Headnote

Arbitration – DIAC rules of arbitration - Jurisdiction – Grounds for annulment of domestic awards – Challenge of a Partial award

Summary of facts

The Petitioner sought to set aside a partial award rendered in arbitration proceedings administered under the DIAC rules in which the arbitral tribunal declared, in a partial award, that it had jurisdiction to hear the case on the ground that the Respondent had not initiated the arbitration proceedings in accordance with the arbitration clause.

The Court of First Instance dismissed the action on the ground that the partial award could not be challenged or set aside before a final award on the merits is rendered within the meaning of article 216.1 of the Civil Procedure Law. The Petitioner appealed to the Court of Appeal which upheld the lower court’s decision on the same ground. The Petitioner filed a petition to cassation.

Held

The judgment was overturned and the case remanded to the lower courts.

While arbitral awards are final and may not be contested in any manner of appeal within the meaning of article 217.1 of the Civil Procedure Law, a party may according to articles 213, 215 and 216 of the Civil Procedure Law apply to set aside the award on any of the grounds listed in paragraphs (a), (b) and (c) of article 216 of the Civil Procedure Law. There is nothing in the law that requires the losing party to wait until the final award to start an action with respect to the partial award.

Judgment

The Petitioner submits that the Court of Appeal erred in concurring with the Court of First Instance’s dismissal of its action to set aside the arbitral award for being premature on the basis that it altered the course of proceedings by deciding the issue of jurisdiction and considering that the tribunal had jurisdiction to consider the subject matter of the arbitration case. As such, the award could not be challenged or set aside without a final award on the merits within the meaning of Article 216(1) of the Civil Procedure Law. The Petitioner noted, however, that, according to Article 37(3) (sic) of the DIAC Rules of Arbitration, rulings and decisions of an arbitral tribunal that do not conclude proceedings would be subject to challenge and review in cases where a separate challenge is made directly. Such cases include matters related to the arbitration clause and the parties’ agreement to it, the deadline for filing an arbitration application, forfeiture of the right to file such application for exceeding the deadline, and the arbitral tribunal exceeding the limits of its jurisdiction to consider the subject matter by ruling on a matter related to a property dispute that falls within the jurisdiction of the ordinary courts, not arbitration. The Petitioner pleaded before the arbitral tribunal and in the instant action that the arbitration clause was void for failure to meet the deadline in the contract which provides that the application for arbitration shall be filed within 20 days from either party’s notice to the other party of the dispute and request for an amicable settlement. The Respondent filed the application on 3 October 2011 when he should have filed it on 15 September 2011. Therefore, the arbitral tribunal has no jurisdiction to hear the arbitration case or to consider the subject matter of the dispute which relates to property which should be decided by the ordinary courts rather than by arbitration. The arbitral tribunal rejected the Petitioner’s plea that it had no jurisdiction in the arbitration case and the Court of First Instance, whose decision was upheld on appeal, held that the arbitral award dismissing the plea could not be separately challenged because it did not conclude the proceedings. The Court of Appeal’s decision is thus erroneous and should be quashed.

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This argument is well taken. According to Article 2 of the DIAC Rules of Arbitration promulgated by Decree No. (11) of 2007 which came into force on 7 May 2007, the date of its publication in the Official Gazette, Issue No. (321) — 41st Year, where the parties have agreed in writing to submit their future or existing disputes to arbitration under the DIAC Rules they shall be deemed to have submitted to arbitration in accordance with the rules in effect on the date of commencement of the arbitration proceedings or such amended rules as may have been adopted thereafter. Where any of these Rules are in conflict with a provision of the law applicable to the arbitration from which the parties cannot derogate, that provision shall prevail. Article 6 of those Rules states that an Arbitration Agreement which forms or was intended to form part of another agreement shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid. If any party raises one or more pleas concerning the existence, validity, scope or enforceability of the arbitration agreement, then the arbitral tribunal shall decide the objection either by a separate decision as a preliminary matter or proceed with the arbitration and render a decision on the plea in the final arbitral award. Either way, each party reserves the right of recourse to any court of jurisdiction to determine whether there is a binding arbitration agreement. According to Article 37 of those Rules, all awards made by the arbitral tribunal (preliminary, interim, interlocutory, partial or final awards) shall be final and binding on the parties. By agreeing to arbitration under these Rules, the parties undertake to carry out any award immediately and without any delay; and the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other judicial authority, insofar as such waiver may be validly made.

However, this Court has held that while arbitral awards, by whatever tribunal they were issued, are final and may not be contested in any manner of appeal within the meaning of Article 217(1) of the Civil Procedure Law which reflects the tenor of Article 37 of the DIAC Rules, a party may, according to Articles 213, 215, 216 of the Civil Procedure Law, apply to set aside the award on any of the grounds listed in paras (a), (b), (c) of Article 216. Such application is filed either as an interlocutory application during the course of the proceeding brought by the prevailing party to confirm the arbitral award or in the normal manner of filing proceedings, as stated in Article 213(3), even before filing an action to ratify the award. There is nothing in the law that requires the losing party to wait until a final award is rendered to start an action with respect to a partial award. The provisions of the above articles are consistent with Article 6 of the DIAC Rules of arbitration in allowing both parties to challenge decisions of the arbitral tribunal with regards to pleas made in respect of the jurisdiction of the tribunal as a preliminary matter or in its final award, once issued, before the competent court, to determine whether there is a binding arbitration agreement without having to wait until the final award on the subject matter of the dispute.

It is clear as a matter of record that Palm Jumeirah had filed the instant action to set aside the award issued by the arbitral tribunal on 30 August 2012 in Arbitration Case No. 319-2010 (Dubai-International) dismissing the Petitioner’s plea to the jurisdiction of the tribunal and declaring that it would proceed with the arbitration. Palm Jumeirah’s reasons for the setting aside of the award were that the arbitration clause/ agreement to arbitrate was non-existent and void on account of failing to meet the contractual deadline for filing the application for arbitration. Since the tribunal ruled on its own jurisdiction as a preliminary matter, either party may challenge its award, once issued, before the competent court as per the legal rules enumerated above.

The Court of First Instance and, in turn, the Court of Appeal contradicted this view by dismissing the action to set aside on the basis that the challenged award did not conclude the proceedings and could not be challenged except with the tribunal’s final award on the merits. The Court of Appeal’s decision is erroneous and will be quashed [Page118:] for this reason. Since this error prevented the Court of Appeal from addressing the grounds relied upon by Palm Jumeirah in its challenge, we will quash and remand. In dismissing the action as premature, the Court of First Instance did not have its say on the action to set aside which is thus remanded to that court for consideration on its merits.