The Seat of Arbitration & Its Significance
The seat is effectively the home of the arbitration, and will generally determine the procedural law governing the arbitration. The seat also determines which court has supervisory jurisdiction over the arbitration, which will be an important consideration when it comes to the setting aside of an arbitral awards or applications for interim measures.
The seat of arbitration, not to be confused with the geographical location of arbitration hearings, is an important aspect in both international and domestic arbitrations, and one that is often overlooked or not given proper consideration.
When drafting dispute resolution clauses, far too many lawyers (in many cases, those with very little practical arbitration or litigation experience) do not appreciate the implications of (i) choosing an inappropriate seat of arbitration or (ii) not clearly specifying the chosen seat.
The seat is effectively the home of the arbitration, and will generally determine the procedural law governing the arbitration.
The seat also determines which court has supervisory jurisdiction over the arbitration, which is a very important factor when it comes to the setting aside of an arbitral awards or applications for interim measures.
In this article, we discuss (with reference to two very remarkable decisions) the recent trend adopted by the UAE courts when it comes to their approach in providing supervisory support to UAE-seated arbitrations.
In a matter that came before the Dubai Court of Cassation in early 2021 (1), the brief factual background can be summarised as follows.
The claimants had been the successful parties, to the tune of circa AED 7.5 million, in a DIFC-LCIA arbitration (the “Award”). The seat of arbitration had been designated as “Dubai”. On that basis, the respondents approached the Dubai Courts in order to apply to have the Award set aside.
In dismissing the respondents’ application, the Court took an unconventional view:
“Challenging the awards and decisions issued by the subsidiaries of the DIFC and its judicial entities shall be before the DIFC’s specialized courts […] Accordingly, the DIFC Courts is the only authority to consider the request of the plaintiff in the current claim to invalidate and end up the arbitration procedures in the arbitration action filed before the arbitration panel in the DIFC”.
From the above extract, it is clear that the Court took the view that because the Award had been issued by an arbitral institution registered in the Dubai International Financial Centre (DIFC), any set aside application should be brought before the DIFC Courts. This is, of course, contrary to the established principle that the courts of the seat are usually exclusively competent to entertain and consider any application to have an arbitral award nullified (2).
Abu Dhabi Courts
In another matter in which our firm had been personally involved, the claimant initiated arbitral proceedings against the respondents under the auspices of the International Chamber of Commerce (“ICC”). The seat of arbitration was specified as “Abu Dhabi City”. The applicant (claimant in the arbitration), in an effort to prevent a successful call on the performance bond, filed an application (3) before the Abu Dhabi Courts (as the courts of the seat) to have a precautionary attachment registered over the bond (4).
In handing down its decision, the Court dismissed the application on the basis that the Abu Dhabi Courts had no jurisdiction to determine the application. In coming to that conclusion, the Court noted that since the arbitration was filed before the ICC, an arbitral institution headquartered in Paris, the arbitration was deemed to be seated in Paris and not Abu Dhabi.
Feeling wronged by the decision, the applicant filed a grievance (or appeal) (5), in which the applicant affirmed the arguments made in the application, but this time, drew specific attention to the fact that the arbitration was seated in Abu Dhabi and not Paris; in accordance with the parties’ arbitration agreement.
Unfortunately, the decision in the grievance was even more puzzling than the decision in the application. In the grievance, the Court determined that the Abu Dhabi Global Market (ADGM) Courts – and not the Abu Dhabi Courts – was the competent court to consider the precautionary attachment application. The Court came to this decision based on the fact that the ICC has a representative office in the ADGM.
It is obviously clear that the above-referenced decisions go completely against established international arbitration principles, which provide that the courts of the seat are the curial courts for any interim measures or set aside applications.
However, although arbitration is a popular mode of dispute resolution in the UAE and the wider gulf region, we need to understand that the concept is still in its infancy, and therefore, may be a largely foreign concept to some UAE judges (6).
Having said that, it is always advisable that when dispute resolution clauses are drafted, and a UAE seat is agreed, the parties make this unequivocally clear in their agreements. For instance, if the parties agree that the Dubai Courts are to have supervisory jurisdiction over their arbitration, they should perhaps specify “onshore Dubai” or “mainland Dubai” as the seat of arbitration instead of references to just “Dubai”. UAE courts may be less likely to dismiss applications (like the ones described above) – for a lack of jurisdiction – if it was unmistakably clear to them that the seat was not one of the freezones.
In the same vein, if the parties agree that either of the offshore courts (i.e., the DIFC Courts or the ADGM Courts) are to be the supervisory courts, then the seat should be specified as “the Dubai International Financial Centre” or “the Abu Dhabi Global Market” instead of simply “Dubai” or “Abu Dhabi”. This would go a long way in clearing up the confusion that is, in many cases, far too common in the UAE.
When agreeing on a seat of arbitration, parties should always be mindful to consider a seat: (i) whose courts are generally familiar or acquainted with the concept of arbitration; (ii) whose jurisdiction and laws are arbitration-friendly and supportive to the arbitration process; and (iii) that is a signatory to the New York Convention (7).
1 – Dubai Court of Cassation, in Case No. 458/2021
2- International Arbitration: Law and Practice by Gary B. Born © 2016 Kluwer Law International BV, The Netherlands at page 123.
3- Abu Dhabi Commercial Court of Appeal, in Case No. 30/2021 (7 April 2021).
4- Under UAE law, a precautionary attachment is an interim remedy available to parties who wish to prevent or restrict the beneficiary (under a performance bond, for instance) from encashing the bond. In many ways, a precautionary attachment is the English law equivalent of an injunction.
5- Abu Dhabi Court of Appeal, in Case No. 35/2021 (3 May 2021).
6- The UAE only recently (2018) introduced its first standalone law on arbitration.
7- New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).
Disclaimer: This publication does not provide any legal advice and it is for information purposes only. You should not rely upon the material or information in this publication as a basis for making any business, legal or other decisions. Any reliance you place on such material is therefore strictly at your own risk.
Author: Nathan Baikie