Headnote

Arbitration – Arbitration outside the court – Fees of the arbitrators – Grounds for annulment of award – Time limit for arbitration proceedings

Summary of facts

A judgment was rendered to appoint arbitrators from the Court list of expert engineers to decide on a dispute between the Respondent and the First and Second Petitioners on the contract between them dated 28 October 1994.

The arbitral tribunal issued an award on 22 September 2001. The award ordered the First Petitioner to pay the sum of AED 1,074,356.86 plus interest of AED 395,726.92 until 23 September 2000 and fees and expenses of the arbitration of AED 118,750 plus 9% interest per annum amounting to AED 1,193,106.86 from 24 September 2000 until it had paid the Respondent in full for having completed Building No. 309. The award ordered that the Second Petitioner pay the remaining amount of AED 1,166,463.95 plus interest of AED 555,413.64 until 23 September 2000 and fees and expenses of the arbitration of AED 118,750 plus 9% interest per annum amounting to AED 1,285,213.95 from 24 September 2000 until full payment of the Respondent for having completed Building No. 310. The Respondent brought an action before the Court of First Instance against the First and Second Petitioners requesting that the award be nullified as it was rendered without an arbitration agreement and ruled on issues not raised by the Respondent.

On 25 February 2003, the Court ratified the award. The First and Second Petitioners each filed an appeal against the judgment. The Court joined the two appeals and then dismissed both of them on 28 May 2003.

The First and Second Petitioners each filed a petition to cassation, which the Court decided to join into one action.

Held

The petitions to cassation were dismissed.

A request to the Court to appoint an arbitrator does not in itself mean that the arbitration is being conducted through the Court under Article 213 of the Civil Procedure Code.

Where there are multiple arbitrators, one arbitrator may schedule a hearing to render the award upon the express or implied authorization of the tribunal. Deliberation in the text of the award can be undertaken by arbitrators at any time after the end of pleadings and before rendering the award. The signature of the arbitrators on the award indicates that it has been rendered by those arbitrators and that the deliberation has also been undertaken by those arbitrators. The award shall not be nullified if one of the members of the tribunal was abroad at the time the award was passed, as long as it is proved that the arbitrator in question attended the pleadings, participated in the rendering of the award and signed the original copy of the award submitted to the Court of First Instance.

Article 218 of the Civil Procedure Code provides: “The arbitrators shall be allowed to valuate their fees and the arbitration expenditures, and they may inflict all or part of them on the losing party, and the court, on the basis of the request of one of the litigant parties, may amend that valuation with what shall be adequate to the effort done and the litigation nature” The estimation of the arbitrators’ fees is therefore within the competence of the arbitrators. The overestimation of fees does not nullify [Page38:] the award. A reduction in fees can only be achieved by filing a motion with the Court. The Court’s judgment will have absolute authority in this regard, as long as the Court clarifies the reasons upon which its judgment is based. The estimation of fees shall fall under the jurisdiction of the trial Court.

The right to litigation is a right guaranteed to all regardless of whether the litigant is a national or a foreigner, an individual or a limited liability company.

Article 216 of the Civil Procedure Code determines the circumstances in which litigants may file a motion to nullify an arbitral award, and these circumstances relate exclusively to arbitral procedure.

The determination of a time limit for the rendering of the award does not preclude an express or implied agreement to extend the time limit or to authorize the arbitrator to extend the time limit from the existing one. Such an implicit agreement can consist of the attendance of the parties at a hearing after the lapse of the time limit. Furthermore, the Court may extend the time limit upon the request of one of the parties or the arbitration panel, provided that the extended time limit continues from the previous time limit.

Judgment

The First Petitioner's first argument was that Article 213.1 of the Civil Procedure Code provides that arbitrators in an arbitration that is undertaken through the court must deposit the arbitral award and the originals of the arbitration deed, minutes and documents with the clerk of the court that is competent to hear the action within 15 days of the passing of an award and that the arbitrators must also deposit a copy of the arbitral award to be handed to each party to the dispute within five days of depositing the original of the award. This argument is inadmissible. A request to the court to appoint an arbitrator does not in itself mean that the arbitration is being conducted through the court. In this case, the Court has done nothing except apply a legal text enabling the litigants to proceed with the arbitration outside the court. Therefore, the provisions in Article 213 of the Civil Procedure Code relating to arbitration outside the court shall apply. Article 213.3 of the Civil Procedure Code, which relates to arbitrations outside the court, provides: “As for the arbitration which takes place between the litigant parties outside the court, the arbitrators should deliver a copy of the decision to each party within five days from the delivery of the arbitration decision and the court shall examine the authentication or the nullity of the decision according to the request of one of the litigant parties through the usual procedures of the action prosecution.” The documents show that the procedure outlined in Article 213.3 was followed.

The First Petitioner's second argument that the arbitration deed must be drawn up and an original copy deposited along with the other documents relating to the proceedings is also inadmissible. The agreement to enter into arbitration can be mentioned in the same instrument that forms the subject of the dispute or can be mentioned separately, for example in an arbitration deed. An arbitration agreement in the disputed instrument would be sufficient for the validity of proceedings. Where such an agreement exists, there is no need to draw up an independent document.

The First Petitioner's third argument that a member of the arbitral tribunal was absent and abroad at the time of the decision to schedule a hearing to render an award in the action as well as at the time of the rendering of the award is inadmissible. In the case of multiple arbitrators, one of them may schedule a hearing to render the award upon the express or implied authorization of the tribunal. Arbitrators can deliberate at any time between the end of the pleadings and the rendering of the award. The signature of the arbitrators on the award indicates that it has been rendered and deliberated by those arbitrators. The award shall not be nullified if one of the members of the tribunal is abroad at the time the award is passed, as long as it is proved that the arbitrator in [Page39:] question attended the pleadings, participated in the rendering of the award and signed the original copy of the award submitted to the Court of First Instance. The award therefore does not violate the law.

The argument that the arbitration panel had combined the arbitrators’ expenses and fees and the attorney’s fees into one amount – a concealment that could lead to the nullification of the award – is inadmissible. Article 218 of the Civil Procedure Code provides: “The arbitrators shall be allowed to valuate their fees and the arbitration expenditures, and they may inflict all or part of them on the losing party, and the court, on the basis of the request of one of the litigant parties, may amend that valuation with what shall be adequate to the effort done and the litigation nature.” This indicates that the estimation of the arbitrators’ fees is within the competence of the arbitrators. The overestimation of fees does not nullify the award. A reduction in fees can only be achieved by filing a motion with the Court. The Court’s judgment will have absolute authority in this regard, as long as the Court clarifies the reasons upon which its judgment is based. The challenged judgment rejected the reduction of the arbitrators’ fees, on the basis that “it is proved that the arbitration panel has heard the dispute during the period from 11 April 2000 until the rendering of the award on 22 September 2001, which is a period exceeding one year and five months; the arbitrators have undoubtedly exerted the time and effort during such period in agreement with the fees’ estimation, and accordingly the request to reduce the fees shall be out of place and be rejected by the Court.” The estimation of fees shall fall under the jurisdiction of the trial Court. The allegation of concealment due to the absence of a fee breakdown is rejected, as the amount was described in the award and the arbitration fees were estimated by the tribunal.

The Second Petitioner's first argument was that the Respondent is not a limited liability company but an individual entity owned by a non-national, that the Respondent accordingly does not have capacity in the arbitration and that the award should therefore be null and void. This argument is rejected, as the Respondent shall not be deprived of the capacity to agree to arbitration. The right to litigation is a right guaranteed to all regardless of whether the litigant is a national or a foreigner, an individual or a limited liability company.

The Second Petitioner's second, third and fourth arguments are rejected since every challenge filed against an arbitral award that relates to the weighing-up of substantive evidence or a lack of validity or reasons on the part of the arbitrators is inadmissible. Article 216 of the Civil Procedure Code determines the circumstances in which litigants may file a motion to nullify an arbitral award, and these circumstances relate exclusively to arbitral procedure. The arguments raised by the Second Petitioner for the nullity of the award in question do not fall under those listed in Article 216, and this challenge is accordingly rejected.

The Second Petitioner's fifth challenge that the award made decisions on matters that were not requested in the initiatory pleading is rejected, as this was a special arbitration taking place outside the court. Accordingly, requests are not mentioned in the initiatory pleading submitted to the court, as the action has not been referred from the court to the arbitral tribunal. The content of the award proves that the matters ruled upon had been requested by the parties.

The Second Petitioner's sixth challenge was that the Court that rendered the challenged judgment rejected the request to nullify the award, even though it was rendered outside the time limit specified for passing the award. This challenge is rejected, as the determination of a time limit for the rendering of the award does not preclude an express or implied agreement to extend the time limit or to authorize the arbitrator to extend the time limit. An implied agreement can consist of the [Page40:] attendance of the parties at a hearing after the lapse of the time limit. Furthermore, the Court may extend the time limit upon the request of one of the parties or the arbitration panel, provided that the extended time limit continues from the previous time limit. The challenged judgment stated in its reasons that “the arbitrators have undertaken their assignment and for lack of a sufficient time limit … to render an award, the specified time limit has been extended by the agreement of the parties to the dispute from 23 March 2001 until 23 September 2001, in accordance with the minutes of the arbitration hearings. On 22 September 2001, the arbitration panel has rendered the award in this dispute.” This adequately demonstrates that the arbitration award had been rendered within the specified time limit.

The Second Petitioner's last argument that arbitrators should not be entitled to receive any fees in the case of the nullification of their award or a lack of agreement with the parties on the estimation of those fees is inadmissible. The estimation of the arbitrators’ fees is within the jurisdiction of the arbitrators in accordance with Article 218 of the Civil Procedure Code. The arbitrators are not bound to agree their estimated fee with the parties. However, the Court may modify the estimated fee upon the request of one of the litigants in line with the effort exerted and the nature of the dispute. This challenge is dismissed as the challenged judgment ruled not to modify the arbitrators’ fees, and this judgment was within the limits of its jurisdiction.

Accordingly, the present petitions to cassation are dismissed.