Headnote

Arbitration – Enforcement – Foreign awards – New York Convention – DIFC/LCIA

Summary of facts

The Respondent in Cassation filed a legal action before Dubai Court of First Instance seeking confirmation of two arbitral awards issued against the Petitioner in Cassation in relation to a dispute that had arisen out of a purchase agreement. The arbitration clause provided for arbitration in London under the DIFC-LCIA rules. The Petitioner in Cassation objected to the Respondent’s request for ratification, arguing that the awards were void on various grounds. Among other things, it claimed that the arbitration agreement was issued by a person who did not have the capacity to agree to arbitration and that the awards contained several procedural irregularities.

The Court of First Instance ratified the two awards and confirmed the provisional attachment filed by the Respondent in Cassation

The Respondent in Cassation appealed to the Court of Appeal, which upheld the lower court’s judgment. Therefore the present petition to cassation was filed by the Petitioner.

Held

The petition to cassation was dismissed.

According to Federal Decree No. 43 of 2006, under which the UAE acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and Article 238 of the UAE Civil Procedure Code, when it comes to foreign arbitral awards issued outside the state, the national courts’ jurisdiction is limited to ensuring that such awards do not contravene the above-mentioned decree and to ensuring their compliance with the procedural and substantive requirements listed in Article 5 of the New York Convention of 1958.

Judgment

The Petitioner in Cassation argued that the agreement between the parties was void, as it was not signed by the manager of the company who was the authorized signatory. During proceedings before the lower court, the Respondent in Cassation requested that the Petitioner produce the original of the agreement, but the latter failed to do so and only submitted a faxed copy, alleging that the agreement was concluded via fax.

The Petitioner’s argument that the arbitration agreement was not signed by an authorized person was rejected as it failed to provide evidence in support of this argument when given the opportunity to do so by the lower courts. Furthermore, Article 5 of the New York Convention of 1958 places the burden of proof on the party claiming the annulment of the award, which in this case is the Petitioner in Cassation, who failed to prove that the signatory of the arbitration agreement lacked authority to sign it.

The Court of Cassation upheld the Court of First Instance’s decision that the courts’ supervision was limited to ensuring that arbitral awards were not issued in contradiction of Federal Decree No. 43 of 2006, under which the UAE acceded to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The Petitioner’s argument that the New York Convention does not preclude an action for setting aside an arbitral award and its request to set aside the abovementioned awards pursuant to Article 216 of the Civil Procedure Code was rejected.

The provisions of the Civil Procedure Code relating to arbitration and the procedures to be followed by the courts when ratifying arbitral awards, in particular Articles 212, 213 and 215, provide that only domestic awards fall within the jurisdiction of the national courts. In the case of foreign arbitral awards, irrespective of whether they are [Page124:] capable of being enforced in the country where they were issued, the courts are compelled to apply the rules concerning foreign arbitral awards.

However, Article 238 of the Civil Procedure Code provides that international conventions that have become enforceable in the UAE by virtue of their ratification shall apply to disputes concerning the enforcement of foreign court decisions and arbitral awards as domestic law.

Federal Decree No. 43 of 2006, which was published in the Official Gazette on 28 June 2006, ratified the UAE’s accession to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. Therefore, its provisions are applicable to this dispute.

The two arbitral awards that form the subject of the present dispute were issued in London in accordance to the New York Convention. Therefore, the UAE courts’ jurisdiction in relation to these arbitral awards is limited to ensuring that they do not contravene Federal Decree No. 43 of 2006.

The Court of Appeal’s findings, supported by sound reasons and adequate evidence, are not inconsistent with the law. The Petitioner cannot argue that the contract containing the arbitration clause is void because it was not signed by the company manager, since it did not substantiate this defence before the trial court as required by Article 5 of the New York Convention, which places the burden of proof on the party contesting the documents presented by the other party. Furthermore, the Petitioner has not proved that the arbitrator’s failure to swear in the witness contravened the law of the country where the award was issued, that the award was contrary to the arbitration clause or that the composition of the arbitral tribunal was not in accordance with the agreement of the parties.

In ruling that the UAE courts have no jurisdiction to set aside foreign arbitral awards, the Court of Appeal reached the right conclusion as a matter of law and cannot be faulted for finding that jurisdiction belongs to the arbitrator that issued the awards. The Court of Cassation can make up for incomplete reasoning and rectify errors without having to reverse the decision. The effect of Federal Decree No. 43 of 2006 is that all UAE courts shall recognize and enforce such awards in the territory where the award is relied upon. Therefore, there is no basis for the Petitioner’s assertion that jurisdiction over this action lies with the DIFC courts and that the arbitral award is contrary to Islamic Sharia and public policy in the UAE because it awards usurious interest.

It is settled in this Court that the prohibition on agreeing to usurious interest in any type of civil or commercial transaction is limited to dealings between individuals and does not extend to dealings between individuals and corporate entities, which can agree with other corporate entities or individuals to charge conventional interest. According to the documents submitted to the Court, the parties to the contract in question are both corporate entities (namely LLCs), so any interest award is permissible. The whole argument is thus baseless.

Accordingly, the present petition to cassation is dismissed.