Dubai Court of Cassation refuses to enforce a foreign arbitral award for lack of jurisdiction
What has happened?
A successful party in an arbitration recently sought to enforce two ICC awards rendered in France against the award debtor in Dubai under the New York Convention. The Dubai Court of Cassation held that it had no jurisdiction over the award debtor, on the basis that the award debtor did not have a domicile or place of residence in the UAE, and the underlying arbitration was not related to an obligation which was carried out in the UAE. The Court of Cassation therefore refused to enforce the arbitral award.
The decision in CCI v Ministry of Irrigation of the Democratic Republic of the Sudan (Civil Cassation Appeal No. 156/2013) is significant for all parties who may want to enforce foreign arbitral awards in the UAE where there is a limited geographical nexus between Dubai and the subject matter of the dispute and/or the identity of the award debtor. The decision also serves as a more general reminder that New York Convention states apply different procedural approaches to enforcement which can have serious unforeseen consequences.
DLA Piper's Litigation and Arbitration team has produced an article for PLC which analyses the judgment and discusses its potential impact on the enforcement regime in the UAE. The article can be accessed by clicking here.
We have also updated our comprehensive practice note on enforcement of arbitral awards in the UAE, which was sent to you earlier this year. This can now be accessed here.
Brief facts of CCI v Sudan
CCI sought enforcement in Dubai of ICC awards rendered in Paris against the Sudanese Ministry of Irrigation. Unusually, we understand that this was in circumstances where the award creditor was unable to identify any assets of the award debtor within the jurisdiction.
The Dubai courts first considered whether they had jurisdiction as a matter of UAE law and noted that the award debtor did not have a domicile or place of residence in the UAE and that the subject matter of the underlying arbitration was not related to an obligation carried out in the jurisdiction.
The Court of Cassation also confirmed that the international jurisdiction of the UAE courts was a matter of public order/policy.
As a result of the above, the Court of Cassation confirmed the decisions of the lower courts that the Dubai courts had no jurisdiction, and thereby declined to enforce the arbitral awards. There has been some suggestion that the decision may have been politically motivated.
What are the potential implications for your business?
The CCI v Sudan judgment must be considered in the context of an emerging series of 'pro-enforcement' case law, which appeared to demonstrate that the UAE courts would apply the terms of the New York Convention to the exclusion of local laws when considering enforcement of foreign arbitral awards rendered in New York Convention countries. Some commentators have therefore suggested that this case represents a backward step, and a blow to the UAE's burgeoning reputation as a global centre for international arbitration.
While we do not agree with that interpretation, the case does highlight the importance of:
(a) preparing thoroughly when planning your enforcement strategy in respect of an award in any given jurisdiction (including gaining a detailed understanding of local requirements); and
(b) carrying out a thorough investigation into the location of a counterparty's domicile, residence and assets at a pre-contract stage, to ensure the risk profile of the transaction is understood at the outset.