The Dubai Court of Cassation stays firmly on course in its enforcement of foreign arbitration awards under the 1958 New York Convention for the recognition and enforcement of foreign arbitral awards (NYC) and hence keeps consolidating its pro-NYC enforcement practice. This has most recently been demonstrated by the Court’s pro-Convention approach in Case No. 434/2014 (Al Reyami Group LLC v. BTI Befestigungstechnik GmbH & Co KG, ruling of the Dubai Court of Cassation of 23rd November 2014), in which the Court embraced the terms of the NYC à la lettre and confirmed in their wording the previous enforcement rulings of the Dubai Court of Appeal (see Case No. 1/2013, ruling of the Dubai Court of Appeal of 9 July 2013, on which I reported in a previous blog) and the Dubai Court of First Instance (see Case No. 681/2012) in the same matter.

By way of reminder, this case deals with the ratification and enforcement of an ICC award rendered by a sole arbitrator in ICC Case No. 15977/JHN in Stuttgart, Germany, and awarding the award creditor, BTI Befestigungstechnik, a German company that specializes in the production and distribution of roofing systems and power tools, an amount of EUR 300,000 in compensation for violation by Al Riyami Group, a UAE incorporated company, of an agency agreement concluded between the parties for the exclusive distribution in the UAE of BTI’s products. The Dubai Court of Cassation was emphatic in its endorsement of the pro-Convention approach previously taken by the Court of First Instance and the Court of Appeal. The Court of Cassation was satisfied that the terms of the NYC found application to the enforcement of the underlying award without reservation. In doing so, the Court emphasized in reliance on Article 238 of the UAE Civil Procedures Code, which gives precedence to the application of international enforcement instruments over the principles of reciprocity otherwise applicable to the enforcement of foreign judgments, and Article 125 of the UAE Constitution, which give domestic force of law to international conventions binding on the UAE, that the Convention formed part of domestic UAE law by virtue of Federal Decree No. 43 of 2006, which implemented the provisions of the Convention at the municipal level. Having satisfied itself that Germany, the jurisdictional origin of the award subject to enforcement, qualified as another Convention country, the Court of Cassation confirmed the overall restrictive grounds of challenge admissible under Article V of the Convention and the corresponding provisions of Article 5 of the Federal Decree No. 43 of 2006.

The Dubai Court of Cassation rejected all the award debtor’s attempts at challenging the award on procedural grounds. More specifically, the Court did not entertain any challenges of public order on the ground of the purported non-arbitrability of exclusive distribution agreements, challenges on the basis of the chosen venue of the arbitration being France (despite the arbitral seat being Stuttgart, Germany), challenges of the improper administrative processing of the arbitration by the ICC International Court of Arbitration in Paris. The Court fully endorsed the findings of the Dubai Court of First Instance, quoting from that Court’s ruling in relevant part:

“[The arbitration] has fulfilled all legal requirements in general and formal terms; it observed the principle of adversarial proceedings between litigants; it did not violate the rights of defense; it did not defeat any previously given award between the same parties; and it did not infringe the public order or public morals. Hence, it fulfilled all requirements and must be ratified.” (my translation)

The Court further confirmed the submission of a duly authenticated copy of the foreign arbitral award and the exclusive distribution agreement, including the arbitration agreement, and emphasized a supervisory court’s obligations of review in the following terms:

“Whereas the judicial supervision of such court over the foreign arbitral award, when considering the request for recognition of a foreign award, is limited to ensuring that the award does not violate the provisions of Federal Decree No. 43 of 2006 and fulfills the formal and substantive elements of an arbitral award prescribed in Articles 4 and 5 of that Decree [corresponding to Articles IV and V of the NYC], as the arbitral award, subject matter of the action, is duly authenticated.” (my translation)

By way of conclusion, the straightforward approach taken by the Dubai Court of Cassation to the application of the terms of the NYC to the enforcement of foreign awards, even against a UAE national award debtor, is an encouraging development, which deserves unreserved support from local arbitration practitioners and the international arbitration community more generally. Slowly but surely, the Dubai courts are building a credible track record of NYC enforcement, which no doubt will continue to encourage the inflow of foreign investment into the UAE economy and the Emirate of Dubai more specifically in years to come.

The new Slovak Arbitration Act (“SAA”) was adopted by the Parliament (Act. No. 336/2014 Coll.), and is in force as of January 1, 2015. In order to see whether the SAA will promote Slovakia as an arbitration venue, main novelties and amendments brought by this new act are analysed in this blog entry.

Arbitrability: Under the old law, parties were allowed to arbitrate disputes, which were subject to settlement in courts under art. 99 of the Slovak Code on Civil Procedure. The amendment provides under art. 1(2) that arbitrable disputes are those, which are related to legal relations and “can be settled by an agreement of the parties [under art. 585 of the Slovak Civil Code (“SCC”)] including disputes regarding the declaration whether there is a right or a legal relation or not”. The second part of the definition, related to the validity of legal acts, was prompted by several Slovak court decisions, which held that parties to an arbitration agreement cannot apply for a declaratory relief regarding the validity of the arbitration agreement to an arbitral tribunal (Case No. 26 Cob 161/2009 of 21 December 2009, Regional Court of Nitra and 2 Cob 178/2008 of 18 December 2008, Regional Court of Bratislava). It was held that a civil court must, in turn, decide such a question. These decisions were in a direct conflict with the Kompetenz-Kompetenz doctrine, incorporated in art. 21(1) of the SAA, which explicitly states that the tribunals have the capacity to decide upon the validity of arbitration clauses. The clarification in the new SAA is thus welcomed, but the decisions of the Slovak courts will need to be tested against this amendment.

Moreover, one of the main changes in the Slovak arbitration regime is the exclusion of consumer disputes from the application of the SAA. For this purpose a brand new Act. No. 335/2014 Coll., which focuses exclusively on consumer disputes, was adopted.

Permanent Courts of Arbitration: Under art. 12 of the SAA, Permanent Courts of Arbitration (“PCAs”) may only be established by a civil association (under Act. No. 83/1990 Coll.), an association of legal entities under the SCC and by chambers of commerce. This change aims to dissuade regular corporations from establishing PCAs for profit, and in turn ensures independent arbitral awards. The existing PCAs must have complied with this change within three months after the SAA came into force.

The regime of the PCAs in Slovakia was (and still remains) the most glaring problem of the legislation. The old law led to the establishment of more than 170 PCAs because their constitution was not regulated at all. The change of the SAA, in all fairness, seems only to partially address this issue. A the same time, the Czech Arbitration Act (Act No. 216/1994 Coll.) allows only the existence of arbitral institutions established by law, and the Czech Chamber of Commerce enjoys a significant amount of arbitrations in the Czech Republic. Nevertheless, it is worth to wait and see whether the SAA is to provide a ground for the establishment of a reliable institution in Slovakia.

Arbitration Clause: In this matter, the SAA reflects the decision of the Slovak Supreme Court (2 Cdo 245/2010 of 30 November 2011, Slovak Supreme Court), which was later followed by lower courts and which stated that the requirement of a “written” arbitration clause is a more formal requirement than the one contained in the SCC. More specifically, the Supreme Court held that an arbitration agreement incorporated by reference into a loan agreement between a bank and its corporate client was invalid due to lack of written form. Consequently, the SAA now explicitly states in art. 4(4) that an arbitration clause can be incorporated by reference without a signature on the incorporated document. Addressing the concern of a recent post, this reference does not need to be specific, i.e. it can be general. Additionally, under a new provision of art. 4(7) of the SAA, the Slovak legislator has finally expressly adopted a practice of considering a valid arbitration clause to be constituted when respondent submits its first memorandum without objecting to the tribunal’s jurisdiction. This addition should also guide the civil courts away from the overly formalistic approach towards the “written” arbitration clause requirement described above.

Interim Orders: The legislator opted to incorporate an extended version of art. 17 of the UNCITRAL Model Law on interim measures and preliminary orders into the SAA. In line with the model legislation, the arbitral tribunal is now competent to order a party to:
• “provide a means of preserving assets out of which a subsequent award may be satisfied”,
• “maintain or restore the status quo pending determination of the dispute”,
• “take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself” and to
• “preserve evidence that may be relevant and material to the resolution of the dispute”.

Importantly, under art. 22a of the SAA, if the parties agree, an interim order may be rendered even before the arbitral tribunal is constituted and without any submission from the respondent (ex parte). Such an interim order, however, is not enforceable through the courts unlike other interim measures (art. 22c of the SAA). All interim orders are, nevertheless, subject to the review of civil courts pursuant to art. 22d of the SAA.

Annulment of an Arbitral Award: A significant amendment was adopted in art. 40(1) of the SAA which is a verbatim adoption of the grounds for the annulment of an arbitral award from art. 34 of the UNCITRAL Model Law. The reasons now include the ground of public policy pursuant to art. 40(1)(b) in conjunction with art. 50(2) of the SAA, which was not a ground for annulment in the old law. For this reason, there were cases when the Constitutional Court took it upon itself to annul an arbitral award due to lack of the public policy ground for annulment (Case No. III. ÚS 162/2011 of 31 May 2011). The empowerment of the civil courts with this ground is, therefore, welcomed. Additionally, the period for the initiation of the annulment proceedings is prolonged to 60 days (from 30) under art. 41 of the SAA.

The Slovak legislator did not choose to follow the solutions of the French and Belgian arbitration acts according to which the parties can waive their right to seek recourse at the national courts against an arbitral award since this is still prohibited in art. 42 of the SAA. Nevertheless, more efficiency in annulment proceedings is ensured because only three district courts now have the competence to deal with arbitration matters. This was achieved by an accompanying amendment of the Act No. 371/2004 Coll. on courts’ districts.

Conclusion

In conclusion, the SAA is a big step made in the pro-arbitration direction, but a long journey still lies ahead. Art. 43(1) of the SAA still states that if a court annuls an award because the arbitration clause was not valid or due to lack of arbitrability, the court will continue in the proceedings as if the claim was made there originally. Ultimately, there is no reason why a verbatim adoption of the UNCITRAL Model Law would not be more efficient. In fact, that is essentially what happened with the reform of the provisions on interim orders and the grounds for annulment.

As a fitting tribute to the vision of the first dedicated arbitration education institution, the School of International Arbitration (SIA) marked its 30th anniversary with a two day conference looking back and looking forwards. Entitled “The Evolution and Future of International Arbitration: The Next 30 years”, it brought together over 200 graduates, academics and practitioners to reflect on the achievements in the field and the challenges ahead. Highlights included some blue-sky thinking as to the dramatic impact technology will have on the landscape of arbitration and some critical introspection as to the ongoing relevance of many of the key practices that the arbitral community holds dear.

Introducing the conference, Professor Julian Lew QC, founder of SIA, remarked on the huge geopolitical shifts in the last 30 years that have rebalanced the world’s power and resources and unravelled “colonialism’s umbilical cord”, all contributing to the increasing relevance of international arbitration. He described 4 major developments:

• A recognition of the differences in international arbitration (IA) from its domestic counterpart which have led to a reduction in restrictions on arbitrability and enforcement and a reduced tendency to over-review;
• The creation of IA legislation has facilitated the development of practice and influenced national legislation;
• The explosion of IA publications and notably of the teaching of IA with the establishment of academies and institutions worldwide; and
• A distinct preference for IA from international business.

Of the 8 panel sessions, one was dedicated to the evolution of the IA process and another to its future.

Delivering the first keynote address, Professor Filip de Ly (Erasmus School of Law) reviewed the sources of IA law and practice, noting the Anglo Americanisation of procedure. Assessing the future landscape he surmised that we are moving towards a hybrid between diversity and uniformity of arbitral practice. Globalised rules and guidelines can never go as far as to override the differences in legal and cultural attitudes and traditions. Cutting across this dichotomy are several clashes of principles: namely of party versus arbitrator autonomy, autonomy and a fair hearing, autonomy and efficiency and a fair hearing and efficiency.

Professor Sebastien Besson (Python & Peter Atorneys at Law) went on to consider the role of case law in the evolution of IA, its centrality but also its limits as regards the development of actual arbitral practice. Analysing trends, Professor Luke Nottage (University of Sydney), noted the success of efficiencies in IA but the comparative lack of success in containing rising costs, even in the Asia Pacific region where costs structures are lower, perhaps because arbitration remains “the only game in town for resolving international commercial disputes”.

Finally, Dr Laurence Shore (Herbert Smith Freehills) provided some critical perspective on the evolution of practice from the time when electric typewriters were used to draft briefs. His comments focussed on the “holy grail” of document production, witness statements and cross-examination. Redfern Schedules, he argued, initially intended to organise and discipline parties to produce only certain types of documents, have become “a trial within a trial”. The complexity of the system of matching documents to categories and the determination of counsel to procure what they say they need has “made the system simply unworkable”. In the age where tablet devices will replace bundles, cases should be led by “what the arbitrator needs to decide rather than what counsel thinks they need”. Challenging our over-reliance on witness statements, Dr Shore noted that tribunals rarely rely on witness statements in their award. Fact statements are key since documents rarely speak for themselves but the fallibility and flawed recollection of witnesses points to the need for thinking around the development of a new system that is more conducive to reaching the truth, such as video evidence-in-chief or a Q&A system. As regards cross-examination, Anglo-Americanisation is often criticised, sometimes justifiably and often because is the cross-examination is poorly executed and used simply to get documents into the evidence. Ultimately, Shore argued, whilst recognising the lawyers need to put their case, the process should be structured to put the arbitrators in a position to make a sound decision.

Looking forwards, the panel on the evolution of process considered how to regulate counsel conduct in the years to come, how institutions and arbitrators can and should manage the process and, finally, how the enormous technological advances will impact upon the conduct of international arbitration. On counsel conduct, Michael Hwang stressed the need to develop sanctions for offending counsel for behaviours such as bribery, breaches of confidentiality to a third party and copying notes of opposing counsel. He noted the concerns that sanctions introduced pre-award may lead to allegations of bias on the part of the tribunal; post-award is even more problematic given that the tribunal would be functus officio. Hwang recommended establishing independent disciplinary committees that would be responsible for sanctioning. This, he argued, would create “uniform standards of appropriate sanctions and stimulate best practice”.

Turning to the issue of conflicts disclosure, Alexis Mourre (Castaldi Mourre & Partners) insisted that this was the cornerstone of trust and confidence. In his view, it is the arbitral institutions that should continue to take responsibility for sanctioning failures in this regard and should be as demanding as possible. He underlined the importance of the soft law that the IBA has developed (and recently refined) in creating the consensus around this issue. The evolution of this area may well extend to the publication by institutions of challenge decisions, despite the ICC’s official reluctance to do so.

Michael Schneider (Lalive) went on to raise and critically analyse several new conceptual models that could transform the way we (and arbitrators in particular) manage arbitration in the coming years and decades: the ‘Reed retreat’ is an idea involving gathering arbitrators together pre-hearing to frontload their preparation and be in a position to ask questions of the parties and invite them to focus on particular areas. Similarly, the Rifkin ‘town elder model’ is premised on more interaction between arbitrator and parties, allowing the arbitrator to involve him/herself in the presentation of the dispute and better advise the parties about preparing their case. Finally, ‘collaborative arbitration’ could involve the arbitrator as a continuous helper to the parties, involving constructive discussion as to which evidence would suffice. A clear theme emerged around the various proposed models that arbitrators should assume a more hands-on role, directing the parties to the dispute and focussing their evidence. Schneider acknowledged that this approach had already begun to find its way into the rules. The LCIA Rules, for example, give the arbitrators power to take the initiative and the IBA Evidence Rules encourage the tribunal to identify issues for preliminary determination. He also acknowledged the spectrum along which this role could be played out, from impartial referee to dispute resolver but that the ownership transfer of the case from counsel to arbitrator should no longer be deferred until the hearing and post-hearing stage.

Arguably the most thought-provoking ideas were presented by Rob Smit (Simpson, Thatcher & Bartlett LLP), outlining the advances in technology that could transform the arbitration landscape. The pace of change, with computer power doubling every 18 months, makes the future (for which we must plan) almost inconceivable. Nonetheless, given current advances, huge shifts are likely to occur in the way we conduct hearings, hear witnesses and deal with multi-lingual nature of international arbitration. As regards hearings, currently extremely costly and disruptive, the future, he argued, resides not in videoconferencing but in telepresence, a projection of 3D figures so that parties can attend “holographically”, and one may not know until one tries to hand over a document to a virtual party, that they are in fact not actually there. This could indeed change the cost-benefit analysis of whether hearings are required. Linguistic differences will be managed not through human translators but through universal translation technology using electrodes that read reverberations and translate them into sound, or through computers that lip-read and synthesise, thereby cutting costs and improving accuracy and fluidity. Reliability of witness evidence will also be enhanced enormously by scanners that have a vastly superior record in detecting truth compared to human arbitrators.

These advances in technology will no doubt bring fundamental changes to the way in which we conduct ourselves in the next 30 years. However, whether they will fundamentally change the nature of arbitration is less certain. Technology could enhance efficiency and materially impact the roles of the various players but ultimately advocates will still have to present a story and arbitrators to decide cases.

Balancing the counsel’s imperative to present the case with the arbitrators need to deal with it fairly and efficiently was perhaps the key concern of all those who presented over the course of the conference. There was clear consensus that to achieve the appropriate balance, there should be a never-ending process of trying to improve the way we conduct international arbitration in light of changing needs. The next 30 years may no longer hold a place for complacency and reflexive behaviours. The SIA has certainly produced an enormous cadre of graduates, thinkers and institutions worldwide built on a similar model, all of whom will be well placed to address these challenges.

The facts of the situation are simple: the claimant goes to the domestic courts and the defendant argues that there is an arbitral agreement. The court judge upholds the jurisdictional objection and refers the parties to arbitration but, once the arbitration proceedings are over, the claimant party appeals to have the award annulled on the grounds that the very same arbitral agreement is invalid or doesn’t exist. Is the court judge’s decision binding on the court that hears the annulment petition?

The problem described doesn’t come up in countries like France, where the domestic courts have to decline jurisdiction and refer the parties to arbitration unless the arbitral agreement is manifestly invalid or inapplicable. However, it does arise in countries like Spain, where judges have full powers to analyse jurisdictional objections without any kind of restriction, which allows them to make findings in full detail on the existence, validity and applicability of the arbitral agreement.

In recent years, a number of Spanish courts have found in favour of the res judicata effect of judicial decisions to decline jurisdiction and higher court decisions upholding these on appeal. This was held, for example, by the regional courts (Audiencias Provinciales) of Madrid (Judgements of 26 June 2009, 26 October 2010 and 29 September 2011 and Order of 16 April 2010), Valencia (Decision by the 9th Panel on 27 January 2010) and Córdoba (Order of the 2nd Panel on 20 February 2003).

In my view, these precedents are wrong for two reasons:

On the one hand, because they are contrary to what it says in Article 222 of Spain’s Civil Procedure Rules (Ley de Enjuiciamiento Civil, “LEC”), which limits the res judicata effect to judicial decisions (sentencias). Jurisdictional objections (including those on the grounds of submission to arbitration) are ruled on by orders (autos) which, as such, do not have that effect. Where Spanish law is intended to give orders the effect of res judicata, it does so explicitly (e.g. Article 743 LEC, on interim measures). Article 222 may be open to question and in fact I don’t agree with it, but the Spanish civil process is governed by the principle of procedural legality and judicial decisions cannot go against the law.

On the other hand, to understand that judicial decisions on jurisdictional objections based on submission to arbitration have a res judicata effect is to invalidate the Kompetenz-Kompetenz principle. And this is because that effect, if it exists, would not be limited to the action to annul the award. It would also extend to arbitrators’ decisions on their own jurisdiction, precluding it. Article 22 of the Arbitration Act provides that arbitrators have the power to decide on their own jurisdiction, even on defences relating to the existence or validity of the arbitral agreement or any other objections that, if upheld, preclude looking at the merits of the case. This provision is incompatible with attributing the res judicata effect to decisions on jurisdictional objections.

It is clear that the solution de lege ferenda involves limiting the powers of countries’ judges to revise arbitral agreements, as happened in France. However, until that occurs, the res judicata effect should at least be denied for decisions on jurisdictional objections. Otherwise, this could mean doubling or even tripling the oversight of the existence and validity of the arbitral agreement, with the consequent risk of contradictory findings. The last word, as is logical, will be had by the domestic court that rules on the possible petition for annulment of the award.

The controversial dispute between the Ecuadorian government and the multinational corporation Chevron arose from the operations undertaken by Texpet –a subsidiary of Texaco at that time- on the country’s Amazon region during the eighties. Texpet was the operator undertaking the exploration and exploitation of hydrocarbons in association with Petroecuador, formerly CEPE, the state-owned oil company of Ecuador.

In the early nineties, Texaco ended its operations in Ecuador and invested approximately 40 million dollars in a remediation project for the zones in the rainforest that had been polluted during the joint operation carried out with Petroecuador. In 1998, Texaco subscribed Release Agreements with the Ecuadorian State that released the company from any further environmental obligation related with environmental remediation.

In 1993, various Ecuadorian plaintiffs filed a class action lawsuit against Texaco before a New York court for public nuisance –among other claims- caused by the environmental damage perpetrated during its operation in Ecuador. Texaco defended itself arguing that American courts were not the most appropriate forum to settle the dispute under forum non conveniens doctrine. In fact, the plaintiffs and the evidence were all located in Ecuador. Thus, Texaco used this argument to persuade the court that it had no jurisdiction to adjudicate the dispute. The court agreed and dismissed the claim.

Accordingly, the plaintiffs embraced a new strategy to sue Texaco before the Ecuadorian courts. Since in 2001 Chevron acquired Texaco and all of its assets, the plaintiffs decided to sue Chevron as the legal successor of Texaco. In 2003, around 40 plaintiffs filed a claim against Chevron before the Lago Agrio courts. Lago Agrio is the first town where Texaco discovered oil. Ecuadorian lawyer Pablo Fajardo and Harvard educated lawyer Steven Dozinger acted as counsels for the plaintiffs in what is today known as the ‘Lago Agrio litigation’. The claim was financially backed by investment funds.

The judge in Lago Agrio took eight years to give judgment. The judge condemned Chevron to pay 18 billion dollars to the plaintiffs for remediation and compensation of the environmental damage caused by its operations during the nineties. Chevron appealed the judgment and also requested a review of the appellate decision before the National Court of Justice acting as a court of cassation. On its decision, the National Court of Justice confirmed the judgment but lowered the amount of compensation to 9,5 billion dollars. At the moment, a decision of the Constitutional Court, the highest judicial court in Ecuador, is pending.

The plaintiffs have initiated enforcement proceedings against Chevron based on the National Court’s decision. Since Chevron never operated in Ecuador, it has no assets in the country; thus, the plaintiffs have been trying to enforce the Lago Agrio judgment filing claims to freeze the multinational’s assets in other jurisdictions such as Argentina, Canada and Brazil.

On its defense, Chevron has mainly alleged that (i) the claims were precluded due to the Release Agreements reached with the Ecuadorian authorities in the nineties and that (ii) the procedure and judgment rendered in Lago Agrio were vitiated by fraud committed between the plaintiffs’ lawyers and the judge. According to Chevron, the fraud included forgery of plaintiffs’ signatures, ghostwriting of procedural orders and judgment and the falsification of an expert witness report on the determination of damages.

In February 2011, Chevron filed a civil lawsuit against the plaintiffs’ counsels before a New York court under the Racketeer Influenced and Corrupt Organizations Act (RICO Act) seeking to hold them accountable for fraud, extortion and other misconduct associated with the Lago Agrio litigation.

Last year, United States District Judge, Lewis Kaplan ruled that RICO Act was applicable to civil plaintiff’s counsels, such as Mr. Donziger and his co-counsels, who attempted and/or committed illegal acts such as bribery, blackmail, extortion, witness tampering and fraud. See, Chevron Corporation v. Steven Dozinger et. al., S.D.N.Y., 4 March 2014. In addition, the decision prevented Dozinger to benefit from any money that derives from the enforcement of the Lago Agrio judgment. See, ibid.

In his nearly 500-page ruling, Kaplan agreed with Chevron’s position that Mr. Donziger and his litigation team engaged in conspiracy and criminal conduct. Certainly, this decision will give any judge that has been requested to enforce the Lago Agrio judgment second thoughts on the legality of such request. The defendant Mr. Dozinger has appealed the judgment. A decision from the Second Circuit is now pending.

Chevron is also pursuing relief against the Ecuadorian State through international arbitration for denial of justice during the Lago Agrio litigation. In 2009, Chevron brought its claim under the U.S.-Ecuador BIT. The arbitration is administered by the PCA. The Arbitral Tribunal decided to divide the dispute into two tracks. Track 1 would deal with the question of whether the Release Agreements entered into by Texaco and the State precluded the claims in the Lago Agrio litigation. Track 2 will focus exclusively on the denial of justice claims.

On September 2013, the Tribunal issued a partial award (Track 1A) in favor of Chevron and its subsidiary TexPet. The Tribunal found that the Release Agreements released TexPet and its affiliates of any liability for all public interest or collective environmental claims and did not preclude individual claims for personal harm. See, Chevron v. The Republic of Ecuador, PCA No. 2009-23, First Partial Award on Track I, 17 September 2013.

On its next decision (Track 1B), the tribunal had to determine whether the Lago Agrio complaint involved or not collective claims (also known as ‘diffuse rights claims’), which were precluded under the Release Agreements. See, Chevron, Decision on Track 1B, 12 March 2015, ¶ 3. On its recently issued decision, the majority of the Tribunal concluded that the Lago Agrio litigation involved both, diffuse rights claims and individual claims. ¶ 183. The tribunal pointed that the plaintiffs did not seek compensation particular to each plaintiff for a particular harm but asserted reparation of the collective rights granted to the community. ¶ 163-164. Since the settlement agreements only barred individual claims, the Tribunal rejected in limine Chevron’s preclusion contention. ¶ 183.

The award implies that the plaintiffs had a legitimate cause of action against Chevron, notwithstanding the execution of the Release Agreements and the remediation undertaken by Texaco in the past. Now that the Tribunal has decided that the plaintiffs had a right to bring a claim and legitimately did it, it will look at the development of the local proceedings to resolve the denial of justice claims that assert that the litigation was tainted by fraud. On their side, the Ecuadorian courts in their decisions on appeals and cassation rejected all of the fraud related claims raised by Chevron.

President Correa has embraced the tribunal’s latest decision acknowledging it is a “great victory” for the Ecuadorian State. However, the majority expressly recognized in the award that their determination was just preliminary and that their decision could change when resolving Track 2.

Attentive readers of this Blog will remember that the Court of Appeal of the Dubai International Financial Centre (DIFC) adopted a ruling in the latter half of last year confirming its status as a “host” or “intermediate” – or, in the Court’s own words, “conduit” – jurisdiction for the enforcement of domestic arbitration awards rendered in mainland Dubai (i.e. outside the DIFC) even absent any geographic nexus with the DIFC (see Case CA-005-2-14, ruling of the DIFC Court of Appeal of 3rd November 2014 and my previous blog reporting on these developments). By way of reminder, Banyan Tree Corporate Pte Ltd, a company incorporated in Singapore and specialising in the management and operation of tourist resorts, (“Banyan”) applied to the DIFC Courts for the recognition and enforcement of a DIAC arbitration award it had obtained in its favour against Meydan Group LLC, a UAE-incorporated company engaged in real estate development, (“Meydan”) for the premature termination by Meydan of a hotel management agreement with Banyan. Despite the fact that Meydan was not known to have any assets in the DIFC, the DIFC Court of First Instance (see Case No. ARB 003/2013 – Banyan Tree Corporate PTE LTD v. Meydan Group LLC, ruling of the DIFC Court of First Instance of 27 May 2014 and my previous blog) and the DIFC Court of Appeal confirmed that the DIFC Courts were competent to hear Banyan’s application for recognition and enforcement in reliance on Arts 5(A)(e) of DIFC Law No. 12 of 2004 as amended by DIFC Law No. 16 of 2011, the Judicial Authority Law, read together with Arts 42, 43 and 44 of DIFC Law No. 1 of 2008 as amended, the DIFC Arbitration Law.

Following the DIFC Court of Appeal’s confirmation of the DIFC Courts’ proper jurisdiction, Meydan chose to absent itself from the further proceedings. Instead, it instigated nullification proceedings for the invalidity of the disputed award before the (mainland) Dubai courts on the basis that (i) the disputed award was issued out of time; (ii) the Sole Arbitrator had failed to hold a preliminary meeting with the Parties in person (rather than by telephone conference); and (iii) the application for recognition and enforcement before the DIFC Courts constituted an abuse of process/ a violation of UAE public policy in that (1) the Dubai courts were the more appropriate forum (forum non conveniens) and in that (2) there was an inherent conflict between the DIFC laws and the UAE Civil Procedures Code (CPC) in terms of the determination of the proper forum (see Cases No. 211/2014, ruling of the Dubai Court of Appeal). The Dubai courts are reported to have dismissed Meydan’s various claims of invalidity, although a final appeal is – to the best of this commentator’s knowledge – presently pending before the Dubai Court of Cassation.

In a ruling of earlier this year (see ARB 003/2013 – Banyan Tree Corporate Pte Ltd v. Meydan Group LLC, ruling of the DIFC Court of First Instance of 2nd April 2015), the DIFC Court of First Instance found in absentia that the disputed DIAC award was to be recognised as binding within the DIFC in accordance with Article 42(1) of the DIFC Arbitration Law and as a result ordered the recognition of the award (see ARB 003/2013 – Banyan Tree Corporate Pte Ltd v. Meydan Group LLC, Order of the DIFC Court of First Instance of 8 April 2015). In confirmation of these findings, H.E. Justice Omar Al Muhairi, one of the two UAE-national resident judges of the DIFC Courts rendering the ruling of the DIFC Court of First Instance, tested the applicability of the various grounds for refusing recognition and enforcement listed at Article 44 of the DIFC Arbitration Law, which in turn are modeled on Article V of the 1958 New York Convention (on the recognition and enforcement of foreign arbitral awards), to the case in hand. Justice Al Muhairi rejected the various grounds of refusal in the following terms:

(i) The invalidity of the arbitration agreement (Art. 44(1)(a)(i)) – Meydan had never advanced any arguments as to the invalidity of the arbitration agreement: Meydan’s argument of invalidity in the nullification proceedings before the Dubai courts was directed at the award only.

(ii) Failure to afford a fair hearing and over-/under-performance of the arbitrator’s mandate (Art. 44(1)(a)(ii) and (iii)) – There was no evidence that Meydan had not been afforded a fair hearing. Further, Meydan had never raised any argument as to the Sole Arbitrator’s performance of his mandate infra or extra petita.

(iii) The arbitration procedure violating the governing arbitration agreement or curial laws (Art. 44(1)(a)(iv) – There was no need for the Sole Arbitrator to hold a preliminary meeting in accordance with Art. 22 of the DIAC Rules (and Art. 208(1) CPC) as such a meeting had already been held by a previously appointed arbitrator whom the Sole Arbitrator replaced.

(iv) The award not yet having become binding or having been set aside by the curial court ((Art. 44(1)(a)(v)) – There was evidence from DIAC on record before the DIFC Courts to the effect that the time-limit for the arbitration had not expired at the time the award was issued. Further, the nullification proceedings before the Dubai courts had so far remained unsuccessful (so the disputed award had not yet been set aside).

(v) UAE public policy defense (Art. 44(1)(b)(vii)) – The threshold for the UAE public policy defense was “high and far from being met in the present circumstances” (see ruling of the DIFC Court of First Instance of 2nd April 2015, para. 43). In support, Justice Al Muhariri relied upon the 2012 Digest of Case Law on the UNCITRAL Model Law (the DIFC Arbitration Law being modeled on the Model Law): “The public policy defence should be applied only if the arbitral award fundamentally offended the most basic and explicit principles of justice and fairness in the enforcement State, or evidences intolerable ignorance or corruption on part of the arbitral tribunal. Courts have also stated that to refuse to enforce an award on the ground that it violates public policy, the award must either be contrary to the essential morality of the State in question, or disclose errors that affect the basic principles of public and economic life. Not every infringement of mandatory law amounts to a violation of public policy. Occasionally it was also required that the violation of public policy must be obvious.” (ibid., para. 31)

The DIFC Court of First Instance’s approach to the recognition and enforcement in the DIFC of domestic awards rendered in mainland Dubai (even absent any geographic nexus to the DIFC) is straightforward and encouraging. The DIFC Courts have apparently remained undeterred by challenges mounted by award debtors that have contested recourse to the DIFC Courts in the given circumstances as a circumvention of the proper jurisdiction of the Dubai courts. This being said, despite the initial positive signs from the Dubai Court of Appeal in support of the DIFC Courts’ findings, it remains to be seen whether the Dubai Court of Cassation will chime with the approach of the DIFC Court of First Instance and ultimately support the execution of the DIFC Courts’ order for recognition and enforcement of domestic awards rendered in mainland Dubai. To say the least, Justice Al Muhairi being a former judge of the courts of mainland Dubai, his reasoning in Banyan will hopefully hold sway with the UAE-national bench and its Egyptian offspring.

By an order of late last year (ARB 002/2014 – A v. B, Order of Justice Sir David Steel of 16 December 2014), Justice Sir David Steel dismissed an application by an award debtor seeking a number of orders to avoid the recognition and enforcement of an award rendered by the Dubai International Arbitration Centre (DIAC) in Dubai, with reasons to follow. The DIFC Court of First Instance thus confirmed the DIFC Courts’ status as a host jurisdiction to hear applications for recognition and enforcement of domestic non-DIFC awards, i.e. awards rendered in mainland Dubai and hence outside the DIFC, even absent any geographic nexus to the DIFC. This essentially means that an award creditor who wishes to avoid the cumbersome domestic ratifications process within the meaning of Art. 215 of the UAE Civil Procedures Code (the “CPC”) and the at times unpredictable application of Art. 216 CPC, which contains a closed list of grounds for the nullification of a non-compliant arbitral award under the UAE Arbitration Chapter, may now resort to the DIFC Courts for an order of recognition and enforcement, which in turn will be binding on the Dubai execution judge by virtue of the regime of mutual recognition in place between the Dubai and DIFC courts and in particular Art. 7 of DIFC Law No. 12 of 2004 as amended by DIFC Law No. 16 of 2011 (the “Judicial Authority Law”). The Dubai Court of First Instance’s recent findings stay firmly in line with the previous approach taken by the DIFC Courts in the Banyan Tree case (see ARB 003/2013 – Banyan Tree Corporate Pte Ltd v. Meydan Group LLC, ruling of the DIFC Court of First Instance of 2nd April 2015 and my previous blog), the first case of its kind.

This case brings to the fore an increasingly familiar theme, which is the award debtor’s continued resistance to have any actions for the recognition and enforcement of domestic Dubai (non-DIFC) awards heard by the DIFC Courts regardless of whether or not there is a geographic nexus with the DIFC. The award debtor with assets in mainland Dubai essentially contests the proper jurisdiction of the DIFC Courts to hear such applications. In response, the DIFC Courts have consistently rejected arguments of forum non conveniens, finding in favour of the proper jurisdiction of the DIFC Courts even absent any assets of the award debtor in the DIFC. More specifically, in the present case, the award debtor also commenced parallel proceedings for the nullification of the disputed award before the mainland Dubai courts on the basis that (i) the arbitration was premature (for want of compliance with contractually-stipulated conditions precedent), (ii) the witnesses failed to testify on oath, (iii) the award was rendered after the contractually prevailing time-limit, and (iv) the award improperly made provision for legal costs. This claim was contradicted by the evidence on record and hence dismissed by the Dubai courts as “factually and legally groundless” on 5 November 2014 (see Redacted Reasons, para. 25). Subsequently, the award debtor filed an appeal, which raises largely the same issues and is as such unlikely to succeed (ibid., para. 27).

This being said, in response to the award creditor’s filing for an order for ratification and enforcement before DIFC Courts, the award debtor advanced a number of applications seeking the following orders:

(i) An order in the form of a declaration to the effect that the DIFC Courts lack jurisdiction to hear the application for recognition and enforcement, in particular because Art. 5(A)(1) of the Judicial Authority Law had not been engaged or if the DIFC Courts had proper jurisdiction, an order not to exercise that jurisdiction;

(ii) in the event that the DIFC Courts decided to exercise their jurisdiction, an order staying the present proceedings pending the outcome of:

(1) the nullification proceedings initiated by the award debtor before the Dubai courts;

(2) the DIFC Court of Appeal’s anticipated ruling in Banyan Tree (which was still pending at that time); and/or

(3) the USC’s ruling on the issue of which court – that of the DIFC or that of Dubai – would have proper jurisdiction following a petition by the award debtor or the DIFC Court upon the award debtor’s request to that effect.

Given the similarity of the disputed matters with those discussed in the Banyan Tree case, the Parties and the DIFC Court decided to adjourn the proceedings until after the DIFC Court’s hearing in Banyan Tree. In the result, as stated by way of introduction and taking account of the outcome in Banyan Tree, Justice Sir David Steel rejected the award debtor’s application with reasons to follow.

Earlier this year, Justice Sir David Steel provided the anticipated more detailed reasoning for his Order of 16 December 2014 in Case ARB 002/2014 (see Redacted Reasons of 22nd January 2015 for the Order of Justice Sir David Steel dated 16 December 2014). Most importantly, Justice Sir David Steel pronounced himself on (i) the question of the DIFC Courts’ proper jurisdiction and (ii) the award debtor’s application for adjournment of the proceedings until completion of the appeal proceedings before the Dubai courts. As regards the former, the award debtor argued that (ibid., para. 20):

(1) The DIFC Courts were only empowered to hear an application for recognition and enforcement of an award provided the presence of assets of the award debtor’s in the DIFC.

(2) As a consequence, the disputed award required separate ratification before the Dubai Courts.

(3) Any circumvention of the above requirements by virtue of Art. 42(4) of the DIFC Arbitration Law, which provides for awards ratified within the DIFC to be enforced outside the DIFC pursuant to the Judicial Authority Law, or Art. 7 of the Judicial Authority Law, which establishes a regime of mutual recognition between the Dubai and DIFC courts, violated the scope of powers conferred upon the Emirate of Dubai in respect of Finance Free Zones under Federal Law No. 99 of 1971 and Federal Law No. 8 of 2004 (Regarding the Financial Free Zones).

(4) In any event the award creditor should not be allowed to forum shop.

(5) The award creditor’s manoeuvre in the instant reference was a waste of costs.

(6) This in turn should prompt a referral to the USC.

Justice Sir David Steel’s reflection on these arguments is admirable in its conciseness and consistency with the DIFC Courts’ previous approach to defining their proper jurisdiction in similar circumstances and deserves citation in full (see Redacted Reasons, paras 21-24):

21. I regret to say that I cannot accept any step in this argument. It is not for this Court to embark on an analysis of its jurisdictional competence to enforce awards. No application to refer matters to the USC is made. In any event no question of constitutional conflict arises at this stage: see X1 v. Y ARB 001 2014 [, on which see my previous blog]. I of course agree that the Court can only order recognition and enforcement within the DIFC. But the DIFC Court has exclusive jurisdiction and no other forum is available to obtain such an order. Likewise the Dubai courts can only order recognition within Dubai. But no question of forum shopping arises. Applications can be made to both courts.

22. I also accept that it is not apparent that the Defendant has any assets within the DIFC against which enforcement could be made. But in this regard I repeat a passage from the judgment in Banyan which, in my view, is equally applicable here:

“43. It is right to say that there is no evidence that Meydan has assets within the DIFC (or otherwise within the jurisdiction of the DIFC Courts). But there is no basis for asserting that the application for enforcement within the DIFC has no independent purpose. I do not understand it to be accepted that no such assets exist or alternatively that no such assets (whether they currently exist or not) may come within the jurisdiction following an order for enforcement. In any event an order for enforcement would enable Banyan to engage the court’s machinery (in the form of say a freezing order or an oral examination) for obtaining details of any assets that are or become available.”

23. Even allowing for the fact that the main (perhaps only) purpose of the application is to make use of the machinery for execution within Dubai as furnished by Article 7 of Law 12 of 2004, the suggestion that those provisions are unconstitutional is not open before me.

24. It is also accepted that the public interest (and indeed compliance with the overriding objective) is not best served where there is a risk of inconsistent decisions. It is open to the Defendant to resist enforcement in the DIFC only by reference to the permitted grounds of challenge under the Arbitration Law (which match the terms of the New York Convention). But the Courts of the seat of the arbitration were the Courts of Dubai. It is on this basis that it is said that the Court should decline jurisdiction where the only courts with power to annul the award are the Courts of Dubai. But even in the event of annulment, recognition in the DIFC is not barred.

On the latter issue of adjournment, Justice Sir David Steel held in equally self-explanatory terms:

31. The last point taken by the Defendant is to invite the Court to adjourn the recognition and enforcement application pending the outcome of the appeal to the Dubai Courts pursuant to Article 42(2) of the Arbitration Law. In this regard I was reminded of the judgment of Gross J in IPCO (Nigeria) Ltd. v. Nigerian National Petroleum Corp [2005] EWHC 726 (QB) where he considered the relevant criteria for such an application:

“…the Act does not furnish a threshold test in respect of the grant of an adjournment and the power to order the provision of security in the exercise of the court’s discretion under s.103(5). In my judgment, it would be wrong to read a fetter into this understandably wide discretion (echoing, as it does, Art. VI of the New York Convention). Ordinarily, a number of considerations are likely to be relevant: (i) whether the application before the court in the country of origin is brought bona fide and not simply by way of delaying tactics; (ii) whether the application before the court in the country of origin has at least a real (i.e., realistic) prospect of success (the test in this jurisdiction for resisting summary judgment); (iii) the extent of the delay occasioned by an adjournment and any resulting prejudice. Beyond such matters, it is probably unwise to generalise; all must depend on the circumstances of the individual case.”

32. The present case is at the bottom end of any sliding scale in regard to these considerations. The appeal in the Dubai Courts borders on the hopeless. It is clearly a device to delay matters and given the technical and unmeritorious nature of the challenge (further exemplified by the sort of points taken in the present application) is redolent of want of good faith. As regards delay I have received no assistance save that a further appeal to the Court of Cassation is contemplated. Any such delay and enhanced cost is clearly prejudicial.

33. In my judgment an adjournment is not appropriate. If I had considered otherwise I would have ordered security to be posted for the full amount of the award but perhaps surprisingly the Claimant did not press for this alternative. From the Defendant’s perspective that might be regarded as a welcome relief.

Justice Sir David Steel’s words leave no doubt that the DIFC Courts will pursue and enforce with rigour the wide scope of the DIFC’s jurisdiction and be little impressed with arguments of unconstitutionality that award debtors have come to play as a wild card into the game of enforcement of domestic awards between the DIFC and Dubai courts. Constitutionally speaking, the DIFC Courts form part of the judicial system of the Emirate of Dubai. Like brothers and sisters, the Dubai and DIFC courts are part of the same family of courts: Their respective actions benefit from a regime of mutual recognition, which takes the shape of the Judicial Authority Law and in particular its Article 7. For the avoidance of doubt, all relevant laws pertaining to the constitution of the DIFC and the DIFC Courts have been adopted by the Ruler of Dubai, who in his legislative function is bound by the UAE Constitution: therefore, any of the legislation constitutive of the DIFC and the DIFC Courts must prima facie be regarded as compliant with the UAE Constitution. The execution of DIFC Court orders for the recognition and enforcement of domestic non-DIFC awards by the Dubai execution judge within the meaning of Art. 7(3) of the Judicial Authority Law should therefore be little controversial.

In a recent ruling of the DIFC Court of First Instance (CFI 043/2014 – DNB Bank ASA v. (1) Gulf Eyadah Corporation (2) Gulf Navigation Holding PJSC, ruling of the DIFC Court of First Instance of 2nd July 2015), H.E. Justice Ali Al Madhani, one of the UAE-national resident judges of the DIFC Courts, drew a distinction between the role of the DIFC Courts as a “conduit” or “host” jurisdiction in the enforcement of foreign judgments and foreign arbitral awards. In the Justice’s view, given the confined scope of application of DIFC Law No. 12 of 2004 as amended by DIFC Law No. 16 of 2011, also known as the Judicial Authority Law, the DIFC Courts could only serve as a conduit jurisdiction in the enforcement of foreign arbitral awards, not however in the enforcement of foreign judgments.

By way of background, on a previous occasion in the past, the DIFC Courts confirmed their status as a host jurisdiction in the enforcement of foreign arbitral awards (see Case No. ARB 002/2013 – (1) X1, (2) X2 v. (1) Y1, (2) Y2, ruling of the DIFC Court of First Instance, undated, 2014, and my previous blog). By way of reminder, the DIFC as host or conduit jurisdiction allows an international award creditor to execute an award against assets of an award debtor in mainland (or onshore) Dubai through the DIFC Courts even absent any geographic nexus to the DIFC (other than the actual application to the DIFC Courts for enforcement and onward execution of the underlying award). A foreign award ratified before the DIFC Courts will benefit from the mutual recognition regime in place between the Dubai and DIFC Courts under Article 7 of the Judicial Authority Law. For the avoidance of doubt, directing the enforcement process through the DIFC Courts is commonly believed to forestall any of the residual procedural uncertainties that enforcement before the mainland Dubai courts may entail (although given the recent history of enforcement of New York Convention awards before the Dubai Courts, these may – out of all fairness – have significantly diminished, on which see my various reporting in this Blog, most recently in Case No. 434/2014 – Al Reyami Group LLC v. BTI Befestigungstechnik GmbH & Co KG, ruling of the Dubai Court of Cassation of 23rd November 2014, see my previous blog). Importantly also, the DIFC Courts have otherwise lent their full support to a wide jurisdiction to hear enforcement actions of foreign awards without a nexus to the DIFC, refusing more recently leave for an application to the Union Supreme for an examination of the constitutionality of the mutual recognition regime under Article 7 of the Judicial Authority Law operated in conjunction with the DIFC Courts’ wide jurisdiction under DIFC Law No. 1 of 2008 as amended (the “DIFC Arbitration Law”) (see Case ARB 001/2014 – (1) X1 (2) X2 v. (1) Y, Order of the Dubai Court of First Instance of 5 January 2014 and my previous blog on the subject-matter). Finally, it is worth mentioning that parallel developments have taken place in relation to the DIFC Courts’ role as a host jurisdiction for the recognition and enforcement of domestic awards (see ARB 003/2013 – Banyan Tree Corporate Pte Ltd v. Meydan Group LLC, ruling of the DIFC Court of First Instance of 2nd April 2015 and my previous blog; and ARB 002/2014 – A v. B, Order of Justice Sir David Steel of 16 December 2014, and my previous blog).

In the present case, the Claimant, the judgment creditor, sought recognition and enforcement before the DIFC Courts of a judgment order issued by the English High Court of Justice that required the Defendant, the judgment debtor, to pay the judgment creditor US$ 8.7 million plus cost under various finance documents in dispute between the Parties. The judgment debtor moved to challenge the jurisdiction of the DIFC Courts, essentially on the basis that in the absence of any assets in the DIFC, a foreign judgment could not be enforced against it through the DIFC Courts. The Parties’ various arguments of the DIFC Courts’ proper jurisdiction brought to the fore the Courts’ acquired role as a conduit jurisdiction in the recognition and enforcement of foreign arbitral awards. Prompted to consider the question as to whether the DIFC Courts’ role as a conduit jurisdiction in arbitration was transferrable to the enforcement of foreign judgments, Justice Al Madhani found as follows:

44. […] Unlike the situation in cases where an Arbitral Award is brought for recognition and then for enforcement, Recognised Foreign Judgments or Orders by the DIFC Courts cannot be said to be referred to the Dubai Courts for execution beyond the DIFC jurisdiction.

45. Article 7(2) of the Judicial Authority Law […] provides that:

‘Where the subject matter of execution is situated outside the DIFC, the judgments, decisions and orders rendered by the Courts and the Arbitral Awards ratified by the Courts shall be executed by the competent entity having jurisdiction outside DIFC in accordance with the procedure and rules adopted by such entities in this regard, as well as with any agreements or memoranda of understanding between the Courts and these entities[,] [s]uch execution shall be subject to the following conditions.’

46. In this Article there is reference to judgments, decisions and orders rendered by the DIFC Courts and the Arbitral Awards ratified by the DIFC Courts to be referred for execution but no reference at all to any foreign judgment recognised by the DIFC Courts. The Article has excluded Recognised Foreign Judgments from that rule. This is not by mistake, because Articles 7(4) and 7(5) of the said law stated that Dubai Court decisions and Arbitral Awards ratified by the Dubai Courts could be brought for execution in the DIFC but not Foreign Courts Judgments recognised by Dubai Courts.

47. Recognised Foreign Judgments were only mentioned in Article 7(6) […]:

‘The judgments, decisions, orders and ratified Arbitral Awards rendered outside DIFC by any court other than Dubai Courts shall be executed within DIFC in accordance with the procedure prescribed in the Rules of the Courts.’

48. In my view, the meaning of Article 7 of the Judicial Authority Law […] along with Article 24(1) of the Court Law in regards to Foreign Court Judgments is that although this Court may execute judgments, decisions and orders rendered by any Recognised Court other than Dubai Courts, that execution shall not go beyond the jurisdiction of this Court which requires this Court not to refer Recognised Foreign Judgments to the Dubai Court for execution and vice versa.

49. This would surely lead me to say that this Court cannot be said to be a ‘conduit jurisdiction Court’ if the matter before it is related to a Foreign Court Judgment. There shall be no contradiction between my finding and the finding in the Banyan Tree case and XX v YY, since these cases involved Ratified Arbitration Awards that were said to be able to be sent for execution between the DIFC Courts and Dubai Courts according to Article 7(3)(4) and (5). For these reasons one cannot imagine that the DIFC Courts are obliged to enforce foreign court judgments in the same way they are obliged to enforce Foreign Arbitral Awards (XX v YY) or even domestic arbitral awards (Banyan Tree).

50. One might argue that Foreign Judgments or Orders recognised by the DIFC Courts come under the meaning of ‘the judgments, decisions and orders rendered by the Courts’ in Article 7(2) and therefore can be referred to the Dubai Courts for execution. In my view it does not, and if that were the correct approach there would be no need to particularly mention or add ‘Arbitral Awards ratified by the Courts’ in separate words to that provision. The acknowledgment of the ‘Arbitral Awards ratified by the Courts’ means that a distinction must be drawn to what this Court issues or renders (judgments, decisions and orders) by itself and between what is rendered or issued by another court or institution and then brought for recognition or ratification.

51. My interpretation of Article 7 is that a Recognised Foreign Court Judgment or Ratified Arbitral Award cannot be said to be within the meaning of ‘the judgments, decisions and orders rendered by the Courts’.

52. In conclusion, although this Court has jurisdiction to recognise and enforce Foreign Judgments and that power shall be within the DIFC and cannot extend beyond the DIFC, this Court has no power to refer Recognised Foreign Judgments to Dubai Courts for execution. […]” (italics in the original)

The lesson to be drawn from Justice Al Madhani’s ruling in DNB Bank is clear: Contracting parties, who wish to benefit from the DIFC Courts’ service as a host or conduit jurisdiction for enforcement purposes, should opt for arbitration as the prevailing contractual dispute resolution mechanism. Irrespective of whether the arbitration of a future dispute is seated in the UAE or abroad and hence produces a domestic or foreign arbitral award, the award creditor – regardless of the location of the award debtor’s assets in mainland Dubai – will be able to apply to the DIFC Courts for the ratification and enforcement of that award with onward execution before the Dubai Courts in reliance on the regime of mutual recognition between the Dubai and DIFC Courts under Article 7 of the Judicial Authority Law.

The Odyssey is one of the most famous epic poems of the classic era. Attributed to Homer, it describes the journey of Odysseus from Troy to Ithaca, his homeland. It took the hero about ten years to complete his journey. This history is full of unexpected events, sudden changes and new obstacles that Odysseus must overcome in order to reach his final destiny. This is why, nowadays, when we refer to a long and eventful journey or experience, we use the word “odyssey”. Some practitioners would not disagree with the idea that, in certain situations, to litigate an arbitral-related matter before local courts can end up being quite close to an odyssey. This was the case in relation to the procedure for the annulment of an arbitral award in Ecuador until recently. On 22 April 2015, the Constitutional Court of Ecuador rendered a judgment that put an end to the uncertainty and contradictory case law that abounded in this field.

Background

Article 31 of the Ecuadorian Arbitration and Mediation Law (AML) states that an arbitral award can only be challenged through an annulment procedure. The grounds for annulment of an arbitral award are numerus clausus and they refer exclusively to in procedendo errors, i.e., (i) failure to serve the claim to the defendant provided that (i.a) the process started and ended without the participation of the defendant, and (i.b) it has limited the defendant’s right of defence; (ii) failure to notify one of the parties with an order of the Tribunal provided that this fact has limited or prevented the exercise of that party’s right of defence; (iii) failure to hear or take evidence despite the existence of facts that must be justified; (iv.a) the arbitral award decided matters that fall outside the scope of the arbitral agreement; (iv.b) extra or ultra petita decision; and, (v) breach of the procedure for the appointment of the arbitral tribunal.

According to the same article, a request for annulment has to be filed within 10 days of the day on which the award has become final. With the request for annulment and subject to post a security, a party can also request a stay of enforcement of the award. The decision on annulment has to be delivered by the President of the respective Provincial Court -court of appeal- within 30 days of receiving the file.

The Odyssey: History of a Problem

The first problem that litigators faced with the annulment procedure of arbitral awards related to the procedure to be followed by the President of the Provincial Court. Some Courts used to apply the so-called procedimiento ordinario procedure instead of the procedure established in article 31 of the AML. The application of this procedure used to cause a considerable delay in the resolution of annulment proceedings. On 5 May 2009, the Constitutional Court ruled (Judgment No. 0008-2008-DI) that the annulment proceeding was a special procedure, and therefore the procedimiento ordinario was not applicable to the annulment of arbitral awards.

The second problem was whether or not there could be an appeal against the decision of the President of the Provincial Court. Traditionally, when the President of the Provincial Court was the judge of first instance, the Specialized Chamber of the Provincial Court could hear the dispute on appeal. The case law concerning the admissibility of an appeal against the decision of annulment of an arbitral award was absolutely divided. Whether the appeal was admitted or not, depended on the chamber that heard the case. Even the National Court of Justice rendered contradictory decisions in the matter (see Asociación Ecuatoriana de Ecoturismo ASEC v. Ministerio de Turismo, 2 March, 2010; and Latin Amercia Telecom Inc. v. Pacifictel S.A., 11 June 2007).

The final problem concerned whether or not a Casación recourse could be filed against the final decision on annulment. Casación is a special recourse intended to control the legality, uniformity and properness of judicial decisions. Casación allows the National Court of Justice to make a de iure review of a lower court’s decisions. In the case of annulment of arbitral awards, the discussion centred on the nature of the annulment procedure and if the annulment decision was one of the decisions that could be subject to Casación. It may not come as a surprise to learn that case law in this matter was divided as well. Some decisions established that, since the annulment procedure did not resolve or refer to the underlying rights of the dispute nor to the dispute in itself – it was not a conocimiento procedure – an annulment decision was not subject to Casación (see for instance Colonial Compañía de Seguros y Reajustes S.A. v La Ganga Rca. Cía. Ltda., 10 October 2001; Inmodiursa S.A. v. Compañía Alfredo Ribadeneira Arquitectos Cía. Ltda., 13 May 2013). The other side of the argument contended that an annulment decision was subject to Casación because it fundamentally decided over the parties’ rights – therefore it was a conocimiento procedure (see Impocomjaher Cía. Ltda., Judgment No. 10-2009, 5 February 2009; Trasinvest S.A. v. BMI Financial Group Inc., 18 January 2010).

The Constitutional Court Decision

On 22 April 2015, the Constitutional Court of Ecuador rendered a judgment in the case Ministerio de Transporte y Obras Públicas y Procuraduría General del Estado v. Fiduciaria Ecuador Fiduecuador (Judgment No. 124-15-SEP-CC, 22 April 2015) clarifying the procedure for the annulment of arbitral awards. In this judgment the Court ruled that (i) there can be an appeal from the annulment decision of the President of the Provincial Court, (ii) there can be Casación over the final decision on annulment, and, (iii) in all cases – the decision of the President, the decision of the Specialized Chamber, and the Casación – judges cannot review the Tribunal’s decision on merits of the dispute.

One could certainly disagree with the Constitutional Court’s reasoning, or – policy wise – consider it inappropriate to admit all these recourses into an annulment procedure. Nonetheless one thing holds true, this decision will bring more certainty and predictability to this conflicted area. Yet, since the procedure confirmed by the court is a lengthy and complex one, it is still to be seen whether this decision has put an end to or ratified what has been, for quite a few years, an arbitral odyssey.

This article discusses the successful challenge of a unanimous arbitral award on the grounds that the arbitral tribunal was improperly constituted due to the bias of one of the three arbitrators. The challenge was successful before the Higher Regional Court of Munich (Decision of Feb. 2nd 2014, Case 34 Sch 7/13). The German Supreme Court, Bundesgerichtshof, dealing with the appeal of this decision strongly backed the decision of the Higher Regional Court.

The German Arbitration Law is based on the UNCITRAL Model Law and provides that an arbitral award may be set aside in the Courts of the lex arbitri if the composition of the arbitral tribunal or the arbitral procedure was not in accordance with a provision of this Book or with an admissible agreement of the parties and this presumably affected the award (Section 1059(2)(d) of the German Code of Civil Procedure, Zivilprozessordnung). This provision mirrors Article 34 of the UNCITRAL Model Law on International Commercial Arbitration and its correct application can be understood from the decision given by the German Federal Supreme Court, Bundesgerichtshof in December 2014, in the Case of I ZB 23/14.

The case involved a dispute in relation to a lease agreement for a thermal bath that was concluded in 1986 and contained an arbitration clause for settlement of disputes by a three member Tribunal seated in Germany. In 2010, when disputes arose between the parties, the matter was referred to ad-hoc arbitration in accordance with the agreement. Each Party appointed an arbitrator, and subsequently the two Party-appointed arbitrators appointed the Chairperson of the Tribunal.

One of the Parties (hereinafter referred to as “the Complainant”) lodged an application against the appointment of the chairperson to disqualify him on the grounds of bias. The application was heard by the Tribunal and the challenge was dismissed. Subsequently, the Complainant appealed the decision of the Tribunal in the Higher Regional Court.

The tribunal continued with the proceedings while the appeal was pending before Court and rendered an award in April 2013 against the Complainant. However, the challenge of the chairperson was only decided by the Court in January 2014 and it was in decided favour of the Complainant. The Court found the challenge in its decision of Jan. 3rd, 2014 (Case 34 SchH 7/13), justified because the chairperson was not able to thoroughly destroy the lodged reasonable doubts regarding her independence and impartiality in a responding statement. Irrespective of an actual existence of bias, the Court found these circumstances to constitute objective reasons for a justified disqualification of the Chairperson since objectively incorrect statements as the one given by the Chairperson are also apt to raise doubts regarding an arbitrator’s due diligence.

Armed with this incontestable decision in accordance with Section 1065 (1) s. 2 of the German Code of Civil Procedure, the Complainant then applied to the Court to set aside the award rendered by the Tribunal on the grounds that the constitution of the Tribunal was not in accordance with law or the agreement of the Parties as the Chairperson had been found to be biased. Au contraire, the adverse party argued the decision of the Tribunal had been unanimous and therefore, the bias of the Chairperson had no impact on the award.

The question thus arose as to whether a unanimous award could be set aside if the appointment of one of the three arbitrators was successfully challenged. The primary point of contention was the difference between Section 1059(2)(d) and Article 34 to the extent that the former provided that the improper composition should presumably affect the award.

The two party-appointed arbitrators submitted a statement arguing that the award was valid as the bias of the Chairperson had no impact on the decision of the Tribunal and even if the Tribunal were re-constituted, the same award would be rendered as the two party-appointed arbitrators would retain the majority vote.

The Court, however, did not accept this line of reasoning and set aside the award. In examining the degree to which the bias of one arbitrator affected a unanimous award, the Court opined that the standard for determining the same should not be very high. In fact, whether or not the award was unanimous has no bearing on a finding under Section 1059(2)(d). Similarly, the Court held that the statement given by the two party-appointed arbitrators that a re-constituted Tribunal would also reach the same decision, had no probative value. The biased arbitrator was an inherent part of the Tribunal and participated in the arbitral proceedings. His bias could potentially have influenced the other arbitrators through his participation in meetings and deliberations. Thus, as his mere presence on the Tribunal presumably affected the award, it was not necessary to substantiate with evidence or a specific finding the causal link between the improper constitution of the Tribunal and the impugned award. On a side-note the Court emphasized that the statement given by the two party-appointed was suitable to raise doubts regarding the impartiality and the qualification of the two arbitrators.

This judgement of the Court is a well-reasoned decision and reflects upon an important aspect, the inter-dependence of arbitral proceedings on the Courts of the lex arbitri. Had the decision of the Court been handed down in time, the Chairperson would have had to recuse himself and the Tribunal may have reached a different decision. The fact that the Court reached a decision regarding the challenge of the Chairperson after a unanimous award had been rendered, cannot lead to a situation wherein the protection of Section 1059(2)(d) is nullified. However, it would be interesting to see how this matter proceeds now since the German law is silent on whether or not the re-constituted Tribunal shall commence proceedings from the beginning. In this regard even the UNCITRAL Model law does not provide any guidance unlike Rules of certain arbitral institution like the ICC which provide that the arbitral tribunal, on re-constitution shall determine if and to what extent prior proceedings shall be repeated. Ultimately, the parties will have to reach an agreement on how to proceed in this matter.

Ideally, the two party-appointed arbitrators should recuse themselves altogether from the proceedings in the light of the statement submitted by them in Court during the setting aside proceedings since the given statement is able to raise doubts regarding the arbitrators’ impartiality and as this has been explicitly emphasized by the Court. Failing this, the Complainant may attempt to challenge the two party-appointed arbitrators on this basis. Assuming that the parties have not agreed on a procedure for the recusal, the legal obstacle for him to overcome is the two week time limit for an application for recusal which is provided in Section 1037 (2) in the German Code of Civil Procedure. In favour of the Complainant, it can be argued that the two week time limit would start from the date of composition of the new Tribunal, i.e. the appointment of the new Chairperson by the two Party-appointed arbitrators. Because only then the Complainant gains knowledge of the actual cast of the new Tribunal. The fact that he knew the names of the challenged arbitrators before is innocuous since the time limit for a challenge of the new Tribunal otherwise would have elapsed even before its constitution (see Musielak/Voit, ZPO, Commentary on the German Code of Civil Procedure (12th Ed. 2015), Section 1037 recital 3). If the Tribunal again rejects the application, the Complainant can again approach the Court. It is clear that this last step would most certainly destroy the remaining credibility of the two Party-appointed arbitrators. At least, the decision is an explicit advice to future arbitrators in a similar situation to desist from giving such a statement in view of the principle of confidentiality of deliberation (emphasizing this as well Weyer, IBR Law Journal, 2015, vol. 7, p. 2795).

Furthermore, this case is also an example of instances, where in retrospect, it can be argued that the Tribunal should have suspended the proceedings till the Court decided on the Complainant’s challenge petition. Either way, this judgement is relevant for all jurisdictions which follow the UNCITRAL Model Law.

S.I. Strong

University of Missouri School of Law For ITA

Most arbitration agreements in the international realm require arbitrators to produce a “reasoned” or “fully reasoned” award. However, relatively little has been written on why such awards are necessary and what constitutes a reasoned award in a legal regime that includes elements of both the common and civil law.

On one level, the question of why a reasoned award (sometimes described as “findings of fact and conclusions of law”) is necessary can be answered in very simple terms: reasoned awards are required if and when the arbitration agreement or arbitral rules chosen by the parties require such an award. However, the inquiry cannot stop there. Why do parties routinely request such awards, particularly given the amount of time and money that is usually required to generate those types of rulings?

Some answers might be found through an analogy to litigation, particularly litigation in common law courts. Common law systems typically require reasoned decisions and opinions to assist in the development of the common law and aid appellate judges in determining whether and to what extent the lower court decision should be affirmed or overturned. However, not every matter heard in a common law court results in a fully reasoned decision or opinion. Furthermore, many civil law systems also require courts to provide reasoned determinations even though those countries do not adhere to the principle of precedent in the same way that common law jurisdictions do. Therefore, reasoned rulings cannot be linked solely to the special requirements of the common law.

Reasoned awards could be deemed necessary or useful in situations where judicial appeals of arbitral awards may be made as a matter of law (such as in England under section 69 of the Arbitration Act 1996) or in cases where an arbitral appeal (i.e., an appeal to another arbitral tribunal) may be brought. In those situations, the reviewing court or tribunal would benefit greatly from a fully reasoned award at first instance. However, a very small proportion of international commercial awards currently fall within either of these two scenarios.

The preceding paragraphs suggest that there is something more than functional or structural concerns involved in the reasoning requirement in international commercial arbitration. Instead, parties’ desire for reasoned awards may be explained by reference to one or more non-functional rationales. For example, it has been said that:

• reasoned awards provide key assurances regarding the nature and quality of justice that is being dispensed by the arbitrator;
• use of reasoned awards improves the quality of the decision-making process and consequently of the decision itself;
• reasoned awards provide parties with a more comprehensive and satisfactory explanation of why the arbitrator decided as he or she did and may therefore increase the likelihood of voluntary compliance, since the losing party will feel fully “heard”; and
• reasoned awards enhance the legitimacy of the arbitral process in the eyes of the arbitrators, the parties and the public, including national courts that may be asked to enforce an award, even if there is no ability to review the merits of the award, by demonstrating the seriousness and integrity of the arbitral endeavor.

Not all of these rationales may be equally attractive to all parties. However, these principles do provide some explanation of why parties continue to require reasoned awards even though many jurisdictions do not incorporate a legal requirement for such awards.

Of course, some jurisdictions may require a fully reasoned award as a matter of law, and most parties require such an award as a matter of contract. As a result, the question of why a reasoned award is needed is perhaps less important than what constitutes a reasoned award.

Again, the first way to respond to this question might be through an analogy to litigation. However, judicial practice with respect to written rulings varies widely both within and between jurisdictions. Thus, for example, a French judgment, with its multiple “whereas” clauses (attendus), looks very different than a U.S. judgment, although both are considered reasoned ruling. While some people may simply attribute those distinctions to the differences between the common law and civil law, significant variety also exists within each of those legal traditions. Thus, a German judgment is very different than a French judgment and even a Dutch judgment. Similar distinctions appear in common law jurisdictions, as reflected in the disparities between U.S. judgments and English judgments.

Differences within a single jurisdiction are harder to see, but are nevertheless evident. For example, U.S. Supreme Court Justice Benjamin Cardozo created and discussed a taxonomy of judicial rulings in his book, The Nature of the Judicial Process (1949). In that book, he identified three different types of disputes that can result in a judicial ruling and demonstrated how the shape and content of a reasoned ruling can and should be adapted to take those underlying differences into account. That methodology can be adapted for use in international commercial arbitration, thereby increasing efficiencies of time and money and resulting in more appropriately tailored awards.

For example, Justice Cardozo suggested that some disputes arise when “[t]he law and its application alike are plain” (Cardozo, pp. 164-65). Such matters can only be decided in one way and therefore merit a very short written ruling. Another set of disputes arise when “the rule of law is certain, and the application alone doubtful” (id.). These matters can be handled by a short description of how the court or arbitral tribunal arrived at its decision, even though the ruling does not include a detailed discussion of the facts or a comprehensive explanation of the legal rationales underlying the decision. The final set of disputes involves situations that “will count for the future, will advance or retard, sometimes much, sometimes little, the development of the law” and therefore require a fully reasoned decision or opinion (id.). While arbitrators do not act like common law courts, they nevertheless resolve a variety of issues that can be characterized as ground-breaking and that therefore merit a comprehensive written ruling. By distinguishing between the various types of disputes, Justice Cardozo provides a principled manner of limiting judicial and arbitral writings, thereby increasing the efficiency of the dispute resolution process while avoiding any detrimental effect on the parties or to the concept of a reasoned award.

Justice Cardozo and other experts in judicial writing have also identified how the classical principles of Greco-Roman rhetoric can be adapted for use in judicial rulings. This structure, which includes an orientation paragraph (exordium), a summary of legal issues (divisio), a statement of facts (narratio), an analysis of legal issues (confirmatio a. confutatio) and a conclusion indicating the holding or disposition (peroratio), can also be adapted for use in international commercial arbitration.

As useful as these suggestions are, they do not provide arbitrators with detailed guidance on how to write a reasoned award. This lacuna is somewhat problematic, given that the shift from advocate to decision-maker is much more difficult than it initially appears to be, as many judges have noted. Though some observers have suggested that international arbitrators can learn their new profession through observation and experience, that approach – which is based on the common law model of judicial education, which has been criticized from both within and without – would seem untenable, particularly given statements from many esteemed judges, including U.S. Supreme Court Justice Hugo Black, who once said that one of the hardest things about coming to the Court was learning to write.

The preceding discussion suggests that a great deal more thought must go into the concept of a reasoned award in international commercial arbitration, both as to the motivations for such awards and the shape that such awards can or should take. While it is in no way desirable that a single model award should be adopted, it would doubtless be helpful if the arbitral community had a better understanding of what constituted a reasoned award in the international commercial context, particularly since novice (and experienced) arbitrators have very little to look at in the way of models. Not only are published awards relatively scarce, but many of the materials that are publicly available are typically offered only in excerpted, digested or translated form and may not be suitable for use as prototypes. While arbitrators could seek guidance from other types of reasoned rulings (such as awards generated in investment arbitration or reasoned decisions from national courts), not all of those procedures are truly analogous to international commercial arbitration.

This is just an introduction to the many issues that arise with respect to reasoned awards. Many of the themes introduced in this post are discussed in more detail in my forthcoming article in the Michigan Journal of International Law. However, the concept of reasoned awards is something that can and should be subject to robust debate and discussion within the arbitral community as a whole. It is therefore hoped that this post will inspire more scholarship and thought on matters relating to reasoned awards in international commercial arbitration

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Gordon Blanke

DWF (Middle East) LLP

In a recent ruling of the DIFC Court of Appeal (CA 007/2015 – DNB Bank ASA v. (1) Gulf Eyadah Corporation (2) Gulf Navigation Holdings PJSC, ruling of the DIFC Court of Appeal of 25 February 2016), Chief Justice Michael Hwang, Justice Sir David Steel and H.E. Justice Omar Al Muhairi took the opportunity to revisit and reverse the findings of H.E. Justice Ali Al Madhani in the same matter before the DIFC Court of First Instance (see CFI 043/2014 – DNB Bank ASA v. (1) Gulf Eyadah Corporation (2) Gulf Navigation Holding PJSC, ruling of the DIFC Court of First Instance of 2nd July 2015, on which I reported in a previous blog). By way of reminder, in the earlier ruling of the DIFC Court of First Instance, H.E. Justice Ali Al Madhani drew a distinction between the role of the DIFC Courts as a “conduit” or “host” jurisdiction in the enforcement of foreign judgments and foreign arbitral awards on the basis of the confined scope of application of DIFC Law No. 12 of 2004 as amended by DIFC Law No. 16 of 2011, also known as the Judicial Authority Law, according to which – in the Justice’s view – the DIFC Courts could only serve as a conduit jurisdiction in the enforcement of foreign arbitral awards, not however in the enforcement of foreign judgments. In essence, Justice Al Madhani found that:

“50. One might argue that Foreign Judgments or Orders recognised by the DIFC Courts come under the meaning of ‘the judgments, decisions and orders rendered by the Courts’ in Article 7(2) and therefore can be referred to the Dubai Courts for execution. In my view it does not, and if that were the correct approach there would be no need to particularly mention or add ‘Arbitral Awards ratified by the Courts’ in separate words to that provision. The acknowledgment of the ‘Arbitral Awards ratified by the Courts’ means that a distinction must be drawn to what this Court issues or renders (judgments, decisions and orders) by itself and between what is rendered or issued by another court or institution and then brought for recognition or ratification.

51. My interpretation of Article 7 is that a Recognised Foreign Court Judgment or Ratified Arbitral Award cannot be said to be within the meaning of ‘the judgments, decisions and orders rendered by the Courts’.

52. In conclusion, although this Court has jurisdiction to recognise and enforce Foreign Judgments and that power shall be within the DIFC and cannot extend beyond the DIFC, this Court has no power to refer Recognised Foreign Judgments to Dubai Courts for execution. […]”

Seized on appeal, Chief Justice Hwang found differently in the DIFC Court of Appeal, Justices Steel and Al Madhani concurring. In the Chief Justice’s self-explanatory words:

“ 116. […] In the present matter, it is clear that the judgment sought to be enforced is a foreign money judgment, which is enforceable by this Court. Once it is enforced, it becomes an independent local judgment of this Court.

117. Accordingly, I respectfully disagree with the Judge’s analysis of Article 7(2) of the JAL [i.e. the Judicial Authority Law]. A foreign judgment which is enforced by this Court would become a local judgment and therefore falls within the scope of ‘judgments, decisions and orders rendered by the Courts’ under Article 7(2) of the JAL.

[…]

120. In my view, the Respondents are incorrect in drawing […] a distinction between a recognised arbitral award and a foreign judgment simply based on the wording of both provisions in the JAL. The distinction, however, is that the recognition of a foreign award does not of itself give rise to a judgment in terms of the award. In this regard, a recognised award may not be enforced because enforcement has not been asked for or the Court has, in its discretion, refused enforcement.

121. There is a clear distinction between the enforcement of a recognised arbitral award and the enforcement of a judgment confirming a recognised arbitral award. Rule 43.75 (2) of the RDC clearly illustrates this distinction. It provides that once the Court has made an Order enforcing an arbitral award, the Court may enter judgment in the terms of the award.

[…]

123. There are also situations where enforcement of a recognised arbitral award is not sought by the parties. Instead, parties only seek to recognise an arbitral award. The provisions in the DIFC Arbitration Law parallel that of the New York Convention. […]

124. Accordingly, recognition of foreign awards need to be mentioned in Articles 7(2) and 7(6) of the JAL, otherwise they would not be enforceable. Enforced foreign awards where the Court has entered judgment in the terms of the award become judgments of the DIFC Courts and as such are already enforceable under Article 7(2) of JAL.” (italics in the original)

In support of these findings, the Chief Justice also placed reliance on Justice Sir John Chadwick’s obiter in Bocimar International N.V. v. Emirates Trading Agency LLC (see CFI 008/2015, ruling of the DIFC Court of First Instance), quoting in relevant part as follows:

“114. […]

‘21. It follows that recognised foreign awards are referred to in Article 7(2) because they would otherwise not be enforceable; and enforced foreign awards (that is awards in respect of which a DIFC Courts judgment has been entered) are not so referred to, for once foreign awards have been enforced by entry of a judgment in their terms, they become judgments of the DIFC Courts and so are already enforceable under Article 7(2). Similarly, there is no reference in Article 7(2) to foreign judgments because once they are recognised and enforced by action on the judgment, the Court issues a DIFC Courts judgment, which is itself enforceable under Article 7(2).’

[…]”

Chief Justice Hwang insisted that in reliance on relevant arbitration precedent (see CA005/2014 – Meydan Group LLC v. Banyan Tree Corporate Pte Ltd, on which see my previous blog) enforcement actions in relation to foreign judgments in the DIFC do not require the presence of assets of the judgments debtor’s in the DIFC or indeed any other geographic nexus with the DIFC (see paras 125 et seq.). In the Chief Justice’s conclusion:

“129. From the perspective of the DIFC Courts, it is not wrong to use the DIFC Courts as a conduit jurisdiction to enforce a foreign judgment and then use reciprocal mechanisms to execute against assets in another jurisdiction. The DIFC Courts are not concerned with what happens in the Dubai Courts in which the Claimant seeks to enforce its judgment as it does not have the jurisdiction to dictate what they should do. However, the holder of a DIFC Courts judgment recognising a foreign judgment will seek enforcement of the DIFC Courts judgment at its own risk. Furthermore, the Respondents did not argue that the Dubai Courts would not enforce the judgment.”

The Chief Justice’s findings on appeal in DNB Bank support the DIFC Courts’ role as a universal conduit or host jurisdiction for the enforcement of both foreign judgments and arbitration awards for onward execution in mainland Dubai, even absent any geographic nexus with the DIFC other than the application for enforcement itself. Irrespective of the original choice of forum for the resolution of disputes – whether litigation or arbitration, the judgment or award creditor, regardless of the location of the judgment or award debtor’s assets in mainland Dubai, will be able to apply to the DIFC Courts for the enforcement of that judgment or award with the objective of onward execution before the Dubai Courts in reliance on the regime of mutual recognition between the Dubai and DIFC Courts under Article 7 of the Judicial Authority Law. As a consequence of the Chief Justice’s findings, any limitations that may have been believed to fetter the DIFC Courts’ role as a conduit or host jurisdiction following the ruling of Justice Madhani at first instance have become jurisprudential history.

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Nathalie Voser

Schellenberg Wittmer For Schellenberg Wittmer

On 1 March 2016, the European Court of Human Rights (“ECtHR” or the “Court”) rendered a decision in the case of Tabbane v. Switzerland (application no. 41069/12). In that decision, which was published on 24 March 2016, the Court, for the first time, examined the compatibility of a waiver of recourse against an arbitral award with article 6(1) of the European Convention on Human Rights (“ECHR”) which guarantees every person’s right of access to a court in civil matters.

The Swiss Private International Law Act (“SPILA”) allows foreign parties to waive the right to challenge an arbitral award rendered in Switzerland. More particularly, Article 192(1) of the SPILA provides that:

If none of the parties have their domicile, their habitual residence, or a business establishment, in Switzerland, they may, by an express statement in the arbitration agreement or by a subsequent written agreement, waive their right to challenge the award, or they may limit that right to one or several of the grounds for challenge listed in Article 190(2).

A limited number of other national arbitration laws contain similar provisions, for example Section 51 of the Swedish Arbitration Act, Article 1718 of the Belgian Judicial Code and Article 1522 of the French Code of Civil Procedure.

The decision of the Court confirms that such provisions are not, per se, incompatible with the ECHR, as long as parties are free to choose arbitration instead of state courts, and the waiver to challenge the award itself is unequivocal.

Facts

In the late 1990s, the French company Colgate-Palmolive Services SA (“Colgate”) decided to cooperate with a Tunisian company to manufacture its products locally. In that context, it entered into an industrial and commercial partnership with Mr Noureddine Tabbane, a Tunisian businessman, and his three sons.

The parties signed various agreements setting out their respective financial and legal obligations, including an agreement that gave Colgate the option to acquire shares held by Mr Tabbane and his sons in “Hysys”, a holding company linked to the partnership (the “Option Agreement”). Colgate decided to exercise that option in 2007, but Mr Tabbane and his sons refused to transfer their shares.

The Option Agreement contained an arbitration clause according to which disputes were to be settled by an arbitral tribunal composed of three members, in accordance with the ICC Rules. The seat of the arbitration was to be determined by the arbitrators. The clause also specifically provided that:

The decision of the arbitration shall be final and binding and neither party shall have any right to appeal such decision to any court of law.

Colgate initiated arbitration proceedings against Mr Tabbane and his sons in 2008, requesting that they transfer their shares in Hysys. The arbitral tribunal chose Geneva as the seat of arbitration. It rendered its final award in 2011 in favour of Colgate.

Mr Tabbane, who owned nearly all of the shares in Hysys that were to be transferred, petitioned the Swiss Supreme Court to have the award set aside. On 4 January 2012, the Supreme Court, after examining the arbitration clause contained in the Option Agreement, found that the petition was inadmissible as the parties had validly waived the right to challenge the award.

Mr Tabbane lodged an application with the ECtHR on 2 July 2012. He died in March 2013, but his widow and three sons pursued the application.

Decision of the ECtHR

Mr Tabbane’s main complaint was that he had been denied access to a court in Switzerland that would have reviewed his challenge to the arbitral award. He alleged that Article 192 of the SPILA, which provides that parties may, in certain circumstances, waive recourse against arbitral awards, was not compatible with Article 6(1) of the ECHR.

Article 6(1) of the ECHR guarantees every person’s right of access to a court in civil matters. That right, as the ECtHR pointed out, is not absolute and does not necessarily imply the right to seize a “traditional” state court, i.e. one that is part of the judiciary of a country. As has already been established in previous case law of the ECtHR, submitting disputes to arbitration is not incompatible with article 6(1) of the ECHR.

The Court recalled the distinction between compulsory and voluntary arbitration and its related case law. Whereas compulsory arbitration must comply with the guarantees provided for in Article 6(1) of the ECHR, voluntary arbitration does not fall under that provision. Indeed, parties are entitled to waive certain rights guaranteed by the ECHR to the extent that the waiver is freely made, licit and unequivocal. Provided that those criteria are fulfilled, they may choose to exclude the jurisdiction of state courts and submit their disputes to arbitration.

The ECtHR applied those same criteria to the waiver of recourse against an arbitral award. It found that there was absolutely no indication that Mr Tabbane was under any form of constraint when he entered into the Option Agreement and the arbitration agreement contained therein. Indeed, the applicant himself had never claimed otherwise.

The ECtHR upheld the Swiss Supreme Court’s finding that the wording of the waiver of recourse was unequivocal (“neither party shall have any right to appeal such decision to any court of law“). It also pointed out that the waiver had been “surrounded by minimum safeguards appropriate to its gravity“. Mr Tabbane was able to take part in the appointment of the arbitral tribunal and in the arbitration process. His challenge to the award was duly examined by the Swiss Supreme Court, whose judgment was reasoned and gave no appearance of being arbitrary.

The Court then turned to the question of the compatibility of Article 192 of the SPILA with the ECHR. It started by recalling that the ECHR does not provide for an actio popularis for the interpretation of the rights set out therein, or permit individuals to complain about a provision of national law simply because they consider, without having been directly affected by it, that it might contravene the Convention.

The Court recalled that, when adopting that provision, the Swiss lawmakers had two main objectives, namely:
• to reinforce the attractiveness of Switzerland as a venue for international arbitration, by avoiding a dual review of the award, first in setting aside proceedings, then in enforcement proceedings;
• to lighten the caseload of the Supreme Court.

These, according to the ECtHR, are legitimate objectives. Moreover, parties are not obliged to waive their right to challenge the award, but are merely given the choice to do so if they fulfil the requisite criteria. The Court also referred to the second paragraph of Article 192 of the SPILA, which provides that the New York Convention applies by analogy to the enforcement in Switzerland of awards with regard to which the parties have waived recourse to the Swiss Supreme Court. This provision serves to ensure that parties are not entirely precluded from challenging serious irregularities in the arbitration, even if they have waived recourse.

In light of those considerations, the Court held that the restriction of Mr Tabbane’s right of access to a court followed a legitimate objective, namely to reinforce the attractiveness of Switzerland as an arbitration hub by allowing for flexible and fast procedures while respecting the applicant’s autonomy, and was not disproportionate. The essence of Mr Tabbane’s right of access to a court had therefore not been impaired.

Comments

This is the first decision in which the ECtHR examines the compatibility of a waiver of recourse against an arbitral award with the Convention. The application to such a waiver of the criteria developed for arbitration agreements in general, namely that the agreement to arbitrate must be freely made, licit and unequivocal, is both logical and reasonable.

In this instance, the waiver was clearly voluntary – Mr Tabbane was an experienced businessman and entered freely into the arbitration agreement. There are other scenarios where it may be less clear whether all parties were in fact free to agree or disagree to the certain terms. One area in particular where this is an issue is sports arbitration. It is well recognised that there is an imbalance between athletes and sports-related bodies, which in many cases enables the latter to impose terms on the former. In recognition of that fact, the Swiss Supreme Court, in the well-known Cañas case (Decision of Swiss Supreme Court of 22 March 2007, 133 III 235), has found that athletes are not, in principle, bound by waivers of recourse against awards, even if they satisfy the formal requirements of Article 192 of the SPILA. The Supreme Court’s reasoning was that such a waiver cannot be deemed to have been freely made, given the imbalance mentioned above, and, if the waiver were to be deemed valid, there would be no possibility of judicial control over the award, as awards in sports arbitration are enforced by sports-related bodies, not state courts.

The requirement that waivers of recourse be unequivocal is in line with the Swiss Supreme Court’s own case law which applies a stringent test to such waivers. Even more so than the agreement to arbitrate, the agreement to exclude any possibility of challenging the award must be explicit and unambiguous, as the resulting restriction to the parties’ rights is more pronounced.

This decision may influence the current discussion in Switzerland surrounding the revision of the provisions of the SPILA on international arbitration. There has been some debate as to whether the scope of Article 192 should be deleted or, conversely, extended. At present, Article 192 of the SPILA applies only to foreign parties, as do the corresponding Swedish and Belgian provisions. However, it could be extended to include national (i.e. Swiss) parties, which is the solution adopted in the French Code of Civil Procedure. The decision in Tabbane v. Switzerland could provide some arguments in support of such an extension, as it shows that: (i) there are legitimate reasons for such provisions, (ii) party autonomy is and remains the guiding principle in arbitration, and (iii) parties can ultimately only be held to a waiver if it was voluntary and explicit.

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Ashraf El-Motei

Motei & Associates

Motei & Associates was instructed by the Respondent in recent legal proceedings between two parties (details for which must remain confidential) before the Dubai Courts in relation to the ratification of an arbitral award issued by the Dubai International Arbitration Centre (DIAC).

Appeal Court’s rationale

An arbitrator is under an obligation to give the parties a reasonable opportunity to present their case. Failure to do so gives legal grounds for the annulment of the resultant arbitral award.

Facts of the Case

In the above case, the Claimant company, a supplier of construction material, entered into an agreement with the Respondent, a subcontractor, in which they agreed to settle any disputes arising in relation to the agreement through arbitration in accordance with the DIAC Rules.

The Claimant claimed that the Respondent failed to perform its contractual obligations and initiated arbitration proceedings pursuant to the DIAC Rules. In finding for the Claimant, the sole arbitrator ordered the Respondent to pay the Claimant damages and legal fees for breach of contract, amounting to USD 12, 369, EUR 63, 536 plus interest and costs. The Claimant initiated ratification proceedings before the Dubai Court of First Instance.

The Dubai Court of First Instance’s decision

Before the Court of First Instance, the Respondent challenged the ratification action, requesting the annulment of the award on the grounds that the Respondent was not granted a reasonable opportunity to present its case. Respondent argued that:

1. The Claimant had erroneously stated Respondent’s name in both the request for arbitration and its statement of claim. As a result, the Respondent had never been properly notified, and was therefore unaware of, the arbitration proceedings.

2. On realizing such error, the arbitrator issued a procedural order to rectify the name of the Respondent and re-notify it with the correct name.

3. Immediately upon being notified of the arbitration proceedings, the Respondent, on 27 December 2011, through its manager, has responded and requested the arbitrator to be granted time to appoint a lawyer and submit its statement of defense.

4. On 6 January 2012, the arbitrator dismissed the Respondent’s request, and rendered his award. In the award, the arbitrator stated that “the Respondent’s request for time was submitted without an official power of attorney”, a fact that the Respondent contested in the proceedings. The court considered that the arbitrator, based on the submitted trade license, should have, at the least, given the Respondent the opportunity to appear before him and present his authority, taking into account the date on which the Respondent has been officially notified of the proceedings, and the date of issuing the award.

The Court of First Instance dismissed the Respondent’s arguments, and ordered the enforcement of the arbitral award.

The Court of Appeal

On the Respondent’s appeal, the Dubai Court of Appeal ruled that the arbitral award was null and void because the arbitrator had failed to observe the adversarial principle (“principe du contradictoire”) that gives the parties the right to present their case fairly. The Court of Appeal further found that the rejection of the Respondent’s request was made on baseless grounds without legal justification.
As such, under Article 216 of the UAE Civil Procedures Law, the Court of Appeal overturned the prior Court’s decision and set aside the award, ordering the Claimant to pay all court and legal fees for both sets of court proceedings. In this regard, in order to recognise and enforce an arbitration award under domestic law in the UAE, such award must be legally valid and free of any flaws.

No appeal was filed by the Claimant before the Court of Cassation within the legal time limit, hence, the above Court of Appeal judgment became final and subject to no further appeal.

This case demonstrates that the local courts in the Emirate of Dubai accord fundamental importance to, and respect for, the right of due process in international arbitration, as guaranteed under Article 216 of the Civil Procedure Law. The equivalent ground for a foreign award sought to be enforced under the New York Convention is Article V(1)(b). Merely because the parties have agreed to resolve a dispute outside of the national courts does not mean that either party is deemed to have waived its rights to participate in the proceedings and to put forward its case, and by disregarding such fundamental right, the arbitral tribunal runs the risk that its award shall not be enforced.

Another interesting question that this case raises is whether the Claimant may seek some sort of redress against the sole arbitrator for failing to respect the fundamental right of due process, and therefore acting negligently in the process of rendering the award. Under the DIAC Rules, however, it would seem that the arbitrator would be protected from such action, as Article 40 of such Rules provides that Article 40 of the DIAC Rules provides that: “No member of the Tribunal or of the Executive Committee, nor the Centre and its employees, nor any expert to the Tribunal shall be liable to any person for any act or omission in connection with the arbitration.”

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Nicolás Costabile

Wilmer Cutler Pickering Hale and Dorr LLP

Following up on a recent post by Daniela Palacios on 24 May 2016 titled “Emelec vs Canal Uno: How Many Bites Can the Apple Handle?”, this article explores: (i) Ecuadorian courts’ historic approach to the availability of cassation (recurso de casación) against decisions that resolve annulment proceedings of arbitral awards, (ii) the change of approach taken in the past year, and (iii) its particular impact on the finality principle essential to arbitration.

Indeed, two recent decisions of the Constitutional Court of Ecuador (Case 1279-11-EP dated 22 April 2015 and Case No. 1139-13-EP dated 30 September 2015) found that judicial decisions on annulment of arbitral awards are subject to review by the National Court of Justice (“NCJ”), by means of the cassation recourse. This is directly contrary to the Ecuadorian courts’ prevailing practice, which consistently rejected cassation recourses against this type of decisions.

• Admissibility of cassation recourses against judicial decisions in annulment proceedings

In Ecuador, pursuant to Article 30 of Arbitration and Mediation Act 1997 (“AMA”) parties to an arbitration only have a statutory right to challenge arbitral awards by means of an annulment action; it is expressly provided that no other recourse is available against arbitral awards.  Pursuant to Article 31 of the AMA, arbitral awards can be annulled by the domestic courts in Ecuador, on the basis of  five specific grounds: (i) failure to serve the claim on the defendant in proceedings heard and terminated in absentia, provided that it limits that party’s right of defense; (ii) failure to serve the tribunal’s orders on the parties, thus limiting or preventing their right of defense; (iii) failure to summon, notify or present evidence despite the existence of facts that should be proved; (iv) extra– or ultra petita inconsistencies; and (v) illegal appointment and formation of the arbitration tribunal.

Since the enactment of the AMA, the Ecuadorian arbitration community has debated whether the decision that resolves an annulment action, particularly one that denies a request for annulment, is subject to the cassation recourse.  In Ecuador, the cassation recourse is an extraordinary remedy which only proceeds against judgments and interim decisions that put an end to a contentious matter (procesos de conocimiento) decided by the Court of Appeals.  Cassation recourses are filed before the NCJ (formerly, the Supreme Court of Justice of Ecuador).

Historically, the Ecuadorian Supreme Court of Justice would accept jurisdiction to hear cassation recourses filed against decisions denying the annulment of arbitral awards. The rationale behind those judgments was that the decision that resolves the annulment action against an arbitral award is not governed by the AMA, but rather by Article 59 of the Code of Civil Procedure.  Thus, since this Article establishes that any dispute that does not have a special procedure will be understood as an ordinary procedure, it was possible for decisions on annulment action to be subject to various remedies, including cassation.

This view, however, changed following the Supreme Court of Justice’s decision in La Ganga v. Colonia de Seguros in 2003.  This was a significant step for Ecuador’s arbitration framework, since it provided parties with more certainty as to the recourses available against decisions in annulment proceedings.  In this case, the Supreme Court dismissed a cassation recourse against the decision that rejected the annulment action against the final award.  It held that the cassation recourse was only applicable to judicial decisions that decide on the merits of a dispute and not against incidental remedies –such as the annulment action, which does not decide on the merits, but rather decides on the validity of an arbitral award, and only pursuant to the specific grounds for annulment, as provided by the AMA.

However, two recent decisions of the Constitutional Court of Ecuador (issued in April and September 2015), take the courts back to the position prior to the La Ganga case, thereby undermining the vital finality principle of arbitration rather than reinforcing it.

• Procedural history of the Constitutional Court’s decision of April 2015

In 2007 an arbitral tribunal constituted under the Rules of the Arbitral Centre of the Quito Chamber of Commerce issued an arbitral award against the Ministry of Public Works.  Thereafter, both the Ministry of Public Works and the Attorney General (who was an interested third party in the underlying dispute representing Ecuador) filed an action to set aside the arbitral award before the Pichincha Provincial Court of Justice.  In November 2008 the president of the Pichincha Provincial Court dismissed the action to set aside the award.

On appeal, in February 2011, the First Chamber for Commercial Matters of the Pichincha Provincial Court (in its Court of Appeals capacity) confirmed the ruling of the president of the Pichincha Provincial Court, thus rejecting the annulment action filed by the Minister and the Attorney General.  Afterwards, the Minister and the Attorney General filed separate cassation recourses against the Chamber’s decision.  Later, in April 2011, the majority of the Civil Chamber for Mercantile Matters of the Pichincha Provincial Court of Justice rejected the petition, on the basis of the prevailing position at that moment that rejected cassation recourses against decisions on annulment actions.

Then, the Minister and the Attorney General filed an Extraordinary Protection Action before the Constitutional Court of Ecuador. This remedy is different from the cassation action and can only be filed against final decisions of national courts that have allegedly violated rights enshrined in the Ecuadorian Constitution. This remedy should be filed after all other remedies have been exhausted.

The Constitutional Court then ordered the Pichincha Provincial Court to grant the cassation recourse, initially denied to both petitioners.

• Procedural history of the Constitutional Court’s decision of September 2015

In October 2009, football club Emelec initiated a commercial arbitration against a national television station (Canal Uno) before the Guayaquil Chamber of Commerce due to Canal Uno’s alleged breach of a contract signed by the parties in 2005.  The arbitral tribunal ruled for Canal Uno.  In May 2012, Emelec moved to set aside the award. The president of the Guayas Provincial Court (formerly Superior Court of Guayas) dismissed the action for lack of merit.

Emelec then appealed the Guayas Court president’s decision. However, on July 6 2012, the magistrate refused to grant the appeal on the grounds that arbitral awards are not subject to appeal even though it was clear that Emelec had appealed the judicial decision that denied the annulment action and not the arbitral award.  Emelec therefore filed a cassation recourse against that ruling before the National Court of Justice. The Chamber of Civil and Commercial Matters of the National Court of Justice dismissed the cassation on the basis that cassation recourses were not available against decisions issued in incidental (and summary) proceedings, such as the annulment action.

Emelec subsequently filed an extraordinary protection action with the Constitutional Court in order to quash the NCJ’s decision. According to Emelec, the Guayas Court decision had breached rights and guarantees established in the Constitution.  In particular, Emelec argued that the decision breached Article 76(7) of the Constitution, which guarantees the right to appeal all judicial decisions, as well as Article 8(h) of the Inter­American Convention of Human Rights, which establishes a similar guarantee.

The Constitutional Court vacated the ruling of the NCJ and ordered the president of the Guayas Court to allow the plaintiff’s appeal. One of the chambers of the Guayas  Court should hear the appeal. If after hearing the appeal, the Court rules against Emelec, it will be entitled to file a cassation recourse before the National Court of Justice.

• The reasoning of the Constitutional Court decisions

In both cases the Constitutional Court found that the cassation recourses were wrongly denied by the lower courts. Although the Constitutional Court clarified that arbitral awards cannot be subject to any other recourse than the annulment action provided in the AMA, the denial of appeal and cassation recourses against the decision on the annulment action violated the parties’ constitutional rights of due process and effective judicial protection (Articles 75 and 76.7(a) and (m) of the Constitution of Ecuador).

Specifically, in its decision of 22 April 2015, the Constitutional Court held that the decision rendered by the Provincial Court denying the cassation recourse against the decision on the annulment action violated both petitioners’ right of due process. According to the Constitutional Court, the Pichincha Provincial Court erred when it found that the fact that an arbitral award was not subject to appeal was a sufficient reason to deny the cassation recourse. The Constitutional Court reasoned that the cassation recourse should be granted because the petitioners did not file the recourse directly against the arbitral award, but rather against the decision on the annulment action. Similarly, in its decision of 30 September of 2015, the Constitutional Court found that both the Guayas Court and the NCJ’s decisions violated Emelec’s constitutional right to recourse judicial decisions and due process.  The Constitutional Court once again emphasized that the appeal had to be granted because it had been filed against the judicial decision that denied the annulment action, instead of against the arbitral ward itself.

• Comments

These decisions could be rightly seen as a step back for Ecuador’s arbitration framework since it provides losing parties with an extra recourse against the decision on annulment actions and thus lengthens the annulment process.  It also changes the (more arbitration-friendly) prevailing position as to the inadmissibility of cassation recourses against this type of judgment.

Although Ecuador does not have a case-law-based system, the weight of the Constitutional Court’s decision will without doubt influence lower judges in deciding on whether to admit or reject a cassation recourse against decisions on annulment actions.  This not only provides the losing party with another recourse against arbitral awards rendered in Ecuador (which was not available until recently), but also allows a losing party to delay the enforcement of an unfavorable award.

While it is yet to be seen whether the National Court of Justice will accept the Constitutional Court’s ruling, this decision takes Ecuador at least one step backwards in terms of finality of the awards rendered in Ecuador, thereby providing parties with an additional (discouraging) issue to consider when choosing Ecuador as the seat of arbitration. This trend contrasts with other Latin American jurisdictions, like Mexico, where the arbitration law expressly denies any judicial recourse against a decision on annulment actions (except in very extraordinary circumstances where recourse by means of a writ of amparo might be available).

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Khalil Mechantaf

Baker & McKenzie

In one of the very rare decisions issued by courts in the Arab world applying the provisions of the Unified Agreement for the Investment of Arab Capital in the Arab States (the “UAIAC”), the Cairo Court of Appeal has revived in its decision dated February 5, 2014, the principle of finality of arbitration awards, by which it rejected a claim for annulment of a UAIAC award, filed by the State of Libya (first claimant to annulment), the Libyan ministries of Economy and Finance (second and third claimants) and the General Authority for encouraging investments (fourth claimant), against a kuwaiti investor, Al-Kharafi & Sons Co. (case n° 39, judicial year 130/2014). The ratio decidendi of the court’s decision reads the following:

“Since the arbitral award, subject matter of this annulment, is rendered on the basis of the Unified Agreement for the Investment of Arab Capital in the Arab States, to which the Arab Republic of Egypt is a member, such award shall be considered as final immediately following its render by the arbitral tribunal, and the application for annulment shall therefore be rejected pursuant to Article 2(8) of the treaty’s Annex”.

Many of you may be aware of the arbitral proceedings between the parties that lead to a final award rendered in Cairo on March 22, 2013, and was reported on IA Reporter and GAR. In summary, Al-Kharafi & Sons Co. (Claimant in arbitration), brought a claim for damages against the State of Libya on the basis of clause 29 of the contract concluded between them in 2006, which provides for a UAIAC clause, as follows:

“Any dispute arising between the parties in connection with the interpretation or enforcement of this contract shall be settled amicably, failing which the dispute shall be referred to arbitration in accordance with the Unified Agreement for the Investment of Arab Capital in the Arab States dated 26 November 1981”.

The claim was brought following the decision n° (203/2010) issued by the General People’s Committee for Industry, Economy and Trade in Libya, which terminated the investment project without awarding the Claimant an appropriate compensation. The final award rendered by a UAIAC tribunal ruled in favor of the Claimant awarding it an astonishing USD 930 Million, which left the State of Libya with no choice but to refuse honoring the award and bring an action for annulment before the Egyptian courts, being the courts of the seat of arbitration.

The Cairo Court of Appeal’s decision is beyond any doubt one of the very rare decisions, if not the first decision, issued in respect of a UAIAC award, and confirms with it the application of one of the supranational principles of international arbitration… the finality of arbitral awards. In fact, the challenges brought against investment treaty awards has remained one of the dark little secrets of investment treaty arbitration as enforcement of international awards is becoming increasingly unpredictable and expensive, belying the efficiency and effectiveness of arbitration. That should not be anymore the case if an investor is lucky enough to have a UAIAC arbitration as the parties’ agreed dispute resolution mechanism.

By way of background, the UAIAC was signed on November 26, 1980 in Amman, Jordan, during the Eleventh Arab Summit Conference. It entered into force in Egypt on July 19, 1992, and is now applicable in twenty-one Arab States. The finality of arbitration awards is provided under Article 2(8) of the treaty’s Annex, which reads the following:

“Awards of an arbitral tribunal rendered in accordance with the provisions of this article shall be final and binding. Both parties must comply with and implement the award immediately upon its render unless the tribunal specifies a deferral of its implementation or of the implementation of a part thereof. No appeal may be made against arbitration awards”.

Based on the foregoing, arbitral awards are final and cannot be subject to any challenge brought before the courts of a member State, even if that challenge is on grounds of domestic public policy. The validity of the arbitration award is therefore subject only to the provisions of the UAIAC, irrespective of the grounds of annulment laid down in the law of the seat of arbitration. The principle of finality of awards was included by the drafters of the UAIAC to avoid the common pitfalls in investment treaty arbitration, which allow the courts of the host State to avoid the enforcement of an award condemning the national government’s attitude towards inward foreign investments. Additionally, the UAIAC is absent of any provision in respect of the need for an execution order within the meaning of its Article 2(8). This is evidenced by the provisions of Article 11 of the UAIAC, which provides:

“Where the decision of the arbitral panel fails to be implemented within three months of its render, the matter shall be brought before the Arab Investment Court to rule on such measures for its enforcement as it deems appropriate”.

Accordingly, an award debtor has three months to voluntarily enforce an arbitration award. Failing to do so will result in a compulsory enforcement process that can be brought before the Arab Investment Court (AIC). Interestingly, Article 11 limited the powers of the AIC to only review applications for enforcement, instead of annulment of awards, which thus confirms the finality and binding effect thereof. The Cairo Court of Appeal took a formalistic approach in applying such provisions and emphasized the need to respect its international commitments, as follows:

“Any international treaty signed and ratified by the Arab Republic of Egypt becomes an integral part of Egyptian law. If such a treaty includes special rules with regard to arbitration, those rules shall override any other rules laid down in the Egyptian arbitration law n°27/1994”.

As a result, awards rendered under the context of UAIAC do not need to fit in internationalist or nationalist-positivist views and can operate outside the constraints of national legal systems in the Arab world. The court reviewing any claim for annulment in that regard would only be allowed to reject the claim, even when it includes a challenge on the application ratione materiae and ratione personae of the UAIAC, or even a challenge on public policy.

It is expected that the surge of investment claims under the UAIAC as a result of the Arab uprising will trigger further court decisions issued by other member States, which should provide further clarity on the application of Article 2(8) and determine, if any, the limits of application of the principle of finality.

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Eugene Tan and Rupert Coldwell

Clyde & Co. LLP For Clyde & Co.

Singapore’s longstanding reputation as an arbitration friendly jurisdiction was reinforced in 2010 with the legislature’s adoption of the 2006 amendments to the UNCITRAL Model Law on International Commercial Arbitration. The 2006 UNCITRAL amendments concerned, among other matters, the use of interim awards in international arbitration, and recognised “the need for provisions in the Model Law to conform to current practices in international trade and modern means of contracting with regard to … the granting of interim measures” (General Assembly Resolution 61/33 on 4 December 2006).

Since 2010, under section 12(1) of Singapore’s International Arbitration Act (IAA), an arbitral tribunal has the power to make orders or give directions to any party for interim injunctions and interim awards. Under section 12A, the High Court has the power to make these interim orders into court orders. Section 19B provides that an award, whether final or interim, made by an arbitral tribunal pursuant to an arbitration agreement is final and binding on the parties, and that an arbitral tribunal must not vary, amend, correct, review, add to or revoke the award.

An interesting question arose in relation to these provisions of the IAA in the High Court of Singapore’s recent decision in PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation (Indonesia) and another matter [2014] SGHC 146 (PT Perusahaan); essentially, how does a final award affect an interim award made previously in the same arbitration (when both are final and binding under the IAA)?

Background

PT Perusahaan Gas Negara (Persero) TBK (PGN) and CRW Joint Operation (Indonesia) (CRW) entered into a contract (Contract) based on the FIDIC 1999 Red Book for the design, procurement, installation, testing and pre-commissioning of a pipeline to convey natural gas from South Sumatra to West Java, Indonesia. A dispute arose in respect to variation claims under the Contract, and the matter was taken to the Dispute Adjudication Board (DAB) constituted under the Contract. The DAB found against PGN, requiring it to pay over US$17m to CRW (DAB Decision).

The Contract contained a provision requiring compliance with the DAB Decision. However, although PGN accepted this obligation, no payment was made to CRW. In response to this, in 2009 CRW instituted arbitral proceedings to compel PGN to comply with its obligations under the contract to make payment (referred to in the High Court judgement as the Secondary Dispute). PGN argued that it could not be compelled to comply with the DAB Decision unless the arbitral tribunal heard the merits of the dispute first put to the DAB (referred to in the High Court judgement as the Primary Dispute). The 2009 tribunal held that PGN was required to comply with the DAB Decision and issued a final award for the sums decided in the DAB Decision (2009 Award). The Tribunal also left it open to PGN to commence a separate arbitration to deal with the Primary Dispute.

PGN successfully appealed the award in the High Court to have the 2009 Award set aside. The High Court’s decision was affirmed by the Court of Appeal albeit on different grounds. The Court of Appeal found inter alia that the tribunal should not have granted a final award for the sums decided in the DAB Decision without also hearing the merits of the Primary Dispute. It opined that the Secondary Dispute should have been dealt with by way of an interim or partial award; the merits of the Primary Dispute should have been dealt with subsequently in the same arbitration proceedings and decided by way of a final award.

In 2011, CRW instituted further arbitral proceedings and sought an interim or partial award to enforce the DAB Decision and a final award for the same sum or such sums as assessed by the Tribunal if it decided to review and revise the DAB Decision. The 2011 Tribunal issued an interim award compelling PGN to comply with the DAB Decision (2011 Interim Award). CRW obtained leave from the High Court to enforce the 2011 Interim Award against PGN, and PGN applied to the High Court to set aside the award.

Issues before the High Court

Among a raft of issues raised in the proceedings, the High Court was required to determine whether the 2011 Interim Award was final and binding pursuant to the IAA and therefore enforceable against PGN.

PGN argued that the 2011 Interim Award was a provisional award intended to have finality only until the Tribunal rendered an award on the Primary Dispute (which would be the final award in the arbitration) and that the IAA does not permit provisional awards under section 19B(1) of the IAA. Accordingly, PGN asserted that the Tribunal did not have the power to award provisional relief.

CRW asserted that the 2011 Interim Award was not provisional, but final and binding on the Secondary Dispute pursuant to section 19B(1). This needed to be read in conjunction with the Tribunal’s award, which had set out that it was final and binding “pending the final resolution of the [Primary Dispute] raised in these proceedings” (para 16(c)). The eventual final award in respect to the Primary Dispute would not vary the interim award because that award would determine with finality a different dispute: the Primary Dispute.

The Decision

The High Court held that the 2011 Interim Award was final and binding on the subject matter of the Secondary Dispute in accordance with section 19B of the IAA, that being, CRW’s undisputed substantive right to be “paid now” and PGN’s substantive obligation to “argue later”. Consequently, the 2011 Interim Award acknowledged that CRW’s substantive, but provisional, right to be paid promptly was final, and did not require that other aspects of the dispute be resolved with finality.

The High Court also held that section 19B did not prohibit “provisional” awards, being awards which grant relief intended to be effective for a limited period (para 128). PGN argued that the IAA deliberately omitted the term “provisional” from section 19B as awards under the IAA were meant to be final, however the High Court held that the legislature sought to avoid the use of “confusing nomenclature”, as opposed to employing a measure to restrict the content of an award under section 19B of the IAA. Further, the High Court held that section 19B did not operate to “override the parties’ autonomy to agree in their contract that they should have substantive provisional rights which, like all substantive rights, are enforceable” (para 136).

In respect to a final award varying the 2011 Interim Award, the High Court held that although section 19B(2) prevents a tribunal from varying, amending, correcting, reviewing, adding or revoking an award made under the IAA, the 2011 Interim Award would not be effected by the final award in a way that contravenes that section. Rather, the 2011 Interim Award, by its terms (“pending the final resolution of the Parties’ dispute raised in these proceedings”), ceased to be effective only when the Tribunal had resolved with finality every aspect of the dispute before it.

Conclusion

In PT Perusahaan, the High Court of Singapore decisively held that any future final award given by the Tribunal would not affect the 2011 Interim Award; the final award related to a different subject matter and the interim award “ceased to be effective”. This being said, the High Court’s decision was largely dependent on the wording of the 2011 Interim Award – “pending the final resolution of the Parties’ dispute raised in these proceedings” – rather than the application of the IAA. Accordingly, it remains perceivable for a situation to arise where a final award amends the content of an interim award contrary to section 19B.

The High Court confirmed that parties may agree to permit a tribunal to issue “provisional” awards for the purposes of granting relief effective for a limited period. According to PT Perusahaan, a provisional award is binding, but not final, as it is only effective for a limited period. This position appears contrary to section 19B of the IAA which states that “[a]n award made by the arbitral tribunal pursuant to an arbitration agreement is final and binding”.

To avoid a predicament, parties to an international arbitration may consider requesting that the tribunal be required to expressly set out the intended application of any interim award within the award to avoid conflicts with any final or other interim award issued in the proceedings.

PGN has appealed the High Court’s decision in PT Perusahaan to the Court of Appeal, the hearing of which is to commence shortly in January 2015.

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Dmytro Galagan

Central European University

Co-Authored with Patricia Živković (Assistant Editor for Europe)

On July 18, 2014, the arbitral tribunal (“Tribunal”) rendered final awards (“Award”) in three cases brought by former shareholders of OAO Yukos Oil Company (“Yukos”). As already well known, the Tribunal unanimously decided that the Russian Federation had breached Article 13(1) of the Energy Charter Treaty by taking measures having an effect “equivalent to nationalization or expropriation” of the claimants’ investment in Yukos (Award, paras. 1580, 1585), and ordered the Russian Federation to pay damages in excess of USD 50 billion. However, on January 28, 2015, the Russian Federation filed three writs (“Writ”) with The Hague District Court, that seek to annul the Award, alleging, inter alia, that the arbitrators did not fulfil their mandate personally because the Tribunal’s assistant played a significant role in analyzing the evidence and legal arguments, in the Tribunal’s deliberations, and in drafting of the Award (Writ, paras. 15(b), 21(c), 363(3), 509). It is this particular ground for setting aside of the Award that is the focus of this blog post.

Did the Tribunal’s assistant act as the fourth arbitrator?

The Russian Federation argues that the arbitrators delegated substantive responsibilities to the Tribunal’s assistant and thus breached their mandate to perform their duties personally, Therefore, they say, the Award should be set aside on the basis of Article 1065(1)(c) of the Dutch Code of Civil Procedure (Writ, para. 469). At the first organizational hearing in October 2005, the chairman, The Hon. L. Yves Fortier QC, informed the parties that Mr. Martin Valasek had been appointed as Assistant to the Tribunal to provide administrative assistance and exercise liaison duties (Writ, paras. 487, 488, 490).

According to the Russian Federation’s position in the setting aside proceedings, the delegation of the arbitrators’ duties to the Tribunal’s assistant is evident from the disproportionate fees billed by Mr. Valasek, which amount to EUR 970,562 (Award, para. 1863), whereas the fees of other arbitrators – Dr. Charles Poncet, Judge Stephen M. Schwebel, and The Hon. L. Yves Fortier QC – amount to EUR 1,513,880, EUR 2,011,092, and EUR 1,732,937 respectively (Award, paras. 1860-1862). Applying the hourly rate of 250-325 EUR for the assistant and 750-850 EUR for each arbitrator, the Russian Federation suggests that the Tribunal’s assistant spent more hours on the arbitrations than any other member of the tribunal, especially on the merits stage of the case (Writ, para. 492). Overall, Mr. Valasek worked 3,006 hours on the Yukos arbitrations: only 381 hours through the hearings on jurisdiction and admissibility, but as many as 2,625 hours through the merits hearing and drafting of the Award (Writ, para. 494). This is 40% to 70% greater than the number of hours spent by any of the arbitrators (Writ, paras. 496-497).

The Russian Federation claims that time spent on the case by the Tribunal’s assistant cannot be explained by his administrative or logistical role, because two staff members of the Permanent Court of Arbitration, Brooks Daly as the Tribunal’s secretary and Judith Levine as the Tribunal’s assistant secretary, already spent more than 5,200 hours on these arbitration proceedings (Writ, paras. 469, 499). Also, the Russian Federation understands the Tribunal’s refusal to further elaborate on the Tribunal’s assistant work on the ground that doing so would engender “the confidentiality of the Tribunal’s deliberations” as an admission that Mr. Valasek participated in the deliberations (Writ, paras. 469, 500).

Arbitral assistants and secretaries in international arbitration

Given the above circumstances, one of the issues to be decided can be phrased in the following way: which type of tasks may be entrusted to the arbitral tribunal’s assistants and, more broadly speaking, to arbitral secretaries, without jeopardizing the mandate of the arbitral tribunal? Arbitral practice, especially in investment arbitration, shows that arbitral assistants are sometimes appointed (See: Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, Award, 5 June 2012; Glamis Gold, Ltd. v. United States, Award, 8 June 2009; Duke Energy International Peru Investments No. 1, Ltd. v. Republic of Peru, ICSID Case No. ARB/03/28, Decision on Jurisdiction, 1 February 2006; The Rompetrol Group N.V. v. The Republic of Romania, ICSID Case No. ARB/06/3, Decision on Respondent’s Preliminary Objections on Jurisdiction and Admissibility, 18 April 2008; Compañía de Aguas del Aconquija S.A., Vivendi Universal v Republic of Argentina, ICSID Case No. ARB/97/3, Award, 20 August 2007). Such appointments might not be a surprise given the complexity of the cases and the abundance of the submissions made by the parties. In at least one of these cases, the tribunal justified the appointment of the tribunal’s assistant by the need for “logistical assistance on the file in this case” (Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, Award, 5 June 2012). What can such “logistical assistance” include?

The Young ICCA Guide on Arbitral Secretaries 2014 (“Guide”) provides in Article 3 a non-exhaustive list of the arbitral secretaries’ roles, many of which are of purely administrative or organizational nature (for example, Articles 3(2)(a), (c) and (d) of the Guide). According to the same Article, the role of an arbitral secretary may go beyond the purely administrative, subject to “appropriate direction and supervision by the arbitral tribunal”. Some clearly non-administrative tasks are drafting tasks, more specifically “[d]rafting procedural orders and similar documents” and “[d]rafting appropriate parts of the award” (Guide, Article 3(2)(g) and (j)). However, not all parts of the award are equally acceptable to be drafted by the arbitral secretary: drafting controversies especially arise regarding the “Legal Reasoning” and “presumably the final analysis and operative portions of the award” (Guide, Commentary to Article 3(2)(j)).

The role of a secretary and an assistant in the arbitration proceedings can be understood by the comparison given in the IBA Guidelines on Conflict of Interest in International Arbitration 2014 (“IBA Guidelines”) that both “secretaries and assistants to the Arbitral Tribunal are bound by the same duty of independence and impartiality (including the duty of disclosure) as arbitrators” (IBA Guidelines, General Standard 5(b)). However, this still does not clarify the assistant’s tasks in the proceedings and the thin line between drafting the award and deciding the case may not always be visible.

Tribunal’s mandate in commercial arbitration: case of Sacheri v Robotto (1989)

In commercial arbitration, a similar situation was addressed in a decision by the Italian Supreme Court rendered on 7 June 1989 in the case Sacheri v. Robotto (“Decision”, excerpt available in Yearbook Commercial Arbitration, Volume 16, Kluwer Law International 1991, pp. 156-157; Commented also in: Julian D. M. Lew, Loukas A. Mistelis, et al., Comparative International Commercial Arbitration, Kluwer Law International 2003, pp. 234, 637). Arbitrators, who had no legal training, did not participate in drafting the award. Instead, they hired a lawyer, who was appointed as an expert, to draft the award for them. The adjudication of their mandate was clear in this case, as the Supreme Court noted that “[d]ue to the arbitrators’ professed incapacity to decide issues other than technical construction problems, it amounted to delegating a third person to formulate the final decision, which the arbitrators were not able to conceive and which they could not critically examine once it had been drafted” (Decision, para. 1). The Supreme Court emphasized that legal decision-making is a task which cannot be delegated to the persons other than the arbitrators (Decision, paras. 3, 4).

Conclusion

The proceedings on setting aside of the Yukos Awards has brought to light an interesting question: may the tribunal entrust its assistant with substantive obligations with regard to analysis of the parties’ arguments and drafting of the award? Earlier, the Italian Supreme Court set a clear rule that a tribunal composed of non-lawyers may not delegate a third party to solve the legal issues of the case. On the contrary, all the arbitrators in the Yukos arbitration were highly renowned and respected lawyers, so it remains to be seen where the court will draw a line in determining the limits on the arbitral tribunal’s assistant’s competences.

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Patricia Živković (Associate Editor)

The Main Approaches Regarding Enforcement of Annulled Foreign Awards

The ongoing issue of whether an award that was set aside in the country of origin should be enforced has recently arisen in England and Wales. This issue has divided jurisdictions in two camps: the first camp is comprised of jurisdictions that are ready to enforce an award notwithstanding the fate of that award in the country of origin, while in the second are jurisdictions in which the courts deny the enforcement of an annulled award. The former jurisdictions are adopting the delocalized approach which emphasizes the transnational nature of an award and their courts are therefore more likely to disregard the annulment of an award. The latter jurisdictions adopt the territorial approach under which once the courts find that the award is set aside, there is no longer an award which can be enforced. Without going into further details of these two approaches, it should be mentioned that the English jurisdiction has to date generally followed the territorial approach (For a detailed analysis of the approaches see: Michael Dunmore, Enforcement of Awards Set Aside in their Jurisdiction of Origin, Austrian Yearbook on International Arbitration 2014, p. 285-292). It remains to be seen whether a recent decision in this matter of the High Court in Malicorp Limited v Government of the Arab Republic of Egypt, Egyptian Holding Company for Aviation, Egyptian Airports Company [2015] EWHC 361 (Comm) (“Decision”) brings anything new in this regard.

The Facts in Malicorp v Egypt

The case before the Court concerned an arbitration brought by Malicorp Ltd (“Malicorp”), a company registered in England and Wales, against the Government of the Arab Republic of Egypt, the Egyptian Holding Company for Aviation, and the Egyptian Airports Company (“Egypt”). The case was commenced in Cairo and related to claims which arose under a concession contract that was concluded on 4 November 2000. On 7 March 2006, the Arbitral Tribunal rendered an award (“Award”) in favour of Malicorp and ordered Egypt to pay damages in amount of $US14,773,497. Egypt, however, successfully challenged the award before the Cairo Court of Appeal on 5 December 2012, and the Court of Appeal’s decision was appealed to the Egyptian Court of Cassation and was still being considered at the time the Decision was rendered (“Cairo Court’s Decision”). On 29 February 2012, the order allowing the enforcement of the Award in England and Wales (“Enforcement Order”) under section 101(2) of the Arbitration Act was rendered. The proceedings before the Court raised the issue of whether the Enforcement Order should be upheld or set aside and the effect of the Cairo Court’s Decision on the enforcement of the Award.

“The Preferred Approach” as a Legal Test and the Court’s Decision

When dealing with the issue of the effect of the Cairo Court’s Decision, the Court proceeded on two assumptions, which were later in the Decision addressed as “the preferred approach”:

“(1) that the word “may” in s 103(2) of the 1996 Act confers a discretion on this court to enforce an award even though the award has been set aside by a decision (“the set aside decision”) of a court constituting a competent authority within s 103(2)(f) ; and

(2) it would not be right to exercise that discretion if, applying general principles of English private international law, the set aside decision was one which this court would give effect to.” (Decision, para. 21)

Section 103(2)(f) reflects Article V(1)(e) of the New York Convention (“NY Convention”) which provides that recognition and enforcement of the award may be refused if the party proves “[…]that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.” As mentioned above, the English courts generally followed the territorial approach when deciding on this ground. The Court in this case followed the same approach, but applied a test adopted by the Court in one of its earlier decisions stated the following:

“The preferred approach which I have described above applies, in the present context, well established principles as to the recognition of foreign judgments. It does not seem to me that they leave room, as a matter of discretion, to give effect to the Cairo award once it is established, as here, that a set aside decision of the supervisory court meets the tests for recognition.” (Decision, para. 28)

This rule of giving effect to the decision of a foreign court has, however, an exception: “[…]it would be both unsatisfactory and contrary to principle if the Court were bound to recognise a decision of a foreign court which offended against basic principles of honesty, natural justice and domestic concepts of public policy.” (emphasis added) (Decision, para. 22; Yukos Capital S.a.r.L v OJSC Oil Company Rosneft [2014] EWHC 2188 (Comm), para. 20). Therefore, it would appear that if a decision of a foreign court does not violate these principles, it should be given effect.

This legal test, i.e. the so-called “preferred approach”, resembles the comity approach “under which a judgment vacating an award should be recognized on grounds of comity – i.e., the vacated award not enforced – unless the vacating judgment is ‘procedurally unfair or contrary to fundamental notions of justice’” (emphasis added)(Michael Dunmore, Enforcement of Awards Set Aside in their Jurisdiction of Origin, Austrian Yearbook on International Arbitration 2014, p. 294). When the Court applied the test, it decided that none of the grounds invoked by Malicorp were sufficient to make a valid complaint and it, therefore, treated the Cairo Court’s Decision as a final decision and set aside the Enforcement Order on 19 February 2015 (Decision, para. 44).

Conclusion

It is clear that the Court continued the tradition of adopting and developing the territorial approach regarding the enforcement of annulled foreign arbitral awards. It also applied a legal test in this matter, which it called “the preferred approach”. The test involved a principle of comity as the second tier. On one hand, the creation of such a legal test under Article V(1)(e) of the NY Convention is welcome in order to achieve greater legal certainty for the parties and such creation is within the court’s discretion provided under the NY Convention. However, at the same time, by making the exercise of the discretion practically non-enforceable when the foreign judgement on setting aside is recognisable in England and Wales, “the preferred approach” brings the “principles as to the recognition of foreign judgments” to the spotlight rather than the principles as to recognition of foreign arbitral awards.

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Gordon Blanke

DWF (Middle East) LLP

The Dubai Court of Cassation stays firmly on course in its enforcement of foreign arbitration awards under the 1958 New York Convention for the recognition and enforcement of foreign arbitral awards (NYC) and hence keeps consolidating its pro-NYC enforcement practice. This has most recently been demonstrated by the Court’s pro-Convention approach in Case No. 434/2014 (Al Reyami Group LLC v. BTI Befestigungstechnik GmbH & Co KG, ruling of the Dubai Court of Cassation of 23rd November 2014), in which the Court embraced the terms of the NYC à la lettre and confirmed in their wording the previous enforcement rulings of the Dubai Court of Appeal (see Case No. 1/2013, ruling of the Dubai Court of Appeal of 9 July 2013, on which I reported in a previous blog) and the Dubai Court of First Instance (see Case No. 681/2012) in the same matter.

By way of reminder, this case deals with the ratification and enforcement of an ICC award rendered by a sole arbitrator in ICC Case No. 15977/JHN in Stuttgart, Germany, and awarding the award creditor, BTI Befestigungstechnik, a German company that specializes in the production and distribution of roofing systems and power tools, an amount of EUR 300,000 in compensation for violation by Al Riyami Group, a UAE incorporated company, of an agency agreement concluded between the parties for the exclusive distribution in the UAE of BTI’s products. The Dubai Court of Cassation was emphatic in its endorsement of the pro-Convention approach previously taken by the Court of First Instance and the Court of Appeal. The Court of Cassation was satisfied that the terms of the NYC found application to the enforcement of the underlying award without reservation. In doing so, the Court emphasized in reliance on Article 238 of the UAE Civil Procedures Code, which gives precedence to the application of international enforcement instruments over the principles of reciprocity otherwise applicable to the enforcement of foreign judgments, and Article 125 of the UAE Constitution, which give domestic force of law to international conventions binding on the UAE, that the Convention formed part of domestic UAE law by virtue of Federal Decree No. 43 of 2006, which implemented the provisions of the Convention at the municipal level. Having satisfied itself that Germany, the jurisdictional origin of the award subject to enforcement, qualified as another Convention country, the Court of Cassation confirmed the overall restrictive grounds of challenge admissible under Article V of the Convention and the corresponding provisions of Article 5 of the Federal Decree No. 43 of 2006.

The Dubai Court of Cassation rejected all the award debtor’s attempts at challenging the award on procedural grounds. More specifically, the Court did not entertain any challenges of public order on the ground of the purported non-arbitrability of exclusive distribution agreements, challenges on the basis of the chosen venue of the arbitration being France (despite the arbitral seat being Stuttgart, Germany), challenges of the improper administrative processing of the arbitration by the ICC International Court of Arbitration in Paris. The Court fully endorsed the findings of the Dubai Court of First Instance, quoting from that Court’s ruling in relevant part:

“[The arbitration] has fulfilled all legal requirements in general and formal terms; it observed the principle of adversarial proceedings between litigants; it did not violate the rights of defense; it did not defeat any previously given award between the same parties; and it did not infringe the public order or public morals. Hence, it fulfilled all requirements and must be ratified.” (my translation)

The Court further confirmed the submission of a duly authenticated copy of the foreign arbitral award and the exclusive distribution agreement, including the arbitration agreement, and emphasized a supervisory court’s obligations of review in the following terms:

“Whereas the judicial supervision of such court over the foreign arbitral award, when considering the request for recognition of a foreign award, is limited to ensuring that the award does not violate the provisions of Federal Decree No. 43 of 2006 and fulfills the formal and substantive elements of an arbitral award prescribed in Articles 4 and 5 of that Decree [corresponding to Articles IV and V of the NYC], as the arbitral award, subject matter of the action, is duly authenticated.” (my translation)

By way of conclusion, the straightforward approach taken by the Dubai Court of Cassation to the application of the terms of the NYC to the enforcement of foreign awards, even against a UAE national award debtor, is an encouraging development, which deserves unreserved support from local arbitration practitioners and the international arbitration community more generally. Slowly but surely, the Dubai courts are building a credible track record of NYC enforcement, which no doubt will continue to encourage the inflow of foreign investment into the UAE economy and the Emirate of Dubai more specifically in years to come.

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