Headnote

Arbitration – Ratification of an award – Interference by the court in the merits of an award – Res judicata

Summary of facts

The Respondent sued two members of the same family (A + B) in an action before the Dubai Court of First Instance seeking to ratify the arbitral award issued in a DIAC arbitration. The award provided that A pay damages plus interest and costs. Petitioner A then sought to dismiss the claim on the grounds that the award was void because it also included a finding against B who was not a party to the agreement that contained the arbitration clause. The Court of First Instance confirmed the award against A and the Court of Appeal, on Appeal by A, upheld the decision. A then appealed to the Court of Cassation on the grounds that the Court of Appeal had effectively removed B from the arbitral award which was not a valid exercise of its supervisory authority given the prohibition of judicial review of arbitral awards on their merits.

Held

The petition to cassation was dismissed.

An arbitral award becomes res judicata upon its issue, even though its enforcement is contingent upon its ratification by the Court. In seeking to ratify an award, the Court has absolute discretion to look at the arbitration agreement and the extent to which the arbitrator(s) have stayed within the terms of reference. While the award sought to join B, he was not a party to the arbitration agreement and the Court of First Instance excluded him from the ratification of the award. The Court of Appeal upheld the decision. This approach was correct, as the Court confirmed the arbitral award was within the scope of its authority having regard to the terms of the arbitration agreement and the extent to which the arbitrators stayed within the terms of reference. The Court of Appeal did not interfere with or divide up the arbitral award.

Judgment

This Court has consistently held that an arbitral award becomes res judicata upon its issue even though its enforcement is contingent upon its confirmation as neither party may approach the court after its issue. Nevertheless, with res judicata, a valid action may be filed to set aside the award although res judicata would prevent the parties from re-litigating issues that have been decided in the award, even on the basis of new legal or factual evidence. In looking to confirm an arbitral award, the court has absolute discretion to explain the terms of the arbitration agreement and the extent to which the arbitrators have stayed within the terms of reference without review by the Court of Cassation as long as its explanation does not go beyond the words within those terms. This Court has also held that the court may not, when looking to confirm an arbitral award, address its substantive aspects and the extent of its conformity with the law, as every dispute raised by one of the parties to the arbitration as a challenge to the award and related to arbitrator’s assessment of the dispute or the invalidity or insufficiency of the justification for his award would be unacceptable. Furthermore, a contradiction impairing a decision occurs when there are inconsistent reasons that cancel each other out such that the underlying basis of the Court’s decision cannot be ascertained. A contradiction would not occur if there are words that suggest a contradiction in the reasoning as long as the Court’s intention is clear.

In confirming the arbitral award with respect to A, the Court of First Instance held that it was clear from the case documents and the file of DIAC Arbitration Case No. 50-2008 that while the arbitral award in question satisfied all the applicable formal and legal requirements and observed the principle of confrontation between the parties

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(Respondents and A) and determined their dispute, it joined B, a non-party with no connection to the arbitration agreement when the Memorandum of Understanding (MoU) dated 30 April 2008 was executed between the Respondents and A which meant that the Respondents were legally entitled to the relief sought against the latter and to an order confirming the arbitral award issued on 17 April 2010 in Arbitration Case No. 50-2008.

The Court of Appeal took up A’s appeal to reverse the lower Court’s decision and have the case dismissed on the basis that the lower Court had excluded B, who was found liable under the award that was to be confirmed, from the proceedings, thereby addressing the substantive aspects of the dispute which it is not allowed to do. In affirming the Court of First Instance’s findings, the Court of Appeal added that the appeal was brought by A who was adjudged liable in Arbitration Case No. 50-2008 but had not sought any relief against B and that, therefore, A could not pursue an appeal with the intention of holding B liable for the amount of the award, especially considering that the Respondents did not file an appeal against B and sought only an order affirming the first instance decision which, accordingly, the Court of Appeal affirmed.

These reasons are sound and correct as a matter of law and are supported by evidence sufficient to sustain the Court of Appeal’s decision which is not at all contradictory in the above sense. The Court of Appeal confirmed the arbitral award within the scope of its authority to explain the terms of the arbitration agreement and the extent to which the arbitrators have stayed within the terms of reference. The Court of Appeal has not interfered with or divided the arbitral award as A claims in his contention and there is no merit in his position relative to the Court of Appeal’s ruling. The argument is unacceptable and the entire challenge is baseless.