Introduction

In a landmark decision issued on January 7, 2025, the Dubai Court of Cassation (Appeal No. 1106/2024 Commercial) reinforced key principles governing the challenging of arbitration awards in the UAE. This judgment provides significant clarifications on the interpretation of Dubai International Arbitration Centre (DIAC) Rules and establishes important precedents regarding the formalities of arbitration awards and the jurisdiction of tribunals over legal costs and fees.

Case Background

The dispute arose when a company challenged an arbitration award issued by the Dubai International Arbitration Centre (DIAC) on July 5, 2024. The challenger sought annulment of the entire award—or partial annulment of the portion related to legal fees and costs—before the Dubai Court of Appeal.

The challenger’s primary arguments were:

1. The arbitration award was void because it failed to include details of the procedural orders issued by the arbitration tribunal during the proceedings
2. The tribunal lacked jurisdiction to determine legal fees and costs

After the Dubai Court of Appeal rejected these arguments on September 30, 2024, the challenger appealed to the Dubai Court of Cassation, which ultimately upheld the Court of Appeal’s decision.

Key Legal Principles Established

1. Exceptional Nature of Arbitration

The Court reaffirmed the foundational principle that arbitration constitutes an exceptional method of dispute resolution that departs from ordinary litigation procedures. The Court stated:

“Arbitration is an exceptional path for resolving disputes based on departing from ordinary litigation procedures and their associated guarantees. It is limited to what the parties’ will extends to in a specific dispute through a special document, or to all disputes arising from a specific contract.”

2. Limited Grounds for Annulment

The Court emphasized that the legislative intent in arbitration law is to minimize grounds for annulment by prioritizing the validity of procedural actions over reasons for their nullity or insufficiency. The Court reasoned that:

“The legislative intent in arbitration is directed toward reducing grounds for annulment by prioritizing reasons for the validity of procedural actions over reasons for their nullity or insufficiency, considering that the purpose of the procedure is to serve the right.”

3. Interpretation of DIAC Rules

The Court provided important clarification on the interpretation of DIAC Rules, particularly regarding the applicable procedural rules and requirements for arbitration awards. The judgment specifically analyzed:

• Article 2 of Decree No. 11 of 2007 (ratifying DIAC Rules) establishes that these rules apply when parties agree to submit their disputes to DIAC arbitration
• Article 17 of the same decree, which establishes the hierarchy of procedural rules applicable to DIAC arbitrations
• Article 37(4) and 37(5), which establish the formal requirements for arbitration awards

The Court particularly highlighted that under the applicable DIAC Rules, an arbitration award must contain:

• The date of issuance
• The place of arbitration
• The reasons upon which it was based (unless the parties agree otherwise and the applicable law does not require reasons)

Notably, the Court expressly held that the DIAC Rules do not require arbitration awards to include details of procedural orders issued by the tribunal during the proceedings.

4. Party Autonomy and Agreement on Costs

The Court reinforced the principle of party autonomy in arbitration by finding that the parties had agreed to apply the DIAC Rules to their proceedings. The Court also determined that the appellant had implicitly acknowledged the tribunal’s jurisdiction over fees and costs by:

1. Requesting recovery of arbitration costs, including DIAC costs, representation costs, and other expenses incurred during proceedings
2. Not objecting to a provision in the award stating that both parties had agreed that the tribunal could determine legal fees and costs

Analysis and Implications

This judgment demonstrates the UAE courts’ increasingly sophisticated and pragmatic approach to arbitration. Rather than adopting an overly formalistic approach that might invalidate awards for minor procedural issues, the Court focused on whether the award met the substantive requirements established by the applicable rules.

The decision aligns with global best practices by recognizing that arbitration awards should not be annulled for procedural irregularities unless these are explicitly required by the applicable law and rules.

Hierarchy of Rules

The Court provided valuable guidance on the hierarchy of rules applicable to arbitration proceedings, confirming that:

1. Primarily, the specific arbitration rules agreed upon by the parties (in this case, DIAC Rules) govern the proceedings
2. Where those rules are silent, the parties’ additional agreements on procedure apply
3. In the absence of party agreement, the tribunal has discretion to determine applicable procedures
4. Mandatory provisions of UAE law override any contradictory provisions in the agreed-upon rules or procedures

Tribunal’s Power Over Costs

The judgment confirms that arbitral tribunals have jurisdiction to determine legal fees and costs when:

• This authority is provided by the applicable arbitration rules
• The parties have expressly or implicitly agreed to such jurisdiction
• Parties request such determinations during proceedings

This clarification provides certainty to arbitration practitioners and parties regarding cost allocation in UAE-seated arbitrations.

Conclusion

This judgment represents an important contribution to UAE arbitration jurisprudence, reinforcing the pro-arbitration stance of UAE courts and their commitment to upholding arbitration awards except in clearly defined circumstances. By taking a substance-over-form approach, the Dubai Court of Cassation has further enhanced the UAE’s position as a reliable seat for international arbitration.

The decision also highlights the importance of understanding the specific requirements of the chosen arbitration rules and ensuring that arbitration agreements and requests for relief are carefully drafted to avoid jurisdictional challenges later.