Court of Cassation Establish the Divisibility of the Arbitration Award. Judgment Partially Annulling Arbitration Award for Breach of the Public Order and Validate the Other Part of the Award

Court of Cassation  Establish the Divisibility of the Arbitration Award.  Judgment Partially Annulling Arbitration Award for Breach of the Public Order and Validate the Other Part of the Award

The Dubai court of Cassation, based on the appeal submitted by this office (Bin Nakhira & Partners) on behalf of the appellant, has recently issued its ruling in case no. 298/2020 – Civil Appeal, by annulling one part of an arbitration award for its breach of the public order. However, as long as concerned award is divisible, the court should have annul the default part and ratify the correct one.

Introduction

Dubai court of appeal has nullified an arbitration award, for its breach of the public order, based on the following grounds: “The award revealed that the arbitration panel has obliged the plaintiff to enforce the investment contract of the plot owned by the defendant through an endowment from HH Sheikh/ Maktoum bin Mohammed bin Rashid Al Maktoum, as shown on the title”. the arbitration award should have nullified the contract for violating the instructions of the governor, which prohibits conveyance of endowed lands and where such instruction is correlated to the public order, the court should have nullified the arbitration ward based on its violation to article 53/2-b of the Federal Arbitration Act no. 6 of 2018.

Thereupon, our office has filed an appeal on subject court order based on the following grounds:

• Subject arbitration award obliged the appellee to pay all debts and liabilities resulted from his benefits generated under the investment contract dated 22.11.2004, which are correlated to the mortgage of both the plot and the construction made on the same. Since such part of the award does not contradict with the instructions of the governor on 08.11.1994 prohibiting conveyance of endowed plots or those allocated by the Government to citizens in Emirate of Dubai, therefore, it is considered arbitrable.

• The partial annulment of the arbitral award, nevertheless it constitutes an exception to the general original jurisdiction which, requires to nullify the whole award, the court shall apply article 53/1/ha, where possible. Whereas, and based on the original jurisdiction, the annulment shall apply only to the invalid part, leaving the other part which does not constitute a breach to the public order, as is.

Court of Cassation Opinion

The court has positively responded to above defence on the following grounds: “Since such justification is true in that the principle in the proceedings of this court is to only ratify the correct part of the award and nullify the other part, as long as the award is separable into two unrelated parts. Thereupon and since the appellant has file a counter claim during hearings of arbitral claim filed by the appellee claiming to oblige the appellant for debts and liabilities generated by the hotel apartments project constructed on subject plot under the investment contract concluded between both of them and release his part from the same. The arbitral award has nullified the appellant’s original claim and obliged the appellee under said counter claim to enforce all articles of the investment contract and to assume all debts and liabilities generated therefrom and release the appellant from the same. Therefore, the award is void with respect to oblige the appellee to enforce all articles of the investment contract, which is totally void based on its breach to the public order, whereas the concerned plot is endowed property and shall not be conveyed, but such voidance does not include the other part of the award, which released the appellant from debts and liabilities generated by the appellee from the plot under question, since there is no connection between the voidances of the investment contract and responsibility of the appellee about conveyance actions undertaken for benefiting and investing in the project intended to be constructed on the plot under question and his responsibility for liabilities generated therefrom. This is also valid even considering the fact that the award was based on article 18 of the void investment contract which affirm the responsibility of appellee for debts and liabilities of such investment, the context which constitute a reiteration of the principle rule in the law, which specifies that the outcomes of such conveyance, in a form of rights or obligations shall return only to the benefit of landlord and that the person shall not assume responsibilities of others, unless he implicitly and explicitly declare the same. Should the appealed award disobeyed such rule and annulled the whole arbitral award, despite the fact that part of such award is correct, such act shall then constitute a breach to the law in a way that necessitate to annul the same. Whereas the subject is valid for judgment and based on the above, this court annuls the arbitral awards in question, excluding the part that pertain to the responsibility of appellee for debts and liabilities generated from investment of subject plot with respect to mortgage of both the plot and the building constructed on the same and release of appellant from such responsibility.”

Conclusion

Even though, the arbitration law of 2018 has legalized the divisibility of the arbitral award in one case, as stated in article 1153/1/h, which reads as follows: “should the arbitral award adjudicated in issues not included in or trespassed the arbitration agreement scope, and it was possible to separate between arbitrable and non-arbitrable parts of the award”, the court of cassation has endeavoured to restrict the justifications for annulling the arbitral award to the narrowest;   the prevailing principle is  the validity of the arbitral award and the annulling concerns only the invalid part of the award, as long as the award is divisible, otherwise the winner in the concerned award will face considerable hardship.