Headnote

Arbitration – Conflict between two Dubai Courts – Challenge to DIFC Courts’ ratification of arbitral award where challenge in onshore courts is pending

Summary of facts

The Respondent to the application brought a successful claim in a DIAC arbitration against the Petitioners and an award was issued directing the Petitioners to pay compensation, interest and costs. The Petitioners brought an action in the Dubai Court of First Instance to set the award aside. The Respondent also brought an action in the DIFC Court to ratify the award. The DIFC Court ratified the award and the ratification was upheld on appeal. The Petitioners then applied to the Federal Supreme Court claiming that the DIFC Courts’ consideration of the application for ratification and the Dubai Courts’ consideration of the action to set aside the award gave rise to a positive conflict between two judicial bodies which must be resolved by the Federal Supreme Court under Article 33(1) of its law. The Respondent claimed that one of the Petitioners to the application lacked both capacity and interest as no award was made against it in the arbitration and it was not a party to the actions to ratify or set aside the award respectively. The Respondent further argued that the application should in any event be dismissed since the DIFC Court was the only court that had made a ruling because the application to set aside in the Dubai Court was still pending. There was therefore no positive conflict that needed to be determined.

Held

The application was dismissed.

The claim by the Respondent that the First Petitioner lacked capacity and interest was dismissed. Capacity and interest need not be the same in the substantive action and the application to the Federal Supreme Court. The First Petitioner is an entity of the Government of Dubai and is the owner of the Second Petitioner. Any rights of the Second Petitioner would be rights of the First Petitioner by virtue of that relationship. The First Petitioner would also be bound by any award made against the Second Petitioner.

The application by the Petitioners on the substantive issue was also dismissed. A positive conflict of interest arises where two judicial bodies before whom a dispute is brought in relation to the same subject matter assert jurisdiction over the claim. However, it also requires that the case is still pending before both bodies. Where one body has issued a final decision there can be no conflict, since there is no case pending before two bodies that might give rise to such a conflict.

Judgment

The Petitioners initiated proceedings against the Respondent seeking:

A summary order staying both actions, subject of the challenge application; and

On the merits, a decision on the positive challenge and a ruling that the Dubai Courts have jurisdiction over the action to ratify the DIAC award.

The DIAC had issued an award on 2 December 2013 in Arbitration Case 81-2010 brought by the Respondent directing that the Petitioners in the challenge action pay monetary sums to the Respondent consisting of compensation, interest and costs. The Petitioners then brought Commercial Action 2127-2014 in the Dubai Court of First Instance to set aside the arbitral award in question. The Respondent also brought Case No. ARB 003-2013 before the DIFC to ratify the arbitral award.

The Petitioners contended that the Dubai Courts have jurisdiction to hear the action to ratify the arbitral award as the courts of general/original jurisdiction over all actions, [Page150:] including actions to ratify DIAC awards while the DIFC courts have an exceptional jurisdiction which does not extend to the ratification of DIAC awards since the DIAC is not an entity of the DIFC Courts and the dispute does not relate to any entity of the DIFC Courts or a relationship which arose within the DIFC. Accordingly, the DIFC Courts have no jurisdiction to handle the matter of ratification of the said arbitral award.

The Petitioners added that the DIFC Courts’ consideration of the application for ratification of the arbitral award and the Dubai Courts’ consideration of the action to set aside the award gives rise to a positive conflict between two local judicial bodies in one Emirate which conflict must therefore be resolved by the Federal Supreme Court which possesses jurisdiction under Article 33(10) of its law. Hence, the Petitioners’ action.

The Respondent countered that the challenge action filed by the First Petitioner should be dismissed for their lack of capacity and interest in the proceeding in the absence of any award made against them in the arbitration and given the fact that they are not a party to the actions to ratify and set aside the arbitral award respectively.

The Respondent further argued that the First Petitioner’s action should be dismissed since no case of jurisdictional conflict was made out under Article 33(9, 10) of the Federal Supreme Court’s law. The only ruling issued at the time of filing the statement of claim of the challenge action with the Supreme Court was the DIFC Courts’ decision. No ruling had been made in the action to set aside the arbitral award which negates the possibility of any conflict. The DIFC Courts are competent to handle the action for ratification according to DIFC Court Law No. (12) of 2004, as amended, notably Article 5(e). The jurisdiction of the Federal Supreme Court over challenge actions is limited to designating the competent court in two cases: 1) where rulings issued by judicial bodies in the UAE give rise to a positive or negative conflict of jurisdiction, 2) where such judicial bodies issue conflicting rulings. Neither condition is met in the case at hand as the DIFC Courts’ decision to ratify has become final under its law and the Dubai Courts have not issued a final decision in the action to set aside the arbitral award. Furthermore, the relief sought in the action to ratify the arbitral award is different from the relief sought in the action to set it aside and the request to ratify before the DIFC Courts would not preclude a request to annul ratification before the Dubai Courts as the two actions are different.

The parties both attended and the Petitioners’ attorney filed a memorandum seeking a decision on the positive challenge to the effect that the Dubai Courts have jurisdiction over the application to ratify the DIAC award while the Respondent’s attorney sought leave to respond. At the same hearing, the Court of First Instance set down the matter for judgment on 16 December 2015 with 20-day leave for final submissions during which the Respondent filed a reply to the Petitioners’ memorandum seeking an order that the Federal Supreme Court has no jurisdiction to consider the challenge action and its merits.

The Respondent’s argument that the Federal Supreme Court has no jurisdiction to consider the challenge action fails because court jurisdiction means the court’s competence to hear the action or application before it based on the assignment of judicial authority between the various judicial bodies of a specific jurisdiction. Article 33(9, 10) of Federal Law No. (10) of 1973 concerning the Federal Supreme Court states:

The Federal Supreme Court shall have exclusive jurisdiction over the following matters:

[Page151:]

9 Conflicts of jurisdiction between the federal courts and the judicial bodies in the Emirates;

10 Conflicts of jurisdiction between a judicial body in one Emirate and a judicial body in another Emirate or between the judicial bodies of any Emirate, between …

Article 60 of that Law states:

In case of a conflict of jurisdiction between two or more of the judicial bodies mentioned at sections 9, 10 of Article 33, where such bodies did not decline jurisdiction or declined jurisdiction or issued conflicting decisions, an application for designation of the competent court shall be filed with the Federal Supreme Court.

Those two articles indicate that the legislature has vested the Federal Supreme Court with exclusive jurisdiction to determine positive or negative conflicts of jurisdiction between the Federal Court and the federal or local judicial bodies of the Emirates, whether in one Emirate, between them, or in two different Emirates. The Petitioners’ request is for the designation of the court competent to hear the action to ratify the arbitral award, which falls under first condition for the jurisdiction of the Federal Supreme Court under Article 60 which renders the argument without merit.

The Respondent’s argument that the action should not be accepted relative to the First Petitioner due to their lack of capacity and interest therein is also without merit. Capacity and interest need not be the same in both the substantive action and the challenge action as they are independent of one another as to subject matter and cause.

As per the record, the First Petitioner is an entity of the Government of Dubai and is the owner of the Second Claimant. The essence of this relationship is that any rights the Second Petitioner may be found to have would be rights of the First Petitioner by virtue of their relationship. By the same token, the First Petitioner would be bound by any award made against the Second Petitioner. Hence, the First Petitioner has capacity and interest in the action. The argument is without merit.

Turning to the merits of the challenge action, the Federal Supreme Court has held that a negative conflict of jurisdiction would arise when two judicial bodies before whom a claim is brought in respect of the same subject matter decide that the matter falls outside their remit and accordingly decline jurisdiction. A positive conflict of jurisdiction arises when two judicial bodies before whom a dispute is brought in respect of the same subject matter assert jurisdiction based on their remit. Neither judicial body gives up jurisdiction which justifies recourse to the challenge court to determine the matter by designating the competent court. However, this requires that a case be simultaneously pending before both disputant bodies where they both have asserted their jurisdiction over the matter and did not decline jurisdiction when the matter was referred to the authority entrusted with designating the court competent to hear and decide it.

In a situation where either body had actually issued a final decision disposing of the dispute on its merits before the filing of the challenge action, there would be no conflict pending determination, since there is no case pending before the two bodies or, in turn, a case of conflict. A case pending before two bodies disputing the matter is what justifies recourse to the body designated by law to appoint the court competent to consider the dispute.

As per the record, the DIFC Courts had made a primary ruling on the action to ratify the DIAC award and their ruling was upheld by the DIFC Court of Appeal and is therefore final under the DIFC Courts Law. The Petitioners brought their action before [Page152:] the Dubai Courts to set aside the arbitral award after the DIFC Courts’ ruling. The Dubai Court of First Instance looking into Commercial Action No. 2127-2014 to set aside the arbitral award ruled on 22 April 2015 that it had no jurisdiction to hear the matter. It follows that there is no case of positive conflict on which the Petitioners have based their action which is accordingly dismissed.