Headnote

Arbitration – ADCCAC arbitration rules – Challenge to ratification of award – Annulment of arbitration award – Stay of proceedings – Refusal to sign terms of reference – Res judicata

Summary of facts

The Respondent requested the Court of First Instance to enforce an ADCCAC Arbitration award. The Petitioner filed a counterclaim requesting the annulment of the award for the following reasons: i) the partner of the Petitioner should have been a party to the award and removing the partner was not within the jurisdiction of the tribunal; ii) the tribunal exceeded the permitted time to issue its award; iii) the appointment of one of the arbitrators was in violation of the Centre’s rules and without consultation with the Petitioner; iv) the terms of reference and the award were invalid due to the involvement of said arbitrator; v) the terms of reference were invalid as they were not signed by the Petitioner; and vi) the Claimant’s claim is time barred. The Court of First Instance rejected the original claim and annulled the arbitral award. The Respondent appealed and its appeal was rejected by the Court of Appeal. The Respondent appealed to the Court of Cassation which reversed the Court of Appeal decision and remanded the matter to the Court of Appeal. The Court of Appeal issued its second judgment enforcing the award following which the Petitioner filed this appeal to challenge that decision.

Held

The petition to cassation was dismissed:

  1. A court of cassation’s decision on whether the time permitted for the tribunal to issue its award has lapsed or was extended with the consent of the parties, and its decision to dismiss the Petitioner’s objection to the tribunal’s refusal to stay the arbitral proceedings until the court reviews the Petitioner’s request to reject the appointment of an arbitrator, are not subject to further review by the lower courts even if new factual or legal arguments are presented.
  2. A party’s refusal to sign the terms of reference does not make the arbitral award subject to annulment as that would make the arbitration clause devoid of legal effect since otherwise parties can sign the arbitration clause and refuse to sign the terms of reference to halt the arbitration proceedings.

Judgment

The appeal was based on three arguments. The first argument was that the tribunal refused to stay the arbitral proceedings pending the review of the Petitioner’s request to remove one of the arbitrators. The second argument was that the time period permitted for the tribunal to issue its decision had lapsed without a proper extension. The third argument was that the terms of reference were invalid since the Appellant did not sign them.

The first and second arguments were dismissed based on applying the principle of res judicata. The court reasoned that it is established based on Article 184 of the Civil Procedure Law and the settled practice of the Court of Cassation, where the ruling is overturned and the case is referred back to the court which issued the contested decision for retrial, the remand court must defer to the Court of Cassation on the legal issues that have been determined. The Court of Cassation’s ruling would operate as res judicata in respect of the issues determined as to preclude the remand court from revisiting those issues on retrial and limit its consideration of the merits to the scope of the remand.

The Court of Cassation’s overturning decision addressed the issue of the statutory and contractual time limits for arbitration and held that the tribunal held its first hearing on [Page120:] 7 January 2009 and was authorised by the parties to extend that time limit which it did, pursuant to the powers conferred thereon by the parties, until an award was issued on 10 February 2010. Deferring to the overturning decision, the Court of Appeal dismissed the Petitioner’s plea of a void arbitral award that was allegedly issued without any agreement to extend the arbitration time limit. Therefore, that issue determined by the overturning decision may not be raised again even on the basis of completely new factual evidence and legal arguments.

The second argument about the arbitral award being void because the arbitration proceedings were not stayed pending a decision on the application to remove the Respondent’s arbitrator is also rejected. The issue of the arbitrator’s removal and a stay of arbitration proceedings pending a decision on the application for removal had been raised by the Petitioner in an independent claim and the related appeals. The claim was dismissed by a final ruling and res judicata would apply to preclude re-litigation of that issue previously determined.

The third argument is not well taken either. The arbitration clause and arbitration agreement which is referred to as an “arbitration document” under Article 203-3 of the UAE Civil Procedure Law should not be confused with any other designations. An arbitration clause is a clause in a contract that requires the parties to resolve their disputes over the interpretation or performance of their contract through an arbitration process, i.e. the arbitration clause covers disputes that may arise in the future. The arbitration agreement, on the other hand, is one that submits already existing disputes to arbitration and stands apart from the main contract which provides the basis for arbitration. Each agreement must be signed by or on behalf of both parties, as required by Article 203, Section 1 of the UAE Civil Procedure Law. Other documents, including the one designated “terms of reference” which the arbitrator prepares to confirm the parties’ agreement before him and provide a framework for the arbitral proceedings are also to be signed by both parties, just as any other agreement. Failure by either party to sign the terms of reference shall not constitute grounds to set aside the arbitral award under Article 216(a) of the UAE Civil Procedure Law which allows courts to set aside awards if they are issued without, or were based on invalid terms of reference or an agreement which has expired by time prescription, or if the arbitrator has exceeded his limits under the terms of reference.

To say that a mere lack of signature would constitute a ground for setting aside an award renders the previous agreement (the arbitration clause) inoperative and contradicts the legal principle that if a person seeks to set aside what he has (conclusively) performed, his attempt shall be rejected. The Court of Appeal rejected the Petitioner’s arguments in this regard, saying that their failure to sign the terms of reference did not constitute grounds for setting aside the award insofar as the terms of reference were prepared by the arbitrators after the points of agreement and disagreement were defined by the parties’ representatives and the Petitioner continued to pursue the arbitration. Those reasons are sound and consistent with law and are sufficient to sustain the Court of Appeal’s decision. The exception taken to its decision under this head is baseless and the appeal is accordingly dismissed.