Arbitration is best described as a cost-effective alternate dispute resolution process, which assists in smoother business relationships without incurring the rigidity of court proceedings. To address many of the pitfalls of the arbitration process and to bring the UAE arbitration process in tune with the best international standards, the UAE enacted Federal Law No. 6 of 2018 on ‘Arbitration’ and its amendments (“Arbitration Law”).
Article 1 of the Arbitration Law defines ‘Arbitration’ as ‘a method that is regulated by Law, by which a dispute which has arisen between two Parties or more is decided by a binding decision through an Arbitral Tribunal upon the agreement of Parties. The said article further defines an ‘Arbitration Agreement’ as ‘An agreement by the Parties to refer to Arbitration whether such Agreement is made before or after the dispute has arisen’.
Binding nature of Arbitration:
An arbitration award made by an arbitration tribunal according to the provisions of the Arbitration Law(Article 52) shall be binding to the Parties and have the force of res judicata and same enforceability as if it is a Court judgment, although for it to be enforced a decision confirming the award must be obtained from the Court (referred to as the ratification process)
Challenging an arbitral award:
Article 53 of the Arbitration law deals with the provisions for challenging an arbitration award and states the following grounds:
- For, Lack of arbitration agreement or on the ground that an arbitration agreement is void and thus, un-enforceable;
- That, a party, at the time of conclusion of the Arbitration Agreement, was incompetent or under some incapacity under the Law governing his capacity.
- That, a person does not have the legal capacity to dispose of the disputed right under the Law governing his capacity.
- That, a party to the Arbitration fails to present its case because it was not given proper notice of the appointment of an Arbitrator or of the arbitral proceedings or because the Arbitral Tribunal breached due process or for any other reason beyond his control.
- That, the arbitral award excludes the application of the Parties’ choice of Law for the dispute.
- That, the arbitral proceedings were marred by irregularities that affected the award or the arbitral award was not issued within the specified time frame.
- That, the award contains decisions on matters not falling within the terms of the submission to Arbitration or beyond its scope.
- That, the composition of the Arbitral Tribunal or appointment of any Arbitrator was not in accordance with the Arbitration Law or the agreement of the Parties.
Apart from the above grounds for challenging an arbitration award, the Court may also, on its own initiative, set aside the arbitral award if it finds that:
- The subject-matter of the dispute is not capable of settlement by Arbitration.
- The arbitral award is in conflict with the public order and morality of the State.
Procedure for Appeal:
Once an arbitral award is issued, it is also to be ratified before the Court.
An arbitral award can only be challenged by an action for setting aside before the Court or during the pendency of an application to confirm the award (ratification process). The party seeking to set aside the award must establish any of the grounds as stated above in order to be successful in challenging the award. Further, a decision issued by the Court in action to set aside the arbitral award can only be challenged before the Cassation Court within thirty days from the date of judgment.
In numerous ways, the new Arbitration Law has sought to ensure procedures in place that allow for smoother enforcement of arbitral awards in the UAE. In addition, the said Law also allows for direct enforcement of foreign arbitral awards in the UAE, thus catering to the global requirements sought by businesses in the UAE.