A bumpy but successful ride - contested awards under the UAE's new Arbitration Law

Middle East

Following the implementation of the UAE’s new Arbitration Law (Federal Law No. 6 of 2018) (the “Arbitration Law”) in June 2018 (see our previous Law Now here), CMS was instructed in one of the first cases involving an application to nullify an arbitration award under the Arbitration Law.

CMS represented an award creditor in relation to a DIAC award issued in early 2018. The award creditor applied to the Dubai Courts to ratify the award after the Arbitration Law came into effect. Simultaneously, an application to nullify the award was filed by the award debtor. The simultaneous filing of applications led to a ’stress test’ of the new processes related to the Arbitration Law.

Ratification

A number of practical issues arose in the period immediately following the implementation of the Arbitration Law.  For example, the Court of Appeal’s registration department was initially unable to accept ratification applications due to the overhaul of the online registration system. As a result of delays (and following many meetings with the head of the registration department) the application was, ultimately, registered manually.

The Court of Appeal also highlighted other practical issues with new filing requirements, which parties may wish to be mindful in future applications:

  • The registration department required copies of the award creditor’s and debtors original and attested trade licenses as they were foreign entities. Naturally this may be difficult and time consuming when faced with an award debtor reluctant to provide such information.
  • The registration department required a “certified copy” of the arbitral award. This was easily obtained from DIAC but may lead to delay when dealing with other arbitral institutions outside of the UAE.

Parties would be advised to start obtaining such documentation as early as possible.

Ultimately, in this case the ratification application was registered and CMS’s client was successful in obtaining a ratified award from the Dubai Court of Appeal. The ratification process was incredibly efficient and took far less time than that under the previous ratification regime.

Nullification

According to the Court of Appeal, the process of registering a nullification application is far more streamlined, as the nullification application is not made on an ex-parte basis (unlike the ratification application).

During the first hearing, the court specified that the award creditor would be permitted to file only one pleading in defence. However, the process was far more protracted with the parties exchanging 5 pleadings over the course of the nullification proceedings.

During the course of the nullification proceedings, CMS’s client successfully ratified the creditor’s award (referred to above). In turn, this led to the award debtor filing a grievance application in the ratification proceedings. Helpfully, the Dubai Court of Appeal consolidated the parallel proceedings (nullification and contested ratification), ensuring that the process was efficient.

In January 2019, CMS’s client successfully obtained judgment from the Dubai Court of Appeal dismissing the award debtor’s nullification application and grievance.

Comment

Despite the initial teething problems, the Arbitration Law overhauled the existing regime to make the ratification process far more streamlined. This is highlighted by the fact that the Court of Appeal took only 3 weeks to ratify the award.

Perhaps more importantly, the Court of Appeal rejected the award debtor’s arguments, including those concerning procedural issues that had previously caused many difficulties in enforcing arbitral awards in the UAE.

Overall, the nullification process took slightly over 4 months, which in our experience is a huge improvement over the prior system where the proceedings before the Court of First Instance could last at least six months – with the potential for further proceedings before the Courts of Appeal and Cassation.

Unfortunately, there will always be the possibility that recalcitrant judgment debtors seek to avoid their obligations and challenge awards through the UAE courts. In those circumstances, successful parties hope that the local courts where the award is being challenged will adopt a robust, arbitration friendly attitude to unmeritorious challenges and claims. If our experience under the new Arbitration Law is anything to go by, the UAE Courts continue to demonstrate an understanding of the purpose and spirit of the Arbitration Law to further the promotion of the UAE as a regional arbitration hub.