Introduction
This article is the second of our two articles on enforcement of arbitration awards in the United Arab Emirates (UAE), and in it we consider the enforcement of foreign arbitration awards in the UAE. For the purposes of this article, a foreign arbitration award is one where the arbitration award is made outside the UAE, made on an issue, which is arbitrable under the law of the UAE, and capable of enforcement in the country in which it was made.
We discussed in our first article (which concerned enforcement of UAE domestic – that is, non-foreign - arbitration awards), the statutory framework for the enforcement of arbitration awards; readers may recall that the statutory framework concerning arbitration in the UAE is principally contained within Articles in the UAE's Civil Procedure Code of 1992 (CPC) – Articles 203 to 218 and, in relation to international arbitration awards, Articles 235 and 236 of the CPC need also to be taken into account.
Our first article highlighted difficulties that can arise when arbitration awards come before the courts in the UAE; the notable exception being when recognition of an arbitration award is sought in the courts of the Dubai International Financial Centre (DIFC) – a free zone with its own civil courts and civil law framework, in each case reflecting the English court and common law systems.
When the enforcement of a foreign arbitration award is considered one naturally first looks to consider the applicability of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). The UAE signed that convention and acceded to it in November 2006; as will be seen, following from that the UAE courts grasped the opportunity and modified their approach to recognition and enforcement of foreign arbitration awards.
In summary, as a result of the UAE signing the New York Convention, a foreign arbitral award which may not be fully compliant with the requirements of Articles 203 to 218 of the CPC may, nevertheless, be enforced in the UAE, provided there are no grounds under the New York Convention upon which to challenge properly the awards validity.
However, it is important to remember that in the UAE the judicial reasons why one court makes a decision in a particular case is not formally binding on another court; in general terms, judgments may be persuasive, but the individual judge has freedom to apply the law as that judge sees it to the case before them; this does create a degree of uncertainty as to how a particular court will react to a matter. Added to this, there is no single unified court system throughout all seven Emirates that comprise the UAE.
Recognition in the UAE
Pursuant to Article V of the New York Convention, a foreign arbitration award should be recognised and enforced in a New York Convention signatory country if, on the application to the appropriate court by a party to the arbitration award, another party to the arbitration award does not satisfy the court of any of the following:
- The parties to the arbitration agreement were under some incapacity or the arbitration agreement is not valid under the law to which the parties subjected it or the law of the country where the award was made.
- The party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the proceedings, or was otherwise unable to present its case.
- The award deals with a difference not contemplated or falling within the terms of the submission to arbitration.
- The composition of the arbitral authority or the arbitral procedure was not in accordance with the parties' agreement or the law of the seat of arbitration.
- The law has not yet become binding on the parties or has been set aside or suspended by the courts at the seat of arbitration.
- The subject matter of the difference is not capable of settlement by arbitration under the law of the country where enforcement is sought (that is, UAE law in this case).
- Enforcement would be contrary to the public policy of the state in which enforcement is sought (in this case, that would be the UAE).
The UAE's signature to the New York Convention provoked much debate at the time about the attitude which the UAE courts would take to enforcing a foreign arbitration award, particularly in the absence of legislation expressly implementing in UAE law the provisions of the New York Convention. However, recent decisions have shown a marked trend towards enforcement strictly in accordance with the New York Convention principles, driven perhaps by the UAE's well-founded wish to be recognised as an internationally desirable place to do business.
In commercial case number 35 of 2010, the Fujairah Court of First Instance ordered enforcement of a foreign award in the UAE under the New York Convention: this is believed to be the first time this occurred in the UAE. The judgment expressly recognised that conventions and treaties entered into by the UAE have the force of local legislation, and accordingly many grounds that were traditionally used to challenge the recognition and enforcement of foreign arbitral awards were not applicable.
A further positive step forward came in 2012, when it was confirmed by the Dubai Court of Cassation in Macsteel International v. Airmech (Dubai) LLC, that the requirements of the CPC have no application in enforcement of foreign arbitration awards in the UAE, and that the UAE Courts should only apply the provisions of the New York Convention when enforcing foreign arbitral awards.
That being said, as one would expect in any legal system where there is a developing area of law, there have been some bumps in the road on this journey. In 2013, an area of uncertainty was introduced in CCI v. Ministry of Irrigation of the Democratic Republic of the Sudan; there the Dubai Court of Cassation held that the enforcement of arbitral awards rendered in other jurisdictions that are signatories to the New York Convention may be refused for lack of jurisdiction where (broadly) the award debtor does not have a domicile or place of residence in the UAE, or where the case is not related to an obligation carried out within the UAE. Given the non-binding nature of court decisions (as mentioned briefly above), the wider implications of this decision are not clear.
In a more recent decision, from 2014, Reyami v. BTI, which concerned the ratification and enforcement of an award made in Germany under the auspices of the ICC, the Dubai Court of Cassation held that the New York Convention had the force of law in the UAE and that the Courts of Dubai should therefore apply the provisions of the New York Convention to the execution of foreign arbitration awards.
Having set-out the general direction of travel, it may assist if we now touch upon the procedure for enforcing foreign arbitral awards in the UAE.
In order to enforce a foreign arbitration award, in addition to the procedure in CPC Articles 215 – 217, it is also necessary to have regard to Article 235 of the CPC: Article 235 sets out the requirements for the recognition of a foreign court decision, but Article 236 extends Article 235 to apply to what may conveniently be described as foreign arbitration awards. Article 235 sets out a number of requirements that must be met which mostly go to the validity of the award under the law of the country where it was made, and the summoning and representation of the parties. Article 236 adds to this by requiring that the foreign arbitration award must be issued in the manner permitted by the law of the State where the award is issued.
The enforcement process is likely to take about one year to the conclusion of the Court of First Instance stage, and thereafter there is an automatic right to appeal from the Court of First Instance to the Court of Appeal and, on issues of law only, from the Court of Appeal to the Court of Cassation.
On the face of it, when a court comes to recognise and enforce an arbitration award CPC Article 217 would suggest that the award of the arbitrators shall not be subject to challenge in any manner by way of appeal. In other words, the court should not consider the merits of the decision on the underlying substantive dispute.
However, CPC Article 215 does refer to the court reviewing the award and terms of reference and ensuring that there is no encumbrance to enforcement, and that may entail causing the court, at the prompting of an aggrieved party, to be tempted to trespass on to aspects of the merits.
Further, when an application is made to a Court of First Instance to enforce an arbitration award it is not uncommon for the respondent to resist enforcement by way of an application pursuant to CPC Article 216 to nullify the award on one or more of the three grounds set-out in that Article. Whether the court decides to ratify the award or annul the award, the losing party has the automatic right to appeal against the first instance judge's decision.
When the arbitration award is ratified by the courts, it will be good for execution by the courts; the court order ratifying the foreign arbitration award will be considered equal to a judgment delivered by a UAE court. Execution of the arbitration award will go through the same process as that for the execution of a UAE court judgment.
Recognition in the DIFC
The process for the recognition and enforcement in the DIFC of a foreign arbitral award is relatively straightforward, given the legislative framework.
Article 42 (1) of the DIFC Arbitration Law provides that an arbitral award, irrespective of where it was made, shall be recognised as binding within the DIFC and shall be enforced subject only to the limited grounds for refusal set out in Article 44 of the DIFC Arbitration Law. Those grounds reflect the well-known grounds set out in Article V of the 1958 New York Convention (see above).
Article 42 (4) provides, further, that awards recognised by the DIFC Court may be enforced outside the DIFC, pursuant to the Judicial Authority Law (Dubai Law No 12 of 2004, as amended by Dubai Law No 16 of 2011).
The DIFC Arbitration Law highlights that where the UAE has entered into an applicable treaty for the mutual enforcement of judgments, such treaty provisions shall be complied with.
In a decision issued in November 2014 in ARB 002/2013 (1) X1, (2) X2 v. (1) Y1, (2) Y2, the DIFC Court of First Instance confirmed that even in the absence of any relevant assets within the DIFC against which an arbitral award can be enforced, the DIFC court has jurisdiction to recognise and ratify foreign arbitral awards.
These decisions show the DIFC court's willingness to give effect to the enforcement and recognition provision contained in Articles 42 and 43 of the DIFC Arbitration Law and highlight the limited grounds that an award debtor can seek to rely on in resisting an order for the recognition and enforcement of foreign awards.
As an aside (and with apologies for going outside the ambit of this article), it is interesting to note, in contrast to the DIFC court's approach in relation to foreign arbitral awards mentioned above, H.E. Justice Ali Al Madhani in July 2015 in the DIFC Court of First Instance decision in CFI 043/2014 DNB Bank ASA v. (1) Gulf Eyadah Corporation (2) Gulf Navigation Holding PJSC, held that foreign judgments which are recognised by the DIFC courts cannot be referred to the Dubai courts for execution. In his view, the meaning of Article 7 of the Judicial Authority Law (as amended) and Article 24 (1) of the DIFC Court Law is that execution of a foreign judgment shall not go beyond the jurisdiction of the DIFC court. This decision confirms that the parties are not able to use the DIFC courts as a conduit jurisdiction for the purposes of enforcing foreign court judgments. However, as noted above, arbitration is quite different.
Other bilateral and multi-lateral treaties
While dealing with an award rendered in a country that is not a signatory to the New York Convention, a potential route of enforcement could be via a bilateral treaty or a multilateral treaty between the UAE and that particular state. The UAE has bilateral and multilateral treaties with several countries such as Somalia, Sudan, Egypt, Syria, Jordan, Riyadh, France, GCC etc. Each of these treaties also apply to, and are binding on, the off-shore courts in the DIFC. However, further consideration of that here is beyond the ambit of this article. However, we may touch upon it some other day.
Conclusion
Following some initial reluctance, there is a positive trend developing for the UAE courts to recognise the primacy of the New York Convention, and apply it. These court judgments indicate a positive shift for the enforcement regime in the UAE for those seeking to enforce foreign arbitral awards in the UAE. However, it is important to bear in mind that the UAE courts do not operate a binding precedent system: in other words, a decision by one judge does not bind another, and as such, a judge is free not to follow these decisions applying the New York Convention.
A major piece of pending legislation in the UAE is a Federal Arbitration Law, which practitioners have been eagerly awaiting since 2008. It is anticipated that the new law will remove some of the current uncertainties in relation to overall arbitration process and bring the UAE in line with major international arbitration centres.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
