Headnote

Arbitration – Content of award – Grounds for nullification of award – Scope of arbitration agreement – Time limit for arbitration proceedings

Summary of facts

The Petitioner initiated a legal action against the two Respondents requesting the nullification of the arbitration award issued by the Second Respondent. The Petitioner, a Kuwaiti national involved in the business of share trading, the First Respondent, an American citizen also involved in the business of share trading, and a third party (the “Third Party”) agreed to purchase 27,500 shares of Dubai Islamic Bank. It was further agreed that the Third Party would purchase the shares and that the First Respondent and the Petitioner would pay the amount of the shares in exchange for the equal distribution of the dividends generated. The shares were purchased by the Third Party as agreed under two shares certificates. The 27,500 shares purchased were then doubled, by virtue of bonus shares, totalling 41,250 shares. It was further established in the proceedings that the First Respondent took control of the shares by threatening the Third Party, following which a dispute arose between the Petitioner and the First Respondent in relation to the distribution of dividends. Both the Petitioner and the First Respondent entered into an arbitration agreement to refer their dispute to the Second Respondent acting as arbitrator. The award rendered by the arbitrator was challenged by the Petitioner. However, the Court of First Instance dismissed the claim. The Petitioner appealed against the judgment, but the Court of Appeal dismissed the appeal. The Petitioner subsequently challenged the appeal before the Court of Cassation, claiming, among other things, that the award was rendered after the expiry of the time limit on which the parties had agreed.

Held

The petition to cassation was dismissed.

According to Article 210 of the Civil Procedure Code, the agreement on a time limit for the rendering of the award by the arbitrator, contained within an arbitration clause, does not prevent the parties from either explicitly or implicitly agreeing to extend such time limit later on. The implicit agreement may result from the parties meeting to discuss the subject matter of the dispute after the expiry of the time limit for rendering the award.

Judgment

The appeal is based on six grounds.

On the first ground, the Petitioner argued that the arbitrator exceeded his power by deciding on the partnership between the parties when the subject matter of the dispute submitted to arbitration was the distribution of dividends.

The Court of Cassation rejected the argument on the ground that the determination of the subject matter of the dispute is at the sole discretion of the lower courts. The Court further stated that investigating the issue of the Petitioner’s distribution of the dividends fell within the scope of the subject matter of the dispute and that arbitration is not solely restricted to the dividends but extends to the determination of the obligations of each party in the partnership of the shares.

On the second ground, the Petitioner argued that, in electing not to resolve the dispute by way of conciliation, the arbitrator had exceeded his power. According to the Petitioner, the arbitration agreement provided that the parties would refer the dispute to the arbitrator for conciliation.

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The Court of Cassation rejected the argument on the basis that, while the arbitration agreement provided that the arbitrator was empowered to pursue conciliation, this does not mean that the arbitrator had to initiate conciliation between the parties prior to starting the arbitration procedure, as long as the arbitration agreement did not provide otherwise.

On the third ground, the Petitioner claimed that, while his attorney was entitled to represent him during the course of arbitration procedure, he was not authorized to extend the time limit within which the award had to be rendered. As a consequence, the Petitioner argued that the award was not valid since it was rendered after the expiry of the time limit agreed upon between the parties.

The Court of Cassation rejected the argument. It further held that the attorney authorized to represent the parties in the arbitration was empowered to carry on specific matters. If the arbitration agreement determines a time limit for rendering the award, the parties may extend such date either expressly or implicitly. The implied agreement to extend the time limit may result from the fact that the parties attended a meeting before the arbitrator to discuss the subject matter of the dispute following the expiry of the time limit. The Court of Cassation further held that one of the essential features of arbitration is the possibility to extend the time limit for rendering the award. The attorney shall have the right to extend this time limit.

With respect to the remaining grounds, the Petitioner claimed that the minutes of the arbitration hearing had been forged. In this respect, the Petitioner further claimed that the minutes of the hearing stated that the Respondent’s attorney attended the hearing while in reality he did not. This was allegedly corroborated by the absence of his signature on the minutes.

The Court of Cassation dismissed this claim and stated that the rules of procedure are those that should be abided by and that any claim as to their violation should be proved. The Court of Cassation further stated that, although the arbitrator had not produced the minutes of the hearing as ordered by the Court of Appeal upon the Petitioner’s request, the arbitrator was not obliged to file the minutes of the arbitration hearing with the clerk of the Court since the arbitration was conducted outside of the court. Furthermore, the Court held that the Petitioner did not make any reservation before the arbitrator concerning the contents of the minutes of the hearing. Moreover, the signature of the Petitioner’s attorney on the minutes of the hearing is not exactly a prerequisite and its absence does not constitute an indication of forgery. Finally, it was established that the lower courts may consider the validity of the plea of forgery at their discretion.

Accordingly, the petition to cassation was dismissed.