Headnote

Arbitration – DIAC arbitration rules - Challenge to domestic award – Grounds for annulment of a domestic award – Stay of proceedings – Expiry of time limit

Summary of facts

The Respondent filed an action before the Court of First Instance to set aside an award rendered in proceedings administered under the DIAC arbitration rules on the grounds, among others, that the arbitration agreement was void because it had been signed by a person who was not authorised to do so; the arbitration was rendered following the expiry of the time limit to do so; the award was issued abroad and in English; the award was rendered by another tribunal than the one which had issued a preliminary decision in the proceedings due to the resignation and replacement of one of the arbitrators. The Court of First Instance dismissed the Respondent’s action.

The Respondent appealed the Court of First Instance decision. The Court of Appeal reversed the decision of the lower court and set aside the award on the ground that the tribunal had exceeded the timeframe for the arbitration.

The Petitioners filed a petition to cassation.

Held

The Petition to cassation was dismissed.

Setting aside the final award entails setting aside all proceedings and decisions rendered in the proceedings that led to the award.

For a stay of proceedings to be granted under article 102 of the Civil Procedure Law, there must be another matter outside the legal jurisdiction of the court which must be decided before the court can decide the case that is submitted to it.

According to articles 213.2, 216.1 and 217.1 of the UAE Civil Procedure Law, an arbitral award is not subject to any form of appeal under the UAE Civil Procedure Law but a party may request that the award be set aside for any of the reasons stated at paragraphs (a), (b) and (c) of article 216 either through an interlocutory application made during the court’s consideration of the enforcement of the award or in the normal manner of filing proceedings.

According to article 216 of the Civil Procedure Law, an action for setting aside an award is directed against the award as a legal act based upon an error of procedure rather than an error of judgment. The defects which a party alleging irregularity may assert are strictly defined and pertain either to the agreement to arbitrate or the arbitration proceedings.

It is settled that if a contested decision is soundly reasoned based on sufficient evidence then there is no issue if the court failed to address each and every aspect of the defence since it is not obliged to address and analyze each plea and argument put forward as long as the evidence relied upon constitutes a categoric reply to those pleas and arguments.

Judgment

The Petitioners appealed on 11 July 2012 relying on fourteen grounds.

GROUNDS 1, 2:

They argue that the lower Court erred by setting aside Arbitral Award No. 14 of 2005 (DIAC) but not overturning the first instance decision dismissing the action and not setting aside the preliminary decisions which preceded the final award even though the purpose of the action was to set aside preliminary decisions and the arbitral award.

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This argument is unsound. A decision may be articulated in both the operative part and the reasons in explicit and implicit terms. An implicit decision may be gleaned from the operative part or the reasons or may be required to render an explicit decision on the matter. In its reasons for overturning the Court of First Instance decision, the Court of Appeal held, after explaining its justification for setting aside the arbitral award: “The Court of First Instance went against all the above and its decision will be overturned and the arbitral award set aside.” This is an explicit decision to overturn the Court of First Instance decision and the first point is without merit. Setting aside the final award necessarily entails setting aside all previous proceedings and preliminary decisions. The second point is accordingly baseless.

GROUND 3:

The Petitioners argue that the lower court failed to respond to their application for a stay of proceedings pending the resolution of Commercial Action No. 977-2011 which was brought to enforce the arbitral award that is to be set aside in the instant action.

This argument is unacceptable. For a stay of proceedings to be granted under Article 102 of the UAE Civil Procedure Law, there must be another matter outside the legal jurisdiction of the court which must be decided before the court can decide the case that is submitted before it. A stay is granted at the court’s discretion which would consider whether the decision to be rendered by the other court is substantive enough to the extent that if ignored, the court’s finding will be affected.

Since the determination of the application for setting aside the arbitral award before the court is not conditional upon the determination of the application made to the execution judge to enforce the award, the Court of Appeal did not err by ignoring the application.

GROUNDS 6, 7, 12:

The instant action was brought to set aside the arbitral award. There are no provisions on setting aside arbitral awards which are final and enforceable. DIAC awards are enforceable under DIAC rules and no action may be brought to confirm or set aside such awards. The lower court has set aside the award in contradiction with the DIAC rules.

This argument is unsound. According to Articles 213-2, 216-1, 217-1 of the UAE Civil Procedure Law, an arbitral award is not subject to any form of appeal under the UAE Civil Procedure Law but a party may request that it be set aside for any of the reasons stated at paras a), b), c) of Article 216 either through an interlocutory application made during the court’s consideration of the action to confirm the arbitral award or in the normal manner of filing proceedings, regardless of whether or not the arbitration is within the court. The Petitioners filed the action to set aside the award on the ground that the time limit to render the award had expired and that there were irregularities of procedure affecting the award.

GROUND 14:

The Petitioners submit that the lower Court erred by setting aside the arbitral award even though the tribunal had earlier decided the Respondent’s pleas as the forum of jurisdiction under DIAC Rules of Commercial Conciliation and Arbitration entitled to decide questions pertaining to its own jurisdiction, the existence and validity of the arbitration clause, and whether the subject matter of the dispute is covered by the arbitration agreement. The Court of Appeal has therefore decided issues outside its jurisdiction.

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This argument is unsound. The test for setting aside an arbitral award under Article 212-1 of the UAE Civil Procedure Law is to consider whether the arbitrator had observed the basic rules of procedure relating to due process and equality of the adversaries and has upheld due process rights by allowing each side to submit its requests for relief and arguments, prove its allegations and refute the evidence of the other side. According to Article 216 of the UAE Civil Procedure Law, an action for setting aside an arbitral award is directed against the award as a legal act based upon an error of procedure rather than an error of judgment. The defects which a party alleging irregularity may assert are strictly defined and pertain either to the agreement to arbitrate or the arbitration proceedings. Irregularity relating to the agreement to arbitrate and constituting a ground for setting aside the arbitral award includes the award being issued without terms of reference or on the basis of invalid terms of reference or terms of reference that have expired by the prescription of time or the arbitrator exceeding his/her authority under the terms of reference or contravening a rule of public policy while irregularity relating to the arbitration proceedings includes the award being issued by arbitrators who were not appointed in accordance with the law, or by a number of the arbitrators who were not authorised to issue the award in the absence of the others or without regard to the aforementioned rules of procedure (when there is no confrontation between adversaries or there is prejudice to the right of defence) or an irregularity in the award itself or in procedure that has affected the award. Any dispute other than the disputes mentioned above relating to the rules of evidence, the arbitrator’s judgment, his failure to decide certain issues, or the invalidity or insufficiency of the justification for his/her award cannot be pleaded as grounds for setting aside the award. The Respondent’s reasons for setting aside relate to the process of confrontation between the adversaries and procedural irregularities affecting the award such as expiration of the timeframe for arbitration or the holding of hearings somewhere other than the agreed venue, which are all reasons that may be advanced in the action for setting aside the award insofar as they do not deal with substantive issues, the arbitrator’s judgment, the sufficiency of the justification for his award or failure to decide certain issues. In taking this approach, the lower Court rightly decided those issues.

GROUNDS 8, 9, 14-1:

The Petitioners argue that the lower Court erred by setting aside the arbitral award on the basis that the arbitration agreement had lapsed due to the expiration of the agreed timeframe, in spite of the fact that the tribunal had decided this plea by rejecting it (which means that it cannot be raised again in court) and in spite of the fact that it was agreed to extend the timeframe for the arbitration by 14 months from the date of issue of the award in the earlier arbitration (15.12.07) and the arbitration proceedings were and remained suspended due to the resignation of the defendant’s arbitrator until the vacancy had been filled which means that the timeframe expired on 31 July 2010, not 15 February 2008. The lower Court did not take note of this.

This argument is unsound. According to Articles 210-1 and 216 of the UAE Civil Procedure Law and the settled practice of this Court, if the arbitrator has exceeded the time limit for rendering the award as agreed upon by the parties then, provided that the right to set aside the award has been asserted, the award shall be set aside unless it appears to the court, when considering the request, that the party asserting such right had explicitly or implicitly waived it after the issuance of the arbitral award. This Court has consistently held that it is for the trial court, as fact finder, to interpret the facts of the case and weigh the evidence and documents and draw justifiable conclusions without review by the Court of Cassation provided its findings are based on sound reasoning that is supported by the evidence. The lower Court set aside Arbitral Award No. 14 of 2005 (DIAC) on the basis that the arbitration agreement had [Page91:] lapsed due to the expiration of the allocated timeframe. Held: “The application for arbitration was filed on 30 June 2005 and it was agreed to extend the timeframe by 14 months from the date of issue of the final award in a separate arbitration matter between the parties involving another contract dated 10 May 2003. That agreement took place at the first hearing (14 December 2006). It is further clear from the documents that the final award in the earlier arbitration was issued on 20 January 2008 as indicated in the copy of the Arabic translation of the earlier English award (16 December 2007 as per copy of the earlier English award) but the arbitration was not resumed when the 14-month extension ended in February 2009. The Petitioners requested the resumption of the arbitration proceedings only on 6 August 2009. The Respondent earlier sent a letter on 20 January 2009 confirming that the arbitration agreement was about to expire.” The lower Court went on to say that the resignation of one of the arbitrators had no effect on the timeframe for arbitration. Held: “The Petitioners, although parties to the first arbitration who were logically and practically aware of the fact that the cause of the 14-month extension no longer existed, did not upon expiration of the extension, seek to reactivate the arbitration before the arbitral tribunal for more than six months from the date of issue of the award in the earlier arbitration. The Respondent pleaded that the arbitration had lapsed but the arbitral tribunal dismissed the plea and ruled on the merits of the arbitration even though it had no jurisdiction considering that arbitration is an alternative method of dispute resolution and if any of the parties pleads that the arbitration agreement has lapsed due to expiration of the timeframe, its plea shall stand without having to be repeated or subsequently confirmed unless it expressly manifests its intention to waive such plea and proceed with the arbitration. The arbitral tribunal cannot excuse itself by stating as it does in the award that the length of the arbitration was due to the arbitrator, Mr Akenhead’s resignation and the constitution of the arbitral tribunal becoming complete only after DIAC’s decision to appoint Demis Kews in place of the outgoing arbitrator. It is clear from the reasons stated for the contested award that the previous arbitrator had tendered his resignation on 30 September 2007 and DIAC called upon the Petitioners, vide letter dated 27 November 2007 to nominate another arbitrator, but the Petitioners kept putting it off until 19 January 2009. The executive committee approved the appointment on 20 May 2009 and the arbitrator accepted it on 31 May 2009. The tribunal commenced proceedings only on 24 May 2010 after the arbitration agreement lapsed and its jurisdiction ceased.”

The lower Court’s conclusions are sound, supported by the documents, and sufficient to sustain its decision. There has been no contravention of the law as the fact that the tribunal had earlier responded to the plea that the arbitration agreement had lapsed due to the expiration of the timeframe would not preclude the court seized of the action to set aside from inquiring into the tribunal’s compliance with the agreed timeframe. The lower Court explained how the tribunal exceeded the timeframe and the replacement of one of the arbitrators was irrelevant to the expiration of the timeframe without being extended by agreement. The trial court simply exercised its discretion as fact finder to draw justified inferences from the evidence.

OTHER GROUNDS:

The Petitioners submit that the lower Court erred by failing to cite in its reasons all the documents they had presented in support of their substantive arguments that would have changed opinion on the case. Those documents consisted of DIAC awards in Case No. 14 of 2007 as proof of the resignation and suspension of arbitration proceedings, an arbitral award explaining the final arbitral award, a DIAC certificate confirming DIAC’s jurisdiction, a DIAC certificate stating that the award was rendered in accordance with DIAC Rules, and a certificate listing errors in translation. The documents were relied upon as evidence of the validity of the arbitration award and [Page92:] proceedings but are not mentioned in the appealed decision. Furthermore, the lower Court set aside the tribunal’s award because the venue for arbitration had been changed from Dubai, as originally agreed, to a different location overseas (London) to facilitate testimony even though the tribunal was permitted under the DIAC rules of arbitration to hold its hearings at a different venue as it saw fit. The tribunal explained, although under no obligation to do so, that this was to enable witnesses in London to give testimony and had notified the parties accordingly in compliance with the principle of confrontation. However, the lower Court went against this and set aside the arbitral award because the tribunal had conducted its hearings in London, citing too the fact that not all pages of the award had been signed when in fact the arbitrators had signed the last page (which contained the decision) bearing in mind that they are bound only by DIAC rules which have no such requirement.

This argument fails. If a contested decision rests on two separate footings one of which is in itself proper and sufficient to sustain the decision, then there is no point or merit in challenging the other footing. It is further settled that if a contested decision is soundly reasoned based on sufficient evidence then there is no issue if the court failed to address each and every aspect of the defence since it is not obliged to address and analyze each plea and argument put forward as long as the evidence relied upon constitutes a categorical reply to those pleas and arguments.

The Court of Appeal set aside the arbitral award because the tribunal had exceeded the timeframe. This first reason (see Grounds 8, 9, 14-1) is sufficient for the decision to rest on a proper foundation. The other contentions regarding venue (failure to observe the principle of confrontation between adversaries) and the pages which have been signed, however viewed, are unproductive. After resting its decision on the first ground, the lower Court did not then err in failing to consider all the documents and arguments put forward.