Headnote

Arbitration – Immunity of arbitrators – Res judicata – Scope of the arbitration deed

Summary of facts

The Petitioner entered into an arbitration agreement with the First Respondent on 9 December 2003 to resolve a dispute relating to a sub-contract dated 5 August 1999 (the “Sub-Contract”). The Third, Fourth and Fifth Respondents were appointed as arbitrators (the “Tribunal”). It was agreed that an attachment on a relevant bank guarantee, valued at AED 3,600,000 and issued by the Second Respondent, would be lifted. It was agreed that the bank guarantee would be renewed as long as the arbitration continued but that the Petitioner would not obtain the benefit of the bank guarantee until the end of the arbitration. Although the Second Respondent did not submit the renewed guarantee, the arbitration panel decided that the two parties had the right to resort to the competent entity regarding the bank guarantee.

Accordingly, the Petitioner sent a notice to the tribunal and the First Respondent requesting the renewal of the bank guarantee and asked the tribunal to stop the arbitration proceedings. The tribunal postponed the arbitration until the hearing on 6 June 2004. The Petitioner brought an action before the Dubai Court of First Instance against the First, Second, Third, Fourth and Fifth Respondents, requesting the suspension of the arbitration proceedings until the First Respondent had paid the bank guarantee. The Petitioner argued that this should be a prerequisite for the continuation of the arbitration.

The Petitioner requested the Dubai Court of First Instance:

  1. to nullify the arbitration award rendered on 13 July 2004 (the suspension on the bank guarantee was lifted after 6 June 2004);
  2. to bind the First and Second Respondents jointly and severally to hand over the renewed bank guarantee;
  3. to bind the tribunal jointly to pay AED 75,000 for: (i) non-compliance with Article 209 of the Civil Procedure Code, as the guarantee constituted a guarantee of the Petitioner’s rights; and (ii) violation of the rights of the Petitioner to a defence and to be heard. The Petitioner also alleged that the Tribunal had increased its fees to AED 250,000 and asked the parties to bear the fees equally. However, the First Respondent had paid the whole sum, and as a result the arbitrators were biased in favour of the First Respondent and did not propose reconciliation between the parties.

The First Respondent also brought an action requesting that the arbitration award be returned to the tribunal to render a supplementary award binding on the Petitioner and specifying that:

  1. the original copy of the bank guarantee provided for in the arbitration deed plus the original copies of the renewal appendices be returned to the First Respondent;
  2. the guarantee be considered void ab initio;
  3. the arbitration award rendered on 13 July 2004 be ratified;
  4. the award should be unchallengeable based on Article 217.3 of the Civil Procedure Code.

The Court joined the two actions together and on 8 December 2004 dismissed the Petitioner’s action and ratified the arbitration award rendered in favour of the Respondents on 13 July 2004.

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The Petitioner filed an appeal against the judgment, which the Court dismissed on 2 March 2005, affirming the challenged judgment. The Petitioner then filed this petition to cassation.

Held

The petition to cassation was dismissed.

An arbitrator does not enjoy the immunity and guarantees afforded to a judge and may be litigated against for his faults. An action may also be instituted under Article 218 of the Civil Procedure Code in relation to the arbitration fees and expenses estimated by the arbitrator, where the Court can use its authority to modify the fees in line with the effort exerted and the nature of the dispute.

Where an arbitrator who participated in the deliberation of an award cannot be present at the reciting of the award for personal reasons, the arbitrator can sign the draft award and this signature is then attested to in the hearing minutes. The award is not required to mention the reason for the arbitrator’s absence from the hearing to issue the award. The law does not require the signature of the chairman on the original award.

An arbitral award acquires the evidential status of a judged matter (res judicata) immediately after it is rendered, although the application of this is subject to ratification. In the case of ratification, no litigant may resort to the judiciary. However, an action can be instituted to nullify an award if the requirements of nullification are present.

A legal pleading that involves facts that were not presented to the trial court cannot be made for the first time before the Court of Cassation.

When it ratifies an arbitration award, the court has absolute authority to decide whether the arbitrators have exceeded the limits in the arbitration deed without being subject to the control of the Court of Cassation, provided that the decision of the court has not ignored the provisions of the arbitration clauses. When ratifying an award, the court must not assess the substantive aspects of the award, as this falls within the remit of the tribunal. It is sufficient that the award includes a copy of the arbitration agreement, a summary of the litigants’ pleadings, documents and reasons provided that the award does not violate a public order rule. This includes the procedures of the arbitration, including those set out in the Civil Procedure Code, the Civil Transactions Law and any independent law.

Judgment

The pleading of the tribunal is based on the fact that the arbitration panel shall not be litigated against in the case of the nullification of the award rendered by the tribunal and that the fees paid to the tribunal were estimated according to the effort exerted.

An action may be instituted under Article 218 of the Civil Procedure Code in relation to the arbitration fees and expenses estimated by the arbitrator, where the court can use its authority to modify the fees in line with the effort exerted and the nature of the dispute. However, in this case, the Petitioner had not filed his challenge against the arbitrators’ fees but rather for the nullification of the award for other reasons. Accordingly, the present petition to cassation is dismissed.

The challenge for cassation as to the First and Second Respondents has been filed within the legal term and fulfils all formal requirements.

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The challenge is based on four reasons, the first of which being that the challenged judgment involved a violation and misapplication of the law, an incorrect inference, deficiency in reasoning, inconsistency with the facts proven by the documents and prejudice to the rights of defence due to a violation of Articles 129 and 131 of the Civil Procedure Code, as the award did not mention why the chief arbitrator had not signed it. The draft award and the original of the award were not signed by the chief justice and the clerk, as required, so the award shall be null and void and should be reversed.

The Petitioner’s first argument was inadmissible. Article 128.4 of the Civil Procedure Code provides that “[a]ll judges participating in the deliberation shall be present at the reciting of the award. In cases where one of them cannot be present for personal reasons, they shall sign the draft award, provided that this signature shall be recorded in the hearing minutes.” This indicates that the award is not required to mention the reason for the arbitrator’s absence from the hearing in order to issue the award. In this case, it was established by the challenged judgment that the award had been rendered by the tribunal that signed the draft award, namely the chairman and the two arbitrators. The law does not require the signature of the chairman on the original award, and the challenge is accordingly dismissed.

In the second argument, the Petitioner argued that the challenged judgment involved a violation and misapplication of the law and an incorrect inference, as it was judged that the award rendered by the tribunal had acquired the evidential status of a judged matter (res judicata) immediately after being rendered. It therefore prevented the litigants from resubmitting their dispute to the judiciary, even in a case where a judgment to nullify the award had been passed. The principle set out by the tribunal violated Article 217.2 of the Civil Procedure Code, which allows the submission of challenges against judgments to ratify arbitral awards by litigation.

The Petitioner’s second argument was inadmissible, as the judgment correctly decided that an arbitral award acquires the evidential status of a judged matter (res judicata) immediately after it is rendered, although the application of the judgment is subject to ratification. Once an award ratified, no litigant may resort to the judiciary. However, an action can be instituted to nullify an award if the requirements of nullification are present, as they were in this case. Accordingly, the challenged judgment did not constitute a violation of the law or a misapplication thereof.

In the third argument, the Petitioner argued that the challenged judgment involved a violation and misapplication of the law, an incorrect inference and a deficiency in reasoning, as the cases in which nullification of an award can be requested include cases where the arbitration request is issued by a person who lacks the capacity to agree to arbitration. In this case, two men had signed the arbitration deed on behalf of the Petitioner in the original claim, despite the fact that the Petitioner company’s manager could not use the rights of selling, donation or resorting to arbitration without special authorization. The arbitration deed had been issued by a manager without the capacity to agree to the arbitration, which nullified the arbitration award.

The Petitioner’s third argument was inadmissible, as a legal pleading involving facts that were not presented to the trial court cannot be made for the first time before the Court of Cassation. Since the matter of the incapacity of those who agreed to the arbitration had not been raised before the trial court, these facts could not be presented for the first time before the Court of Cassation.

In the fourth argument, the Petitioner argued that the challenged judgment constituted a violation of the law, as the pleading that the arbitrators had exceeded the limits of the arbitration deed had not been rebutted.

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The Petitioner’s fourth argument was inadmissible. When ratifying an arbitration award, the trial court has absolute authority to decide whether the arbitrators have exceeded the limits in the arbitration deed, provided that the decision of the trial court has not ignored the provisions of the arbitration clauses. When ratifying an award, the trial court must not assess the substantive aspects of the award, as this falls within the remit of the tribunal. It is sufficient that the award includes a copy of the arbitration agreement and a summary of the litigants’ pleadings, documents and reasons, provided that the award does not violate a public order rule. This includes the procedures of the arbitration, including those set out in the Civil Procedure Code, the Civil Transactions Law and any independent law.

Accordingly, the present petition to cassation is dismissed.