Headnote

Arbitration – Content of award – Grounds for annulment of award – Public order

Summary of facts

The Respondent entered into a contract with the Petitioner on 14 October 1983 for the construction of 50 public houses in Sharjah and a further 53 in the Dasman area. However, the Petitioner failed to pay the Respondent the due price. The Respondent therefore brought an action in which it sought to oblige the Petitioner to nominate its arbitrators and requested the Ministry of Justice to nominate the chair of the tribunal. After the Petitioner nominated its arbitrator and the Ministry of Justice nominated a chair of the tribunal, the Court transferred the case to the arbitration panel, which issued its award on 26 March 2003 in favour of the Respondent.

The Respondent then filed a request for the ratification of the arbitral award before the Court of First Instance. However, the Court refused to ratify the award and annulled it. The Respondent appealed to the Court of Appeal, which overturned the decision of the Court of First Instance and ratified the arbitral award. The Petitioner also filed an appeal against the Court of First Instance’s judgment, which was considered inadmissible by the Court of Appeal. The Court of Appeal ordered the Petitioner to pay AED 100,000 to each arbitrator and cancelled the judgment regarding fees paid to the chair of the tribunal.

The Petitioner challenged this judgment in Petition No. 831 of the 25th Judicial Year, and the same judgment was challenged by an arbitrator in Petition No. 67 of the 26th Judicial Year.

Held

The Court of Appeal’s judgment was partially upheld.

The arbitration award shall include a copy of the arbitration agreement, summaries of the statements made and documents presented by litigants, the reasons for and wording of award, the date and place thereof and the arbitrators’ signatures.

When ratifying an award, the court shall not review its substance, save items related to public order.

Although interest is contrary to Sharia, which relates to public order, the constitutional circuit of the Federal Supreme Court allows interest when it is proportionally less than the amount of the transaction.

Annulment of an arbitral award shall be restricted to errors in procedure or faults exclusively set out in Article 216 of the Civil Procedure Code.

Petition to cassation may not be submitted by an irrelevant party to the appeal.

Judgment

1. Petition No. 831 of the 25th Judicial Year

The procedures for arbitrations provide that an arbitration award must include a copy of the arbitration agreement, a summary of the statements made and documents presented by litigants, the reasons for and wording of judgment, the date and place thereof and the arbitrator’s signatures.

Upon ratification of an arbitral award, the court shall not discuss the subject matter or the applicability of the law, except for issues relating to public order. Rather, the court shall only examine the procedural aspects contained in Articles 212 and 216 of the Civil Procedure Code.

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It is also established according to judgment passed by this Court that all kinds of interest, whether compound or simple, are forbidden in principle according to the provisions of Sharia, since they are regarded as a form of usury, which is forbidden. However, according to the judgment passed by the constitutional circuit of the Federal Supreme Court in response to Petition No. 14 of the 19th Judicial Year, interest regarding bank transactions is permitted, with certain limits, should the need arise. Such transactions shall be terminated when there is no need for them. It also held that interest on overdue payments counts as compensation to the creditors for unjust delays caused by debtors. Since it is consistent with the provisions of Sharia, this judgment may be applicable.

The Court that issued the challenged judgment stated that “upon considering a petition for ratification of arbitration awards, judicial control shall be limited to verifying whether arbitrators have fulfilled formal and procedural aspects in order to demonstrate the errors in their award”. However, in stating that the contract between the parties was not related to bank transactions and that no interest was payable, the appealed judgment addressed the subject matter of the dispute, thereby going beyond the jurisdiction of the Court concerned.

The judgment of the Court of Appeal erred in that it ordered the Petitioner to pay a sum of AED 100,000 to the wrong arbitrator. This error should be corrected in the fourth paragraph.

Accordingly, the challenged judgment is partially overruled concerning the fourth paragraph.

2. Petition No. 67 of the 26th Judicial Year

The Respondent pleaded for the rejection or invalidity of the petition to cassation on the ground that the Petitioner was an irrelevant party to the challenged judgment who was not part of the litigation.

This argument is correct, because Articles 150 and 173.1 of the Civil Procedure Code stipulate that a petitioner to cassation shall be a relevant party to the litigation in which the appealed judgment was passed. The purpose of this condition is that petitions should be submitted by and against the same parties in appeal. Being an irrelevant party, the Petitioner may not challenge the judgment even if it suffers harm ensuing from the said judgment. This Petitioner can only offer evidence when it is demanded to do so or if evidence is provided against it. In a petition to cassation, the Petitioner must be a relevant party to litigation who has been obliged by the challenged judgment to perform a certain act.

Accordingly, the petition to cassation is inadmissible.