10 Dec 2015

Recoverability of Lawyers’ Fees in Arbitration

Authored by: Raymond Kisswany

Recoverability of Lawyers’ Fees in Arbitration

Arbitration is an alternative form of dispute resolution where parties agree to resolve their disputes through decisions of an arbitrator(s) rather than court litigation. Arbitration is the preferred method of dispute resolution in many international commercial cases as a result of the complexity of the litigation process as well as the time and costs involved. Arbitration allows parties to avoid courts and maintain strict confidentiality; however, arbitrations have become increasingly costly in terms of lawyers’ fees and other arbitral costs. One of the advantages of arbitrations is the ability for successful parties to recover their lawyers’ fees. This article seeks to examine whether recovering lawyers’ fees in an arbitral award is enforceable in the UAE.

It is important to note that the UAE does not currently have specific legislation regarding arbitration. The applicable regulatory framework is found in UAE Federal Law No. 11 of 1992, concerning Civil Procedures (“CPL”). CPL Article 218 states: “[t]he arbitrators shall be allowed to allocate their fees and arbitration expenses and may decide that such amount, in whole or in part, be borne by the party against whom the award is issued. The court may, at the request of one of the parties, amend the said allocation taking into account the efforts of the arbitrators and the nature of the dispute”. The CPL does not grant the specific authority requiring unsuccessful parties to pay successful parties’ lawyers’ fees, however at the same time, the CPL does not prohibit arbitrators from making such an award.

The Dubai International Arbitration Centre (“DIAC”) has arbitration rules which are in line with international standards and is a popular venue for various types of dispute resolution in the region. Pursuant to the DIAC Rules, the tribunal must specify in the award the costs of the arbitration and their apportionment. The phrase ‘costs of the arbitration’ is defined under Rule 37.10 and states as follows: “Cost of Arbitration, and their apportionment between the parties shall be fixed in the award or other order by which the arbitral proceedings are terminated. An award may be rendered solely for costs”. DIAC Rule 37.10 does not explicitly define or include lawyers’ fees under the term ‘costs of the arbitration’.

The Dubai Court of Cassation, Dubai’s highest court, has directly considered whether lawyers’ fees may be awarded under DIAC Rules. An application was made to the Dubai Court to enforce a DIAC arbitral award which included an order that the unsuccessful party pay the successful party’s lawyers’ fees. The Dubai Court of Cassation held that an arbitration tribunal only has the power to order a party to pay the opposing party’s lawyers’ fees if specifically granted that authority through: (i) applicable UAE procedural law; (ii) arbitral rules agreed by the parties (i.e. DIAC, ICC, AAA); or (iii) an explicit reference to lawyers’ fees in the arbitration agreement between the parties.

UAE procedural law does not grant the right to recover lawyers’ fees. The DIAC Rules only permit the arbitration tribunal to apportion the ‘costs of the arbitration’, but does not explicitly refer to lawyers’ fees in its definition under DIAC Rule 37.10. The Dubai Court of Cassation held that the aforementioned list was exhaustive, and that since it did not include lawyers’ fees incurred by the successful party in presenting its case, the DIAC Rules do not confer such authority on the tribunal. The Dubai Court of Cassation noted that the parties’ arbitration agreement did not discuss or envision recovery of lawyers’ fees by either party. We should note that the Dubai Court of Cassation did not dismiss the entire arbitral award; rather, only the portion of the award as it related to lawyers’ fees.

It is important to note that UAE law recognises the concept of freedom of contract, subject to public policy; therefore, UAE courts should uphold lawyers’ fees in an arbitral award where the arbitration agreement between the parties expressly provides that lawyers’ fees shall be borne by the unsuccessful party in the arbitration.

Therefore, lawyers’ fees are unrecoverable where UAE procedural law is silent and where lawyers’ fees are not clearly and expressly referenced in either the institutional arbitration rules or in the parties’ arbitration agreement.

The concept of recovering lawyers’ fees is not a unanimously accepted notion in arbitrations; furthermore, different jurisdictions interpret the right to recover lawyers’ fees differently. Thus, it is prudent for parties to an arbitration agreement to be detailed, express and explicit in their intentions as to the recovery of lawyers’ fees.

 
 

This article, including any advice, commentary or recommendation herein, is provided on a complimentary basis without consideration of any specific objectives, circumstances or facts. It reflects the views of the writer which may, in some cases, differ from those of the firm, especially in the developing jurisdiction of the UAE.