Headnote

Arbitration – Grounds for annulment of award

Summary of facts

The Petitioner and the Respondent agreed to refer their dispute concerning a factory’s capital to arbitration under the Rules of Commercial Conciliation and Arbitration of the Dubai Chamber of Commerce and Industry (the “Rules”). An arbitrator was appointed to act as sole arbitrator. The arbitrator issued his award on 14 February 2006. The Petitioner subsequently brought an action requesting the ratification and execution of the award.

On 20 May 2006, the Respondent requested the annulment of the award for breach of law. The Respondent argued that he had requested the dismissal of the arbitrator but that the arbitrator had issued his award on 14 May 2006 before the final settlement of Action No. 733 of 2005 (which related to his recusal) and its Appeal No. 194 of 2006. This, the Respondent argued, rendered the award invalid under Article 216 of the Civil Procedure Code. The Court of First Instance agreed and on 23 August 2006 dismissed the Petitioner’s ratification claim and ruled that the award was invalid.

The Petitioner appealed against this judgment. On 17 January 2007, the Court of Appeal dismissed the appeal and upheld the appealed judgment on the ground that the arbitrator had proceeded with the arbitration proceedings and had issued his award despite the fact that a motion had been filed to recuse him. This constituted a ground to invalidate the award under Article 39 of the Rules and Article 216 of the Civil Procedure Code.

On 7 March 2007, the Petitioner challenged the judgment of 17 January 2007, requesting that the judgment be overturned. Among other things, the Petitioner argued:

  1. The suspension of proceedings is not obligatory in a recusal motion. The arbitrator has the power to assess the seriousness of the dispute without being subject to the control of the Court of Cassation. The arbitrator may proceed with the arbitration if he deems that the purpose behind the application for his recusal is to prolong the litigation.
  2. The judgment mistakenly decided that Article 39 of the Rules covered the provisions of Article 120 of the Civil Procedure Code. The explanatory memorandum states that Article 120 of the Civil Procedure Code applies to the incompetence and recusal of judges but not to the recusal of arbitrators.
  3. The recusal motion was submitted after the expiry of the five-day period, and the right to recuse had therefore been forfeited.

Held

The petition to cassation was dismissed.

The law does not allow the arbitrator to proceed with the proceedings while the motion to recuse the arbitrator is pending, even if the allegations raised are incorrect, as the arbitrator does not have the power to decide upon the seriousness of the motion.

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Judgment

Article 216.1(c) of the Civil Procedure Code provides that litigants can request the annulment of an arbitration award when submitted to the Court for ratification if there was a procedural fault in the arbitration.

Article 39 of the Rules provides that arbitration proceedings must be suspended if there is a legal or actual impediment that prevents their continuance in any of the cases listed in subparagraphs (a), (b), (c), (d) and (e) of Article 39 until such impediment is removed. However, Article 39 is not limited to such cases. Other legal texts and general rules may be referred to in order to verify whether there is a legal impediment to the continuance of proceedings. A recusal motion is one of the cases that results in the suspension of proceedings until the concerned authority issues its decision in relation to the recusal motion. The law does not allow the arbitrator to proceed with the action while the motion to recuse the arbitrator is pending. The arbitrator must not insist on proceeding with the arbitration, even if the allegations raised are incorrect, as the arbitrator does not have the power to decide upon the seriousness of the motion. The verification of whether the recusal motion is being used as a method to prolong the litigation is not relevant. Arbitral proceedings must be suspended until the recusal motion is settled, regardless of whether the recusal motion is a method of prolonging the litigation. If the arbitrator insists on proceeding with the action despite being aware of the recusal motion, the procedures initiated by him will be invalid under Article 216 of the Civil Procedure Code.

Finally, the arbitrator has an obligation to suspend proceedings until a judgment dismissing the recusal motion is issued, even if the recusal motion is submitted after the expiry of the relevant period for issuing an award.

Accordingly, the petition to cassation is dismissed.