ADGM Court of First Instance accepts jurisdiction over an application to set aside an arbitral award rendered in ICC proceedings in onshore Abu Dhabi
John GaffneySenior Counsel,Dispute Resolution
Malak NasreddineAssociate,Dispute Resolution
This article reviews the judgment of the Abu Dhabi Global Market (“ADGM”) Court of First Instance on an application brought by the Claimant on 13 October 2022 (the “Application”) to set aside a Final Award dated 19 January 2022 and the “Decision and Addendum to the Final Award” dated 9 May 2022 (collectively, the “Award”), which were issued by an arbitral tribunal in an arbitration in an ICC Case.
The judgment is notable because the ADGM Court of First Instance accepted jurisdiction over an application to set aside an arbitral award rendered in ICC proceedings seated in onshore Abu Dhabi.
The main contractor (the “Defendant”) was engaged on a project involving the procurement and construction of an integrated gas development pipeline. The Defendant appointed a sub-contractor (the “Claimant”), which entered into a contract for the execution of civil works and the erection of a steel structure at phase 1 of the project (the “Contract”).
Clause 32.3.1 of the Contract provided that the parties would resolve their dispute through arbitration seated in Abu Dhabi in accordance with the Rules of the International Chamber of Commerce (“ICC Rules”). Clause 32.1 confirmed that the Contract was governed by the local laws of Abu Dhabi and the federal laws of the UAE.
A dispute arose between the parties concerning the performance of their respective obligations under the Contract. On 5 March 2019, the Claimant commenced an ICC arbitration pursuant to the arbitration agreement in Clause 32 of the Contract. The arbitral tribunal (by majority) awarded the sum of USD 2,136,124.72 plus interest at the rate of 2% per annum. The arbitral tribunal subsequently amended the “Final Award" by way of a “Decision and Addendum to Final Award” pursuant to Article 36 of the ICC Rules.
The Claimant was dissatisfied with the Award since the arbitral tribunal had disallowed its claims beyond the awarded amount. On 20 June 2022, it brought proceedings before the Abu Dhabi Court of Appeal to set aside the Award pursuant to Articles 16 and 53 of Federal Law No. 6 of 2018 on Arbitration (the “Federal Arbitration Law”).
On 6 July 2022, the Abu Dhabi Court of Appeal dismissed the Claimant’s application. The court decided, on its own motion, that: (i) it had no jurisdiction to rule on the set aside application, and (ii) since the branch office of the ICC is located in the ADGM, the jurisdiction to set aside the Award rested with ADGM Courts, and thus the set aside application should be heard by the ADGM Courts.
The Claimant challenged the Court of Appeal judgment on appeal before the Court of Cassation. On 19 September 2022, the Court of Cassation rejected the appeal and rendered a final and conclusive judgment upholding the Abu Dhabi Court of Appeal judgment.
On 13 October 2022, the Claimant filed its application to set aside the Award before the ADGM Court of First Instance.
The ADGM Court of First Instance considered (among other things) four main questions, as follows:
1. Whether the ADGM Courts had jurisdiction to grant the relief sought by the Claimant, and, if so, on what basis?
The Respondent argued that it was not suggested that ADGM is the proper seat of any ICC arbitration conducted in the Emirate of Abu Dhabi, but that in the “exceptional circumstances” of Claimant’s application, and in light of the written consent of both parties to submit to the jurisdiction, there exists a “narrow exception” for ADGM Courts to assume jurisdiction and to decide the present application on its merits.
The ADGM Court of First Instance noted that the circumstances of this case were unusual and expressed its initial hesitation to accept jurisdiction. However, the court stated that such hesitation has been met by the parties’ express agreement in writing that they wished to submit to the jurisdiction of the ADGM Courts, and that in so doing they wished to ‘opt in’ to the jurisdiction of the ADGM Courts pursuant to Abu Dhabi Law No. 4 of 2013 (as amended by Abu Dhabi Law No 12 of 2020) (the “Founding Law”), which permits parties to refer their disputes to ADGM Courts notwithstanding a lack of nexus to the ADGM.
The ADGM Court of First Instance confirmed that, given the parties’ written agreement as to jurisdiction, which satisfies one of the jurisdictional gateways contained in the Founding Law, there was no need for the court to consider whether, on the facts of this case, any of the other jurisdictional gateways had been satisfied.
Accordingly, the ADGM Court of First Instance accepted the case on the basis that the parties opted into the jurisdiction of the court, which of itself is sufficient to find jurisdiction.
2. Whether the provisions of Part 3 of the ADGM Arbitration Regulations be applied in determining the application, or should the Federal Arbitration Law be applied?
The ADGM Court of First Instance noted that, under Section 58 of the ADGM Arbitration Regulations 2015 (the “ADGM Arbitration Regulations”), recourse to the ADGM Courts against an arbitral award is predicated upon the arbitration in question having its seat in the ADGM, which was not the case in the present matter, it being undisputed that the seat of the subject arbitration was mainland Abu Dhabi. The court noted that neither party sought to argue that the establishment of an ICC Case Management Office within the ADGM affected the contractual choice of arbitral seat.
The ADGM Court of First Instance concluded that it therefore must apply Federal Law No. 6 of 2018 on Arbitration (the “Federal Arbitration Law”), which was the governing arbitration law to which the parties agreed in the Contract. The ADGM Court of First Instance confirmed that the ADGM Arbitration Regulations had no application.
3. Whether the application was time-barred?
The ADGM Court of First Instance referred to Article 54(2) of the Federal Arbitration Law, which provides that the action to set aside an arbitral award (termed an ‘action in nullity’) “shall not be heard after thirty (30) days have elapsed following the date of notification of the arbitral award to the applicant requesting the nullification”.
The ADGM Court of First Instance noted that the Claimant’s initiation of proceedings before the Abu Dhabi Court of Appeal was in compliance with the time requirement under Article 54(2), notwithstanding that the Abu Dhabi Court of Appeal and the Court of Cassation declined to hear the merits of the case considering their view that jurisdiction was vested in ADGM Courts.
Accordingly, the ADGM Court of First Instance held that there could be no reliance upon the three-month prescriptive period under Article 58(2)(c) of the ADGM Arbitration Regulations, and the Claimant’s contentions to the contrary must fail.
4. Whether any of the irregularities alleged on the part of the arbitral tribunal formed a basis for granting the relief sought by the Claimant?
The ADGM Court of First Instance considered that the Claimant’s ‘grounds’ for setting aside the Award amounted to no more than alleged factual and/or legal errors on the part of the arbitral tribunal in its assessment and evaluation of the merits of the arbitral dispute, and that, even if such criticisms were to be valid (on which the court took no view), this could not undermine the validity of the Award.
The Respondent submitted that the Claimant failed to demonstrate and prove how the alleged ‘errors’ of the arbitral tribunal offended the public policy of the UAE. The ADGM Court of First Instance agreed with this.
In deciding the application, the ADGM Court of First Instance considered the differing categories itemised in Article 53(1)(a)-(h) of the Federal Arbitration Law, none of which applied in the instant case. Accordingly, there was no case made to satisfy any of the statutory requirements and thus justify setting aside the Award.
Furthermore, the ADGM Court of First Instance rejected the contention that there is a mechanism under the Federal Arbitration Law (or, for that matter, under the ADGM Arbitration Regulations) to ‘re-open’ any arbitration after the Award is rendered. The ADGM Court of First Instance thus confirmed that, in principle, either the Award must be set aside or not; there can be no question of any ‘halfway house’.
This is the first court judgement in which the ADGM Courts have assumed supervisory jurisdiction over an arbitration seated in onshore Abu Dhabi. This judgment avoided a jurisdictional lacuna in circumstances where the Abu Dhabi courts declined jurisdiction over the application. However, the ADGM Court of First Instance did so on the basis of the parties’ consent to its jurisdiction for the purpose of determining the application, so an open question remains as to whether the ADGM Courts will assume jurisdiction over an onshore Abu Dhabi seated ICC arbitration where the parties do not consent to the jurisdiction of the ADGM Courts. Finally, it is notable that, having accepted jurisdiction, the ADGM Court of First Instance applied the Federal Arbitration Law, rather than the ADGM Arbitration Regulations.
For further information,please contact John Gaffney or Malak Nasreddine.
Published in April 2023