Expanding Arbitration Boundaries, the Impact of Seat Selection, and Clarifying ICC Rules
Dispute Resolution / UAE
On the 19 November 2024, the Dubai Court of Cassation issued a significant judgment (Judgment 756 of 2024) (the “First Judgment”) that provides unprecedented guidance on several critical aspects of arbitration.
Law Update: Issue 376 – Transport & Insurance
Naief YahiaPartner, Head of Dispute Resolution - Dubai
Mosaab AlySenior Counsel,Dispute Resolution
Dina AssarKnowledge Lawyer,Dispute Resolution
On the 19 November 2024, the Dubai Court of Cassation issued a significant judgment (Judgment 756 of 2024) (the “First Judgment”) that provides unprecedented guidance on several critical aspects of arbitration. This judgment clarifies the implications of the parties’ selection of the seat of the arbitration proceedings and confirmed that the jurisdiction of the courts is determined by the legal seat, not the physical location of arbitration sessions or the arbitration centre. In this case, the Dubai Court of Cassation adopted a view on the jurisdiction of the ADGM Courts to hear annulment claims concerning ICC awards which differs from the Abu Dhabi Courts’ approach.
In Dubai Court Cassation judgment 756 of 2024, the Court also considered the interpretation of Article 38 of the ICC Rules and the tribunal's authority to award legal costs. In this regard, the Dubai Courts’ decision deviated from a judgment issued earlier last year (Dubai Court of Cassation 12 of 2024) where the Court held that the ICC Rules do not confer authority on the arbitral tribunal to award legal costs.
The Dubai Court of Cassation in Judgment 756 of 2024 also addressed the issue of joining non-signatories to an arbitration agreement. The court ruled that the arbitration agreement could extend to non-signatories under certain conditions.
More recently on 6 February 2025, the Dubai Court of Cassation issued another judgment (Judgment 548 of 2024) (the “Second Judgment”) where it emphasised that an arbitration clause could extend to parties who contributed to the performance of the contract which contained the arbitration clause. It is important to note that the Dubai Court of Cassation sought guidance from earlier judgments on this issue that were issued by the French Court of Cassation, the Swiss Federal Courts and the Egyptian Court of Cassation.
The Dubai Court of Cassation emphasized that the arbitration agreement's scope could extend to non-signatories if certain criteria are met, such as the involvement of the non-signatory in the contract's formation or performance.
This article will discuss the findings of the two Dubai Court of Cassation judgments mentioned above in detail below.
The First Judgment: Dubai Court of Cassation Judgment 756 of 2024The First Judgment revolves around an arbitration award issued by the International Chamber of Commerce (the “ICC”). The award debtor challenged the validity of this arbitration award before the Dubai Court of Appeal on several grounds, primarily arguing that it was not a party to the underlying contract that contained the arbitration clause. The Court decided to only set aside the award’s ruling for legal costs amounting to USD 1,542,376.1 on the grounds that the arbitral tribunal had no authority to award legal cost under the ICC Rules.
Both parties filed an appeal to the Dubai Court of Cassation. The award creditor challenged the Dubai Court of Appeal’s finding on legal costs, while the award debtor challenged the Dubai Court of Appeal’s refusal to set aside other parts of the award. The Dubai Court of Cassation issued the First Judgment allowing the award creditor’s appeal and dismissing the award debtor’s appeal.
The Second Judgment: Dubai Court of Cassation Judgment 548 of 2024The Second Judgment concerns an arbitration award issued in arbitration under the rules of the Dubai International Arbitration Centre (the “DIAC”). The award debtors initiated set aside proceedings before the Dubai Court of Appeal primarily on the grounds that they were not parties to the agreement which contained the arbitration clause. The Dubai Court of Appeal accepted the award debtors’ argument and set aside the DIAC award in its entirety. As a result, the award creditor appealed the Dubai Court of Appeal’s finding to the Dubai Court of Cassation. The Dubai Court of Cassation issued the Second Judgment allowing the award creditor’s appeal and overturning the DCA’s ruling.
The Dubai Court of Cassation, in the First and Second Judgments, laid down unprecedented principles that will be important for the arbitration industry. They are as follows:
The First Judgment clarified the distinction between the physical venue of the arbitration, where arbitration sessions are held or the arbitration centre is based, and the legal seat of arbitration. The legal seat carries significant legal implications, including determining whether the arbitral award is domestic or foreign and identifying the court with jurisdiction to challenge the arbitral award.
The Dubai Court of Cassation also held that while the arbitration sessions were conducted at the Abu Dhabi Global Market (ADGM) Arbitration Centre, the legal seat remained, according to the parties’ agreement, in Dubai. As a result, the Dubai Court of Cassation decided that the Dubai Court of Appeal shall have jurisdiction to hear the annulment proceedings. The Dubai Court of Cassation rejected the argument that the ADGM courts should have jurisdiction to hear the annulment proceedings simply because the arbitration sessions were held there or an application had been submitted to the ADGM Courts for the recognition and enforcement of the award.
The Dubai Court of Cassation also clarified that the presence of the ICC Representative Office in the ADGM does not confer the jurisdiction on ADGM Courts over ICC arbitration awards that are seated in Dubai. The Dubai Court of Cassation explained that “there is no connection between the ICC Representative Office, established by the International Chamber of Commerce (ICC) in the Abu Dhabi Global Market (ADGM) to facilitate arbitration proceedings under the supervision of the ICC in the region, and the ADGM Arbitration Centre. The latter is not an arbitration institution in the strict technical sense but merely a state-of-the-art facility for hosting arbitration hearings.”
In the First Judgment, the Dubai Court of Cassation held, unlike in an earlier judgment, that the ICC Rules allow the arbitral tribunal to award legal costs, including attorney fees, as part of the arbitration costs. Specifically, Article 38(1) of the ICC Rules allows arbitral tribunals to award "other reasonable costs incurred by the parties in the arbitration." The Dubai Court of Cassation noted that the term "costs" in Article 38 is broad and encompasses various expenses, including legal fees. The Dubai Court of Cassation also rejected the argument that the absence of an explicit mention of attorney fees in Article 38 precludes their inclusion as recoverable costs. In its reasoning, the Dubai Court of Cassation referred to international arbitration practices and the interpretation of similar rules by other arbitration institutions, which commonly include legal costs as part of the arbitration expenses.
In its obiter dictum of the First Judgment, the Dubai Court of Cassation addressed the legal principles and conditions under which non-signatories can be joined to an arbitration. The Dubai Court of Cassation held that “a party to an arbitration agreement is not necessarily the one who physically signed it but rather the party issuing instructions”. The Dubai Court of Cassation emphasized that the arbitration agreement's scope could extend to non-signatories if certain criteria are met, such as the involvement of the non-signatory in the contract's formation or performance.
In the Second Judgment, the Dubai Court of Cassation overturned the Dubai Court of Appeal’s finding that the award is null and void on the grounds that the award debtors were not parties to the contract containing the arbitration clause. Unlike the Dubai Court of Appeal, the Dubai Court of Cassation found that the award debtors are bound by the contract, including the arbitration clause. The Dubai Court of Cassation based its finding, inter alia, on the legal principle that “the judiciary tends to extend the arbitration clause stipulated in a contract to those who have contributed to its performance while being aware of the existence of such a clause”. The Dubai Court of Cassation also referenced earlier judgments issued by the French Court of Cassation in its ruling dated 8 July 1991, the Swiss Federal Court in its decision dated 19 April 2011 and the Egyptian Court of Cassation in Appeals No. 4729 and 4730 of Judicial Year 72, issued in its session on 22 June 2004, highlighting the international aspect within the Dubai Court of Cassation’s jurisprudence.
Both the First and Second Judgments contain principles that are aligned with the "group of companies" doctrine and the concept of implied consent. For instance, in the First Judgment, the Dubai Court of Cassation held that “an arbitration clause signed by a subsidiary may extend to the parent company, or vice versa,depending on which party had the decisive authority during the formation or performance of the contract”. The Dubai Court of Cassation’s rulings also indicate that implied consent can be inferred from the conduct of the parties, such as active participation in the contract's execution or performance. This principle is crucial in determining whether a non-signatory can be bound by an arbitration agreement.
The recent Dubai Court of Cassation judgments mark significant strides towards strengthening the arbitration industry within the Emirate of Dubai. By adopting such progressive judicial principles in arbitration jurisprudence, the Dubai courts strive to provide a secure and supportive environment for international arbitration practices. This fosters a conducive legal environment, solidifying Dubai's role as a leading hub for managing international arbitration disputes in the Middle East.
For further information,please contact Naief Yahia, Mosaab Aly and Dina Assar.
Published in April 2025
