Nullification of another DIAC Arbitration Award Have the

floodgates opened? No, says Clyde & Co.

Written by Nassif BouMalhab and Susie Abdel-Nabi

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There have been a number of negative reports in the press in the last few weeks
stating that a recent Dubai Court of Cassation judgment nullifying a Dubai
International Arbitration Centre (DIAC) arbitration award will have far reaching
implications and jeopardise Dubais position as an international arbitration hub.

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Clyde & Co does not share that view. We do not consider that the judgment has any international

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bearing and it should not affect Dubai's standing as a reputable arbitration centre.

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Earlier this year, we reported that the Dubai Court of Cassation had nullified three DIAC arbitral
awards on the basis that those awards ran contrary to public policy within the meaning of the Civil
Code (Federal Law No. 5 of 1985) and Civil Procedure Code (Federal Law No. 11 of 1992) of the
United Arab Emirates.
The judgments nullified DIAC awards in which the arbitrator (it was the same sole arbitrator in all
three cases) applied Article 3 of Law No. 13 of 2008 Regulating the Interim Real Estate Register in
the Emirate of Dubai (the Property Law) and concluded that the off-plan sale and purchase
agreements in dispute were void despite being registered in the Interim Real Estate Register
maintained by the Dubai Department of Lands and Properties (albeit after the 60 day deadline set out
in Article 3). In arriving at the conclusion that the DIAC awards should be set aside, the Court
considered that the application of Article 3 of the Property Law is a matter of public policy which
cannot be resolved through arbitration.
Clyde & Co advised the property developer in each of the three DIAC arbitrations as well as in the
proceedings before the Dubai Courts seeking to set aside the ensuing arbitral awards. For this
reason, we feel that we are able to provide noteworthy insight into the specific context in which the
Dubai Court of Cassation concluded to the annulment of the awards. In our view, by concluding as it
did, the Dubai Court of Cassation has not provided (as others have suggested recently) that any
arbitration disputes relating to the disposition of property or, generally, arbitration disputes involving
an element of public policy are liable to be invalidated by the Dubai Courts. In context, the Dubai
Court of Cassation merely held that parties cannot validly agree to submit disputes concerning the
registration of off-plan sales within the meaning of Article 3 of the Property Law to arbitration to the
exclusion of the Dubai Courts because the application of Article 3 of the Law is a matter of public
policy. The Court arrived at this conclusion in circumstances where the property developer argued
that the arbitral tribunal misapplied a provision which was enacted for the protection of the public
(Article 3 of the Property Law) in a manner which is inconsistent with:
(i) the Dubai Department of Lands and Properties' decision to accept the registration of each
of the sale and purchase agreements which were in dispute;
(ii) the legal principles previously set out by the Dubai Court of Cassation holding that the

registration of off-plan sale and purchase agreements after the 60 day deadline provided in
Article 3 of the Property Law is valid; and
(iii) the purpose of Article 3 of the Property Law which is to ensure that a purchaser of off-plan
property located in Dubai has the means of verifying that the property purchased is accounted
for in the register maintained by the Dubai Department of Lands and Properties and not, for
example, the fraudulent sale of a property which does not exist.
The principles set out in the Dubai Court of Cassation judgments we reported were recently echoed
by another Dubai Court of Cassation judgment (Case No. 14 of 2012) dealing with the application of
Article 3 of the Property Law. It is noteworthy that in rendering its judgment, the Court acknowledged
that it is not for the Court to review the merits of an arbitral award but indicated that it would take
exception where the arbitral tribunal has exceeded its jurisdiction and "resolved a matter of public
policy":
"Whilst it is not for the Court to investigate the subject matter of an arbitral award, if it is shown that an
arbitrator exceeded the limits of [his/her] jurisdiction and resolved a matter of public policy, the Court
shall intervene by investigating and scrutinizing this contravention of the law in light of the applicable
provisions." (unofficial English translation)
In our view, contrary to what others have suggested recently, the Court is not opening the floodgates
to review arbitral awards every time that a provision of public policy is interpreted.

The Court is not,

as others have suggested, instructing that property disputes cannot be validly submitted to
arbitration. In context, the Court has determined a particular type of property dispute - relating to the
registration of off-plan sales - and found, in the context only of that particular type of dispute, that an
arbitral tribunal's decision will be subject to the Court's review (and set aside if the award concludes
that an off-plan sale and purchase agreement subject to registration under Article 3 of the Property
Law is invalid despite the agreement being validly registered with the Dubai Department of Lands and
Properties).
There is no wide-reaching analogy to be drawn from the judgments with an eye on challenging the
validity of arbitral awards at large, particularly in a civil law jurisdiction such as the UAE where the
doctrine of binding case-law precedent does not apply.
The judgments should not affect the ratification and enforcement in the UAE of foreign awards. The
judgments deal only with ratification of domestic awards, applying conditions for ratification set out in
the Civil Procedure Code and the notion of public policy in domestic UAE law. The provisions of UAE
law applied by the Dubai Court of Cassation are separate and distinct from the provisions of the New
York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the notion of
international public policy within the meaning of the Convention and as developed in accordance with
international obligations.
The floodgates for challenges to arbitration awards in Dubai have not opened merely because certain
domestic DIAC arbitration awards dealing with the registration of off-plan sales were (in our view
correctly) invalidated. The lesson to be drawn from these recent judgments is not that Dubai has
compromised its reputation as a hub for international arbitration.
On the contrary, the lesson to be drawn here is a positive one: investors, property developers and
purchasers alike can take comfort in the fact that the Dubai judiciary has adopted a consistent
approach and that they can expect registered off-plan sale and purchase agreements to continue to
be legally binding.
Should you have any questions in connection with this article or the legal issues it covers, please
contact Nassif BouMalhab or Susie Abdel-Nabi.

Published on 29 October 2012

Jurisdictions: Middle East
Areas of expertise: Dispute resolution

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