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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Arbitration – ICC rules of arbitration – Reasons of a decision - Ratification of foreign award – New York Convention for recognition and enforcement of foreign awards – Public Policy
The Respondent filed an action for the recognition of an award rendered in an arbitration administered under the ICC rules seated in Stuttgart, Germany, in accordance with the New York Convention .
The Court of First Instance ratified the award as opposed to recognising it and dismissed all other claims. The Petitioner appealed the decision before the Court of Appeal which upheld the lower court’s decision.
The Petitioner filed a petition to cassation.
The petition to cassation was dismissed.
Only domestic arbitral awards fall within the jurisdiction of the national courts to the exclusion of foreign arbitral awards irrespective of whether they are capable of being enforced in the country where they were issued. In accordance with Article 238 of the UAE Civil Procedure Law, conventions that have become enforceable legislation in the UAE by virtue of ratification shall apply as domestic law in the UAE to disputes concerning the enforcement of foreign court decisions and arbitral awards. Accordingly, the New York Convention which has been ratified by the UAE is to be applied by the UAE courts with respect to enforcement of foreign awards.
The Petitioner relied on seven grounds, arguing under the first and second heads that the Court of Appeal contradicted and misapplied the law and fell into contradictions. In this context, the Court of Appeal failed to make any distinction — though only in the reasons and not in the decision — between the recognition and ratification of an arbitral award and its enforcement in the UAE despite the fact that the Court of First Instance (in whose decision the Court of Appeal concurred) only ratified the award while dismissing all the Respondent’s other requests. The Respondent accepted the primary decision and did not appeal the same. The primary decision is accordingly res judicata and so may not be challenged. Furthermore, the recognition of an arbitral award differs from its ratification. Recognition applies to foreign arbitral awards issued outside the UAE under a foreign law while ratification applies to awards issued inside the UAE in accordance with the Civil Procedure Law. Therefore, the appealed decision is flawed and ought to be overturned.
It is established in judicial precedents of this Court that while the reasons for a decision demonstrate its operative part, it is only the latter that is decisive and final. It is also established that whenever the reasons contradict the decision, the decision shall prevail. The Court of First Instance ratified the arbitral award and dismissed the request for its enforcement. On appeal, the primary decision was upheld without any change being made to its operative part. Hence, there is no basis for faulting the Court of Appeal as there was no need to elaborate regarding the distinction between ratification of the award and its recognition and enforcement in the UAE. The Court of Appeal’s intention was clear and reflected explicitly in its ultimate decision to uphold the primary decision. Even if a contradiction exists, only the operative part would matter and prevail. So, no discrepancy may be assumed in this case and the argument is baseless.
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The Petitioner submitted under the other heads of appeal that the Court of Appeal contradicted and misapplied the law, provided insufficient reasons, made wrong findings, went against the evidence, and prejudiced defence rights.
The Court of Appeal concurred in the Court of First Instance’s decision to ratify the arbitral award without bothering to address all aspects of the Petitioner’s defence of irregularity in arbitral procedure. The arbitral tribunal failed to examine the arbitration document to verify the names and addresses of the parties, the summary of requests, and the seat of arbitration. Under the German Arbitration Act, the objecting party may seek annulment of the arbitral award if the agreed procedure for composition of the arbitral tribunal has not been followed. The change of seat of arbitration from Germany to France also invalidates the award. This is not changed by the fact that, according to the arbitrator’s letter to the French Embassy, the Petitioner’s legal counsel was issued a visa for France to attend the arbitration hearings. Therefore, the Court of Appeal should have granted the Petitioner’s request for referral of the case to investigation to prove their substantive defence in this regard.
The Petitioner maintained that the Respondent should have produced their full agreement with the Petitioner, including the annexes. The Respondent only filed a certified translation of part of the agreement rather than the agreement in its entirety. The Respondent withheld from the Court of First Instance the partial award containing the arbitration procedures which were divided into two parts to facilitate oversight by the Court of First Instance when rendering a decision.
The Petitioner further maintained that no arbitration was possible in matters that are not capable of conciliation. The dispute in question arises out of an exclusive distribution agreement with jurisdiction belonging to the court in whose jurisdiction the contract is to be performed as a matter of public policy under UAE law. Even if the agreement to arbitrate in said distribution agreement were valid, the place whose rules are applicable to the arbitration is the Dubai Courts, not the ICC. The Petitioner had pleaded that the Respondent should submit proof of Germany’s accession to the New York Convention to ensure that the conditions imposed by the country where the award was issued are not less onerous than those imposed by the country where the award is to be enforced. The photocopy of the New York Convention produced by the Respondent as proof of Germany’s accession and its application in the UAE is irrelevant so long as it has been rejected by the Petitioner.
Moreover, the arbitral award is not binding on the parties under the German Arbitration Act as it was not duly served prior to enforcement in the country where it is to be enforced. The Court of Appeal ignored all aspects of the Petitioner’s defence and only reiterated that the arbitral award in question met all the conditions enumerated in Federal Decree No. (43) of 2006 on the UAE’s accession to the New York Convention. Therefore, the appealed decision is flawed and ought to be overturned.
The argument is entirely unsound. The legislator has set forth in Chapter Three of the UAE Civil Procedure Law rules pertaining to arbitration in the United Arab Emirates, as well as procedures to be followed when seeking to ratify or set aside an arbitral award. Subsection 4 of Article 212 of said Law provides that: “The arbitral award shall be issued in the UAE; otherwise the rules pertaining to foreign arbitral awards shall apply.” Subsection 3 of Article 213 of said Law stipulates that “where arbitration is conducted between the parties to a dispute out of court, the arbitrators shall provide each party with a copy of their award within five days from the date of issue of the same. The court shall, upon request of either party in the normal manner of filing proceedings, decide whether to ratify or set aside the award.” Subsection 1 of Article 215 of said Law provides: “The arbitral award shall not be enforced except after being [Page132:] ratified by the court with whose office of the clerks it was filed; and that after reviewing the award and the terms of reference and ascertaining that there is no impediment to enforcement.” Taken together, these articles, as settled in this Court, indicate that only domestic arbitral awards fall within the jurisdiction of the national courts to the exclusion of foreign arbitral awards irrespective of whether they are capable of being enforced in the country where they were issued. However, Article 238 of the Civil Procedure Law provides that conventions that have become enforceable legislation in the UAE by virtue of ratification shall apply as domestic law in the UAE to disputes concerning the enforcement of foreign court decisions and arbitral awards.
Federal Decree No. (43) of 2006 which was published in the Official Gazette on 28 June 2006 confirms that the UAE had agreed to accede to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. Therefore, its provisions are applicable to the dispute. The first three articles of the Convention require each Contracting State to recognise foreign arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon. To obtain the recognition and enforcement aforementioned, there must be an agreement to arbitrate in a contract, agreement, letter, or telegram.
Article 5 adds that recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if proof is furnished that any of the five cases specifically mentioned in Section 1 of that article exist, viz.
Federal Decree No. (43) of 2006, published in the Official Gazette on 28 June 2006, approved the UAE’s accession to the New York Convention which thus applies to the dispute at hand. The Court of First Instance, whose decision was upheld on appeal, took this view and concluded that the New York Convention applied to the subject matter of the dispute since the arbitral award met all the prerequisites, conditions and requirements for its ratification in the UAE at the Respondent’s request in the Court of First Instance which held:
Concerning the Defendant’s request that ratification be declined on the basis that the award was issued outside the UAE whose courts accordingly have no jurisdiction to confirm the award. This argument has no legal basis. The UAE is a State Party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 pursuant to which the arbitral award was issued. The Convention regulates State Parties’ ratification and enforcement of arbitral awards issued pursuant thereto. According to Article 125 of the Constitution and the settled practice of the Court of Cassation, conventions, once ratified, become enforceable legislation in the UAE.
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Concerning the argument that the arbitral award to be ratified was issued in a State that is not a party to the NY Convention which, to apply, requires that the State where the award was issued and the State where it is to be enforced be parties to the Convention. This argument has no legal basis. The Convention is a UN convention drafted by the UN Economic and Social Council. Therefore, the Convention and the State Parties are generally known to judges especially those specialising in commercial matters. The arbitral award was issued in Stuttgart, Germany, which, like the UAE, is a State Party to the Convention which it signed on 10 June 1958 and ratified on 30 June 1958, after which it entered into force on 28 September 1958. Hence, the conditions necessary to apply the New York Convention to the award sought to be confirmed are met.
Concerning the argument that the Claimant failed to produce the full text of the agreement in question in respect of which the arbitral award was issued. This argument has no legal basis. We are of the opinion that the evidence submitted is sufficient to make out a case for the relief sought and for the Court to assess the award’s conformity with public policy. The Court has examined the agreement and the award sought to be confirmed and found them to be in order and free of any violation of public policy or morality. Moreover, the Defendant has not submitted any documents evidencing a contravention of public policy. The Claimant must prove its allegations which the Defendant has not done.
Concerning the argument that the foreign language documents submitted by the Claimant do not carry the seal and signature of the translator. This argument has no legal basis and is contrary to law. Article 45(4) of the Civil Procedure Law requires that documents drafted in a foreign language which are filed in court be accompanied by a certified translation. This requirement is met in the documents submitted by the Claimant. The original documents do not have to carry the seal and signature of the translator and the Defendant has not presented anything to challenge the authenticity of the documents that have been submitted or their translation. In fact, the Defendant has discussed the documents on the merits.
Concerning the argument that the foreign arbitration should not have been pursued contrary to the agreement and domestic law. The agreement permits courts to refuse recognition of an arbitral award if the subject matter of the dispute is not capable of settlement by arbitration under the law of the State or is in conflict with the public policy of the State. Under domestic law, the court having jurisdiction to consider actions involving disputes relating to distributorships is the court where the contract is to be performed. This argument has no legal basis. Article 203 of the UAE Civil Procedure Law states that the parties to a contract may generally include a clause in their main contract or in a subsequent agreement, stipulating that any future dispute arising between them in respect of the performance of a particular contract shall be referred to one or more arbitrators. The parties may also agree to arbitrate a specific dispute under specific terms. The distributorship agreement out of which the dispute in question arose includes a clause stating that any differences arising in relation to the agreement shall be settled in accordance with ICC Rules of Arbitration, by a sole arbitrator to be appointed thereunder and that the seat of arbitration shall be Stuttgart, Germany, and the language of arbitration English. This is permissible and not contrary to law.
Concerning the argument that there is no arbitration document on record. This argument has no legal basis. Article 23 of the ICC Rules of Arbitration regulates the drawing up, by the arbitrator, of an arbitration document and the particulars it is to include as terms of reference. Article 23 states that the terms of reference shall be signed by the parties and that if any of the parties refuses to sign the same, they shall be submitted to the Court (the ICC International Court of Arbitration) for [Page134:] approval and that when they have been approved by the Court, the arbitration shall proceed. It is clear from the arbitral award to be recognised that the arbitrator noted, under procedural clause VII, that the ICC International Court of Arbitration had, from time to time, extended to time limit for the filing of the award and, on 7 July 2007, approved the draft final award submitted by the sole arbitrator. This means that the entire proceedings were conducted under the watchful eye of the International Court of Arbitration who found no irregularities and the Defendant has not provided any proof to the contrary.
We note from the arbitral award rendered on 20 July 2011 in Stuttgart, Germany, by the sole arbitrator in Arbitration Case No. 15977/JHN under the auspices of the Rules of Arbitration of the ICC that it fulfils the relevant legal and formal requirements and observes the adversarial principle and the principle of due process. The award is not inconsistent with any earlier decisions rendered between the same parties and does not contravene public policy and morality. The award meets the criteria for validity and will, in view of the foregoing, be confirmed.
In support of the reasons of the Court of First Instance and in response to the grounds of appeal, the Court of Appeal added:
The Respondent has filed a copy of the arbitral award that is duly authenticated and certified together with the original distribution agreement which contains the agreement on arbitration that was duly authenticated and certified, enclosed with the legal translation.
The court’s supervisory role over the arbitrator’s foreign award when considering the request for the recognition and enforcement of foreign awards is limited to verifying the absence of any violation against said Federal Decree. The Court examines whether the request fulfils the formal and substantive elements required under Articles 4, 5 of the Decree. The arbitral award in question is duly certified and authenticated where this Court did not find that the dispute subject matter of the arbitral award is not capable of resolution by conciliation. Further, the Court did not find any violation of public policy, especially since the Petitioner did not submit to this Court any evidence confirming the existence of one of the cases set out in Article 5 of the Decree. The Petitioner did not prove any incapacity or that the agreement was invalid or that it was not given proper notice of the appointment of arbitrator or of the arbitration proceedings or was otherwise unable to present its case before the arbitrator or that the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration as set out in the agreement made with the Respondent, or that the composition of the arbitral authority or the arbitral procedure was not in accordance with said agreement, or that the arbitrator’s award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the Federal Republic of Germany in which that award was issued.
Nor is this affected by the Petitioner’s other arguments for a patently disingenuous defence. The UAE and Federal Republic of Germany are State Parties to the New York Convention according to the UNCITRAL list which the Respondent has filed. The translator’s signature is not required on the original foreign document he has translated. It is only required on the document the translator has produced as a translation into Arabic. The Respondent has filed the original agreement and arbitral award and their legal translation. Nor is our decision affected by the holding of one of the arbitration hearings in Paris, a Member State of the European Union, to minimise travel expenses, with the agreement of both parties and without changing the seat of arbitration (Stuttgart).
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As such reasons are valid, supported by evidence, and do not involve any violation of law or the New York Convention relied upon by the Court of Appeal, the Petitioner was rightly denied its request to refer the case to investigation to prove the contrary of the Court of Appeal’s conclusion. The Court of Appeal found sufficient facts in the case documents to form an opinion and make a decision without taking such procedure.
There is no point in the Petitioner requesting that the Respondent submit proof of Germany’s accession to the NY Convention, to which the UAE is a Party, given the Petitioner’s rejection of the photocopy of such Convention submitted by the Respondent. Besides, it is the settled practice of this Court that conventions that have become enforceable legislation in the UAE by virtue of ratification shall apply as domestic law in the UAE to disputes even if the parties do not submit copy of the relevant convention. The judge has a responsibility to apply the provisions of laws which are applicable in the State. There is no merit either in the Petitioner’s point regarding service and its connection to the enforcement of the arbitral award in question. The Court of First Instance, whose decision was upheld on appeal, rejected the Respondent’s request to enforce the award. The Respondent accepted the Court of First Instance’s decision and did not appeal the same. The argument is entirely without basis.