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On July 7, 2022, the Court of Cassation in Abu Dhabi delivered its judgment in Commercial Case No. 492 of 2022, in which the parties disputed the start date of the seven-day period for filing an arbitration objection according to Arab Proceedings brought under Section 25 of Federal Law No. 6 of the United Arab Emirates (UAE) (Arbitration Law), which generally applies to arbitrations in the UAE unless the parties agree to the application of another arbitration law. The Supreme Court of Appeal affirmed that the seven-day period begins with the notification of the commencement of the arbitration and not when the arbitral tribunal is established. Accordingly, since Respondent’s failure to raise the argument that arbitration was premature due to non-compliance with the contractual pre-conditions of arbitration before the first hearing of the Arbitral Tribunal, Respondent waived its right to do so, there is no basis for seeking Set aside the arbitral award.
background facts
The Dispute Agreement in Commercial Case No. 492 of 2022 contains a tiered dispute resolution clause. The parties have agreed in the terms that, upon receipt of written notice of the dispute, they will have an initial period of 14 days to seek an amicable resolution of the dispute. If no settlement is reached, the matter will be referred to the Settlement Committee for adjudication. The claimant did not follow these steps and did not establish a settlement committee. Instead, the plaintiff directly initiates arbitration proceedings.
The claimant notified the respondent that it was initiating arbitration proceedings, and the respondent confirmed receipt on March 14, 2021. At the first hearing before the arbitration, the respondent orally raised an objection to the arbitration tribunal on the grounds that the prerequisites of the arbitration contract were not met. The hearing will be held on April 20, 2021. While the judgment did not state how the tribunal would deal with the objection, it can be assumed that the judgment was dismissed because the tribunal determined the merits of the dispute and ruled in favor of the applicant.
The defendants sought to set aside the ruling at the Court of Appeal in Abu Dhabi. The Court of Appeal held that the Respondent failed to present the argument that the arbitration was premature within the 7-day period from the date on which the Respondent admitted that the arbitration began. Therefore, the respondent waived the right to challenge the arbitration proceedings. The Court of Appeal’s decision was subsequently upheld by the Supreme Court of Appeal.
The Supreme Court of Appeal confirmed that, according to Article 25 of the Arbitration Law, if the parties fail to comply with the arbitration agreement, they are deemed to have waived their right to challenge the arbitration. No objection was raised within 7 days of learning of the violation. The Court of Cassation expressly rejected the defendant’s argument that the seven-day period started from the date of the first hearing. The Supreme Court of Appeal further stated that Article 27 of the Arbitration Act – which provides that unless the parties agree otherwise, the arbitral proceedings shall commence on the day following the completion of the constitution of the arbitral tribunal – is irrelevant to the application of Article 27. Clause 25 expressly states that this time period starts from the date of discovery of non-compliance.
The Supreme Court of Appeal further affirmed that section 53 of the Arbitration Act contained an exhaustive list of grounds for setting aside an arbitral award, but none of these grounds were satisfied. Therefore, there is no reason to ask for the award to be set aside.
Notes
This case reminds the parties to the dispute that, for any arbitration proceeding governed by the Arbitration Law, arguments regarding premature and non-compliance with the conditions precedent to the arbitration contract must be presented promptly within 7 days of the commencement of the arbitration.
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