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Posted In: Alert

Posted By: Singularity Legal

Tags: Dubai Courts, Arbitration, Singularity Legal

 125

Dubai Court of Cassation overrules previous judgments which hold that arbitration agreements stand cancelled when an institution closes a case file for non-payment of costs

BACKGROUND

  1. In a recent decision of the Dubai Court of Cassation (DCC 10/2023), the courts reversed previous rulings which held that arbitration agreements were to be deemed abandoned upon closure of the arbitration file by arbitration institutions for non-payment of costs. 

  2. This decision was brought upon by a request of the Technical Office of the Court of Cassation (“Technical Office”) to the General Secretariat of the Court to reconsider the matter.

TECHNICAL OFFICE’S SUBMISSIONS

  1. The Technical Office contended that the closure of an arbitration file by an institution for the non-payment of costs did not result in the revocation and abandonment of the arbitration agreement. Moreover, this could also not amount to a waiver of the arbitration clause.

  2. The Technical Office also argued that an arbitration institution’s decision to close a case file does not prevent either party from resubmitting the case, paying their share of the costs, and requesting the arbitral tribunal to compel the other party to pay their share of the costs.

JUDGMENT

  1. The court started by referring to Federal Law No. 6/2018 On Arbitration (“Federal Arbitration Law”). The court specifically referred to Articles 45(1) and 54(4) of the Federal Arbitration Law. 
  • Article 45(1) of the Federal Arbitration Law states that “arbitration proceedings shall be terminated by the issuance of the award terminating the dispute by the Arbitral Tribunal.

  • Article 54(4) of the Federal Arbitration Law states that “Unless otherwise agreed by the Parties, the Arbitration Agreement shall remain effective according to the provisions of the present Law after the nullification of the arbitral award, unless such nullification is based on that the agreement itself does not exist, or upon the forfeiture of its term, or its nullity, that it is incapable of being performed.
  1. Upon a reading of these two provisions, it is clear that an arbitration agreement remains valid even after the set-aside of an award, and the jurisdiction of the State courts is excluded so long as the arbitration agreement is itself valid and enforceable.

  2. On this basis, the court unanimously decided to reverse its previous rulings regarding the deemed abandonment of arbitration agreements when arbitration institutions closed a case file for the non-payment of costs. The court also concluded that the non-payment of costs does not imply a waiver of the arbitration agreement, and does not prevent either party from re-commencing a claim in arbitration.

ANALYSIS AND CONCLUSION

  1. This decision of the Dubai Court of Cassation is another welcome step towards the promotion of arbitration in Dubai and the UAE.

  2. The previous position in Dubai, set out by a 2013 decision of the Dubai Court of Cassation (DCC 379/2013), was that if the parties failed to pay the costs of arbitration, and the arbitration file was closed by the institution, the arbitration agreement was not capable of being performed. Consequently, the jurisdiction would go back to the courts, since they have “general jurisdiction” over the parties.

  3. The old position faced criticism, since a recalcitrant respondent could defeat arbitration proceedings merely by refusing to pay its share of the costs.

  4. However, parties can now remain confident that a valid arbitration agreement will continue to remain valid regardless of whether an arbitration institution has closed the arbitration file due to non-payment of costs. It is also now clear that an arbitration agreement is not invalidated even after the setting aside of an arbitral award.

Author: Rohit Bhattacharya