Headnote

Arbitration – Arbitrator acting as a mediator – Grounds for annulment of award

Summary of facts

The Petitioner initiated legal proceedings against the Respondent before Abu Dhabi Court of First Instance requesting the Court to ratify the arbitral award issued by the arbitrator under the auspices of the Abu Dhabi Conciliation Commercial Arbitration Centre and render it enforceable.

The Respondent filed a counterclaim requesting the Court to set aside the arbitral award on the grounds that it did not include the parties’ agreement to arbitrate and contravened Article 212.6 of the UAE Civil Procedure Code.

The Court of First Instance ratified the award in question and dismissed the Respondent’s counterclaim.

The Respondent appealed before the Abu Dhabi Court of Appeal, which ruled that the appeal was not permissible. Consequently, the Petitioner filed the present petition to cassation.

Article 217 of the Civil Procedure Code provides that arbitral awards are not subject to appeal. However, the courts’ decisions ratifying or annulling arbitral awards are subject to appeal by either party, with the exception of decisions ratifying or annulling an award that was issued by an arbitrator who was explicitly authorized by the parties to conduct conciliation , decisions relating to arbitrations in which the parties expressly waived their right to appeal and decisions relating to arbitrations in which the amount in dispute does not exceed AED 10,000.

Held

The judgment of the Court of Appeal was overturned.

The parties’ agreement to authorize an arbitrator to settle their dispute must be explicit, leaving no doubt as to their intention to provide the arbitrator with powers to adjudicate their dispute.

Judgment

The Respondent argued that the Court of Appeal’s decision that the appeal was not admissible on the ground that arbitral awards are not subject to appeal is wrong.

The Court of Cassation held that the Petitioner’s argument was with grounds. According to Article 217 of the Civil Procedure Code, arbitral awards are not subject to appeal. However, the courts’ decisions ratifying or annulling arbitral awards are subject to appeal by either party, with the exception of decisions ratifying or annulling an award that was issued by an arbitrator who was authorized by the parties to conduct conciliation, decisions relating to arbitrations in which the parties expressly waived their right to appeal and decisions relating to arbitrations in which the amount in dispute does not exceed AED 10,000.

Given that arbitrators are not bound by rules of law, except those relating to public order, and that an award is not subject to appeal, the parties’ agreement to have their disputes settled by arbitration must be explicit in their agreement and not be presumed therefrom.

An arbitrator’s authority to arbitrate is different than a mediator’s authority to mediate in that the latter is not entitled to render a binding decision. A mediator can only recommend methods to settle the dispute to the parties, and if the parties reach a settlement the mediator’s mandate expires. His recommendations are not binding, and the parties may choose to disregard them.

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It is established that the parties’ agreement entitled the arbitrator to mediate their dispute during the arbitration proceedings. This indicates that the parties explicitly agreed to allow the arbitrator to mediate the dispute before rendering an award and that they did not agree to provide him with the authority to settle the dispute in conciliation. The fact that they referred to Articles 212.2 and 217.3 of the Civil Procedure Code does not entail that the parties agreed to have the arbitrator settle their dispute.

The lower court’s decision that the parties’ agreement to entitle the arbitrator to mediate their dispute entails an explicit agreement to authorize him to settle the dispute contravenes the law.

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