We review the decision of the onshore Abu Dhabi Courts on the ratification of an arbitral award issued by an arbitral tribunal under ICC arbitration rules
John GaffneySenior Counsel,Dispute Resolution
Malak NasreddineAssociate,Dispute Resolution
In a recent case before the onshore Abu Dhabi Courts on the ratification of an arbitral award issued by an arbitral tribunal under the rules of arbitration of the International Chamber of Commerce (“ICC”), the courts declined jurisdiction in favour of the courts of the Abu Dhabi Global Market (“ADGM”). This article reviews the courts’ approach and reasoning in reaching this highly important decision.
Article 18(1) of the Federal Law No. (6) of 2018 on Arbitration (“Federal Arbitration Law”) states that: “The Competent Court shall have jurisdiction to consider arbitration issues referred hereunder in accordance with the procedural laws of the State. The Competent Court shall exercise exclusive jurisdiction until the conclusion of all arbitral proceedings.”Article 1 of the Federal Arbitration Law defines the ‘Court’ as: “The federal or local Court of Appeals agreed upon by the parties or in whose jurisdiction the arbitration is conducted.”
This important judgment suggests that as a matter of UAE law, parties arbitrating under the ICC Rules in Abu Dhabi will be deemed to have chosen the ADGM as the seat of arbitration by virtue of the location of the ICC Representative Office.
Article 1 of Law No. 4 of 2013 concerning the Abu Dhabi Global Market, as amended by Law No. 12 of 2020 (“ADGM Law”), defines ‘Global Market Establishments’ as:
“Company, Any branch, representative office, institution entity, or project registered or licensed to operate or conduct any activity within the Global market by any of the Global market Authorities according to the provisions of this law or the Global market regulations or the executive resolutions including the licensed financial Global market Establishments.”
Article 13(7)(d) of the ADGM Law states that:
“The Court of First Instance and [sic] shall have exclusive jurisdiction to consider and decide on matters according to the following … (d) Any request, claim or dispute which the Global Market’s Courts has the jurisdiction to consider under the Global Market Regulations.”
The dispute between the parties arose from a construction agreement (“Agreement”), under which the Appellant was commissioned by the Respondent to construct a building. The arbitration clause in the Agreement stated:
“Any disputes arising out of or in connection with the present contract shall, failing amicable resolution and the inability of the parties to agree on a dispute resolution body, be finally decided through arbitration subject to the ICC Rules. The arbitration shall be conducted in accordance with the laws of the UAE and shall be seated in the Emirate of Abu Dhabi.”The dispute resolution clause in the Agreement thus provided that the Arbitration Rules of the ICC (“ICC Rules”) would apply and that the seat of the arbitration would be Abu Dhabi. The Respondent commenced ICC arbitration proceedings against the Appellant, who in turn filed a counterclaim. On 4 September 2022, the ICC arbitral tribunal issued a final award.
After the parties entered into the Agreement (and before the ICC tribunal issued its final award), the ICC opened its fifth branch as a representative office in the ADGM (“ICC Representative Office”).
The Appellant filed a claim before the Abu Dhabi Court of Appeal under Case No. 14 of 2022 to set aside and invalidate the arbitral award, and to summarily stay enforcement of the arbitral award pending final judgment.
The Appellant argued before the Court of Appeal that the arbitral award was invalid because, amongst other things, (a) the arbitral award contradicted public policy in respect to its form and contents, (b) the arbitral award was invalid because the tribunal breached the principle of impartiality in its decision, and (c) the tribunal awarded legal fees and costs in the arbitral award, but such award exceeded the limits of the power of attorney given by the Respondent to their counsel in respect of claiming such fees in the arbitration. The Respondent argued that the Appellant’s case was time-barred.
On 2 November 2022, the Abu Dhabi Court of Appeal held that it did not have jurisdiction to determine the matter.
The Court held that the ADGM Courts had exclusive jurisdiction to hear the challenge because the arbitration was conducted under the ICC Rules, and the ICC Representative Office is an ADGM legal entity (notwithstanding the parties’ agreement to settle the dispute under the ICC Rules, and that the seat of arbitration is Abu Dhabi). The Appellant appealed the Abu Dhabi Court of Appeal’s decision before the Court of Cassation under Case No. 1045 of 2022.
In its appeal before the Abu Dhabi Court of Cassation, the Appellant argued that the Abu Dhabi Court of Appeal misapplied the law and erred in its decision that it did not have jurisdiction to determine the matter in dispute. It argued that:
The parties agreed to settle their dispute under the laws of the UAE. The parties did not agree to settle their dispute under English law, which applies in the ADGM.
The parties agreed that the place of arbitration was the Emirate of Abu Dhabi. Thus, in accordance with Articles 1 and 2(1) of Federal Arbitration Law, the Abu Dhabi Court of Appeal was the competent court to hear claims in setting aside the domestic (onshore) arbitral award.
The fact that the ICC opened its Representative Office in the ADGM (after the parties entered into the Agreement) does not affect the parties’ agreement on the seat of arbitration.
The parties’ agreement to settle their dispute under the ICC Rules does not make the ICC or any of its branches a seat for arbitration, as this violates the agreement between the parties. There was no record of the parties’ agreement to refer to the ADGM as a seat of arbitration, or apply its laws and regulations to the arbitration.
The arbitral award was not issued by the ICC Representative Office in the ADGM. Rather, the arbitral award was issued by the Secretariat of the ICC Court. The ICC Representative Office did not notify the parties of the arbitral award. Rather, the notification was conducted by the Secretariat of the ICC.
The Agreement was not concluded or performed, in whole or in part, and the event did not occur, in whole or in part, in the ADGM. Neither the ADGM, the ADGM authorities, nor any of the ADGM establishments were parties to the arbitral award or the challenge to the arbitral award. Thus, the ADGM Courts do not have the jurisdictional basis to deal with the matter.
Even if the ADGM Courts were competent to hear the dispute, a judicial vacuum would be created because the ADGM Court of First Instance has no jurisdiction to hear the case in accordance with Article 13(7) of ADGM Law. And the ADGM Court of Appeal does not have jurisdiction since its jurisdiction is limited to hearing challenges to judgments and orders of the ADGM Court of First Instance.
Hence, the Appellant argued that the Abu Dhabi Court of Appeal violated Article 54 of the Federal Arbitration Law because the arbitral award was final and may only be challenged before the Abu Dhabi Courts.
The Appellant further argued that the Abu Dhabi Court of Appeal violated the New York Convention, to which the UAE acceded under Federal Decree No. 43 of 2006. The Appellant argued that the New York Convention establishes a rule of jurisdiction that the courts of the country in whose territory the award was issued (i.e., in this case, Abu Dhabi, UAE) are to have exclusive jurisdiction to hear a challenge against the award, whereas the courts of other member states and arbitration organisations may not reconsider and/or hear the challenge of the award.
The Appellant also relied on the Federal Arbitration Law, which sets out the procedure for the recognition and enforcement of arbitral awards before the domestic courts in the UAE, to argue that the Abu Dhabi Courts have jurisdiction considering that the arbitral award was issued in the Emirate of Abu Dhabi, outside the jurisdiction of the ADGM Courts.
The Abu Dhabi Court of Cassation dismissed the appeal & upheld the decision of the Court of Appeal.
In doing so, the Abu Dhabi Court of Cassation relied, amongst other things, on the definition of “Global Market Establishment” under the ADGM Law, which comprises a branch or representative office in the ADGM.
The Abu Dhabi Court of Cassation noted that there was no dispute between the parties that the ICC opened its Representative Office in the ADGM during the conduct of the arbitration proceedings and before the issuance of the arbitral award. Thus, the court determined that, since the arbitration was subject to the ICC Rules in Abu Dhabi, the arbitration fell under the scope of the ICC Representative Office, which is an ADGM Establishment pursuant to the ADGM Law.
Hence, the Abu Dhabi Court of Cassation held that the ICC branch located in the ADGM was considered a Representative Office of the ICC, and the seat of arbitration was the ADGM (and not Abu Dhabi). Accordingly, the challenge to the arbitral award fell within the jurisdiction of the ADGM Courts, and the Abu Dhabi Court of Appeal’s finding that it lacks jurisdiction over the matter was correct in law.
This important judgment suggests that, as a matter of UAE law, parties arbitrating under the ICC Rules in Abu Dhabi will be deemed to have chosen the ADGM as the seat of arbitration by virtue of the location of the ICC Representative Office. It remains to be seen whether the Abu Dhabi courts will uphold party agreements that expressly record their choice of onshore Abu Dhabi as a seat (for example, by excluding the ADGM as a seat), where relevant.
For further information,please contact John Gaffney and Malak Nasreddine.
Published in March 2023