This article was featured in our 2023 Construction Arbitration Report, which is part of a series of industry-focused arbitration reports edited by Jus Connect and Jus Mundi.
This issue explores the construction industry and presents a goldmine of information based on data available on Jus Mundi and Jus Connect as of May 2023. Discover updated insights into construction arbitration and exclusive statistics & rankings, as well as in-depth global and regional perspectives on construction projects, disputes, & arbitration from leading lawyers, arbitrators, experts, arbitral institutions, and in-house counsel.
THE AUTHOR:
James Harbridge, Partner and Head of Engineering and Construction at Hadef & Partners
Alexander Wagg, Associate at Hadef & Partners
Michael Farchakh, Associate at Hadef & Partners
Conducting an arbitration whilst thinking about the enforceability of any resulting arbitration award should be at the forefront of the parties’ minds during any arbitration. However, issues affecting the enforceability of an award are all too often only brought into focus after an award has been issued and, inevitably, challenged by an unsatisfied party.
Within the United Arab Emirates there are three possible seats for an arbitration, three separate sets of lex arbitri and six supervisory court systems overseeing arbitrations within those seats. Parties are free to elect the seat of their arbitration pursuant to the law applicable to each seat:
- Those arbitrations seated ‘onshore’ in one of the seven Emirates of the UAE, outside of the Abu Dhabi Global Market (“ADGM”) and Dubai International Financial Centre (“DIFC”), are governed by Federal Law No. 6 of 2018 concerning arbitration (UAE Arbitration Law). The Emirates of Abu Dhabi, Dubai and Ras Al Khaimah have their own set of courts, while the other Emirates share the use of the Federal Courts;
- DIFC Arbitration Law No. 1 of 2008 (“DIFC Arbitration Law”) applies to arbitrations seated in DIFC; and
- The ADGM Arbitration Regulations 2015 (“ADGM Arbitration Law”) applies to arbitrations seated in the ADGM.
The UAE Arbitration Law provides a list of eight grounds upon which a party may apply to the supervisory courts for annulment of an award. There are also two further reasons by which the UAE courts can annul an award of its own finding, namely the arbitrability of the dispute, and whether the award contradicts public order and morality in the UAE.
In DIFC, the DIFC Arbitration Law provides four grounds upon which a party may apply to set aside an award and three further reasons (including whether the subject matter of the dispute is capable of settlement by arbitration under DIFC law) by which the DIFC courts can, of its own volition, set aside an award.
Likewise, the ADGM Arbitration Regulations 2015 provide five party-applicant grounds for the setting aside of an award, and two reasons by which the ADGM Courts may, of its own volition, set aside an award.
Recently, in judgments from both the Abu Dhabi Courts and the ADGM Courts, the Courts have considered the correct forum for applications for annulment and setting aside of awards seated in the UAE.
In an interesting judgment in early 2023, the Abu Dhabi Court of Cassation has determined, in an appeal on an application for annulment of an ICC award in a UAE seated arbitration, that the arbitration was in fact seated in the ADGM, due to the opening of the ICC’s representative office within the ADGM during the arbitration and prior to issuance of the tribunal’s award. In its judgment in Case No. 1045/2022, Abu Dhabi Court of Cassation dated 18 January 2023, the court considered an application by the claimant at arbitration for annulment of an award issued in a construction arbitration. The Abu Dhabi Court of Appeal (the court empowered to hear the initial application for annulment pursuant to the UAE Arbitration Law), in its judgment of 2 November 2022 in Case No. 14/2022, the Abu Dhabi Court of Appeal, rejected the claimant’s application for annulment, and its decision was subsequently upheld by the Abu Dhabi Court of Cassation.
In similar but unrelated (and described by the court as ‘unusual’) proceedings before the ADGM Courts, in its decision of 13 March 2023 in A6 v B6 [2023] ADGMCFI 0005, the ADGM Court of First Instance adjudicated on an application for set aside of an ICC award but, in doing so applied the UAE Arbitration Law as agreed by the parties in their original contract. It ultimately dismissed the claimant’s application, and in applying the UAE Arbitration Law found that the claimant had not in fact evidenced any of the specified grounds for annulment of the award.
In this case, the claimant applied to the ADGM Court of First Instance for the setting aside of an ICC award, seeking re-opening of the arbitration proceedings and instruction of a newly-appointed tribunal to assess its apparent further evidence. The arbitration involved claims by the claimant subcontractor against the respondent main contractor regarding the construction of an integrated gas development pipeline. The agreement between the parties provided for disputes to be resolved pursuant to ICC arbitration “conducted in Abu Dhabi City (U.A.E)”. The arbitration clause included an express governing law clause (those being the laws of the Emirate of Abu Dhabi, and those of the UAE), but did not specifically dictate whether it was the parties’ intention that ‘Abu Dhabi City (U.A.E)’ was the seat of the arbitration or the venue for the arbitration.
In its award, the tribunal had awarded the claimant roughly 7% of the sums it claimed, and the claimant therefore commended proceedings before the Abu Dhabi Court of Appeal seeking annulment of the award. The Abu Dhabi Court of Appeal dismissed the claimant’s application, citing lack of jurisdiction on the basis that the ICC’s branch office was situated in the ADGM, and therefore it was the ADGM Courts that had jurisdiction to hear the set aside application. The claimant appealed the Abu Dhabi Court of Appeal decision to the Abu Dhabi Court of Cassation, which upheld the decision of the Abu Dhabi Court of Appeal, prior to the claimant’s application to the ADGM Courts.
Both parties agreed that the ADGM was not the proper seat for any ICC arbitration conducted in Abu Dhabi, however in this case both parties had subsequently agreed in writing to submit to the jurisdiction of the ADGM courts as a ‘narrow exception’. The ADGM Court of First Instance therefore considered that the parties were at liberty to ‘opt-in’ to the jurisdiction of the ADGM Courts.
The ADGM Courts recognised the difficulty in the claimant’s position: It was asking the ADGM Courts to consider an application for setting aside of an award (which the ADGM Courts were empowered to hear) pursuant to the ADGM Arbitration Regulations 2015, whilst at the same time maintaining that the applicable law of the seat of the arbitration was the UAE Arbitration Law. The ADGM Court of First Instance applied the UAE Arbitration Law on the basis that that had been agreed as the law governing the seat in the parties’ agreement.
As to the merits of the claimant’s application to set aside the award, the ADGM Court of First Instance found that none of the claimant’s contentions, regarding contravention of public policy and natural justice, fairness, misapplication of evidence by the tribunal, and unequal treatment, were proven and therefore any potential criticisms of either factual or legal errors in the award could not undermine its validity. In its decision the court noted:
“It is well established that courts faced with applications to set aside arbitral awards are loath to trespass upon the duly constituted tribunal’s assessment of the case before it except in instances in which egregious and particularly obvious errors have occurred which clearly can be seen to impact upon the intrinsic fairness and veracity of the arbitral process. This basic principle underpins both legislative provision and the substance of judicial pronouncement, and on this point there is a substantial correlation of view between different jurisdictions.”
The ADGM Court of First Instance also cited Case No. 1383/2021 Abu Dhabi Court of Cassation, in which the court stated that an application for annulment cannot be founded on either how an arbitrator had applied the law or the extent to which he had violated the law or erred in its application or interpretation, nor on the arbitrator’s assessment of the evidence and the documents presented. Any application for annulment was therefore strictly limited to the grounds set out in the UAE Arbitration Law.
Importantly, the ADGM Court of First Instance addressed the fact that the claimant sought to re-open parts of the proceedings as regards underlying parts of the award that it was not satisfied with, stating that there was nothing in the UAE Arbitration Law, nor the ADGM Arbitration Regulations 2015, that allowed for part of an award to be ‘re-opened’. Any application for set aside of an award was for the setting aside of an award in its entirety.
Subsequently, in its decision of 27 April 2023 in A6 v B6 [2023] ADGMCFI 0010, the ADGM Court of First Instance refused the claimant’s application for permission to appeal.
As a result of these decisions, it appears that the Abu Dhabi Courts have time and time again recently conflated the ICC’s branch office (registered and situated within the ADGM) as conferring on parties whose arbitrations are administered pursuant to ICC Rules in Abu Dhabi an express ‘choice’ of an AGDM seat. Practically, as can be seen, this has then forced parties (whose agreements to arbitrate have specified a UAE seat) to agree to ‘opt in’ to the jurisdiction of the ADGM Courts in order for the ADGM Courts to assess their applications, not under the ADGM Arbitration Regulations 2015 (for which the ADGM Courts are the supervisory courts), but instead under the UAE Arbitration Law.
To conclude, complexity is the watchword!
ABOUT THE AUTHOR
James Harbridge, Partner and Head of Engineering and Construction at Hadef & Partners. James Harbridge is a partner in the Dispute Resolution team, specialising in construction arbitration and litigation. James also has a broad commercial disputes background, predominantly in international arbitration. He qualified in England in 1995 and has worked exclusively in the Middle East’s disputes resolution market since 1999. Prior to joining Hadef & Partners, he worked as a partner for a number of international law firms. Before moving to UAE in 2016, he spent many years living and working in Muscat, Oman and he retains close ties with the country.
Alexander Wagg is an Associate at Hadef & Partners in the engineering and construction team. He has spent most of his life in the Middle East, having lived in Oman and Abu Dhabi, and has been based in Dubai since 1999. He has extensive experience of UAE law and assists developers, main contractors and subcontractors in arbitrations before DIAC, ICC and, prior to the abolition of the DIFC Arbitration Institute, before the DIFC-LCIA, as well as related disputes before the DIFC courts and Dubai courts.
Michael Farchakh is an Associate with Hadef & Partners’ Dispute Resolution Team in Dubai. He is qualified in Beirut and New York and admitted to the DIFC Courts. Michael’s practice focuses on arbitration and litigation, particularly in the construction and energy industries. Michael also advises clients on issues of Public International Law.
Find more data-backed insights in our 2023 Construction Arbitration Report
