Headnote

Arbitration – Applicable procedure in arbitration – Content of award – Grounds for annulment of award

Summary of facts

The Respondent had filed an action against the Petitioners before the Sharjah Court of First Instance requesting the ratification of the award issued in the dispute arising between the Respondent and Petitioners on 16 July 2000. According to this award, the Petitioners were obliged to pay the Respondent the amount of USD 151,200. On 14 February 2001, the Court of First Instance decided to ratify the award. However, this judgment was appealed by the Petitioners before the Sharjah Court of Appeal. On 28 August 2001, the Court of Appeal upheld the appealed judgment. Nonetheless, the Petitioners challenged this judgment by means of a petition to cassation.

Held

The petition to cassation was dismissed.

The award must include a copy of the arbitration agreement to ensure that the award was passed within the limits of the competence conferred upon the arbitrators under the agreement. It is not necessary to mention the provisions of the arbitration agreement in the award; the purport thereof shall be sufficient, yet without any alteration to its meaning.

Arbitrators are exempt from the rules governing ordinary legal proceedings save for matters provided for under the arbitration rules contained in the Civil Procedure Code and procedures agreed upon by the parties.

Challenges to the validity of awards can only be made against defects in procedures and not against the arbitrator’s discretion to decide on the merits of the case. The grounds for challenging awards are limited to those laid down in Article 216 of the Civil Procedure Code. Any unsubstantiated arguments against the validity of awards are inadmissible.

Judgment

The appeal is based on two arguments.

Firstly, the Petitioners insisted on the invalidity of the award, arguing that it was passed without an arbitration agreement validly concluded between the parties. It was further argued that the grounds of the award included no reference to the arbitration agreement and that no copy of the agreement had been enclosed along with the award. Nonetheless, the Court of Appeal dismissed this plea on the ground that a request for the appointment of an arbitrator had the same practical effect as an arbitration agreement. The Petitioners insisted that this fact did not necessarily mean that an arbitration agreement was in existence, as the purpose intended by the lawmaker was to encourage the use of an arbitration agreement detailing the requirements of the arbitration envisaged. Accordingly, the challenged judgment involved a breach and misapplication of the law.

The Court considers the Petitioners’ argument to be inadmissible. Under the provisions of Article 212.1 and 212.5 of the Civil Procedure Code, the lawmaker stipulated that the award shall include a copy of the arbitration agreement annexed to it. This condition is, in essence, made with a view to verifying that the award is given within the limits of the arbitrators’ competence and authority as extracted from the requisite arbitration agreement. The award shall include a copy of the agreement, even if a copy of the agreement, or the original as the case may be, is submitted to the Court during the consideration of the dispute. It is not necessary to mention the exact provisions of the arbitration agreement, providing there is no alteration to its meaning. Arbitration agreements are not required to exist as a separate document, [Page60:] but may also be included in a contract as an arbitration clause. The Court considers that an arbitration clause has the same meaning as an arbitration agreement. It is established from the case papers that the arbitration agreement between the Petitioners and the Respondent took the form of an arbitration clause in Clause 10 of the contract concluded between them on 1 February 1994. It is further established that the award included the provisions of the contract, including the arbitration clause referred to above. The Court considers that the award shall be deemed to have fulfilled the requirements stipulated under the provisions of Article 212.5 of the Civil Procedure Code and that it shall therefore be deemed valid.

Secondly, the Petitioners argued that the Court of Appeal’s judgment involved defective causation and invalid inference. The Petitioners objected to the report of the expert appointed by the arbitrator, arguing that the expert did not personally meet with or hear the arguments of the disputing parties. The Petitioners further argued, among others things, that the expert did not examine the documents submitted by the disputing parties but rather delegated this task to his employees. Therefore, the report of the expert led to an award that should be considered null and void. As the challenged judgment did not address this argument and dismissed the Petitioners’ plea that the award was invalid, the Petitioners argued that the judgment had been based on defective causation and invalid inference.

The Court considers the above argument to be invalid. According to Article 212 of the Civil Procedure Code, the arbitrator shall be exempt from the rules applicable to proceedings before courts of law, with the exception of procedures prescribed under the arbitration chapter of the Code or otherwise agreed upon between the disputing parties, including procedures relating to the summoning of the parties, the hearing of their arguments and their ability to submit documents. This exemption also applies to procedures relating to evidence mentioned under the law. According to the Evidence Law, arbitrators in civil and commercial transactions may appoint experts who may, for the sake of accomplishing their mission, seek assistance from employees or any other persons under their supervision. The opinions expressed in the expert’s report shall be subject to discussion by the disputing parties. In this context, the Court considers that the expert’s report is no more than an element of evidence brought to the attention of the arbitrator, who has the discretion to decide how much weight should be attached to such reports.

In accordance with Article 216 of the Civil Procedure Code, the Court considers that any argument claiming that an award is invalid shall be made on the ground of a procedural defect and should not pertain to the decision made by the arbitrator. Defects in arbitration procedures are exclusively enumerated in Article 216 of the Code so that no analogy may be drawn. These defects relate mainly to the arbitration agreement or arbitration procedures. Defects will thus often arise in cases where an award is given without a valid arbitration document or based on an invalid or timelapsed arbitration document. Defects may also arise in instances where the arbitrator acts beyond his competence contemplated under an arbitration agreement or in breach of a rule pertaining to public order. Article 216 also exclusively enumerates the cases in which an award shall be deemed invalid due to a defect in the arbitration procedures, i.e., in cases where the award is given by arbitrators not appointed in accordance with the law or by some arbitrators who are not authorized to issue the award in absence of others, in cases in which the condition of confrontation between the disputing parties has not been fulfilled, in cases involving a breach of the right of defence or in cases in which the award or any procedure affecting the award has become invalid. The Court considers that any argument not related to the abovementioned cases or otherwise related to the rules of evidence, such as claims regarding the discretionary power of the arbitrator, the arbitrator’s failure to resolve [Page61:] any substantive issues or the insufficiency or invalidity of grounds, shall always be inadmissible. Accordingly, the Court does not accept the arguments raised by the Petitioners as to the expert’s report. The Court of Appeal has rightly concluded that all formal requirements were met by the challenged award, noting “the dispute was referred to the arbitrator who decided on the same within the limits of the arbitration agreement. The said award was passed and signed by the arbitrator elected and was phrased according to the wording set under law for awards. The award was not based on an invalid procedure … and that the Court finds that the remaining arguments do not affect the validity of the award…. Hence, the request to invalidate the award shall be legally groundless and consequently dismissible…”. The Court considers that the challenged judgment was passed in accordance with the law.

Accordingly, the award is valid and the petition to cassation is dismissed.