On 30 March 2016, the Dubai Court of Appeal issued a surprising decision regarding the enforcement of arbitral awards under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention) (the New York Convention), which could lead to a greater shift in focus by potential claimants towards the DIFC courts as a venue for enforcement.
Fluor Transworld Services are a US-based company who provided consultancy services to Petrixo Oil & Gas, a UAE-based company, who are owned by a UAE national businessman, Mr Saif Ahmed Belhasa, in respect of a refinery petrochemical complex and biofuel facility located in the Emirate of Fujairah.
Fluor alleged that Petrixo had failed to pay for the consultancy services and commenced ICC arbitration in London. Petrixo did not engage with the arbitration and the sole arbitrator made an award in Fluor’s favour.
Fluor attempted to enforce the arbitration award against Petrixo via the Dubai Court of First Instance, who rejected the application on the basis that there was no evidence that the ICC International Court of Arbitration had approved the award prior to it being issued. Fluor appealed the decision to the Dubai Court of Appeal (the CoA), arguing that the CoA should enforce the arbitration award under the Convention.
The Dubai Court of Appeal decision
The CoA rejected Fluor’s appeal and ruled in favour of Petrixo.
Unusually, however, it appears that the CoA based its decision on an issue raised of its own motion, that the CoA could not enforce the arbitral award under the New York Convention as it was not satisfied that there was enough evidence that the UK was in fact a signatory to the New York Convention.
The CoA was therefore not convinced that the courts of England and Wales would recognise an arbitral award issued in the UAE. The requirement for reciprocity contained within Federal Law No 11 of 1992 (the UAE Civil Procedures Law) was not satisfied and the CoA would not enforce the award.
The New York Convention
The surprising element of the judgment is, of course, that the CoA did not consider there to be sufficient evidence that the UK is a signatory to the New York Convention.
A list of contracting states is available on the New York Convention website, along with their dates of ratification, 24 September 1975 and 21 August 2006 for the UK and UAE respectively. Numerous other websites contain similar information, including, for example, the UNCITRAL website.
Information regarding how the courts of the respective states have dealt with arbitral awards under the New York Convention is also freely available on the New York Convention website. At the time of writing, the courts in the UK have issued 99 decisions in respect of the New York Convention, whilst the courts of the UAE have issued 3 (now 4).
The New York Convention does permit signatory states to incorporate reservations as a condition of their ratification, including (i) the state will only apply the New York Convention in respect of awards from other contracting states and (ii) in regard to non-contracting states, the state will only apply the New York Convention to the extent that those states grant reciprocal treatment.
The UAE did not opt to incorporate either of these reservations, the UK has opted into the first but as the UAE is a contracting state it would not be relevant in this instance.
As a civil law jurisdiction, the UAE has no system of binding precedent and the decision in Fluor can be contrasted with a previous recent decision by the CoA, in which the CoA held that it would enforce an award issued in London pursuant to the New York Convention (see our article http:// www.hfw.com/Dubai-court-issues- landmark-judgment-recognising-and- enforcing-a-foreign-arbitral-award- September-2015).
We understand that the CoA decision has been appealed to the Dubai Court of Cassation which has, on previous occasions, including in the 2012 case Airmec Dubai, LLC v Maxtel International LLC, confirmed that the UAE courts should not apply the formalistic rules of the UAE Civil Procedure Code when it comes to Convention decisions. However, with no system of binding precedent in the UAE, the outcome of the Court of Cassation proceedings is not certain.
Given the ever-increasing willingness of the DIFC courts to recognise and enforce foreign arbitral awards, and more recently judgments, providing claimants with an “offshore” gateway into “onshore” UAE1, it is possible that decisions like Fluor will have a real impact on potential claimants’ choice of venue when it comes to enforcement.