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This can be a persuasive argument because in the UAE arbitration is seen as an exceptional form of dispute resolution, one that deprives parties of their rights to refer disputes to the national courts. The Courts will therefore need to be satisfied that the company signatory had the required authority when signing to ensure the company consented to arbitration.
Where a UAE company is subject to a foreign award, a question that often emerges is which law needs to be complied with when determining the authority of the signatory. Is it UAE law (being the law under which the party was formed and exits); the governing law of the agreement; or the law where the arbitration takes place?
In a recent decision 693/2015 Commercial Appeal, the Dubai Court of Cassation has clarified that it is sufficient that the signatory has the authority to sign under the laws where the arbitration took place. Al Tamimi represented the successful Plaintiffs.
In October 2014, a major shipping line (the “Owners” or “Plaintiffs”), filed a claim for the recognition and enforcement of a foreign arbitral award in the UAE. The award has been issued pursuant to the LMAA rules in London. The party against whom the arbitral award was issued was a commercial company based in the UAE (the “Defendants” or “Charterers’ Guarantor”).
The facts of the arbitral award are as below:
The Owners chartered their vessel to ‘X’, with the Defendants countersigning the Charterparty as a Charterers’ Guarantor. X went into compulsory liquidation and failed to pay the hire amount punctually to the Owners. In accordance with the terms of the Charterparty, the matter was referred to arbitration in London.
By a Second Final Partial Arbitration Award, the arbitrators ordered the Charterers’ Guarantor, as the counter signatory, to pay the Owners an amount of USD 12,221,875.00 plus costs, 5% annual interest from 2011 until complete payment, and arbitration fees.
Dubai Court of First Instance
The Charterers’ Guarantor submitted a reply to challenge the enforcement proceedings, raising, amongst other arguments, the below defences:
The Plaintiffs argued that:
The Court of First Instance decided to dismiss the arguments of the Defendants, and decided to recognise the Second Final Arbitral Award in the UAE. It was satisfied that the award complied with the 1958 New York Convention on the Recognition and Enforcement of Foreign Awards (which the UAE signed in 2006), and was in compliance with local laws and did not contradict or breach UAE public policy.
Dubai Court of Appeal:
The Defendants appealed the Court of First Instance judgment, raising the same arguments. However, the Court of Appeal upheld the arguments made by the Plaintiffs and ordered that the arbitral award be recognised and enforced in the UAE. In a short judgment the Court referred to the New York Convention, acknowledging that it applied directly to the enforcement of foreign arbitral awards, and rejected the arguments made by Defendants.
Dubai Court of Cassation:
The Defendants chose to lodge a further appeal before the Dubai Court of Cassation, and also submitted an application to stay the execution proceedings until a final judgment had been issued by the Dubai Court of Cassation. The application for a stay of execution proceedings was approved by the Dubai Court of Cassation, as it was held that prior to enforcing the award it was necessary that a final court judgment be issued by the Court of Cassation.
The Defendants appeal was based on two main reasons, namely:
The Dubai Court of Cassation issued its judgment on 10 April 2016, dismissing the appeal and affirming the Court of First Instance and the Court of Appeal judgments, for the following reasons:
This case helpfully clarifies at the highest level that a company’s capacity to enter into an arbitration clause shall not be limited to its director, but can also be extended to its employees, agents or brokers as long as this is in compliance with the laws applicable where the arbitration proceedings take place (the seat). This means that even if the signatory may not have been authorised pursuant to UAE law, provided the signatory would have had the authority under the foreign law, that is sufficient.
This is because the Court interpreted the phrase “the law applicable to them” referred to in article V(1)(a) of the New York Convention, as the laws governing the arbitration proceedings (i.e. the laws of the seat) rather than the laws governing the incorporation of each party.
This is a welcome judgment that demonstrates the Dubai Courts’ supportive attitude towards the enforcement of foreign arbitral awards, and will strengthen the perception of the UAE as a pro-arbitration jurisdiction.