Enforcement of foreign arbitration awards in the United Arab Emirates.

AuthorMayew, Gregory J.

THE United Arab Emirates ("UAE") is a federation established in 1971 of the seven Emirates of Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain. (1) Abu Dhabi is the Federal capital of the UAE.

The UAE has approximately eight percent of the world's proven oil reserves and the Emirate of Abu Dhabi commands one of the wealthiest sovereign investment funds in the world. The UAE has one of the highest incomes per capita in the world. Concerns about regional security have made the UAE a major purchaser of defense technology. By one estimate, the UAE is the fourth largest importer of arms in the world. (2)

Because of the UAE's very strong financial standing regionally and internationally, it has attracted businesses from around the world to do commerce there. As a necessary part of doing commerce, all parties to the transaction are served by an agreed forum to hear and resolve disputes that may arise if they cannot resolve those disputes themselves. There is a strong need for a mechanism that is governed by rules that are known and understood and that can lead to a binding and, perhaps most importantly, enforceable result. Foreign arbitration clauses are probably the most common means of achieving these ends, and contracts between foreign defense contractors and UAE counterparties, for example, often include foreign arbitration clauses. If an arbitration clause is invalid in the UAE (and enforcement abroad is not an option), the only option is to seek enforcement in the courts in the UAE. If a party has concerns about the prospect of an existing arbitration clause being deemed unenforceable, it could (i) seek to amend the clause by mutual agreement with the other party, or (ii) file suit in the local courts.

  1. Brief Overview of Local Court System

    The UAE Constitution provides for a Federal court system, but permits each Emirate to opt out of the Federal court system and maintain an independent court system. Currently, the Emirates of Ajman, Fujairah, Sharjah and Umm Al Quwain participate in the Federal court system. The Emirates of Abu Dhabi, Dubai and Ras Al Khaimah each maintain separate court systems. (3) Rules of evidence and court procedure are governed by Federal laws, which apply in all seven Emirates.

    The UAE is a civil law jurisdiction, and the doctrine of binding judicial precedent is not followed. (4) Court decisions are often indicative of how other courts may act in the future, but are not binding on such courts. Moreover, not all court decisions are published. There are no juries, and cases are heard by a single judge or a three-judge panel, depending on the nature of the dispute. Cases proceed on the basis of written pleadings submitted by advocates at a series of hearings conducted in Arabic. All evidence submitted to the court must be in Arabic or be translated into Arabic by a translator certified by the UAE Ministry of Justice.

    Laws in the UAE are made both at the Federal and individual Emirate level. The existence of different court systems means that the interpretation of UAE Federal law may vary. For example, the courts in the Emirate of Dubai may interpret UAE Federal law differently than the Federal courts or the courts in the Emirate of Abu Dhabi.

  2. Important Elements in any Foreign Arbitration Clause

    When incorporating a foreign arbitration clause into a contract, there are certain essential elements that should exist in every clause. The language of the arbitration is important. One of the reasons foreign companies want to avoid the local courts in the UAE is the fact that all proceedings there must be in Arabic. Thus, any arbitration clause should include an agreement on the language by which any arbitration will be conducted. Parties are also free to select the venue of such arbitration. Generally, the parties will agree on a venue that favours neither party; i.e. neutral territory. Recognize, however, that the parties will bear the travel expenses of the arbitrator selected by the arbitral body to hear the case in that location. And most importantly, the arbitral body and its attendant rules must be agreed upon. The most common international bodies used in UAE transactions are the International Chamber of Commerce ("ICC") in Paris, France, and the London Court of International Arbitration ("LCLA").

    In the case of a suit in the local courts, an arbitration clause is an affirmative defense to the jurisdiction of the local courts. It must be raised in the first hearing (under the Civil Procedure Code) or it will be deemed waived. If a party files suit in court and the other party raises the arbitration defense, the court will make a ruling (either referring the case to arbitration or invoking jurisdiction). If the court upholds the arbitration clause and refuses to assert jurisdiction, it will be difficult for the party that invoked the arbitration defense to challenge the enforceability of an award rendered at a later date.

  3. Historical Background--Foreign Arbitral Awards Before and After the UAE Joined the New York Convention

    The UAE does not have an arbitration law. Instead, relevant provisions in the UAE Federal Civil Procedure Code (the "Civil Procedure Code") (5) address the enforcement of domestic arbitration awards. (6) Articles 235 and 236 of the Civil Procedure Code deal with the enforcement of foreign arbitration awards. (7)

    While foreign arbitration awards are theoretically enforceable under the Civil Procedure Code, the criteria for enforcement have historically proven very difficult to meet. Indeed, as a practical matter, prior to the UAE joining the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the "New York Convention") in 2006, enforcement of a foreign arbitration award in the UAE was possible only in cases where the relevant country had entered into a judicial cooperation treaty with the UAE. (8)

    In 2006, the UAE joined the New York Convention without making any reservations or modifications pursuant to Federal Decree No. 43 of 2006 ("Decree 43"). (9) This...

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