26 Jan 2020

Hadef in the Courts: The Joint Judicial Tribunal has affirmed that the “seat” is unshakeable

Authored by: Kadry Zaghawa, Matthew Page and Ghalib Mahmoud

The Joint Judicial Tribunal, set up to resolve conflicts of jurisdiction between the DIFC and on-shore Dubai Courts, has determined that the Dubai Courts will not have jurisdiction to hear nullification and any other arbitral claims made before it if the agreed legal seat is the DIFC. The Tribunal highlights that this shall remain the case irrespective of having a hearing take place in on-shore Dubai.  

In this article, our awarding winning Arbitration and Dispute Resolution team discusses a recent decision of the Joint Judicial Tribunal.

Background

On 15 March 2019, a three-member Tribunal rendered a multi-million dirham arbitral award (the Award) in favour of the Claimant, a subcontractor working on a major construction project in Abu Dhabi. The arbitration proceedings were conducted pursuant to the Rules of the DIFC-LCIA Arbitration Centre and the governing law of the Arbitration Agreement were the laws of the Emirate of Abu Dhabi and the Federal law of the UAE. The Arbitration Agreement further expressly indicated that “Pursuant to Article 16.1 of the DIFC-LCIA Rules, the seat of the arbitration shall be the Dubai International Financial Centre (DIFC)”.

The Respondent, a contractor, disputed the claims made by the Claimant, which related to the works carried out by the Claimant and, after the Award was rendered, the Respondent refused to pay the Claimant. The Respondent then took legal action against the Claimant to avoid payment of the amounts awarded to it and to nullify the Award and the Arbitration Agreement.

The Claimant filed an application with the DIFC Court to ratify or recognise the Award. An order recognising the Award was granted by the DIFC Court and was served on the Respondent. The Respondent filed an application to nullify the Award before the Dubai Courts, followed by the filing of an application with the Joint Judicial Committee (JJC) or Judicial Tribunal, arguing that the Dubai Courts had jurisdiction to  hear matters concerning the Award and not the DIFC Courts.

In its arguments before the JJC, the Respondent (Applicant before the JJC) argued that since the Parties held the arbitral hearing in on-shore Dubai (at a hotel located in Dubai Marina) and not in the DIFC, the Dubai Courts have exclusive jurisdiction to hear matters related to the Award.

The JJC Judgment

In a  poignant and unanimous judgment, rendered on 11 December 2019, which supports the DIFC’s jurisdiction , the JJC determined the seat of the arbitration is the relevant jurisdiction for hearing applications relating to the Award and not the place of the hearing (i.e. Dubai Courts) (the JJC Judgment). The JJC specifically referenced the Rules of DIFC-LCIA Arbitration Centre and what appears to be the language of Article 16.3 which states: “The Arbitral Tribunal may hold any hearing at any convenient geographical place in consultation with the parties and hold its deliberations at any geographical place of its own choice; and if such place(s) should be elsewhere than the seat of the arbitration, the arbitration shall nonetheless be treated for all purposes as an arbitration conducted at the arbitral seat and any order or award as having been made at that seat.” The JJC stated in paragraph 10 of its judgment that “the arbitration shall be considered as [an] arbitration held at the [seat of the arbitration] and any arbitration award issued shall be considered as if it was issued in the [seat of the arbitration]”(please note that “Arbitration Center” is a mistranslation from the Arabic which states “seat of the arbitration”).

Given the unambiguous agreement by the Parties to have the seat of the arbitration as the DIFC, the JJC found that the DIFC Courts have jurisdiction to hear the case and the Dubai Courts must cease from hearing this case.

This JJC Judgment is in contrast to a prior judgment made by the JJC in Cassation No. 1/2018. While both decisions found that the DIFC Courts were the appropriate venue for hearing matters pertaining to the respective awards, Cassation No. 1/2018, relied on the location of the DIFC-LCIA Arbitration Centre which is located in the DIFC, when determining that the DIFC Courts had jurisdiction. Here, the JJC referenced the overriding legal principle that the seat of the arbitration is the relevant jurisdiction/court under which a party must file nullification proceedings and/or an arbitration claim that may relate to the underlying arbitral proceedings. However, as is widely practiced by prevailing parties, ratification or recognition applications may be filed in more than one jurisdiction, usually in jurisdictions where the prevailing party believes that the non-prevailing may have assets to satisfy the award and in jurisdictions that are a contracting party to the 1958 - Convention on the Recognition and Enforcement of Foreign Arbitral Awards - the "New York" Convention.

Procedurally, despite the JJC Judgment, the respective Dubai Court (the Dubai Court of Appeal in this case) does not instantly issue a decision dismissing the matter nor does it stay the proceedings during the JJC process. The Dubai Courts instead adjourned the hearing dates and after the issuance of the JJC judgment, the matter was reserved for judgment for a future date on which the Dubai Courts will issue a judgment on the matter. While both Parties submitted pleadings before the Dubai Courts, including the JJC Judgment, a definitive judgment dismissing the nullification proceedings has not been made and will only be made on the judgment date. The judgment made by the Dubai Courts is also appealable to the Court of Cassation. The DIFC Courts, on the other hand, issued an order lifting the stay on proceedings within days of the JJC Judgment and the DIFC Court is in the process of facilitating the proceedings for a pending application before it.

Review

In summation, with this Judgment, parties are reminded of the importance of carefully and clearly expressing the seat of arbitration and the appropriate arbitration rules to support the seat chosen, especially should the place of the hearing be in a different location, in any arbitration/commercial agreement that is drafted.

Notably, in reviewing all published 2019 JJC judgments, in all but one of those judgments rendered and published, the JJC has found that the DIFC Courts have jurisdiction to hear the matter and not the Dubai Courts – a trend that appears to be starkly different from that which favoured the Dubai Courts in the onset years of the JJC’s establishment.

If you have any questions about this judgment, please contact Kadry Zaghawa, Matthew Page and Ghalib Mahmoud.

 
 

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.