January 27, 2025 ARBITRATION - ORDERS
Claim No: ARB 004/2022
ARB: 005/2023
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF APPEAL
BEFORE CHIEF JUSTICE WAYNE MARTIN, H.E. DEPUTY CHIEF JUSTICE ALI AL MADHANI AND JUSTICE ROBERT FRENCH
BETWEEN
ARB-004-2022
MIRMA
Appellant/Claimant
and
MOBAL
Respondent/Defendant
ARB-005-2023
MOBAL
Respondent/Claimant
and
MIRMA
Appellant/Defendant
Hearing: | 7 November 2024 |
---|---|
Counsel: | Mr James Barratt of Vinson & Elkins for the Appellant Mr Christopher Harris KC instructed by Eversheds Sutherland and Afridi & Angell, for the Respondent |
Reasons issued: | 27 January 2025 |
REASONS FOR THE ORDER OF THE COURT OF APPEAL DATED 8 NOVEMBER 2024
Introduction
1. Mirma was the unsuccessful party in an arbitration arising out of a salvage contract (the “Contract”) with Mobal. Mirma applied to the Court of First Instance (“CFI”) to set aside the Award. Mobal applied to the CFI for an order recognising and enforcing the Award. Mirma’s application was dismissed and Mobal’s application was granted.
2. Having applied to the Primary Judge for permission to appeal his decision dismissing the application to set aside the Award, Mirma renewed the application for permission in this Court. It also applied directly to this Court for permission to appeal the Enforcement and Recognition Order.
3. The Court dismissed both applications after hearing oral argument on 7 November 2024. Our reasons for doing so follow.
Factual and procedural background
4. Mirma is a company owned by the Iraqi Ministry of Oil. Mobal is a Dutch company. On 14 December 2013, Mobalentered into a contract with Mirma whereby it agreed to recover and remove the wreck of an oil tanker, the Marcus which had been bombed and had sunk during the first Gulf War in 1991. The wreck was located within a marine exclusion zone established around an oil terminal. Permission was required from the Iraqi Navy to enter or leave the zone.
5. In March 2014, Mobal informed Mirma that it had located a 70 ft wooden dhow within the wreck. A dispute arose with Mirma as to whether, under the Contract, Mirma was required to compensate Mobal for clearance costs over and above the original contract price. On 3 August 2015, following other disputes between the parties arising in the course of the works, Mobal gave notice that it was suspending work. It commenced that suspension on 4 August 2015 and reduced onsite personnel. On 18 August 2015 Mobal informed Mirma that its vessels were being prevented from departing from the zone. It was common ground that the Iraqi Navy detained Mobals fleet and another two vessels which Mobal had chartered preventing them from leaving the port. In an arbitration that followed, the Tribunal found that Mirma had brought about that detention by informing the Navy that Mobal’s vessels were not permitted to leave the port1
6. Mobal engaged an Iraqi Member of Parliament (“Iraqi MP”) to arrange meetings with the Ministry of Oil to help lift the blockade. In the event the blockade was lifted. Mobal finished the works by 30 June 2017 and left the site. The parties remained in dispute.
7. In August 2018, Mobal filed a request for arbitration including claims for losses suffered as a result of its inability to remove its vessels from the zone. It also claimed fees in respect of the removal of the dhow.
8. Mirma took preliminary objections to the Tribunal determining the claims. The Tribunal indicated it would determine those objections along with the merits of the claims.
9. Mirma brought four counterclaims. One of them related to Mobal’s dealings with the Iraqi MP. Mirma alleged that Mobal had bribed the Iraqi MP with a view to influencing Mirma to agree to Mobal’s demands in relation to the suspension and detention.
10. The Contract contained an ICC Arbitration Agreement covering “any disputes concerning or arising from this Contract.” The original agreed seat was Jordan. In January 2019, the parties agreed to change the seat to the Dubai International Financial Centre (“DIFC”). The arbitration hearings proceeded from September 2020 to December 2020. The Tribunal rendered its award on 2 November 2021 and made corrections by addenda dated 28 February 2022.
11. The Tribunal found that the parties had agreed to a variation for the removal of dhow and awarded USD 2,015,767 for that variation. The Tribunal also held that, in relation to a claim designated ‘Claim 6’, Mobal was entitled to a contractual variation in respect of the detention of its marine spread.
12. Claim 7 concerned the detention of two chartered vessels. The Tribunal did not accept that there was a contractual basis for the claim. It found, however, that Mirma was liable to Mobal in tort for the cost.
13. The Tribunal awarded:
(a) USD 57,074,115 in respect of the variation relating to the detention of Mobal ’s marine spread;
(b) USD 303,574 in respect of the detention of the two vessels; and
(c) USD 18,435,950 in respect of the costs incurred by Mobal in repeating work after the restart.
14. In respect of Mirma’s counterclaim based upon the allegation that Mobal had entered into a business arrangement with the Iraqi MP and his son in an attempt to influence Mirma in a way which was “unethical and illicit” and in breach of the Contract, the Tribunal found the complaint was made out. Its award on that complaint was intended to deprive Mobal of any profit on the Contract. It applied a profit ratio of 25% to all sums paid and due under the Contract. In respect of the fees claimed for the removal of the dhow, the variation in relation to the detention of the marine spread and the award for costs of repeating the work after the restart, the Tribunal found that Mobal should not be entitled to its expected 25% profit on those sums. It therefore awarded Mirma a total of USD 19,381,458 in respect of those claims. The sum awarded over the whole Contract on the counterclaim was USD 37,738,777, with a direction that Mirma was entitled to withhold USD 1,144,031.25 in respect of a certain invoice.
15. Mirma brought an application in the CFI in ARB-004-2022 asking the Court to set aside the Award and, alternatively, parts of it. Mobal, in ARB-005-2023, applied to the Court for orders recognising and enforcing the Award.
16. In a judgment issued in relation to both applications on 8 February 2023, His Excellency Justice Shamlan Al Sawalehi dismissed Mirma’s application and ordered that it pay Mobal’s costs of the application on the standard basis to be assessed by a Registrar if not agreed. The costs of the jurisdictional challenge were to be dealt with separately. By an order dated 20 March 2023, in ARB-005-2023, His Excellency granted Mobal’s application.
17. The following applications were then made to the Judge:
(a) In ARB-004-2022:
(i) Mirma applied for permission to appeal against the judgment;
(ii) Mobal applied for an order that any permission be conditional on Mirma providing security for the net sums due under the Main Award (the “Appeal Conditions Application”).
(b) In ARB-005-2023:
(i) On 13 April 2023, Mirma applied for an order setting aside the Recognition Order (the “Set Aside Application”) on the same grounds as those advanced in ARB-004-2022, but asked the Court to adjourn the application until the conclusion of any appeal in ARB-004-2022;
(ii) Mobal applied for an order that any adjournment be conditional on Mirma providing security for the net sums due under the Main Award (the “Adjournment Conditions Application”); and
(iii) Mirma also applied for permission to advance a counterclaim for enforcement of another award (CC4) made in the same arbitration proceedings (the “Counterclaim Application” and the “CC4 Award”).
18. In a judgment issued on 12 September 2023,2 His Excellency made the following orders:
“1. The Permission Application is dismissed, and Mirma shall pay Mobal its costs of the application on the standard basis, to be assessed by the Registrar, if not agreed.
2. The Appeal Conditions Application falls away. There shall be no order as to costs.
3. The Set Aside Application is dismissed, and Mirma shall pay Mobal its costs of the Set Aside Application on the standard basis, to be assessed by the Registrar, if not agreed.
4. The Adjournment Conditions Application falls away. Mobal shall pay Mirma its costs of the Application on the standard basis, to be assessed by the Registrar, if not agreed.
5. The Counterclaim Application is dismissed, and Mirmashall pay Mobal its costs of the Counterclaim Application on the standard basis, to be assessed by the Registrar, if not agreed.”
19. In ARB-004-2022, Mirma then renewed its application in this Court for permission to appeal against the judgment. It also brought for the first time an application for permission to appeal directly to this Court against His Excellency’s judgment of 8 February 2023 in ARB-005-2023 in which he refused to set aside the Arbitral Award.
20. This Court heard both applications concurrently and invited the parties to present their arguments as for the proposed appeals. At the conclusion of the oral submissions the Court dismissed both applications for permission to appeal. It also ordered that Mirma pay Mobal’s costs of the applications. The Court proposed that following publication of these reasons, the parties should confer in relation to the method to be adopted for determining the amount of the costs. They were invited to agree a timetable with respect to the exchange of submissions and, in particular, on the question whether they should have immediate assessment under Part 38 of the Rules of the DIFC (“RDC”) or a detailed assessment under Part 40.
Grounds of Appeal
21. There were five grounds of the proposed appeals in ARB-004-2022 and ARB-005-2023. As set out in Mirma’s Skeleton Argument they were as follows:
“(1) … the judge erred in law when dismissing [Mirma’s] complaint that the claim of [Mobal] flowing from a naval blockade of [Mobal’s] vessels (“the detention claim”) fell outside the tribunal’s jurisdiction and so fell to be set aside under the Arbitration Law, Article 41(2)(iii)…
(2) The learned Judge further erred in dismissing [Mirma’s] complaint that [Mirma] had not been afforded a fair opportunity to present its case as to the tribunal’s jurisdiction over the contractual basis for the detention claim and so fell to be set aside under the Arbitration Law, Article 41(2)(ii)…
(3) The learned Judge also erred in dismissing [Mirma’s] complaint that [Mirma] had not been afforded a fair opportunity to present its case as to whether the sums awarded in respect of claim 7 in the arbitration (i.e., a tort claim relating to a detention by the Iraqi Navy of two of Mobal’s vessels, for a shorter period of time) were caused by an unlawful act under Iraqi law, and so fell to be set aside under the Arbitration Law, Article 41(2)(ii)...
(4) In addition, the learned Judge erred in dismissing [Mirma’s] application to set aside the entire award under the Arbitration Law, Article 41(2)(b)(iii), for allowing [Mobal] to recover on the contract despite the violation of UAE public policy...
(5) Finally, the learned Judge erred in dismissing [Mirma’s] application to set aside the wooden dhow claim under the Arbitration Law, Article 41(2)(a)(iii), for the tribunal’s improper decision on a matter not before it…”
Procedure for permission to appeal
22. Mobal raised a question whether Mirma could bring an Application for Permission to Appeal in ARB-005-2023 directly without first having made an application to the Primary Judge in that matter.
23. The requirement and criteria for permission to appeal to the Court of Appeal are set out in Part 44 of the RDC. Relevant provisions are:
“44.5
An appellant or respondent requires permission to appeal:
(1) where the appeal is to the Court of Appeal, except where the appeal is against a committal order;
…
44.6
An appellant’s application for permission to appeal must be made to the lower Court:
(1) orally at the hearing at which the decision to be appealed was made; or
(2) in an appellant’s notice.
…
44.8
The lower Court may refer an application for permission to appeal to the appeal Court for decision.
44.9
Where the lower Court refuses permission to appeal, a further application for permission to appeal may be made to the appeal Court in an appellant’s notice.
…
44.19
Permission to appeal may only be given where the lower Court or the appeal Court considers that:
(1) the appeal would have a real prospect of success; or
(2) there is some other compelling reason why the appeal should be heard.
…
44.25
The lower Court or the appeal Court will normally allow the respondent his costs of an application for permission to appeal if permission to appeal is refused.”
24. Having regard to the identity of the issues in both cases and notwithstanding Mobal’s objection which was not pressed, the Court proceeded to hear both applications. In so doing it had regard to the provisions of RDC 4.51, which provides:
“4.51
Where there has been an error of procedure such as a failure to comply with a Rule or Practice Direction:
(1) the error does not invalidate any step taken in the proceedings unless the Court so orders; and
(2) the court may make an order to remedy the error.”
25. The Court also had regard to the overriding objective of the Rules, set out in RDC 1.6:
“1.6
These Rules have the overriding objective of enabling the Courts to deal with cases justly. Dealing with a case justly includes, so far as is practicable:
(1) ensuring that the parties are on an equal footing;
(2) saving expense;
(3) dealing with the case in ways which are proportionate—
(a) to the amount of money involved;
(b) to the importance of the case;
(c) to the complexity of the issues; and
(d) to the financial position of each party.
(4) ensuring that it is dealt with expeditiously and fairly; and
(5) allotting to it an appropriate share of the Court’s resources, while taking into account the need to allot resources to other cases.”
This is to be read with RDC 1.7:
“1.7
The Courts must seek to give effect to the overriding objective when it—
(1) exercises any power given to it by the Rules; or
(2) interprets any Rule or Practice Direction subject only to the public interest.”
Statutory framework — DIFC Arbitration Law 2008
26. The Arbitration Law DIFC Law No 1 of 2008 (“Arbitration Law”), by virtue of Article 3 of that Law, applies in the jurisdiction of the DIFC.
27. Under Article 7, Parts 1–4 and the Schedule to the Law apply where the seat of the arbitration is the DIFC — as was agreed in this case.
28. Article 41 deals with applications for setting aside an arbitral award. Relevantly to this case, it provides:
“41 Application for setting aside as exclusive recourse against arbitral award
(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 Court. An arbitral award may be set aside by the DIFC Court only if:
(a) The party making the application furnishes proof that:
…
(ii) the party making the application was not given proper notice of the appointment of an arbitrator 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 Court finds that:
…
(iii) the award is in conflict with the public policy of the UAE”
These were the provisions of the Arbitration Law relied upon by Mirma in its Applications for Permission to Appeal.
Ground 1
29. By way of background to this Ground, it is necessary to refer to clause 23.3 of the General Conditions of the Contract between the parties. This provided:
“23.3 Changes in Security Conditions
The Contractor shall provide the security means during the performance of this Contract in accordance with Section 4, Part 4 — Security Execution, which is based on the security conditions present at the Site at the Base Date. Should the security conditions, including procedures and protocols, change significantly or in case of an event directly controlled by the Employer occurring as to have an adverse effect on the performance of the Work or is deemed to create a hazard for the safety of the Contractor Group’s personnel, the Parties shall discuss without delay taking into account the urgency of the situation, in good faith the remedial actions. This shall include the provision by the Contractor of additional security means. It is hereby understood that any cost and / or delays suffered by the Contractor as a result of these changes in the security conditions or events as referred to above shall be subject to a variation in accordance with the provisions of Clause 11.0.” (emphasis added)
30. There appear to have been two sets of claims raised by Mobal in relation to the detention. The first was a claim arising out of the detention of the marine spread from 18 August, 2015 to 21 June, 2016. This was designated in the Award as “Claimant’s Claim No. 6”. The Tribunal found, at paragraph 930, that information given by Mirma to the Iraqi Navy that Mobal’s vessels were not allowed to depart, had the effect that the Iraqi Navy ordered their detention “… so that the detention must be considered as being in [Mirma’s] “direct control”. On that basis the Tribunal considered “that the detention was an event directly controlled by [Mirma], as required by Clause 23.3 limb (ii) of the Contract.” Further, the Tribunal found that it was an event which created a hazard for the safety of Mobal’s personnel. On that basis the Tribunal concluded that the requirements of clause met and that Mobal was entitled to a variation for the costs suffered as a result of the detention of its vessels from August 2015 until June 2016.3
31. The Tribunal rejected a tort claim raised under Claim 6 by Mobal on the basis that it arose out of the very same facts as the Contractual Claim. For these reasons it was said the Tribunal could not assess the tort claim.
32. Mobal also raised a separate claim, designated Claim 7, for costs arising out of the detention of two vessels, Mason (“Mason”) and Maya from 19 May to 8 June 2015. The Tribunal held at [1031] of the Award that:
“…it was [Mirma’s] direct influence that lead to the detention of [Mobal’s] vessels. In fact, it is the Arbitral Tribunal’s view that [Mirma’s] information that the Mason was not allowed to depart did have the effect that the Iraqi Navy ordered the detention so that the detention must be considered as being in [Mirma’s] “direct control”. Therefore, the Arbitral Tribunal considers that the detention was an event directly controlled by [Mirma], as required by Clause 23.3 limb (ii) of the Contract.” (emphasis in original)
However the Tribunal concluded that Mobal had failed to establish that there was a change in the security conditions arising from the detention of the two vessels. It had also failed to establish that the detention had an adverse effect on the performance of its work or resulted in safety concerns for its personnel. It was therefore not entitled to a contractual variation.
33. Unlike Claim 6, this left open a tort claim as to which the Tribunal concluded at [1068]:
“that while it has not been established that [Mirma’s] behavior was intended to cause injury to [Mobal] or that [Mirma] obtained any benefits from its behaviors, [Mirma’s] information to the Iraqi Navy that the Mason was not allowed to leave which resulted in the detention of Mason was not lawful. Specifically, any disagreement with regard to [Mobal’s] Schedule or even any commercial dispute between the Parties would not have justified the detention of the Mason or [Mirma’s] respective information to the Iraqi Navy, which – as [Mirma] knew – caused the Iraqi Navy to detain [Mobal’s] vessels.”
34. The Tribunal concluded in light of the above that the detention of the Mason and its tug from May to June 2015, was an unlawful act pursuant to Article 7 of the Iraqi Civil Code (“Iraqi CC”). That Article provides:
1 He who impermissibly exercises his right shall be liable.
2. The exercise of a right becomes impermissible in the following cases:
(a) where such exercise is intended to cause injury to a third party;.
(b) where the benefits sought from such exercise are insignificant such as it will not at all be proportionate to the injury caused thereby to a third party;
(c) where the benefits to be obtained are unlawful.4”
35. In reasoning to that conclusion, the Tribunal considered whether a decision on the tort claim would require it to adjudicate the Iraqi Navy’s acts in its absence. This raised the question about the potential application of an Act of State doctrine to the Award. The Tribunal said
“1054 …in the case at hand, the Arbitral Tribunal does not adjudicate the acts of the Iraqi State or the Iraqi Navy, but the acts of [Mirma]. The Arbitral Tribunal has concluded above that the detention – insofar as it is relevant in the proceedings at hand – had been carried out by the Iraqi Navy at the request of [Mirma] and was caused by it based on the evidence on record…
1055 Therefore, the Arbitral Tribunal concludes that a decision on [Mobal’s] tort claim does not entail or necessitate considering and adjudicating any acts of the Iraqi Navy in its absence.”
36. In an interim conclusion that followed, the Tribunal noted that it was undisputed that the Iraqi Navy had ultimately denied Mobal permission to leave the site as a matter of fact. However, the Tribunal concluded that while the detention was in the end carried out by the Iraqi Navy it was directly caused by Mirma.5 The Tribunal concluded that it had jurisdiction to adjudicate Mobal’s tort claim in relation to the alleged detention.6
37. In his judgment on 8 February 2023,7 His Excellency, Justice Shamlan Al Sawalehi, rejected the submission that the Tribunal’s finding that Mirma was in direct control of the detention necessarily required a finding that Mirma thereby exercised a state authority. What the Tribunal meant by “direct control” was said to have been explained in the Award. The Judge observed:
“For example, at [930] itself the tribunal stated that it concluded “that [Mirma’s] information that the vessels were not allowed to depart did have the effect that the Iraqi Navy ordered the detention so that the detention must be considered as being in [Mirma’s] ‘direct control.’” And so it was by [Mirma’s] provision of information to the Iraqi Navy, not an order, that the tribunal found [Mirma] was in direct control of the detention.” 8
38. In its skeleton outline, Mirma contended that the Tribunal’s decision that it had “directly controlled” the detention of Mobal’s vessels amounted to the conclusion that Mirma was exercising Iraqi State authority. Mirma contended that the detention was indisputably a typical State action. In making the conclusion to hold Mirma liable for the naval detention, the Tribunal must have concluded that the Iraqi Navy was not “justified” in its actions and therefore acted wrongfully. Mirma pointed to the Tribunal’s statement in its Award that “there was no security concern […] which would have justified the Navy to stop the Mason ”9, further there was not “any other reason that would have justified the Iraqi Navy to prevent the Mason from leaving.”10 Mirma submitted that plainly the Tribunal had found that its direct control over the Iraqi Navy was the reason for a sovereign State’s action and also ruled that the action was unjustified as it must have, because in order to find that Mirma had breached the relevant provision of the Contract clause 23.3, it necessarily had to rule that Mirma had “direct control” of the naval detention. Such findings were said to be outside the Tribunal’s jurisdiction.
39. Mobal in its Skeleton Submission argued that in essence the Tribunal had concluded that the naval detention was within Mirma’s “direct control” because Mirma itself had made a voluntary statement to the Iraqi Navy and whether or not to make such a statement was within its control. That statement, as a matter of fact, caused the detention. The Tribunal considered those facts sufficient to satisfy the contractual requirement of direct control. Mobal pointed to the Primary Judge’s conclusion that “the tribunal’s use of the term “direct control” does not seem intended to imply a type of control that the Iraqi navy was beholden to”.11 This was said to be correct particularly given that the Tribunal had made clear that it was not suggesting that Mirma exercised any sovereign power.
40. In our opinion this Ground does not raise a tenable jurisdictional argument. It is directed to a finding of fact about the conduct of Mirma, which had consequences reflected in actions undertaken by the Iraqi Navy
41. The application of the Act of State doctrine to DIFC-seated arbitrations was not in contest before this Court. It has only relatively recently been the subject of judicial decision in the United Kingdom. In Reliance Industries Ltd v Union of India [2018] EWHC 822 (Comm), Popplewell J held that it applied to English-seated arbitrations. H.E. Justice Sawalehi, in a decision delivered on 29 August 202412 held that the Act of State doctrine is applicable as a matter of DIFC Law and is embraced in the Public Policy Ground in Article 41(2)(b)(iii) of the Arbitration Law. The objection based on an Act of State argument was not made out in that case. It is not necessary for present purposes for this Court to expound upon the application of ‘Act of State’ constraints upon arbitral decision-making in the DIFC. Assuming the doctrine to be applicable, it was, for the reasons set out above, not engaged in the present case.
42. It may be noted by way of contrast that in the United States 9 US Code § 15 it is provided that:
“Enforcement of arbitral agreements, confirmation of arbitral awards, and execution upon judgments based on orders confirming such awards shall not be refused on the basis of the Act of State doctrine.”
Ground 2
43. No separate consideration of this ground is required. Counsel accepted that if he failed on Ground 1 he could not succeed on Ground 2.
Ground 3
44. Mirma contended that it had been unable to present its case before the Tribunal as to whether there was a “lawful reason” for its acts said to be at issue in the tort detention claim. The Tribunal had dismissed Mobal’s contractual bases for Claim 7 but found Mirma liable in tort under that claim and that it had acted unlawfully under Article 7 of the Iraqi CC.
45. Mirma pointed out that the Tribunal had found it was not established that it had intended to cause Mobal any injury13 and that it was not clear whether Mirma had obtained any benefits or whether they would be proportionate to injury.14 Neither the first nor the third circumstance was met. Rather than finding that “the benefits to be obtained are unlawful”, which was said to be the case set forth by Mobal, the Tribunal concluded that Mirma’s actions were “not supported by a lawful reason” and did so without explanation.15 Mirma argued that the Tribunal therefore implicitly found that a party can be liable in tort for the consequences of its actions if they are “not supported by a lawful reason”. That, it was said, was not a case ever articulated by Mobal. Nor was it raised by the Tribunal before the Award.
46. Mobal referred to the Primary Judge’s explanation that the Tribunal had not decided the case on a surprise point but on one that had been argued between the parties. That was re-emphasised in his judgment of 12 September. In its Statement of Claim Mobal had expressly relied on each limb of Article 7. Mirma had pleaded various legal bases for its claim. In its Reply, Mobal had said, inter alia, that Mirma had not identified “any argument that Iraqi law entitled it to interfere with the movement of Mobal’s vessels.”
47. Mobal’s case before the Tribunal was:
(a) the reasons that Mirma had identified as justifying its communication to the Iraqi Navy were unsatisfactory.
(b) Mirma had not therefore identified a legal basis for making the communication causing the Iraqi Navy to detain its fleet.
(c) ipso facto the conduct was unlawful under Iraqi law.
48. This was said to be the case upheld by the Tribunal. Mirma’s asserted reason was not a valid justification. There was no lawful basis for its conduct, which was therefore unlawful. Mobal also met an argument by Mirma that the Tribunal’s reasoning amounted to “improperly reversing the parties’ burden”. Mobal had contended that Mirma’s conduct was unlawful because there was no lawful justification for it under Iraqi law. Mirma asserted a lawful justification which the Tribunal rejected and found Mobal’s case proven. Mirma’s implicit contention that this was an impermissible mode of reasoning under Iraqi law was characterised by Mobal as “simply an attempt to appeal the Tribunal’s conclusion of Iraqi law by the backdoor.”16 An appeal on the merits is not a basis to set aside an award under Article 41(2)(ii) of the Arbitration Law.
49. In oral argument, counsel for Mirma was asked what evidence or arguments would have been put to the Tribunal that were not led and put. Counsel responded that they would have advanced arguments that Mirma’s actions were lawful. There was no factual inquiry into that question nor legal analysis of it because that was not the case they had to meet. Counsel accepted that there was an issue before the Tribunal about the lawfulness of Mirma’s actions and that the question was whether or not it was lawful for Mirma to invite the Iraqi Navy to detain their vessels.
50. Notwithstanding Counsel’s submissions, this Court is not of the opinion that there would be any reasonable prospect of success on an appeal on the ground that Mirma did not have an opportunity to present its case. The question must always be one of practical unfairness. Given the range of issues before the Tribunal in relation to the tortious aspects of Claim No 7, practical unfairness is not demonstrated.
Ground 4
51. Mirma submitted that the Primary Judge erred in dismissing its application to set aside the Award as “in conflict with the public policy of the UAE”.17 This arose out of the recognition by the Tribunal that Mobal should not be able to benefit from its unethical acts. Mirma contended that by depriving Mobal of the profit of the Contract but allowing additional recovery under the Contract, the Award made an artificial distinction. There was no logical basis upon which to distinguish the profits from the Contract from Mobal ’s additional recovery arising from the entire Contract. The Primary Judge was said to have failed to advert to the Tribunal’s recognition of the seriousness of Mobal’s conduct.
52. Mobal pointed out that Mirma had made a counterclaim, CC4, relating to Mobal’s dealings with the Iraqi MP and an ongoing investigation in the Netherlands. The Tribunal had found that by engaging the Iraqi MP Mobal had breached ethical obligations in the Contract. The damages were quantified by reference to profits which Mobal was deprived under the Contract. The Tribunal had also agreed to deal with CC4 at the time in a separate confidential award because of the ongoing investigation in the Netherlands. Under the CC4 Award, Mirma was awarded USD 37.7 million plus interest and costs.
53. The Primary Judge referred to the law on the public policy issue and by reference to DIFC authorities held that:
(a) The burden was on Mirma to show that the Main Award “fundamentally offends the most basic and explicit principles of justice and fairness” in the UAE or establish “intolerable ignorance or corruption on the part of the arbitral tribunal”.18
(b) That required Mirma to show that there some “intrinsic characteristic of the award” contrary to public policy or that there was “an alleged procedural defect in the course of the arbitration” or “the conduct of the arbitrators” that conflicted with public policy.19
(c) Unless the conflict was sufficiently serious — for example if recognising the award and enforcing it would require abandoning the very fundamentals on which the legal system is based — it is unlikely that the Court would exercise its discretion to set aside the Award.
54. Mobal made the point that Mirma did not challenge the principles and that it was upon those principles that the Primary Judge rejected Mirma’s public policy complaint. It had not shown a sufficient connection between the alleged bribery and the Contract or the Main Award.
55. The unethical aspects of Mobal’s conduct were dealt with in the Award as indicated earlier. It cannot be said that the Award itself was contrary to public policy in any relevant sense. There is no prospect of success on this ground.
Ground 5
56. This ground related to the dhow claim. It was said that the Primary Judge had erred rejecting Mirma’s argument that the Award be set aside for deciding an issue that did not fall within the terms of submission to the arbitration when ruling on the wooden dhow claim.
57. Mobal’s case, set out in the Terms of Reference, was that Mirma had “refused in bad faith to agree to a contractual variation for [Mobal’s] additional costs in removing the wooden dhow, despite its agent’s prior approval.” Mobal had claimed that Mirma promised to agree to a variation, but did not do so. The claim was for a variation either pursuant to the alleged promise or pursuant to the claim. Mirma’s position was that the work was within Mobal’s scope of work. The Tribunal found that the parties had reached an agreement which itself amounted to a variation. Mirma contended that the Tribunal’s finding was outside the scope of submission to the arbitration on the basis that the parties’ claims are limited to the Terms of Reference.
58. The Primary Judge found that Article 23(4) of the ICC Rules “expressly contemplates the Tribunal deciding matters not contained in the terms of reference”. Further he stated “[i]t is noteworthy in this regard, in my judgment, the rule and the ICC Rules 2012 generally do not appear to stipulate how the tribunal might authorise the making of a new claim. Perhaps tacit approval […] would suffice.” 20 This conclusion was said to be an error of law and fact because the ICC Rules do not include any provision that new claims may be admitted after the terms of reference through a tacit approval without notification and affording the other party an opportunity to comment and Mobal never even advanced that case.
59. It was said that the contractual agreement for a variation was a claim never advanced by Mobal as a new claim and its admission could not have been approved by the Tribunal.
60. Mobal responded by pointing to the Primary Judge’s reasoning and further pointing out that by the time the Terms of Reference had been signed, Mobal had served its Statement of Claim making clear that it claimed a variation for the work to remove the dhow. The Terms of Reference themselves had defined the submission to arbitration as including the totality of the issues raised on the pleadings and submissions and “any further questions of fact or law which the Arbitral Tribunal in is own discretion may deem necessary or appropriate to decide upon”.21
61. In the view of the Court, in light of the argument advanced by Mobal, Ground 5 has no reasonable prospect of success.
Conclusion
62. For the above reasons, the Applications for Permission to Appeal in ARB-004-2022 and ARB-005-2023 were dismissed with costs.
Issued by:
Hayley Norton
Assistant Registrar
Date of issue: 27 January 2025
At: 2pm