005.
 Maxtel International FZE v Airmec Dubai LLC, Court of First Instance Commercial Action No. 268/2010, dated 12 January 2011.
 The provisions of the Decree being identical in content and numbering with those of the New York Convention.
 To note that the Court of Appeal ordered both the Appellant and the Respondent to submit their original copy of the underlying agreement showing the arbitration clause and ordered the appellant to determine its subordinates who signed the underlying agreement in order for the Court to determine whether he was authorized by the manager or not. Neither party submitted its original copy of the underlying agreement. The Appellant further satisfied itself by alleging that he did not sign the underlying agreement and that he did not know the one who signed it. The Court of Appeal underlined in its decision that such allegation was in contradiction with the Appellant's allegations before the Court of First Instance and with the submissions filed on its behalf before the Court, thus inducing the Court to confirm the judgment under appeal.
 Being a federation, the UAE legal system is governed by the UAE Federal Constitution. Under the Constitution, each Emirate is allowed to either establish its own legislature and judiciary or to merge with the federal court system. As a result, there is a combination of federal and local (or Emirates) courts in the UAE with parallel with parallel jurisdictions, depending on which system the individual Emirate has opted for.  Dubai Court of First Instance, case No. 531/2011, judgment dated 18 May 2011.
 Dubai Law No. 9 of 2004 (the DIFC Law).
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