By Dennis Brand
Dennis Brand from HBJ Gately Wareing looks at the issue of dispute resolution in a contract.
I think it is fair to say that occasionally some thought is given as to enforcement of the arbitration award, but rarely if any real thought is given to the jurisdiction of the local courts, either as to any challenge to an arbitration award or its enforcement.
Unlike many jurisdictions, the UAE does not have an arbitration law; in 2008, a draft arbitration law was in circulation, but as of today it is still in draft form.
The subject of arbitration is dealt with in the UAE Federal Law No.11 of 1992 as amended - The Law of Civil Procedure (Civil Procedure Law). Chapter 3, Articles 203 to 218 of the Civil Procedure Law specifically deals with arbitration, the appointment of arbitrators, the arbitration process and the validity of the arbitration award. Of course, where the parties choose the rules of a recognised arbitration centre - for example, the Dubai International Arbitration Centre (DIAC) or the International Chamber of Commerce (ICC), etc.
The rules of arbitration of such arbitration centres are both clear and comprehensive, which is why they are chosen by the parties to a contract as the preferred method of resolving a dispute. Both the DIAC and ICC, as do other arbitration centres, provide model arbitration clauses to be inserted in the contract, for example:
"Any dispute arising out of the formation, performance, interpretation, nullification, termination or invalidation of this contract or arising therefrom or related thereto in any manner whatsoever, shall be settled by arbitration in accordance with the provisions set forth under the DIAC Arbitration Rules (the Rules), by one or more arbitrators appointed in compliance with the Rules." - DIAC.
"All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules." - IIC.
Such model clauses are not provided simply to assist those preparing such contracts, but to ensure that the rules of arbitration which the parties have decided upon are incorporated as part of the contract, and that the process or award cannot be challenged in the local courts.
The Civil Procedure Law contains a number of provisions when considering the inclusion of an arbitration provision as the dispute resolution procedure in a contract:
• For an arbitration clause to be upheld by a court, it must be in writing and agreed upon by the parties. The subject of the dispute must be defined in the arbitration document, or the arbitration will be invalid;
• Where the parties have agreed upon arbitration, it will not be permissible for a claim to be filed in the court. However, if a claim is filed in the courts and the other party does not raise any objection at the first session, then the claim may be heard and the arbitration agreement will be deemed to have been cancelled;
• It is permissible for one party to make application to the court concerning the protection or attachment of assets, but the court will not deal with the substantive issues in the arbitration;
• The Civil Procedure Law in relation to the arbitration tribunal requires that an arbitrator must not be a minor, under guardianship or an undischarged bankrupt, etc.;
• If there is more than one arbitrator it must always be an uneven number;
• An arbitrator's consent must be in writing or by confirmation of his acceptance in the record of the session; he may not withdraw from an arbitration proceeding except with the agreement of the parties and may not be removed without an order of the court;
• An arbitrator must, within 30 days, notify the parties of the first session fixed for the hearing; must establish a time limit for the submission of documents and memoranda; and may make a ruling on the basis of submission of one party if the other party fails to do so within the specified time limit. If the parties have not stipulated a time limit for the arbitration (this would include any time limit set by the rules applied of a particular arbitration centre), then the arbitrators are required to rule within six months of the first arbitration session;
• The arbitrator shall require the witness to swear an oath, and anyone who gives false testimony before an arbitrator shall be deemed to have committed perjury;
• If there is more than one arbitrator, then the ruling or award shall be issued by a written majority opinion, together with any dissenting opinion. The award must comprise a copy of the agreement for arbitration, a summary of the statements and reasons for the award, together with the date and place of its issue and the signatures of the arbitrators. Unless the parties have agreed otherwise, the award must be issued in Arabic.
While it is as well to be aware of the Civil Procedure Law, the choice of a recognised established arbitration centre and proper adherence to its rules will reduce the possibility of a UAE court rejecting any application to enforce an arbitration award or accept a challenge as to its validity.