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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Arbitration – Arbitrator acted as an expert to the tribunal – Invalidation of award – Whether such action falls within Article 216 of the Civil Procedure Law – Whether a party must seek a recusal at the time – Effect of Article 114 of the UAE Civil Procedure Law
The Petitioner, an engineer specialising in building work, brought Arbitration Case No. 1852-2010 against the Respondent, the owner of a residential plot. The Petitioner agreed to construct two villas for the Respondent, a small villa which the Appellant financed himself, and a larger villa which he financed through a AED 500,000 loan, against an undertaking by the Respondent to allow the Appellant to use the small villa for a period of nine years and the large villa for a period of two years, to be added to the construction period. The investment contract included an arbitration clause providing for the referral of any disputes over the performance of the contract to be arbitrated by a three-person tribunal.
On completion of construction, the Respondent delivered the small villa but refused, without justification, to deliver the large villa and nominate his arbitrator despite receiving notice to do so.
The Petitioner sought to refer the matter to arbitration pursuant to the arbitration clause and to compel the Respondent to give the Petitioner possession of the large villa to exploit over the agreed period or compensate the Petitioner for the amount of the investment paid. The Petitioner further sought to appoint a judge as the presiding arbitrator of the arbitral tribunal. The Respondent replied that he had no objection to the matter proceeding to arbitration, asking that he be given the option of selecting his own arbitrator rather than having the court appoint one.
The tribunal was duly convened and issued an award dismissing the claim which it then filed in the Court of First Instance. The Petitioner argued that the award was void because one of the arbitrators was unfit to serve after giving an opinion on the matter as an expert appointed by the tribunal. The Court of First Instance confirmed the arbitral award on the grounds that (1) the arbitrator’s fitness to serve is not among the grounds for which an arbitral award may be set aside under Article 216 of the Civil Procedure Law and (2) in any event the Petitioner did not object to the arbitrator during the course of the expert proceedings or seek his recusal on a timely basis — once an award has been issued, that right is waived pursuant to Article 207 of the Civil Procedure Law.
The Court of Appeal (Appeal No. 565-2012) upheld the primary ruling on the grounds that the expert was sitting as an expert, not as an arbitrator. It also confirmed the Court of First Instance decision that the grounds for nullity put forward by the Petitioner were not among the grounds for setting aside an award under Article 216 of the Civil Procedure Law and that the Appellant did not timely seek the arbitrator’s recusal under Article 207 of the Civil Procedure Law.
The Petitioner appealed to the Court of Cassation on the grounds under Article 216, an arbitral award may be set aside if issued by an arbitrator who does not satisfy the requirements of the law. Like a judge (Article 207), an arbitrator becomes unfit to serve under Article 114 if, as an expert, he gives an opinion on the matter, even if his recusal is not sought by a party. If he continues to act as an arbitrator, his award will be void.
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The Court of Appeal decision was overturned.
Article 207 of the UAE Civil Procedure Law provides that an arbitrator cannot be recused except for reasons occurring or appearing after his appointment. The grounds for recusal must be the same as those on which a court judge may be dismissed or deemed unfit for passing judgment. Article 114 of the UAE Civil Procedure Law provides that a judge shall be unfit to try a case, even if his recusal is not sought by a party, if he has given an opinion on the matter or considered it as an expert. Article 216 of the UAE Civil Procedure Law provides that the parties may whilst the award is being reviewed by the court for the purpose of confirmation, seek to have it set aside if it was issued by an arbitrator who does not satisfy the requirements of the law. On the facts one of the arbitrators had given expert evidence to the tribunal and therefore he became unfit to serve under Article 114.
Article 207 of the UAE Civil Procedure Law provides that an arbitrator cannot be recused except for reasons occurring or appearing after his appointment. The grounds for recusal must be the same as those on which a court judge may be dismissed or deemed unfit for passing judgment. Article 114 of the UAE Civil Procedure Law provides that a judge shall be unfit to try a case, even if his recusal is not sought by a party, if he has given an opinion on the matter or considered it as an expert. Article 216 of the UAE Civil Procedure Law provides that the parties may whilst the award is being reviewed by the court for the purpose of confirmation, seek to have it set aside if it was issued by an arbitrator who does not satisfy the requirements of the law.
Concurring in the Court of First Instance’s decision, the Court of Appeal held: “The grounds on which the award is being challenged as to the arbitrator’s fitness to serve are not among the grounds for which an arbitral award may be set aside under Article 216 of the Civil Procedure Law. Moreover, the Petitioner did not timely seek the arbitrator’s recusal noting that once an award has been issued, that right is waived — Article 207 of the UAE Civil Procedure Law.”
The evidence, on the other hand, shows that the arbitral award is void because it was issued by a tribunal that included a member who had previously given an opinion on the arbitration matter after the tribunal appointed him as an expert. At that point, he lost an essential requirement (the fitness to serve criteria) for performing his arbitral duties under Article 216 and became unfit to serve under Article 114, notwithstanding that his recusal was not sought by a party.
The Court of Appeal’s misinterpretation of Articles 207 and 216 led to its misapplication of Article 114 and, consequently, its misapplication of the law. Its ruling will be overturned in view of this foremost consideration which must take precedence over the other grounds of appeal. Since the confirmation was performed on an invalid award, the primary ruling will be quashed and the award set aside.