Dubai Court of Cassation on Arbitration Seat, ICC Rules, Legal Costs, and Third-Party Agreements

Introduction

On 19 November 2024, the Dubai Court of Cassation (“DCC”) issued a significant judgment that provides guidance on important issues related to the parties’ selection of the seat of the arbitration proceedings. In this regard, the DCC adopted a view on the jurisdiction of the ADGM Courts to hear annulment claims concerning ICC awards which differs from the Abu Dhabi Courts’ view.

In this judgment, the DCC has also opined on the interpretation of Article 38 of the ICC Rules and the tribunal’s authority to award legal costs. In addition, the DCC also provided unprecedented guidance on the extension of arbitration agreements to third parties.

Implications of the Parties’ Selection of the Seat and Jurisdiction of the ADGM courts

The DCC, in this judgment, held that the Abu Dhabi Global Market (“ADGM”) Courts lacked jurisdiction to hear annulment claims related to International Chamber of Commerce (“ICC”) Awards seated in Dubai.  The DCC based its decision on the parties’ agreement that Dubai would be the seat of arbitration. The DCC also clarified that the presence of the ICC Representative Office in ADGM does not confer jurisdiction on ADGM Courts over ICC arbitration awards seated in Dubai. In this regard, the DCC explained that “there is no connection between the ICC Representative Office, established by the International Chamber of Commerce (ICC) in the Abu Dhabi Global Market (ADGM) to facilitate arbitration proceedings under the supervision of the ICC in the region, and the ADGM Arbitration Centre. The latter is not an arbitration institution in the strict technical sense but merely a state-of-the-art facility for hosting arbitration hearings.”

Further, the DCC emphasized that it is essential to distinguish between the physical venue of arbitration, where arbitration hearings are conducted, and the seat of arbitration as a legal principle. The latter carries significant legal implications, including determining whether the arbitral award is domestic or foreign and identifying the court with jurisdiction to challenge the arbitral award.

Article 38 of the ICC Rules and Legal Costs

The DCC addressed the authority of arbitral tribunals to rule on legal costs, including attorney fees, under Article 38 of the ICC Rules. Article 38 of the ICC Rules allows arbitral tribunals to award “reasonable legal and other costs incurred by the parties for the arbitration.” The DCC noted that the term “costs” in Article 38 is broad and encompasses various expenses, including legal fees. The DCC also rejected the argument that the absence of an explicit mention of attorney fees in Article 38 precludes their inclusion as recoverable costs. It also highlighted that international arbitration practices, including those of the ICC, generally recognize attorney fees as recoverable costs. The DCC referred to the ICC’s own guidelines and commentary, which supports the inclusion of legal fees as part of the arbitration costs.

Extension of Arbitration Agreement to Third Parties

The court also addressed the issue of whether an arbitration agreement may extend to a third party other than those who signed it. In this regard, the Court held that “it is a well-established principle that a party to an arbitration agreement is not necessarily the one who physically signed it but rather the party issuing instructions. Accordingly, an arbitration clause signed by a subsidiary may extend to the parent company, or vice versa, depending on which party had the decisive authority during the formation or performance of the contract”. This judgment aligns with established legal principles that recognize the extension of arbitration agreements to entities that, while not signatories, are closely related to the contract and its performance.

Conclusion

Having regard to the above judgment and recent authorities of the DCC, it is evident that the judiciary in the Emirate of Dubai is making significant strides toward strengthening the arbitration industry within the Emirate. It is fostering a conducive legal environment to solidify Dubai’s role as a leading hub for managing international arbitration disputes in the Middle East.

For more information on these decrees, please contact Hassan Arab, Partner, Regional Head of Dispute Resolution, Naief Yahia, Partner, Head of Litigation – Dubai, Mosaab Aly, Senior Counsel, Dispute Resolution.