Sep 25, 2014

Enforcing an arbitration award in the UAE By James Foster

Different regimes apply in the UAE for enforcing international awards and local awards (ie awards made within the UAE).

International arbitration awards

The UAE is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). Arbitration awards made in the UAE can be enforced overseas in the many other countries which have signed up to the Convention and also, importantly, awards made in other Convention countries can be enforced in the UAE.

There are also other conventions and treaties to which the UAE is a party which deal with reciprocal enforcements of awards between countries in the Gulf Cooperation Council (GCC), of which the UAE is one, and other Arab and North African countries.
The Convention is intended to make enforcement of arbitration awards between the member countries both consistent and relatively easy. Although enforcement of an award under the Convention is not automatic, there are only certain closely defined exceptions to the general rule that enforcement should be allowed. The intention is that the Convention provisions should take priority over the local rules which would otherwise apply to enforcement in the country in question.
The UAE's accession to the Convention in 2006 provoked much debate at the time about the attitude which the local UAE courts would take towards enforcing a foreign arbitration award under its provisions. The local courts in the UAE have always taken a conservative view toward arbitration, regarding it as a possible encroachment on their powers and exclusive jurisdiction. Arbitration awards had always previously been recognised and enforced only under the strict conditions provided for under UAE law.
The early decisions of the UAE courts on enforcement of Convention awards confirmed the suspicion that there would be a general reluctance to depart altogether from local UAE law principles on enforcement, despite the clear provisions of the Convention.
However, prompted perhaps by the UAE's wish to be recognised as an internationally desirable place to do business, more recent decisions have shown a marked trend towards enforcement strictly in accordance with the Convention provisions. As a consequence, and perhaps ironically, it is now easier to enforce an international arbitration award in the UAE than it is to enforce a local award.

Local arbitration awards

In the case of a local award, the traditional approach continues and the courts will only ratify and enforce an award under the strict conditions set out in the UAE Civil Procedure Code.
A provision in the Code which often causes difficulties says that an award may not be ratified and enforced by the local courts "If an invalidity occurs in the ruling or in the procedures which influence the ruling". These words are often used as the basis for a challenge to an award on highly technical and unmeritorious grounds.
Such challenges sometimes succeed, and even if they do not, there are two stages of automatic appeal from the court which first hears the challenge. This can lead to months and sometimes years of delay, during which time enforcement of the award will usually not be possible.
Strictly speaking, the UAE courts have no power to review the merits of an arbitration award if the other conditions for ratification and enforcement are satisfied. But in practice challenges based on the merits are often dressed up as challenges for a supposed "invalidity ... in the ruling or in the procedures", which then results in the courts undertaking a review of the merits and setting aside the award. In those circumstances, it is difficult to have confidence in the supposed finality of an arbitration award.

Banyan Tree v Meydan

Against this background, the Dubai International Financial Centre (DIFC) Court's decision inBanyan Tree Corporate PTE Ltd v Meydan Group LLC has attracted considerable attention. The court in that case decided that it had jurisdiction to recognise and enforce a local award made by the Dubai International Arbitration Centre.
That part of the decision was no surprise, but many had assumed that the DIFC Court's jurisdiction to recognise and enforce a local award was limited to cases where the parties or the dispute had some connection with the DIFC. However, the DIFC Court went on to decide that no such connection was necessary.
The DIFC Court did not need to decide in Banyan Tree whether the presence of assets within the physical boundaries of the DIFC was a precondition of it having jurisdiction to recognise and enforce, but there are good reasons for thinking that it is not a requirement.
If so, it raises the intriguing possibility that a local award can be recognised and enforced by theDIFC Court - and a judgment of the DIFC Court obtained to that effect - even where there is no connection of any kind with the DIFC and even where the only assets are outside the DIFCboundaries and can therefore only be executed against through the local courts.
This prospect has caused a stir in the UAE legal community. Although the local courts would still have to be involved in executing the DIFC Court's judgment against the assets outside the DIFC, the local courts must observe the terms of an agreed enforcement protocol with the DIFC Court when executing DIFC Court judgments. In particular, the local courts "may not reconsider the merits of the judgment, decision or order".
Does this mean that technical challenges to an arbitration award can still be made at that stage under the UAE Civil Procedure Code? Or will the local courts, when executing the award, respect the DIFC Court's judgment and decide that the a.ward is to be executed without any further enquiry? The answers to those questions will no doubt become clear. When they do, it will be interesting to see whether the local courts maintain the conservative approach they did in the early days of the Convention, or whether the more arbitration friendly approach of recent decisions will be apparent.
In the UAE we live, as the saying goes, in interesting times ...

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