ADGM Court accepts supervisory jurisdiction for onshore Abu Dhabi arbitration (A6 v B6)

Freshfields Bruckhaus Deringer LLP wins for its client in precedent judgment issued by Abu Dhabi Global Market (“ADGM”) court. In A6 v. B6, the ADGM Court of First Instance (“CFI)) accepts jurisdiction over applications to set aside arbitral awards rendered in ICC proceedings in Abu Dhabi.¹ The decision, handed down on 13 March 2023, is an important response to the loophole that may arise when courts in Abu Dhabi relinquish their jurisdiction over applications for annulment (or approval) of proceedings in Abu Dhabi.

The risk of jurisdictional confusion between onshore and offshore Abu Dhabi courts has been highlighted in Abu Dhabi in recent months following at least two cases in which Abu Dhabi courts have refused to exercise jurisdiction over rescission applications) Simply because the proceedings are governed by the Arbitration Rules of the International Chamber of Commerce (“OOO“), with representative offices and overseas case management offices in ADGM.

background

A dispute arose between the main contractor and its subcontractors regarding the execution of works for the Abu Dhabi Integrated Gas Pipeline Project. The subcontract agrees to resolve disputes by arbitration in “Abu Dhabi City (UAE)” in accordance with the International Chamber of Commerce Arbitration Rules, as follows:

Arbitration shall be conducted in the City of Abu Dhabi (UAE) in accordance with the Rules of the International Chamber of Commerce (ICC Rules) in force at the time the claim, dispute or dispute arose.

In 2019, subcontractors (“claim”) commenced arbitration, and in 2022 a majority of the tribunal dismissed most of its claims and ordered the main contractor (“defendant”) pays the claimant a small portion of the claim (“prize“).

According to the Arbitration Law No. 6 of 2018 of the United Arab Emirates (hereinafter referred to as “theFederal Arbitration Act“).

On July 6, 2022, the Abu Dhabi Court of Appeal decided on its own motion that (i) it did not have jurisdiction over the Plaintiff’s motion to set aside and (ii) jurisdiction rested exclusively with the ADGM Court (“CoA judgment“):

arbitral institution that makes its own award […] Is the ICC – International Court of Arbitration, headquartered in Abu Dhabi Global Market, which, as stated above, is considered one of the district courts of the Emirate of Abu Dhabi, and therefore nothing more, and to the exclusion of other courts, having decided this rescission Jurisdiction for the application, as this is the exclusive jurisdiction provided by law. Therefore, the Abu Dhabi Court of Appeal, which falls under the Abu Dhabi Global Market Court, has no jurisdiction.²

The plaintiff appealed to the Supreme Court of Abu Dhabi, which upheld the judgment of the CoA on 19 September 2022 for the following reasons (“CoC Judgment“):³

• Arbitration agreements to resolve disputes under the International Chamber of Commerce Arbitration Rules;
• Ahead of the awards, ICC opened its fifth representative office at ADGM;
• Pursuant to Article 1 of Abu Dhabi Law No. 4 of 2013 as amended by Abu Dhabi Law No. 12 of 2020, the ICC Representative Office is an “Institution” of ADGM (“theADGM Founding Law“);
• The ICC representative office becomes the “seat of arbitration”, which in turn is governed by the ADGM Law;
• Accordingly, the ADGM courts shall have exclusive jurisdiction over any application for setting aside arising from this arbitration.

The CoC’s decision was surprising, not least because the seat of the arbitration was not disputed during the arbitration and was considered by all parties to be in Abu Dhabi.

The plaintiffs filed an application for reconsideration, a special form of appeal under the Federal Code of Civil Procedure, to the Supreme Court of Abu Dhabi, but it was also dismissed.

Proceedings in ADGM Courts

On October 13, 2022, Claimants filed suit with ADGM CFI seeking, inter alia, to set aside the Award (“application”). The application relied on an analysis of the courts in Abu Dhabi as a basis for the jurisdiction of the ADGM courts and cited the ADGM Arbitration Regulations 2015.

Defendants represented by Freshfields voluntarily submit to the jurisdiction of the ADGM courts pursuant to the 2020 amendments to the ADGM Founding Act⁴Parties are permitted to “opt-in” to ADGM’s jurisdiction by express written agreement without any prior connection with ADGM.⁵ Although the ADGM Courts do not have jurisdiction over the application in principle, the defendants submit to the jurisdiction of the ADGM Courts to reach a final settlement of the matter on the merits.

In order to accept jurisdiction in this case, the ADGM CFI must address two core issues:

• Whether the ADGM Courts may, by mutual consent of the parties following the award, exercise jurisdiction over the arbitration taking place within Abu Dhabi; and
• If the answer to the first question is yes, whether the application should be governed by the Federal Arbitration Act or the ADGM Arbitration Regulations 2015.

In response to these questions, defendants argued that the exceptional circumstances of the case, as well as certain policy considerations, created a “narrow exception” that allowed the ADGM court to exercise jurisdiction and determine the application on its merits. The Defendant clarified that, for the avoidance of doubt, it did not represent that ADGM was the proper venue for every ICC arbitration in the Emirate of Abu Dhabi.

While the parties agree that the ADGM CFI has jurisdiction following the parties’ decision to “opt in,” they disagree on the applicable procedural law. The plaintiffs insisted that the ADGM Arbitration Regulations 2015 apply, while the defendant argued that the Federal Arbitration Act should apply because it was the arbitration law of the seat.⁶ Defendant further explained that (i) unless otherwise agreed, Part 3 (arbitration) the ADGM Arbitration Regulations 2015 apply only to ADGM arbitrations,⁷ (ii) here, the seat of the arbitration was not in dispute within Abu Dhabi, (iii) the parties’ agreement to submit to the jurisdiction of the ADGM courts did not alter their original choice of seat, and (iv) the application of foreign procedural law was not prohibited by ADGM law.

In addition to these difficult issues of jurisdiction and procedural law, the case also involved other complex issues such as statute of limitations, early waiver of the right to seek setting aside of the award, and choice of law.

ADGM CFI Decisions

ADGM CFI accepts jurisdiction over the Application pursuant to the express agreement of the parties to submit to the jurisdiction of the ADGM courts, in the form of written opinions exchanged during the proceedings and confirmed by counsel. The ADGM CFI considers that such mutual written consent satisfies one of the jurisdictional thresholds set out in Article 13(8) of the ADGM Founding Act, which reads as follows:⁸

The Global Markets courts may hear and decide any civil or commercial claim or dispute, provided the parties agree in writing to have such claim or dispute brought to them, whether before or after the claim or dispute arises.

ADGM CFI also noted that it does not need to consider whether other jurisdictional gateways are satisfied.

As to the applicable procedural law, ADGM CFI accepted the defendant’s contention that the application should be decided under the Federal Arbitration Act. The Court noted that recourse to the ADGM Arbitration Regulations, 2015 was not applicable in the case as the arbitration in question took place in Abu Dhabi.

ADGM CFI also accepted the defendants’ arguments on the merits and dismissed the application. ADGM CFI observed:

Courts facing an application to set aside an arbitral award are notoriously reluctant to interfere with a duly constituted arbitral tribunal’s assessment of a case before it unless clear and obvious errors have occurred which would clearly affect the arbitral award. The inherent fairness and accuracy of the arbitration process. This fundamental principle underpins the substance of legislative provisions and judicial pronouncements, on which there is considerable correlation between views across jurisdictions.⁹

In the end, ADGM CFI ruled that the defendant was entitled to recover the costs it incurred as a result of the application on the basis of the fee-as-events principle.

Significance of this judgment

This judgment is important for several reasons. This is the first time that an ADGM court has assumed supervisory jurisdiction over an arbitration conducted in Abu Dhabi.While the onshore and offshore Abu Dhabi courts are “courts of the emirate [of Abu Dhabi]”,¹⁰They technically belong to different jurisdictions.

ADGM CFI Judgment A6 five. B6 To its credit, it provides a solution to what can be a judicial dilemma for the parties. Without CFI’s intervention, the parties could be in an adverse jurisdictional conflict. In this case, the fate of the dispute would be uncertain because (i) Abu Dhabi does not have a judicial tribunal (similar to Dubai’s Joint Judicial Council) to resolve jurisdictional conflicts between its onshore and offshore courts; (ii) It is not clear whether the Supreme Court of Abu Dhabi will step in to resolve this negative jurisdictional conflict between courts inside and outside of Abu Dhabi; (iii) the UAE Federal Supreme Court has recently lost its ability to resolve “one emirate judicial authority” Jurisdictional conflicts between statutory powers.¹¹

The CFI judgment also provides some guidance for future similar cases. While this is unusual, it is not the only case in which a court in Abu Dhabi has refused to exercise jurisdiction over an application to set aside an award rendered in Abu Dhabi. For example, the Supreme Court of Abu Dhabi reached the same result in its latest ruling on January 18, 2023.¹²

in conclusion

decision in A6 v. B6 To some extent, it provides comfort to parties in ICC arbitrations conducted in Abu Dhabi. In doing so, it protects the UAE’s arbitration policy and enhances its status as an arbitration centre.

Uncertainty will remain, however, unless Abu Dhabi’s domestic courts revisit the approach to bringing onshore ICC arbitrations to ADGM.