October 24, 2018

Ongoing Arbitral Proceedings: the UAE’s new Arbitration Law in action (or not…)

The UAE's new Arbitration Law (Federal Law No. 6 of 2018) (the Arbitration Law) was issued on 3 May 2018 and came into force on 16 June 2018; repealing Articles 203 to 218 of the UAE Civil Procedure Code (Federal Law No. 11 of 1992) applicable to arbitration, and any other provisions contrary to the Arbitration Law. The Arbitration Law is intended to apply to all ongoing arbitral proceedings according to its Article 59 which provides that: "[t]he provisions of this Law shall apply to all ongoing arbitral proceedings at the time of entry into force of this Law even if such proceedings rely on an arbitration agreement that was concluded prior to the issuance of the Law". The applicability of the Arbitration Law to ongoing arbitral proceedings was recently debated before the Dubai Court of First Instance. The court was asked to determine whether the Arbitration Law applies to court proceedings challenging the validity of a partial award on jurisdiction filed just a few days before the Arbitration Law came into force.

The key facts

On 13 June 2018, the Claimant commenced proceedings before the Court of First Instance challenging a partial award concluding that the arbitral tribunal had jurisdiction to determine the dispute. The court proceedings commenced by the Claimant ran parallel to the ongoing arbitration proceedings.

The Claimant argued that the challenge of the partial award was not subject to the Arbitration Law because the court proceedings were commenced before the Arbitration Law came into force.  The Claimant sought to rely on the former regime because the former regime was less restrictive than the new one as regards the grounds upon which an arbitral award may be challenged.

Conversely, based on Article 59 of the Arbitration Law, the Respondent argued that the Arbitration Law applied to all ongoing arbitration proceedings regardless whether the related court proceedings were commenced before or after the Arbitration Law came into force.

Further to the point, the Respondent observed that under the Arbitration Law the parties have recourse to either challenge the decision of an arbitral tribunal as to its own jurisdiction within 15 days from the issuance of such decision, or challenge the final award on the basis of lack of jurisdiction at the ratification stage. On this basis, the Respondent argued that the Claimant's logic was flawed.  Following the Claimant's logic, if the Claimant had challenged the final award on the basis of lack of jurisdiction at the ratification stage instead of challenging the partial award on jurisdiction immediately, the Arbitration Law would have certainly applied since the challenge of the final award would have occurred after the Arbitration Law came into force. According to the Respondent it would be inconsistent to apply the former regime to the challenge of the partial award, but the Arbitration Law to the challenge of the final award on the same grounds relating to jurisdiction.

Not all is what it seems

On 19 September 2018, the Court of First Instance rendered a judgment dismissing the challenge raised by the Claimant on the basis of the former regime, not the Arbitration Law.

The court relied on Article 216 of the Civil Procedure Code applicable under the former regime to  conclude that the Claimant's challenge was premature.  The court considered that the partial award of the arbitral tribunal recognising jurisdiction to determine the dispute was not a final award and that only a final award is subject to challenge under Article 216.

The judgment of the Court of First Instance is subject to appeal as of right to the Court of Appeal. It remains to be seen whether the Court of Appeal will apply the Arbitration Law.  The final outcome will be particularly relevant to ongoing court proceedings commenced prior to the Arbitration Law coming into force.  For the time being, in what is one of the first (if not the first) judgments rendered in respect of the new Arbitration Law, it would appear that Article 59 of the Arbitration Law may not apply as squarely as a plain reading of the text suggests.