Arbitral Proceedings: Adherence to Objections before the Arbitral Tribunal Jurisdiction/ UAE

Arbitral Proceedings: Adherence to Objections before the Arbitral Tribunal Jurisdiction/ UAE

On 3 May 2018, the United Arab Emirates issued Federal Law No. (6) of the year 2018, On Arbitration (the “UAE Arbitration Law”). The federal legislation adopted most of its provisions from the UNCITRAL Model Law on International Commercial Arbitration. One of the new provisions incorporated into the UAE Arbitration Law from the UNCITRAL Model Law is Article 25.

Article 25 (“Waiver of Right to Object”) of the UAE Arbitration Law corresponds to Article 4 of the UNCITRAL Model Law, and states:

“If a party proceeds with arbitration proceedings knowing that any requirement under the Arbitration Agreement or any of the provisions of the present Law from of which an agreement may be made to the contrary, has not been complied with, where he fails to submit an objection to such violation on the time limit agreed upon or within seven (7) days of the date of becoming aware upon non-agreement, he shall be considered to have waived his right to object.”

According to this provision, if a party continues in the arbitration without presenting their objections within the time agreed between the parties or within seven (7) days from the date of their awareness of the non-compliance by the counterparty will constitute a waiver of the right to object. The party will not be able to raise a claim against the counterparty at a later stage.

The party’s failure to make their objections within the prescribed date is evidence of the party’s consent to the counterparty’s actions. The interpretation of the party’s failure to timely object is an implicit concession since the party was aware of the violation but did not submit an objection. For the objection to be accepted, it must be raised to the arbitral tribunal within the required time period or within seven (7) days the party becomes aware of the non-compliance.

The underlining purpose of Article 25 of the UAE Arbitration Law is to support the quick resolution of the dispute by restricting the counterparty from raising objections to procedural irregularities that may occur during the course of the arbitral proceedings beyond a certain period of time. This article will help limit any delay tactics by the counterparty and support the effective management of the arbitration proceedings.

Another principle at play under Article 25 is the requirement of good faith by the parties in the arbitration proceedings. The good faith principle under UAE law not only requires the parties to a contract to perform the terms in good faith but also requires the parties in an arbitration to conduct the proceedings in good faith. If the party becomes aware of the non-compliance by the counterparty, the party in good faith is require to raise this issue to the arbitral tribunal.

The principles behind Article 25 of the UAE Arbitration Law have been explicitly stated in most legislations and arbitration rules. By way of example see the following provisions:

• Section 73 of the English Arbitration Act 1996;
• Article 5 of the Qatar Arbitration Law;
• Article 8 of the Egyptian Arbitration Act 1994;
• Article 7 of the Jordanian Arbitration Act;
• Article 33 of the ICC Arbitration Rules.

Courts have also confirmed this rule in court judgements. By way of example, the Cairo Court of Appeal ruled that “the respondent has not objected the extension of the arbitration period during its review and till a date fixing for judgment a matter considered as assignment of its right to challenge the extension of arbitration period”. (3)

The French judicial system has also established this rule, although not explicitly stated in the French Arbitration Act. By way of example, the French Court of Cassation has held that “payment of arbitration fees during the deliberation of arbitrators indicates a clear and unambiguous will to proceed with the arbitration proceedings and acceptance of the period extension. If the opponent assigned his right to object the breaching procedure which is the expiry of arbitration period he cannot object before the judge of invalidity about issuance of the award after the time specified.” (4)

In another French Court of Cassation decision, the court held that “the opponent, who has not disputed the jurisdiction of the arbitral tribunal before it, it shall not be accepted from him thereafter to claim the invalidity of the arbitral award by stating that the arbitral tribunal has made a decision in a matter not under its jurisdiction”.(5) The Paris Court of Appeal has also held that “[i]n view of the role of arbitrators set out in the arbitration agreement, the plaintiff depended on the defendant’s breach of the agreed exclusive use clause and claimed compensation. Since it did not dispute the jurisdiction of the arbitral tribunal to determine the validity of the exclusive use clause, it is inadmissible to claim before the court of invalidity that the arbitral tribunal exceeds its assigned task limits”. (6)

Further, any non-compliance with issues relating to public order and the failure of a party to raise an objection fall outside the scope of Article 25 of the UAE Arbitration Law. These issues include, for example, the legal capacity of the plaintiff or the defendant, violation of the rules relating to the respect of the rights of defense and equality of the parties, violation of composition of the arbitral tribunal, or if the dispute subject matter is not subject to arbitration. If a party’s non-compliance relates to a violation of the public order the party will not be required to raise the objection within the specified time period. The party will not waive its ability to object. Such violation can be raised if no objection was made during the course of the arbitral proceedings which shall permit the arbitral tribunal the opportunity to decide the issue (see Article 53 (2) of the UAE Arbitration Law).

In addition, UAE legislator stipulated in Articles 19 and 20 of the UAE Arbitration Law that the defenses relating to the arbitration agreement must be adhered to, nullified, or not included in the subject matter of the dispute within a period not exceeding the time of submission of the defendant’s defense or during the next hearing at which challenge is made. If the objection is not raised before the arbitral tribunal within this period, the right to make the objection will be waived. However, the arbitral tribunal may accept the later plea if it considers the delay was for acceptable reason.

In our opinion, Article 25 of the UAE Arbitration Law requires the party raising the objection to do so before the arbitral tribunal within the specified period of time. This is consistent with most mainstream Arbitration Rules and international standards as it aims to expedite the settlement of disputes and prevent a party’s bad intention to object the arbitration award although knowing the appeal shall not be accepted. As a principle to protect the right to urgently resolve the dispute, if one of the parties exceeded the deadlines set by the legislator, the right to defend shall automatically elapse.

References:

1. UAE Arbitration Act of 2018.
2. The English Arbitration Act of 1996.
3. Cairo Court of Appeal Bench 91 Commercial – Case No. 29 for year 122 – 25/9/2009.
4. Paris Court of Cassation, case No. 2/2004 dated 6 July 2006, note Eric Ioquin, p310.
5. Paris Court of Cassation, case No. 3/2004, 3 June 2004.
6. Paris Court of Appeal, SA Exodis/v/ Ricoh France, 3 June 2004.