A recent decision by the Dubai Court of Cassation (Dubai’s final appellate court) has bolstered Dubai’s position as one of the world’s leading international arbitration centres.
One of the challenges for the UAE and Dubai has been attracting parties who are willing to settle disputes under its institutions1 , rather than in the more established institutions based in more traditional arbitration centres such as London. Arguably, it has been a slow burn since the UAE’s decision in 2006 to ratify the New York Convention which signified a readiness to endorse international arbitration, re-inforced in May 20152 when the Dubai Court of Appeal, in a landmark judgment, recognised and enforced a London arbitration award. The recent case of Meydan Group v WCT Holdings, will give further encouragement to parties, and also to those invited to form a tribunal, that Dubai is supportive of arbitration and that, whilst still a concern, the courts will not always find the tribunal personally liable.
The initial arbitration concerned the construction of the Nad-Al-Sheba racecourse in Dubai, which was intended to be completed in time for the 2010 World Cup. In September 2007, WCT Holdings (WCT) won a contract to build the racecourse in a joint venture with Arabtec Construction LLC on a 50/50 basis on behalf of the Meydan Group (Meydan). However, just over a year later, Meydan cancelled the contract citing a ‘considerable delay of implementation’, although the timing of the cancellation, at the height of the global financial crisis, may have also suggested that economics played their part too.
Soon after the cancellation of the contract WCT brought an arbitration claim against Meydan in the DIAC for breach of contract and sought damages for the work completed, estimated to be approximately 65% of the project, repayment of the performance bond, and loss of profits.
In early 2010, during the arbitration proceedings, the tribunal ordered a stay in the arbitration for settlement negotiations to take place, which were ordered to be confidential and not to be revealed to the tribunal, should they fail and the arbitration proceed. However, following the failure of the settlement negotiations, the tribunal gave an order granting itself jurisdiction to analyse the negotiations and convened a hearing to consider the parties’ submissions. Meydan refused to attend the meeting citing it as a breach of, and contradictory to, the tribunal’s prior order. In addition, it commenced legal proceedings against the members of the tribunal in the amount of US$16.3 million, and attempted to disqualify the three arbitrators on the grounds that by reviewing the settlement negotiations they had failed in their duty to be impartial and independent.
This case is unusual in that at the same time that Meydan was bringing legal proceedings against the members of the tribunal in the Dubai courts to disqualify them on the basis that they were not impartial, having been privy to the settlement negotiations, the same tribunal was considering the main dispute.
The Dubai Court of first instance dismissed the claim against the tribunal, a decision upheld on appeal some six months later in June 2015. In the arbitration proceedings, the tribunal ordered Meydan to pay WCT damages amounting to US$313 million. In December 2015, the Court of Cassation upheld the lower courts’ decisions and dismissed Meydan’s claim for damages against the three arbitrators.
The case has similar themes to an earlier DIAC arbitration, also involving Meydan, who in 2014 attempted to sue a sole arbitrator for US$191,000 claiming losses suffered as a result of a delay in publication of an arbitration award, as well as attempting, unsuccessfully, to challenge his appointment. In this case the Court of Cassation noted that under DIAC rules, arbitrators could not be responsible for “any unintentional error while carrying out any duties regarding the settlement of any dispute through DIAC”, and that an error would need to be a “major error”. It would appear that neither of the courts in Meydan Group v WCT, or the 2014 case considered the respective actions of the arbitrators to be sufficient to amount to a “major error”.
These decisions further demonstrate that Dubai is growing as an arbitration friendly jurisdiction and that the courts can be increasingly relied upon to promote and support arbitration. Historically, arbitration in Dubai has faced some criticism, notably that arbitration awards must be ratified by the Dubai courts, leading to delays, and also potentially undermining their authority. It is however, worth noting that there remains the issue in Dubai, as in Hong Kong, that arbitrators do not benefit from immunity as they do in many other jurisdictions and are consequently at risk of being sued personally. Therefore, judgments such as those discussed above go a long way to allay the fears of arbitrators, and are a victory for arbitration in Dubai, a location in which HFW has a considerable amount of experience.
Moreover, an increasing awareness of the immunity issue, as highlighted by these cases, will perhaps trigger legislative action in this area, affording greater protection to arbitrators and further establish Dubai as a centre for international arbitration.