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Legal developments

Decision on enforcement of foreign awards under the New York Convention

A decision of the highest court in Dubai in 2013 to refuse to recognise or enforce two foreign arbitration awards under the New York Convention in the case of CCI v Ministry of Irrigation of the Democratic Republic of the Sudan has generated a lot of speculation in the UAE arbitration community. Concerns have been expressed that the CCI decision may represent a backward step from the pro-enforcement decision of the same court in the 2012 case of Macsteel International v Airmech (Dubai) LLC. CCI applied to the Dubai courts for recognition and enforcement of two arbitration awards dating from 1988 and 1989 that were issued under the ICC arbitration rules by a Tribunal seated in Paris. CCI relied upon the 1992 bilateral agreement between France and the UAE (the Paris Convention) and the New York Convention.

The Dubai Court of Cassation refused to recognise or enforce the foreign awards on the basis that the Dubai courts had no jurisdiction over the award debtor. This was based on the fact that the award debtor did not have domicile or any physical presence in Dubai, the relevant obligations were all agreed outside of Dubai and the obligations were to be performed outside of Dubai. Lawyers involved in the case have also reported that the enforcing party, CCI, did not identify any assets of the award debtor in Dubai.

The Dubai Court of Cassation made the following key decisions in the CCI judgment:

  • the court's jurisdiction over foreign parties is a matter of "public order";
  • the following provisions of the Paris Convention and the New York Convention allow the Dubai courts to apply domestic UAE law relating to the jurisdiction of the UAE courts over foreign parties:

Article 15 of the Paris Convention: "The procedure for securing the enforcement of the judgment shall be governed by the law of the requested State".

Article III of the New York Convention: "Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon under the conditions laid down in the following articles."

In the 2012 Macsteel case, the Dubai Court of Cassation confirmed clearly that the New York Convention regime applied to the recognition and enforcement of foreign awards. The main concern arising from the CCI judgment is that it may indicate a reluctance of the Dubai courts to apply the New York Convention regime to foreign awards.

In our view, the CCI case does not indicate a backward step. This is because:

  • the Dubai Court of Cassation considered and relied upon the terms of the New York Convention in the CCI judgment (although there is debate as to whether it interpreted the relevant provisions correctly); and
  • it is not unprecedented for the courts of a New York Convention state to require that its jurisdiction over the award debtor must be established under domestic law as a pre-condition to the application of the New York Convention (eg the United States courts).

Parties seeking to enforce foreign awards in the UAE may also take comfort from the unusual circumstances of the CCI case. In particular, it is unusual for a party to seek the enforcement of a foreign award in a jurisdiction where the award debtor does not have a physical presence or any identifiable assets.

Where the award debtor has a presence or identifiable assets in Dubai, the Dubai courts will have jurisdiction under UAE domestic law and, in those circumstances, the CCI case and the Macsteel case both indicate that the New York Convention regime will apply to the recognition and enforcement of foreign awards.

Grant of a reflective Freezing Order by the DIFC Courts

There have been recent reports in the Dubai press that the DIFC Courts have enforced a Worldwide Freezing Order that was granted by the English courts.

The judgment and order of the DIFC court in this case has not been published yet. However, as there is no legal basis under DIFC law for the enforcement of interim orders of the English courts, we assume that the Worldwide Freezing Order granted by the English courts was submitted by the applicant as evidence in support of an application to the DIFC Courts for the grant of a Freezing Order on similar terms. This would not be surprising since there are no substantial differences between the considerations that are relevant to the DIFC Courts and the English courts on an application for a Freezing Order.

New ADCCAC arbitration rules

The Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC) has issued new arbitration rules that took effect from 20 October 2013. The new ADCCAC rules replace the old rules with a more modern framework for arbitration which is comparable to that of other leading arbitration institutions in the region. This development is likely to be seen as a positive step that is in line with other initiatives to develop Abu Dhabi into a modern hub for business in the Middle East.

Legal and Regulatory Risk Note
Middle East