Recognition and Enforcement of the Arbitration Awards in UAE - Research Paper Example

 Recognition and Enforcement of the Arbitration Awards in UAE, & especially in Dubai MLA referencing style and UK English. Topics covered: 1.Introduction 2. Definition of the word arbitration 3. Domestic and International arbitration 4. The New York Convention on Arbitration 5.The UAE’s Accession 6. The Riyadh Convention 7. The UAE Courts and foreign arbitration clauses 8. UAE’s experience 9. Arbitration and enforcement in Dubai 10. Conclusion Recognition and Enforcement of the Arbitration Awards in UAE 1 Introduction The UAE (United Arab Emirates), which has undoubtedly emerged as a key regional commercial hub in the Middle East because of the special status granted to one of its Emirates Dubai, is a signatory since 2006 to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ( Oxford, 232). The UAE is also a signatory to the 1983 Riyadh Convention on Arbitral Awards (Sanders, 56) , besides being a member since 1982 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). The main objective of the UAE, like any other country, in acceding to these conventions on Arbitration Laws is to protect its interests in attracting international investments into its territories in general and into Dubai in particular by falling in line with the member states of the UNO and those of the Arab League in the matters of dispute resolution that may arise among the investment and business community. Though the Emirate of Dubai gains a special status in the international investment and business community because of its independent judicial and arbitral system ( Luttrell, 31-45) and also because of its being equipped with the Dubai International Financial Centre, the recognition and enforcement of foreign arbitral awards in the UAE in general and in Dubai in particular may face certain difficulties as the country’s judiciary is obsessed with the feeling of jurisdiction of local courts (Prince, 286). The UAE is also under an obligation, as the signatory of the Riyadh Convention, to see that the enforcement of any foreign arbitral award on its soil does not violate the spirit of its Recognition and Enforcement of the Arbitration Awards in UAE 2 Constitution, Shari’a Law and public policy. These might turn out to be the potential grounds that would block the interests of the international business community in seeking a serious enforcement of foreign arbitral awards. Since the UAE’s accession to the 1958 Convention is hardly two and half years old, the repercussions of these grounds on the issue would be gradually known in the future. The definition of Arbitration The word ‘Arbitration’ is internationally famous but there is no precise definition to the word anywhere. In fact, it unfortunately does not have a legal definition too. Neither the British Parliament cared to incorporate a definition for the word in its Arbitration Act 1996 nor does a definition appear to this word in the Handbook on International Commercial Arbitration (Poudret, 1). Notwithstanding the lack of proper definition, the word ‘arbitration’ is generally referred to as a private form of a dispute resolution among the involved firms or parties by an arbitrator or a panel of arbitrators ((Tamimi, Pars.3). It commonly arises between two or more international trading organisations or firms when they are involved in disputes over commodities contracts (Our People, Pars.1). Arbitration Awards are therefore nothing but resolutions of trade and economic disputes arising between two or more international parties / firms involved in trading and commercial activity. Such Awards play a dominating role in the economic activity of a country and its international relations. Recognition and Enforcement of the Arbitration Awards in UAE 3 Domestic and International Arbitration Every country has its own arbitration laws for dispute resolution but as international trade and commerce have become part of the day in the present global scenario, most of the countries have to adopt to an international system of arbitral administration to resolve the arising disputes and help the international trading community in the proper conduct of trade and commerce. Adherence to certain practices by nations in this arena would help in the smooth conduct of bilateral trade between nations and thereby help improve the international relations among nations. In tune with these objectives, several regional groups of countries have developed certain arbitration laws for implementing them in their countries. The United Nations Organisation (UNO) too has brought into force certain arbitration laws with the concurrence of its member nations for their implementation to resolve trade disputes among nations. The United Arab Emirates (UAE), like several other nations, has also recognised certain arbitration laws enshrined by the UN for enforcing them on its territory. The UAE accepted and recognised the arbitration laws approved by the New York Convention of 1958 and also those of the Riyadh Convention of 1983. Besides, since 1982, the UAE has been a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). Before a detailed examination is made about how far the UAE has gone in its recognition and enforcement of the arbitration laws developed by the UN and the Riyadh Convention and Recognition and Enforcement of the Arbitration Awards in UAE 4 what type of limitations the trading community is facing in the implementation of the foreign Arbitration Awards, let us examine the laws and related aspects first. The New York Convention on Arbitration A convention of international trade and business representatives was held in 1958 under the sponsorship of the United Nations to approve an international commercial law treaty. The convention, shortly known as The New York Convention of 1958 or the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 in its full form laid down certain conditions, rules and regulations for the recognition and enforcement of foreign arbitration Awards in the territories of UN member states. The Convention laws do not apply to a domestic Award issued in a country for its implementation on its own soil to resolve domestic trade or other disputes. The Convention or the laws enshrined by it must be studied in relation to the Arbitration Awards rendered overseas. The Convention makes it mandatory on the part of the signatory states for the recognition and enforcement of the foreign arbitration awards as long as they are not against the principles of public policy (Beeley, 1-2) . The rules and regulations approved by the New York Convention are such that a country can either enhance or totally destroy the international effectiveness of an Award rendered on its territory by accepting or setting it aside. The Convention makes it obligatory on the part of member nations to enforce written agreements, to submit disputes to arbitration and to enforce Recognition and Enforcement of the Arbitration Awards in UAE 5 arbitral Awards rendered in another country except in certain circumstances mentioned in the Article 5 of the Convention (Murphy, 388). Frick explains (281) the circumstances in a better way by outlining that if an Award is rendered in Switzerland but declared null and void by any Swiss Law, it can’t be enforced in the jurisdiction of any other country. He further explains that, on the other way, if the Award is rendered in Switzerland but nullified under any France Law due to some reason, the nullification would have no bearing in any other country. These rules and regulations have wider and far reaching consequences on international relationships as an arbitration Award issued in the territory of a member country would be directly enforceable in the territory of another member country of the UN. Though the treaty conditions have their loopholes and shortcomings, the treaty has turned out to be one of the most successful UN sponsored commercial law treaties. The UAE’s Accession Being a member of the International Centre for the Settlement of Investment Disputes (CSID), the UAE acceded to the New York Convention 1958 in 2003 through a Cabinet decision but its Government delayed its implementation for a long time (USA IBP, 60). His Highness the President Sheikh Khalifa Bin Zayed Al Nahyan issued a Decree in the year 2006 to enforce the treaty making the UAE the 138th country out of the 143 to accept the Convention laws. The association with the world arbitration rules (V& E, Pars.2). Recognition and Enforcement of the Arbitration Awards in UAE 6 Mills (Pars 35-41) supports this by saying that the UAE finally became a party to the 1958 Convention on arbitration from 16 November 2006. He elaborates that the UAE was the last member-country of the GCC to ratify the treaty after Kuwait, Saudi Arabia, Bahrain, Oman and Qatar which ratified the Arbitration Law in 1978, 1994, 1998, 1999 and 2003 respectively. Going by the version of Mills, UAE would surely not have gained a better experience of implementing the Awards of the 1958 Convention as it had belatedly acceded to it. As the recognition of the New York Convention is hardly two and a half years old, it must be grappling with the implementation of the foreign arbitral Awards now. In fact, the conclusive accession of UAE to the Convention took place in the backdrop of the country gaining the status of a regional and international commercial hub with increasing concentration on Dubai by the foreign investors. The Riyadh Convention In 1983, members of the Arab League ratified an agreement on mutual judicial cooperation in a convention held at Riyadh and this cooperation included some provisions dealing with Arbitral Awards too. As per the Riyadh Convention, Arbitral Awards rendered in a contracting state would also be accepted, recognised and enforced similar to the implementation of judgements given in civil cases (Sanders, 56). The Government of UAE ratified this treaty on 15 April 1999 by issuing the Federal Decree no.53 of 1999. But Article 3(a) of the Riyadh Treaty has Recognition and Enforcement of the Arbitration Awards in UAE 7 asked all its member states not to enforce the Awards or judgements which are contrary to the spirit of the Shari’a Law, the Constitution or the Public Policy of the country where an application is made to enforce such judgements (Luttrell, 1-3). The UAE Courts and foreign arbitration clauses The enforcement of foreign arbitration Awards in the UAE needs to be ratified by the legal courts of the country. Unless and until a foreign arbitration award is ratified by an authorised legal court, it can’t be enforced anywhere on its territory. But one must not forget the fact that the legal courts of UAE, dealing with civil procedure Code and Maritime Code, have innumerable provisions dealing with jurisdiction which is surely a matter of public policy. This gives hope to conclude that in case a dispute involves a connection in any way to the country, the connected parties are bound to invoke the provisions of jurisdiction of local courts. But exceptions are given to the foreign arbitration clauses including those of the New York Convention 1958 as they are recognised and upheld by the UAE courts if the parties concerned place relevance and dependence on such clauses during the first hearing of the dispute in a court (Mills, Pars. 3). This is actually a rigid clause and to seek enforcement of a foreign arbitration award through a UAE court, the parties concerned must place relevance on the related clauses during their first Recognition and Enforcement of the Arbitration Awards in UAE 8 hearing and if they fail to do this for any reason, they would have to forgo the right of seeking enforcement of such an Award. But there is no evidence to suggest that law enforcing authorities in the country are giving good publicity to this clause for creating awareness among international business community seeking enforcement of foreign arbitrary Awards. Mills hastens to add that most of the times those seeking enforcement of the foreign arbitration clauses in UAE take dependence on the past judgements and expect a favourable result for them while ignoring the rule book. In the process, the parties would tend to forget that they are dealing with a young arbitration system or a less developed judicial system. The UAE Federal Supreme Court once held that since the country’s legal courts have jurisdiction over commercial agency disputes under the Commercial Agency Law 1981, the foreign arbitration clauses in registered commercial agencies could not be enforced ( USA IBP, 60). The courts should keep in mind several such judgements while ratifying or rejecting the foreign arbitrary awards. UAE’s experience It is no exaggeration to say that whatever experiences the UAE has gained till now in the implementation of foreign arbitration judgements, they have come to it in relation to the Riyadh Convention and the country has little experience with the enforcement of foreign arbitral judgements in relation to the New York Convention. Luttrell vehemently argues in his research article that the Arab country’s courts would strictly go by the precedents set by the member Recognition and Enforcement of the Arbitration Awards in UAE 9 countries of the Gulf Cooperation Council (GCC) in the interpretation of provisions of the New York Convention. Luttrell continues to say that a close examination of the instruments of the Riyadh and the New York Conventions leads us to conclude that the words “public policy” are commonly used by both of them and that the UAE courts are bound to interpret them as “domestic public policy” when applications for the ratification of foreign arbitration Awards are submitted to them. Western attorneys point out that courts would allow parties involved in legal disputes to file for arbitration at any point of time but would not allow any type of legal claim from any party which has already committed to arbitration (USA IBP, 60). Some corporate agencies and legal experts also express the opinion that the UAE Laws would not oppose parties selecting a Foreign Law to govern their business contracts and also opting for arbitration for dispute resolution. However, they are clear in stating that the UAE courts would not enforce foreign judgements or arbitral Awards unless the conditions laid down by the Federal Civil Procedures Law are met by the disputed parties. So, in practice, it may not be possible to implement the foreign Arbitration Awards if one of the disputed parties is a resident of the UAE or the dispute relates to the contract being implemented in its territory (Emirates Centre for Strategic Studies and Research, 50). Arbitration and enforcement in Dubai The Emirate of Dubai, a part of the UAE, has its own arbitration and enforcement laws to govern its special economic and trade zone called Dubai International Financial Centre (DIFC). Recognition and Enforcement of the Arbitration Awards in UAE 10 The DIFC, created under Federal Law 8 of 2004 and equipped with its independent arbitral laws and judiciary and untied to the rest of the UAE, has recently revised its own Arbitration Law featuring the provisions of the United National Commission on International Trade Law (UNCITRAL) Model Law (Beeley, 1-2). Beeley stresses that the new DIFC Arbitration Law has resulted in a modern and sophisticated arbitration system implementing well pronounced and familiar arbitration rules and being administered by eminent common law judges. It is true that the revised Law undoubtedly eliminates any lingering doubts over seeking arbitration in Dubai through the DIFC. This is quite appreciable as far as seeking arbitration is concerned but when it comes to the enforcement of a foreign arbitral award in Dubai, things may be different. The DIFC Judicial Authority is the concerned legal court in the Dubai Emirate dealing with arbitration and enforcement laws. It works independently on Common Law on its own dealing in English language (Mills). In awarding an arbitration award or ratifying a foreign arbitration award for enforcement, the DIFC court has to abide by the grounds enshrined in article 44 of its Arbitration Law which could be used by local litigants for blocking the issuance or enforcement of an award. Most of these are common and similar to those laid down by the 1958 New York Convention for the signatory countries (Beeley). Some of those are incapacity, invalid agreement to arbitrate, absence of finality, subject matter not eligible for arbitration and finally the award being contrary to public policy. The most important of them is the last one, the award being contrary to public policy, which is likely to be invoked by litigants who want to block an Award or an Award’s enforcement. The Recognition and Enforcement of the Arbitration Awards in UAE 11 mention of ‘public policy’ is not new to UAE as the condition applies to all member nations of the UN acceding to the 1958 convention. An arbitral award rendered in a country under the 1958 convention could be made null and void by its Government by invoking ‘public policy’ issue destroying the Award’s international acceptance. This ‘public policy’ issue gains a double importance in UAE in general and in Dubai in particular as the Riyadh Convention also asks the signatories not to enforce any arbitral award which goes against the public policy. One more problem is that any award which goes against the spirit of Shari’ a Law can’t be enforced in the UAE. Under this provision too, local litigants can move a court for blocking the enforcement of a foreign arbitral award (Luttrell, 1-3). Beeley also points out that an Award rendered by the DIAC is not enforceable in the rest of the UAE territories without the award being ratified first by the DIFC Judicial Authority under the Law of 12 of 2004. In such a case, such an award, without being ratified first by the Judicial Authority can’t be considered as an Arbitration Award rendered in the UAE for the purposes of New York and Riyadh Conventions, though the country is signatory to both. This is a complex situation really. If the DIFC court does not ratify an award rendered by the Dubai Arbitration Authority, it equals to an action taken by the UAE Federal Government to nullify it. The pitiable thing here is that with really no action being taken by the Federal Government to nullify the award under the 1958 convention, the Award gets nullified. With this backdrop, it would be difficult for the enforcement in any another country of such an award under the New York treaty. Recognition and Enforcement of the Arbitration Awards in UAE 12 Conclusion The UAE has been no doubt attracting foreign investors, especially the western segments into its special economic zone Dubai but as long the Emirate enjoys a special status without getting it linked to the New York convention of 1958, ambiguity continues to haunt the Federal Authorities in matters of awarding arbitration and enforcing foreign arbitral awards. The UAE must take a leaf from the books of China which also has created special economic zones (Beeley). If the Federal Government of UAE takes some measures to extend the scope and ambit of the New York Convention to the DIFC, it would go a long way in the arbitration annals of the country. Beeley suggests that the Government can issue a notification or declaration under Article 10 of the 1958 Convention bringing the DIFC into its jurisdiction and explains that such a step would be in tune with the treatment meted out by the People’s Republic of China to its special administrative zones, Hong Kong and Macau. Similar steps must be taken by the UAE Government to clarify the status of DIFC in relation to the Riyadh Convention. This is very much required as the convention has asked its signatories not to enforce any foreign arbitrary award if it goes against the spirit of the Shari’ a Law (Luttrell, 1-3). This condition authorises the UAE courts to reject the enforcement of any foreign arbitrary award at their will and pleasure under the pretext of this clause. Proper legislation or steps should be initiated to eliminate this condition enshrined by the Riyadh convention. Recognition and Enforcement of the Arbitration Awards in UAE 13 Works Cited Books Emirates Centre for Strategic Studies and Research, Markaz al-Imārāt lil-Dirāsāt wa-al-Buḥūth al-Istirātījīyah and Michael Kuczynski. Privatization and deregulation in the Gulf energy sector. I.B.Tauris, 1999 Frick, G. Joachim. Arbitration and Complex International Contracts: With Special Emphasis on the Determination of the Applicable Substantive Law and on the Adaptation of Contracts to Changed Circumstances. Kluwer Law International, 2001 Murphy, D Sean. United States practice in international law. Cambridge University Press, 2006 Poudret , Jean-François, et al..Comparitive Law International. Sweet & Maxwell, 2007. Prince, Richard, Essam Al Tamimi. United Arab Emirates Court of Cassation judgments, 1998-2003. Brill, 2005. Sanders, Pieter. Quo Vadis Arbitration? : Sixty years of Arbitration Practice: A comparative Study Kluwer Law International, 1999 Recognition and Enforcement of the Arbitration Awards in UAE 14 USA International Business Publications. Doing Business and Investing in United Arab Emirates Guide. International Business Publications 2007. Magaznies and Periodicals Luttrell, S.R. “Commentary on the 2008 Arbitration Law of the Dubai International Finance Centre.” International Journal of Private Law. 2.1 ( 2009) : 31-45 Reports Oxford Business Group. The Report Abu Dhabi 2007. Oxford Business Group, 2007 Internet sources: Beeley, Mark (2009). Arbitration in the Dubai International Financial Centre: A promising Law, but will it travel well? 23 March 2009 < http://www.vinson-elkins.com/uploadedFiles/VEsite/Resources/MarkBeeleyArticle.pdf> Luttrell, S.R. Arbitrator Bias in the United Arab Emirates( UAE). 22 March 2009 Recognition and Enforcement of the Arbitration Awards in UAE 15 Mills Chris. ( 2007). Litigation and Dispute Resolution in the UAE: Better the Devil You Know? Not Always. 22 March 2009 Our People (2008). Enforcement of Foreign Arbitration Awards in the United Arab Emirates: The Sands of Change? 29 Feb.2008. Reedsmith the business of relationships. 22 March 2009 Tamini Essam Al. ( 2006). UAE Accedes to New York Convention. 15 July 2006. The Chartered Institute of Arbitrators. 21 March 2009 . V&E International Dispute Resolution E-Communication (2006). "U.A.E. Accedes to the New York Convention". 30 Aug.2006. Publication. 22 March 2009 Read More