Headnote

Arbitration – Public order – Time limit for arbitration proceedings

Summary of facts

The Petitioner and the Respondent entered into a subcontracting agreement that contained an arbitration clause. Following a dispute that arose between the parties, arbitration proceedings were initiated. The parties agreed on the terms of reference on 5 October 2002. The arbitration tribunal issued its first award on 31 March 2004, after the period was extended by mutual consent, awarding compensation to the Respondent in the sum of AED 4,726,255.41. As the award did not rule on certain points raised by the terms of reference, the Respondent filed a second claim to settle these points. On 14 June 2004, the arbitration tribunal issued its award on these points, obliging the Petitioner to pay the Respondent the further sum of AED 511,937.42 as well as the arbitration fees. The Respondent then instituted an action before the Dubai Court of First Instance to ratify the tribunal’s awards.

The Petitioner then instituted a counterclaim to nullify the tribunal’s awards for procedural failures, including invalidity of the terms of reference due to the expiry of the relevant time period for issuing the award, a failure to hold the arbitration sessions, a failure to issue the minutes, the lack of a quorum in the arbitration tribunal and the issuance of the award in English. The Court of First Instance ruled to suspend the action to nullify the awards until the Petitioner’s motion recusing the chair of the arbitration tribunal had been settled. The Respondent filed an appeal. On 21 March 2005, the Court ruled to support the appealed judgment. Following the unsuccessful appeal, the Petitioner filed a petition to cassation. On 17 October 2005, the Court of Cassation ruled to overturn the judgment and to refer it back to the Court of Appeal for rehearing. Following the rehearing, the Court of Appeal ruled to ratify the tribunal’s awards issued on 31 March 2004 and 14 June 2004 and to dismiss the Petitioner’s counterclaim requesting nullification of the awards.

The Petitioner challenged the Court of Appeal’s judgment on the grounds of misapplication of the law and failure to consider the points that the Petitioner had raised.

Held

The Court of Appeal's judgment was overturned.

Under Articles 210.1 and 216(a) of the Civil Procedure Code, the arbitration period is left to the consent of the parties. The parties may therefore count it in months or in days. If the period originally agreed upon is counted in days, any extensions shall also be counted in days. If the period originally agreed upon is counted in months, any extensions shall also be counted in months.

The arbitrator must issue his award within the period agreed between the parties. If the parties fail to reach agreement on such a period, the arbitrator must issue his award within six months of the first session.

The agreement of the parties on a set period within which the arbitrator must issue his award does not prevent the arbitrator’s express or implicit agreement to any extensions or the parties’ ability to authorize the arbitrator to extend the period. The court may also extend the period for such time as it deems necessary for the settlement of the dispute, if so required by either party or the arbitrator.

The period by which the arbitration is extended, whether by agreement between the parties, authorization of the arbitrator or court judgment, must be connected to the previous period.

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The arbitration period shall be deemed to have been uninterrupted if the arbitration parties or their representatives continue to appear before the arbitrator and neither party insists on the invalidity of the terms of reference for exceeding the date set.

Article 216 of the Civil Procedure Code provides that public order does not apply to the invalidity of the terms of reference through the expiry of the date set for the issuance of the award. Therefore, the court may not invoke the invalidity of an award on its own initiative. Rather, the interested party must expressly insist on the court invoking invalidity when making its request for ratification or nullification of the arbitrator’s award before the court.

The parties’ agreement on the term of the arbitration or any extension thereof is within the discretionary power of the trial court, provided that such court bases its judgment on valid grounds supported by the case papers.

Judgment

The terms of reference stated that the arbitration tribunal should issue its award within six months (180 days) of the date of signature of the terms of reference by the parties. The terms of reference stated that the arbitration tribunal could extend this period by a further six months (180 days). Any extension thereafter would have to be agreed by the parties. The 180-day period in the term “six months” was deemed to mean that the parties had agreed that a month meant 30 days.

The parties had agreed, in the terms of reference, that the original arbitration period would last for six months. This was twice extended by mutual consent of the parties, on both occasions for a further period of six months. The first period of 180 days commenced on 5 October 2002 and ended on 2 April 2003, the second period commenced on 3 April 2003 and ended on 29 September 2003 and the third and final period commenced on 30 September 2003 and ended on 27 March 2004. The arbitration tribunal issued its award on 31 March 2004, which was after the expiry of the arbitration period.

In a letter to the chairman of the tribunal dated 22 September 2003 (before the expiry of the arbitration period), the Petitioner opposed the continuance of the arbitration. The Petitioner insisted in its defence that the arbitration award should be nullified, due to the expiry of the time limit to render the award. Since the challenged judgment had been the one that ratified the awards, it should be overturned and the awards granted under it should be nullified.

Accordingly, the Court of Appeal’s judgment is overturned.