A judgment of the Dubai Court of Cassation in another domestic award enforcement case has sparked a legal debate surrounding the Court's refusal to enforce awards on 'public policy' grounds under the CPC. That case involved a claim to enforce three related DIAC awards in relation to a private real estate-related dispute, including consideration of the application of a Dubai law regulating the registration of off-plan property sales. The Court nullified the awards on grounds that the application of the relevant property law is a matter of public policy which cannot be resolved through arbitration. Our commentary on this ruling, including our views on comments made by some legal practitioners on the negative impact of the ruling for Dubai's arbitration credentials, can be read on the following link to our website http://clydeco.com/insight/updates/nullification-of-another-diac-arbitration-award-is-it-time-to-panic-no-says. In short, we consider that some commentators have exaggerated the significance of a judgment that is actually very narrow in its scope.
The approach of the DIFC Courts to arbitration
Dubai's civil law system courts are not alone in taking a stance in support of international arbitration. The DIFC Courts (which are based on common law principles and operate in English) are also playing their part , though not without a blip. In a judgment delivered in October in International Electromechanical Services v Al Fattan, the DIFC Courts have acted to redress an inconsistency between DIFC law and the UAEs treaty obligations, which was recognised in an earlier recent DIFC Court judgment, Injazat v Denton Wilde Sapte & Co. In Al Fattan the DIFC Court of First Instance ordered a stay of DIFC proceedings for a foreign (non-DIFC seated) arbitration to proceed between the parties in accordance with the arbitration agreement in their contract. The Court declined to follow its earlier ruling in Injazat where it had held that it was not bound by the DIFC Arbitration Law (or other DIFC statute) to stay proceedings brought in breach of an arbitration agreement for foreign arbitration, nor did it have an inherent jurisdiction to order a stay of proceedings in favour of foreign arbitration. The Court in Al Fattan agreed with Injazat that that there was no statutory obligation on the Court to stay proceedings for foreign arbitration, but it did not accept that there was no inherent jurisdiction for the Court to order a stay where that jurisdiction was not expressly excluded by statute.
The Court in Injazat expressed reluctance in ruling as it did, particularly as to the inherent jurisdiction point. It also recognised that its ruling on the interpretation of the DIFC Arbitration Law put the UAE in breach of its treaty obligations under the NYC, but considered that it was bound to that interpretation of the relevant provisions. Injazat stands awkwardly opposed with one of the DIFCs stated primary objectives of promoting Dubai as an international arbitration centre. If the judgment was not remedied quickly it had the potential to harm Dubais position as an international arbitration hub.
Unsurprisingly, Injazat was received with concern and disappointment by local practitioners and arbitration users. It was generally hoped that either through legislative amendment and/or subsequent judicial consideration there would be the opportunity to realign DIFC law with the DIFCs pro-arbitration function. The Al Fattan judgment is a timely one differing from the unsatisfactory position created by the DIFC Arbitration Law which the court felt bound to apply in Injazat. We expect to see legislative revision to remove the problem in the DIFC Arbitration Law, and therefore to settle the position more satisfactorily than reliance by the judiciary on inherent jurisdiction.
For arbitration and more generally for the reputation of Dubais legal system and its status as a key global commercial centre, these recent judgments of Dubais civil and common law courts overall show that things are moving in the right direction.