Abu Dhabi Court Determines Seat of Arbitration on the Basis of ICC Office Location

Abu Dhabi Court Determines Seat of Arbitration on the Basis of ICC Office Location

April 3, 2023, Covington Alert

The Abu Dhabi Court of Cassation has ruled that the seat of an arbitration conducted under the International Chamber of Commerce Arbitration Rules (the “ICC Rules”) was the Abu Dhabi Global Market (the “ADGM”), a financial free zone within the Emirate of Abu Dhabi, on the basis that an ICC representative office was present there, notwithstanding that the arbitration agreement stated that the seat was the Emirate of Abu Dhabi.[1] The Court concluded that the ADGM Courts rather than the ‘onshore’ courts of Abu Dhabi had jurisdiction to hear any application to set aside the award.

Factual Background

The Emirate of Abu Dhabi contains two separate jurisdictions which may be chosen by parties as a seat of arbitration: for proceedings seated in ‘onshore’ Abu Dhabi (a civil law jurisdiction), Federal Law No. 6 of 2018 on Arbitration (“Federal Arbitration Law”) applies and the Abu Dhabi courts act as the supervisory courts; for proceedings seated in the ADGM (a common law jurisdiction), the Arbitration Regulations 2015 apply and the ADGM Courts act as the supervisory courts.   

The case related to a dispute which arose out of a contract (the “Contract”) that provided for disputes to be resolved by arbitration under the ICC Rules and seated in the Emirate of Abu Dhabi. The Tribunal issued its award and the appellant commenced proceedings in the onshore Courts of Abu Dhabi to annul the award. The appellant sought to rely on a number of grounds for annulment under the Federal Arbitration Law, including (among others) an incorrect determination of the seat of arbitration.

Legal Background

The Abu Dhabi Court of Appeal held that it did not have jurisdiction to consider the appeal and dismissed the application. It concluded that, as a representative office of the ICC was present in the ADGM, the ADGM was the seat of arbitration.

The appellant appealed to the Abu Dhabi Court of Cassation and argued that the arbitration clause in the Contract provided for the Emirate of Abu Dhabi as the seat of arbitration, with no reference to the ADGM. The appellant argued that the selection of the ICC Rules alone did not amount to agreement that the seat should be determined by reference to the location of the ICC representative office and therefore that the onshore Abu Dhabi Courts should have supervisory jurisdiction.

Judgment

The Court of Cassation rejected the appeal and concluded that the ICC representative office should be considered as the seat of arbitration, with the ADGM Courts therefore having supervisory jurisdiction. Importantly, the Court suggested that the reference to ‘the Emirate of Abu Dhabi’ lacked specificity because both the onshore Abu Dhabi Courts and the ADGM Courts are considered courts of the Emirate of Abu Dhabi. Therefore, the Court could not say that the default position should be that the seat of arbitration is ‘onshore’ Abu Dhabi.

The decision follows the same approach as an earlier decision by the same court, in which the underlying arbitration agreement provided for arbitration in accordance with the ICC Rules to be “conducted in Abu Dhabi City (U.A.E.)”.[2] In this case, neither party had contested the seat of arbitration during the proceedings and yet the ‘on-shore’ courts declined jurisdiction to hear the set-aside application due to the presence of the ICC representative office in the ADGM. On 13 March 2023, the ADGM Court accepted jurisdiction over the application to set aside the award on the basis of an express written agreement by the parties to “opt in” to the jurisdiction of the ADGM Courts (which allows parties to refer their disputes to the ADGM Courts notwithstanding a lack of nexus to the ADGM).[3] This prevented the application from falling into a jurisdictional “limbo”. The Court considered that the express agreement contained in writing in the documents filed in the ADGM proceedings (and therefore after the decision of the Abu Dhabi Court of Cassation) was sufficient to establish the Court’s jurisdiction but the Federal Arbitration Law (and not the Arbitration Regulations 2015) should apply as the seat of arbitration was in fact ‘on-shore’ Abu Dhabi.

Comment on Abu Dhabi

The ICC representative office in the ADGM opened during the course of the arbitral proceedings and there is no other arbitral institution located in the ADGM with its own institutional rules. This would suggest that the parties could not have intended at the time of entering into the Contract for the seat of arbitration to be determined by reference to the representative office of an arbitral institution. It would follow from the Court of Cassation’s decision that the seat of arbitration “relocated” to the ADGM upon the opening of an ICC office.

While judgments of the Abu Dhabi Court of Cassation are persuasive, there is no binding precedent in the UAE and it remains to be seen whether the Abu Dhabi courts will choose to follow this decision in the future. When drafting arbitration agreements where the parties’ intention is for the seat of arbitration to be either ‘on-shore’ Abu Dhabi or the ADGM, the parties may wish to state expressly which arbitration law and supervisory courts are intended.

Comment on Dubai

In Dubai, a combination of court judgments, legislation, and institutional rules provide for a shifting landscape when it comes to choosing ‘onshore’ Dubai or the ‘offshore’ Dubai International Financial Centre (the “DIFC”) as an arbitral seat:

• The ‘offshore’ DIFC Courts have concluded that the words ‘Emirate of Dubai’ are not sufficient to identify the DIFC as the seat of arbitration.[4]
• Article 4 of the Statute of the Dubai International Arbitration Centre (“DIAC”) provides that, where the parties choose the Emirate of Dubai as the seat of arbitration, the Federal Arbitration Law shall apply and the ‘on-shore’ Dubai Courts shall act as the supervisory courts; but where the parties choose the DIFC as the seat of arbitration, the DIFC Arbitration Law No. 1 of 2008 shall apply and the DIFC Courts shall act as the supervisory courts.[5] The legislative intent is therefore that a reference to ‘the Emirate of Dubai’ means the ‘on-shore’ Dubai arbitration legislation will apply and the ‘on-shore” Dubai courts will supervise.
• In contrast, in a recent application to set aside an arbitral award, the Dubai Court of Cassation (the highest court in ‘on-shore’ Dubai) held that the application should be brought before the DIFC Courts because the arbitration had been administered by an institution within the DIFC (the DIFC-LCIA Arbitration Centre), despite that the arbitration agreement specified the seat of arbitration as ‘Dubai’.[6]
• Finally, the arbitration rules published in 2022 by DIAC provide that, in the absence of an express choice by the parties, the default seat of arbitration will be the DIFC.

To avoid unintended consequences, parties in Dubai may also wish to specify the applicable arbitration law and supervisory courts in their arbitration clauses.

If you have any questions concerning the material discussed in this client alert, please contact the members of our International Arbitration practice.

[1] Abu Dhabi Court of Cassation, Case No. 1045 of 2022, 18 January 2023.

[2] Abu Dhabi Court of Cassation, Petition No. 635 of 2022 (Commercial), 19 September 2022.

[3] A6 v. B6 [2023] ADGMCFI 0005, Judgment of Justice William Stone SBS KC, 13 March 2023.

[4] Justice Hwang noted in Amarjeet Singh Dhir v Waterfront Property Investment Limited and Linarus FZE CFI 011/2009 that “the moral of this case is that, if parties want the DIFC Arbitration Law to apply and the DIFC Court to have jurisdiction over an arbitration, they should expressly select the DIFC as the seat in their arbitration agreement”.

[5] The Statute of DIAC is annexed to Dubai Decree No. 34 of 2021, which had the effect of dissolving the DIFC Arbitration Institute, the DIFC entity that operated the DIFC-LCIA Arbitration Centre

[6] Dubai Court of Cassation, Case No. 458/2021.