Claim No: xxxx
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
(1) GEARY MIDDLE EAST FZE
(2) GEARY LIMITED
ORDER OF H.E. JUSTICE OMAR AL MUHAIRI
UPON reviewing the Claim Form in XXXX dated 25 November 2015, seeking to set aside a final DIFC-LCIA Arbitral Award (the “Award”) and the Claim Form in XXXX dated 17 December 2015, seeking the recognition and enforcement of the Award
AND UPON reading the relevant material in the case file
AND UPON hearing Counsel for the Award Creditor and Award Debtor at a hearing on 10 March 2016
AND UPON the Order of H.E. Justice Omar Al Muhairi dated 10 March 2016 consolidating the cases XXXX and XXXX
IT IS HEREBY ORDERED THAT:
1.The Award Debtor’s Application to set aside the Award is dismissed.
2. The Award Creditors’ Application for the recognition and enforcement of the Award is granted, and the Award Creditors shall file a draft Order in this regard.
3. The Award Debtor shall pay the Award Creditors’ costs, which shall be subject to a detailed assessment by the Registrar, if not agreed.
Maha Al Mehairi
Date of issue: 7 April 2016
SCHEDULE OF REASONS
1.The Applications before the Court arise out of the Award issued on 17 November 2014 by the sole arbitrator, under the DIFC-LCIA Arbitration Rules. The Award Debtor was ordered to pay the Award Creditors the sums of AED 31,500,000 plus accrued interest of AED 5,498,339.14 and AED 10,356 per day from 1 September 2013 until payment was made, in addition to AED 309,750 and AED 571,250.40 in respect of costs.
HISTORY OF PROCEEDINGS
2. On 14 December 2015, an Order of Judicial Officer Maha Al Mehairi reallocated the Award Debtor’s Claim Form, originally XXXX, to the Arbitration Court with the new case number XXXX and provided that the date of issue would remain as 25 November 2015. It was also confirmed that the application to set aside the Award was issued correctly.
3. On 13 March 2016, following the hearing on 10 March 2016, H.E. Justice Omar Al Muhairi issued an Order consolidating the Award Debtor’s and Award Creditors’ cases, XXXX and XXXX respectively, to proceed jointly under case number XXXX. Judgment was reserved, to be issued in April 2016.
THE AWARD DEBTOR’S SUBMISSIONS
4. The Award Debtor’s application is for this Court to set aside the Award in full, or at the very least, with respect to the part relating to interest. Article 41 of the Dubai International Financial Centre Law No. 1 of 2008 (the “Arbitration Law”) is relied upon as conferring power on this Court to set aside an award.
5. The Award Debtor was initially a Limited Liability Company, becoming a Private Joint Stock Company (a “PJSC”) in May 2009. Article 103 of the UAE Companies Law (the “Companies Law”) is cited by the Award Debtor as providing that an arbitration agreement can only be authorised by a resolution of the General Assembly or Board of Directors of a PJSC and that the Board of Directors of a PJSC may only enter into an arbitration agreement without the approval of the General Assembly where either:
(a) The Articles of Association permit the Board to enter into arbitration agreements; or
(b) Arbitration agreements are natural elements of the PJSC’s business.
6. The parties entered into a Settlement Agreement on 21 May 2009, in which, clauses 17 and 18 provided that:
“17. This Agreement is governed by and construed in accordance with the laws applicable in the Emirate of Dubai.
18. Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Arbitration Rules of the DIFC-LCIA Arbitration Centre…”
7. The Award Debtor submits that clause 18 (the “Arbitration Agreement”) cannot be a valid arbitration agreement according to the Companies Law as there has never been any suggestion that this clause was approved by a General Assembly of the Award Debtor. Furthermore, it was argued that due to the wording of clause 17, any valid arbitration agreement was intended to be governed by UAE laws rather than DIFC laws.
8. Article 25.2 of the Award Debtor’s Articles of Association granted its Board of Directors authority to enter into arbitration agreements. However, it is asserted that Mr. Samueluel, signatory to the Settlement Agreement, was not a member of the Board of Directors and therefore, the Settlement Agreement and Arbitration Agreement cannot be valid and neither can the resulting Award, which should be set aside.
9. The Award Debtor states that the Sole Arbitrator’s approach and reasoning in issuing the Award was flawed as he failed to give any weight to the decisions of the Dubai Court of Cassation which were drawn to his attention, and he was wrong to conclude that he had jurisdiction to enter into consideration of the matters in dispute in the arbitration. In light of this, it is submitted that the Award should be set aside and the Award Creditors’ application for recognition and enforcement be dismissed.
10. Without prejudice to the above submissions, the Award Debtor submits that the Sole Arbitrator’s decision to award the maximum rate of interest without considering the prevailing market rate at the time and without hearing arguments from the Award Debtor and considering the burden imposed by interest payments was erroneous and unjust. It is asserted that the Award is in conflict with Sharia principles and, by extension, UAE public policy, as defined by Article 3 of the UAE Civil Code.
11. The Award Debtor asks this Court to at least set aside the award for interest of AED 5,498,339.14 to the date of the Award and AED 10,356 per day thereafter. Article 41(2)(b)(iii) of the Arbitration Law is cited as empowering this Court to set aside an award if it is in conflict with UAE public policy and Article 44 of the Arbitration Law as empowering this Court to refuse recognition or enforcement on the same ground.
THE AWARD CREDITORS’ SUBMISSIONS
12. The Award Creditors resist the Award Debtor’s application and seeks an Order of this Court recognising and enforcing the Award.
13. In summary, it is the case of the Award Creditors that:
(i) The Award Debtor waived the right to challenge the Award under Article 41(2)(a)(i) of the Arbitration Law pursuant to Article 26.9 of the Arbitration Rules of the DIFC-LCIA (the “Arbitration Rules”) as, by agreeing to arbitration under the Arbitration Rules, the parties irrevocably waive their right to any form of appeal, review or recourse. Accordingly, the Award Debtor has waived the right to set aside the Award;
(ii) The challenge to the Award under Article 41(2)(a)(i) of the Arbitration Law is, in any event, misconceived as it is based upon the premise that the arbitration agreement is subject to UAE law whereas it is in fact subject to DIFC law, under which it is valid. Clause 17 of the Settlement Agreement does not apply to the Arbitration Agreement in clause 18, which is separate from any substantive contract within which it is contained. In any event, the language used in clause 17 is wide enough to include DIFC law which is applicable within Dubai:
“17. This Agreement is governed by and construed in accordance with the laws applicable in the Emirate of Dubai.”
The Award Creditors accuse the Award Debtor of confusing and conflating UAE procedural and substantive law to make its argument regarding Mr. Samuel’s legal capacity. However, as the parties have not only chosen the DIFC as the seat of their arbitration, but also subjected the arbitration to the supervision of the DIFC-LCIA Arbitration Centre pursuant to its Rules, the validity of the Arbitration Agreement must be determined in accordance with DIFC law rather than UAE law. In any event, the Award Debtor is not able to furnish proof on this Court that Mr. Samuel did not have authority to enter into the Arbitration Agreement under the law of the DIFC as is required under Article 41(2)(a)(i) of the Arbitration Law. Even if Mr. Samuel was not expressly authorised to sign arbitration agreements he was authorised to do so as a matter of UAE law and the Award Debtor is estopped from denying he had authority under the doctrine of ‘apparent authority’ (the “Doctrine”);
(iii) The challenge to the Award under Article 41(2)(b)(iii) is hopeless as the Award Debtor concedes that interest is permissible under UAE law at a rate of up to 12%, therefore the award of interest by the Sole Arbitrator cannot be in conflict with the public policy of the UAE; and
(iv) It follows that the award must be recognised and enforced under Article 42(1) of the Arbitration Law as, if the Award Debtor fails to have the Award set aside, the Award Debtor is not permitted to oppose recognition and enforcement of the Award under Article 44(1)(a) of the Arbitration Law.
14. Before the Court are two separate applications and I shall address the Award Debtor’s application to set aside the Award before turning my attention to the Award Creditors’ application for recognition and enforcement of the same Award.
The Award Debtor’s application to set aside
15. The circumstances in which this Court is empowered to set aside an arbitral award are set out in Article 41 of the Arbitration Law:
“(1) Recourse to a Court against an arbitral award made in the Seat of the DIFC may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this Article.
(2) Such application may only be made to the DIFC Courts. An arbitral award may be set aside by the DIFC Courts only if:
(a) the party making the application furnishes proof that:
(i) a party to the Arbitration Agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, in the absence of any indication thereon, under the law of the DIFC;
(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to Arbitration, or contains decisions on matters beyond the scope of the submission to Arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to Arbitration may be set aside;… or
(b) the DIFC Courts finds that:
(i) the subject-matter of the dispute is not capable of settlement by arbitration under DIFC Law;
(ii) the dispute is expressly referred to a different body or tribunal for resolution under this Law or any mandatory provision of DIFC Law; or
(iii) the award is in conflict with the public policy of the UAE…
16. Central to the Award Debtor’s argument is that the Arbitration Agreement is not valid, as the Settlement Agreement in which it was contained was signed by Mr. Samuel, who lacked the requisite authority to cause the Arbitration Agreement to become binding. Accordingly, it is submitted that the Award should be set aside under Article 41(2)(a)(i) of the Arbitration Law.
17. The burden of proving that Mr. Samuel was not an authorised signatory of the Arbitration Agreement is placed on the Award Debtor. The Award Debtor submits that no evidence of Mr. Samuel being expressly authorised by the Board of Directors was found, however this is obviously distinct from any actual evidence being furnished upon the Court proving he was not authorised to sign arbitration agreements.
18. The “Doctrine” is raised by the Award Creditors in response to the arguments regarding Mr. Samuel’s legal capacity to sign the Arbitration Agreement. This Doctrine is set out in Articles 130 and 131 of the DIFC Contract Law, No. 6 of 2004:
“130. Apparent authority
Apparent authority is the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the other’s conduct towards such third persons.
131. Creation of apparent authority
Except for the conduct of transactions required by statute to be authorised in a particular way, apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.”
19. Although the Award Debtor submits that Mr. Samuel did not have express authority to enter into arbitration agreements on its behalf, he can be found to have ‘apparent authority’ under DIFC law if the Court is satisfied that the conduct of the Award Debtor, reasonably interpreted, caused the Award Creditors to believe that the Award Debtor consented to having the Settlement Agreement (therefore, the Arbitration Agreement) signed by Mr. Samuel, purporting to act for the Award Debtor.
20. Samuel clearly held himself out as having the requisite authority to sign the Settlement Agreement as Executive Managing Director and the Award Debtor appears to accept that Mr. Samuel was authorised to sign the Settlement Agreement but asserts that this authority did not extend to the Arbitration Agreement contained in clause 18. However, no evidence has been furnished on this Court to support the position that Mr. Samuel had only limited authority as signatory to the Settlement Agreement.
21. I am satisfied that Mr. Samuel had ‘apparent authority’ under the Doctrine, even if actual authority by virtue of the Award Debtor’s Articles of Association was lacking. I am also satisfied that it is the DIFC law that governs the Arbitration Agreement; clause 18 expressly provides for all disputes to be resolved according to the Arbitration Rules of the DIFC-LCIA Arbitration Centre and effectively confers jurisdiction to the DIFC Courts.
22. In any event, if it was UAE law that governed the Arbitration Agreement, the Doctrine would still apply. The recent Judgment of the Dubai Court of Cassation in Case 547 of 2014, issued on 21 October 2015 sets a precedent which is in line with the Doctrine:
“This Court has also decided that if a specific company’s name was listed in the preamble or introduction of a contract and was signed by another person at the foot of the page, a presumption is established that the signatory has signed the contract in the name of and on behalf of the company. As a result, the rights and obligations of the mentioned contract are attributed to the company, in view of the signatory acting on behalf of the company. It is also decided that a personal signature, seal, or fingerprint is the only source of authentication of a document.”
23. In light of the above mentioned Judgment, as Mr Sam signed the Settlement Agreement in the name of and on behalf of the Award Debtor, the rights and obligations of the Settlement Agreement are attributed to the Award Debtor. This is the case, particularly as Mr. Samuel signed the Settlement Agreement using the title ‘Executive Managing Director’ of the Award Debtor’s company and used the Award Debtor’s company seal which displayed the company logo to authenticate the document, clearly holding himself out as having the requisite authority to do so.
24. Article 25 of Federal Law No. 2 of 2015, ( “UAE Companies Law” ) states:
“Protection of Those Dealing with the Company
1. The company shall not claim lack of liability towards those dealing with it, on the ground that the management authority was not duly appointed in accordance with the provisions of this Law or the Articles of Association of the company, so long as the acts of such authority is within the usual limits with respect to persons in the same position in companies that conduct the same type of activity as the company.
2. To protect a person dealing with the company, he shall be a bona fide party. A person shall not be deemed as acting in good faith if he actually knows or could have known, based on his relationship with the company, the aspects of deficiency in the act or work proposed to be held thereto against the company.”
25. In this case, Article 25 applies to prevent the Award Debtor from claiming lack of liability. The Award Creditors are the innocent party and there is no evidence that the Award Creditors knew or could have known, based on their relationship with the Award Debtor that Mr. Samuel may not have had the requisite authority.
26. I find that the Arbitration Agreement is valid and it follows that the subsequent Award is also valid. I now turn my attention to the level of interest included in the Award.
27. Moving now to the Interest arguments, Article 76 of the Federal Law No.18 (1993) in respect of Commercial Transactions states:
“A creditor shall have the right to demand interest on a commercial loan in accordance with the rate stipulated in the contract. If the rate of interest is not stipulated in the contract it shall be calculated in accordance with the rate prevailing in the market at the time of the transaction on condition that in this case it should not exceed 12 per cent, until full settlement is made.”
28. With respect to Article 76 and appropriate levels of interest, the UAE Union Supreme Court’s Judgment of 21 March 2010 in Cases 358 and 375 of 2009 provided the following precedent:
(i) In commercial contracts, if the parties have agreed and stipulated the level of interest to be applied then this amount should apply;
(ii) In commercial contracts that do not stipulate the level of interest, the Court must apply Article 76; and
(iii) In non-commercial contracts, Article 76 need not apply and the Court or Arbitrator may apply any interest deemed appropriate in the circumstances.
29. The facts in this case fall into the third scenario envisioned by the Union Supreme Court and therefore I find that the Sole Arbitrator was entitled to award interest at 12 per cent and it is not for this Court to conduct an analysis of the reasoning or merits of his decision. By agreeing to the application of the Arbitration Rules, the parties agreed to waive the right for this or any Court to review the Award or any part of it by virtue of Article 26.9, which states:
“All awards shall be final and binding on the parties. By agreeing to arbitration under these Rules, the parties undertake to carry out any award immediately and without any delay (subject only to Article 27); and the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other judicial authority, insofar as such waiver may be validly made.”
30. It is my opinion that DIFC Law governs the Settlement and therefore, Arbitration Agreement, however, as examined above, even if it were UAE Law that governed in these circumstances the result would be the same. In light of the foregoing observations I dismiss the Award Debtor’s application to set aside the Award or any part thereof.
The Award Creditors’ application for recognition and enforcement
31. The relevant parts of Article 42, 43 and 44 of the Arbitration Law provide:
“42. Recognition and enforcement of awards
(1) An arbitral award, irrespective of the State or jurisdiction in which it was made, shall be recognised as binding within the DIFC and, upon application in writing to the DIFC Courts, shall be enforced subject to the provisions of this Article and of Articles 43 and 44…
(1) Where, upon the application of a party for recognition of an arbitral award, the DIFC Courts decides that the award shall be recognised, it shall issue an order to that effect…
44. Grounds for refusing recognition or enforcement
(1) Recognition or enforcement of an arbitral award, irrespective of the State or jurisdiction in which it was made, may be refused by the DIFC Courts only:
(a) at the request of the party against whom it is invoked, if that party furnishes to the DIFC Courts proof that:
(i) a party to the Arbitration Agreement as defined at Article 12 of this Law was under some incapacity; or the said Arbitration Agreement is not valid under the law to which the parties have subjected it or, in the absence of any indication thereon, under the law of the State or jurisdiction where the award was made…or
(b) if the DIFC Courts finds that:…
(vii) the enforcement of the award would be contrary to the public policy of the UAE…
(3) Any party seeking recourse against an arbitral award made in the Seat of the DIFC shall not be permitted to make an application under paragraph (1)(a) of this Article if it has made or could have made an application under Article 41 of this Law.”
32. I am satisfied that none of the grounds for refusing recognition or enforcement of the Award under Article 44 of the Arbitration Law are met and, therefore, the Award is binding within the DIFC under Article 42 of the Arbitration Law and the Award Creditors’ application for recognition and enforcement of the Award must be granted.
33. The Award Debtor has sought recourse against the Award in its failed application to set it aside under Article 41 of the Arbitration Law, therefore, pursuant to Article 44(3) of the Arbitration Law, the Award Debtor may not rely on the same to object to the recognition and enforcement of the Award in full.
34. I find that the Settlement Agreement and Arbitration Agreement contained in clause 18 are valid as the Award Debtor’s signatory Mr. Samuel had ‘apparent authority’ to sign the Agreement under the Doctrine. The subsequent Award is therefore capable of being recognised and enforced by this Court and an Order for recognition and enforcement is made accordingly. I direct the Award Creditors to file a draft Order in this regard.
35. For the avoidance of doubt, the Award Debtor’s application is dismissed in full and the Award Creditors’ application granted. The Award shall be recognised as binding within the DIFC according to Article 42(1) of the DIFC Arbitration Law No.1 of 2008.
36. The final issue to be decided is that of costs. According to RDC 38.7, if the Court decides to make an order on costs the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. I am satisfied that the Award Debtor, as the unsuccessful party in this case should pay the costs which shall be subject to a detailed assessment if not agreed.
Maha Al Mehairi
Date of issue: 7 April 2016
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