Headnote

Arbitration – Appointment of arbitrators – Grounds for annulment of award

Summary of facts

Two commercial companies entered into an agreement to form a company to produce wood shavings and supply them to horse stables and to divide the resulting profits. The original agreement contained an arbitration clause authorizing an arbitrator to settle any disputes between the parties and to issue awards. However, the arbitration agreement did not state the number of arbitrators required nor did it set out the manner of their appointment.

The Respondent filed a case before the Court of First Instance requesting the appointment of arbitrators to resolve a dispute that had arisen with the Petitioner. The Court of First Instance ordered the appointment of an accounting expert to act as arbitrator (the “expert”) to resolve the dispute between both parties, pursuant to the terms of the arbitration clause.

During the course of the trial, the parties entered into an arbitration agreement stipulating the parties’ approval for the appointment of the expert as an arbitrator to resolve the dispute that had arisen between them.

The arbitrator delivered his decision, concluding that the Respondent was entitled to damages from the Petitioner. The Court of First Instance ordered the enforcement of the arbitrator’s award. The Petitioner appealed to the Court of Appeal, which rejected the appeal. Subsequently, the Petitioner filed a petition to cassation.

The Court of Cassation reversed the Court of Appeal’s decision and returned the action to the Court of Appeal to pass a new judgment, as the arbitration clause empowered the arbitrator to reconcile but did not clearly empower him to unilaterally reconcile between the parties without their approval.

Once again, the Court of Appeal rejected the appeal and confirmed the decision of the Court of First Instance. The Petitioner then challenged the second Court of Appeal’s decision before the Court of Cassation.

Held

The Petition to cassation was dismissed.

Under Article 203 of the Civil Procedure Code, the parties to a contract may in general agree in the main contract or in a subsequent agreement to refer disputes arising between them to one or more arbitrators.

The courts cannot address the merits of an arbitration award when they are asked to ratify or enforce said award, provided that the arbitrator’s award does not contradict a rule relating to public order.

Judgment

The Petitioner first argues that the appointment of the expert by the Court of First Instance was carried out against the provisions of the law, because the Respondent had only requested the appointment of an accounting expert to settle the accounts between both parties. Since the Court of First Instance accepted the plea made by the Petitioner to stay the proceedings on the grounds of the existence of the arbitration clause, it should not have appointed the arbitrator.

The Court states that it is established as per Article 203 of the Civil Procedure Code that the parties to a contract may in general stipulate in the main contract or in a subsequent agreement to refer disputes arising between them from the performance of a certain contract to one or more arbitrators and the parties may agree to arbitration in a certain dispute under special conditions. The subject matter of the dispute must be defined in the arbitration document or during the hearing of the [Page81:] action, i.e., the litigants may lay down a condition in the original contract concluded between them on the submission to arbitration of any dispute that arises between them in respect of the performance of said contract. Furthermore, they may conclude an arbitration agreement in respect of a certain dispute under special conditions and assign the arbitration to a specific person or persons to be agreed upon. If there is a dispute and the parties to the litigation have not agreed on the arbitrators, any one of them may turn to the original court of jurisdiction to hear the dispute to appoint the arbitrators required, pursuant to Article 204 of the Code.

The documents disclosed to the Court demonstrate that the original contract concluded between the two parties on 5 August 2002 contained an arbitration clause that did not assign a specific number of arbitrators or set out the manner of their appointment. Upon the precautionary request made by the Respondent to appoint the arbitrators, the Court of First Instance therefore ordered the appointment of the expert. Subsequently, both parties to the dispute entered into an independent arbitration agreement in which they agreed to the appointment of the expert. The document in question provided the approval of the parties to his appointment as an arbitrator. It also detailed the proceedings that said arbitrator was required to adhere to and both parties’ agreement on the expert’s fees. Hence, this document is deemed to be an independent arbitration agreement in which both parties chose the expert as the sole arbitrator. This document is not disputed by the parties to the litigation and is deemed to be a sufficient base, without violation of the law, to appoint the aforementioned expert as an arbitrator to resolve the existing dispute between them without needing to examine whether or not the Court of First Instance was vested with the power to appoint a sole arbitrator to settle the dispute.

Thus, claiming the above with respect to the challenged judgment is useless in respect of the Petitioner’s allegation regarding the invalidity of the arbitrator’s decision, which maintains that it was delivered by a sole arbitrator who was not appointed by the court in accordance with the law, pursuant to Article 216 of the Civil Procedure Code. This does not change the fact that the court whose judgment is challenged rejected the claim of invalidity based on the original agreement dated 5 August 2002 in which the arbitration clause is provided due to the failure of that agreement to define a certain number of arbitrators. Since the judgment reached the correct conclusion by rejecting the claim regarding the invalidity of the arbitrator’s award, its failure to set out its legal reasons or cite the correct legal references shall not render it defective, as the Court of Cassation may supplement the missing reasons that the judgment failed to set out and return it to a correct legal footing without needing to reverse it.

The Petitioner further argues that the arbitrator should have asked the Court to order a third party to disclose a pivotal document in its possession pursuant to Article 209 of the Civil Procedure Code. Furthermore, the Petitioner argues that the arbitrator’s decision provides that the Respondent had received only AED 80,016 from the Petitioner although it had actually received more than AED 600,000. The Petitioner states that the Respondent did not deny having received AED 600,000, which verifies the invalidity of the assessment adopted by the arbitrator and the Court of Appeal’s disregard for the significance of the documents submitted by the Petitioner in support of its defence.

The Court of Cassation rules that it is established in the rulings of this Court that, when endorsing an arbitral award, the court may not address said award from a substantive perspective or from the perspective of its compliance with the law, because the court cannot review the merits of the award unless it breaches a rule relating to public order.

Accordingly, the present petition to cassation is dismissed.