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Claim No: ARB 030/2020

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

(1) LIMAN
(2) LUDI

Claimants

and

(1) LAYLI
(2) LUNI

Defendants

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ORDER OF H.E. JUSTICE SHAMLAN AL SAWALEHI

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UPON the Claimants’ claim, filed on 18 October 2020, for an arbitral award issued on 22 September 2020 in DIFC-LCIA Claim No. (the “Set Aside Application”)

AND UPON the Defendants’ application, filed on 7 December 2020, for relief from sanctions and an extension of time to dispute the Court’s jurisdiction, having failed to do so within 14 days of filing their acknowledgement of service, as required by RDC r. 12.4(1) (the “Relief Application”)

AND UPON the Defendants’ application, filed on 8 December 2020, disputing the jurisdiction of the Court (the “Jurisdiction Application”)

AND UPON hearing the parties at the hearing which took place on 28 February 2021

AND UPON having dismissed the Relief Application at the hearing, causing the Jurisdiction Application to fall away

AND UPON reviewing the evidence and documents recorded on the Court file

IT IS HEREBY ORDERED:

1. The Defendants shall pay the Claimants their costs of the Relief Application and the Jurisdiction Application, on the standard basis, to be assessed by a registrar if not agreed.

2. The Set Aside Application is dismissed.

3. The Claimants shall pay the Defendants their costs of the Set Aside Application, on the standard basis, to be assessed by a registrar if not agreed.

Issued by:
Nour Hineidi
Registrar
Date of issue: 29 July 2021
Time: 10am

SCHEDULE OF REASONS

Introduction

1. It was the moral of an earlier case that, if parties want the DIFC to be the seat of arbitration, they should expressly select “the DIFC” in their arbitration agreements rather than use more equivocal designations like “the Emirate of Dubai”, which could mean either “onshore Dubai” or “the DIFC”: Dhir v Waterfront Properties [2009] DIFC CFI 011 (8 July 2009) at [92]. Where parties are not specific, it falls to the Court to consider, as a matter of objective contractual construction, what the parties meant: Dhir at [84]. In this court, there is no general rule which applies in every such case. It is a matter of construing “the Emirate of Dubai” or “Dubai”, as the case may be, in its context.

2. The moral of this case is that, if parties have agreed to DIFC-LCIA arbitration specifically and want onshore Dubai to be the seat of arbitration, it is of vital importance that they expressly identify onshore Dubai in their arbitration agreements rather than use terms that also apply to the DIFC as it appears the Dubai Court’s current approach where parties agree to DIFC-LCIA arbitration is to construe “Dubai” as the seat of arbitration as necessarily meaning “the DIFC”, even where there is no dispute between the parties that by “Dubai” they meant “onshore Dubai” rather than “the DIFC” or, apparently, where context might otherwise point to onshore Dubai.

3. This divergence of approaches between the courts of Dubai means that, so far as some arbitration agreements are concerned, there is a potential cavity within the supervisory landscape of the Emirate: if the Dubai Court finds that “Dubai” necessarily means “the DIFC” in a DIFC-LCIA arbitration agreement but the DIFC Court finds, construing “Dubai” in its context, that it means “onshore Dubai”, parties to arbitration under that agreement might find themselves deprived of any court’s supervision.

4. So far as I am aware, the present case is the first instance of a DIFC-LCIA arbitration actually falling into this cavity—the other occasions that I know of on which the Dubai Court took the above approach were at the recognition and enforcement, not supervisory, stage—albeit that strictly speaking only one leg has fallen in so far, this court having not yet determined whether it has supervisory jurisdiction under the parties’ arbitration agreement (the “Arbitration Agreement”). The Claimants and the Defendants mutually understood that the reference to “Dubai” as the seat of arbitration in the Arbitration Agreement was a reference to onshore Dubai rather than the DIFC and that, in turn, the Dubai Court rather than the DIFC Court had supervisory jurisdiction over the arbitration (the “Arbitration”) and the arbitration law applicable in Dubai (the “UAE Arbitration Law”) rather than that applicable in the DIFC (the “DIFC Arbitration Law”) applied. It is evident, too, that the tribunal (the “Tribunal”) had the same understanding and indeed applied that understanding such that, the parties agree, the final award issued on 22 September 2020 (the “Award”) was made, legally speaking, in onshore Dubai.

5. The Dubai Court disagreed. When asked by the Claimants during the Arbitration to exercise a certain supervisory jurisdiction, the Court of Appeal and then the Court of Cassation refused to do so, holding that “Dubai” in the Arbitration Agreement was a reference to the DIFC on account of the Arbitration being DIFC-LCIA arbitration.

6. After the Award was issued, the Claimants then applied to this court, requesting it to set aside the Award on the primary basis that the arbitral procedure was not in accordance with the parties’ agreement to the DIFC as the seat of arbitration, the Tribunal, again, having applied onshore Dubai as the seat (the “Set Aside Application”). It should be stated from the outset that the Claimants have been entirely and helpfully transparent about their change in position on the meaning of “Dubai” in the Arbitration Agreement: whereas they had originally understood that onshore Dubai was the seat of arbitration, following the decisions of the Dubai Courts and having considered their reasonings and consequences, the parties, the Claimants now contend, must have in fact selected the DIFC as the seat of arbitration.

7. In a case such as this, there is an additional hurdle which a claimant must clear before the Court can begin probing a designation like “Dubai” in order to determine its proper construction: it must first be established that, if a ground for setting aside was made out, the Court would have the jurisdiction to set aside that award. Under DIFC law, this is a question that is answered by reference to the seat of arbitration in fact. More will be said on this below.

8. As such, the fact that one leg of the Arbitration has fallen into the DIFC-LCIA supervisory cavity described above does not, in my judgment, and for reasons given below, mean that this court can for that reason alone prevent the other leg from falling in too: it will have to be established that the DIFC Court has the jurisdiction to make such an intervention. This being the case, the present application provides an opportunity for the DIFC Court to contribute to the jurisdictional conversation taking place concerning the meaning of “Dubai” in DIFC-LCIA arbitration agreements and the potential consequences of not expressly selecting onshore Dubai as the seat of arbitration where it is the Dubai Court’s supervision and the UAE Arbitration Law’s application that are desired. It is hoped that this decision will provide some clarity on the issue, by erecting a clear warning sign if nothing else.

Background

The Parties

9. The Second Claimant is a private company incorporated in the Jebel Ali Free Zone, Dubai, UAE.

10. The First Claimant is a Dubai-registered property developer that was appointed by the Second Claimant to develop a 5-star hotel (the “Hotel”) in Dubai (the “Project”). As required by the Dubai real estate regulations, all off-plan sale and purchase agreements for the Hotel were entered into by the First Claimant as the registered developer and the various third parties.

11. Two such third parties are the Defendants, private individuals residing in Dubai who, pursuant to a share and purchase agreement dated 24 October 2013 and signed by the First Claimant “for and on behalf of” the Second Claimant, purchased a residential unit in the Hotel (the “Unit”) for the sum of AED 4,400,000 (the “SPA”).

The Purchase

12. The Defendants completed payment for the Unit and on 13 November 2017 they became the registered owners thereof and the title deed was duly issued to them.

The Arbitration Agreement

13. Clause 13.4 of the SPA is the Arbitration Agreement:

Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred and finally resolved by arbitration under the Arbitration rules of the DIFC-LCIA Arbitration Centre, which Rules are deemed incorporated by reference into this clause. The number of arbitrators shall be three. The seat, or legal place, of arbitration shall be Dubai. The Language to be used in the arbitration shall be English.

The Dispute

14. A dispute arose concerning the branding of the Hotel and the Unit. The Defendants also alleged quality issues with the works at the Unit.

The Arbitration and Dubai Courts Proceedings

15. On 19 February 2018, the Defendants filed the Arbitration.

16. Initially, the Claimants participated in the Arbitration. They withdrew, however, in October 2019 as they were “concerned” that any further participation “had the potential to prejudice” a claim the First Claimant had made in the Dubai Court, the court that the parties believed had supervisory jurisdiction under the Arbitration Agreement, to terminate the Arbitration on the basis that a final award had not been issued within 1 year of the date of the “first session of the arbitration”, in breach, the First Claimant contended, of Article 42(1) of the UAE Arbitration Law which provides:

17. On 3 October 2019, the Claimants withdrew from the Arbitration, informing the Tribunal in writing that they considered “that [the Arbitration] lacked the requisite legal standing and… are seriously [deficient] in the process”. When asked by the Tribunal to explain what they considered those deficiencies to be, the Claimants declined the opportunity to be more specific: “being the court of the seat of the arbitration, the matter is pending consideration before the Dubai court and therefore sub judice.”

18. The hearing of dispute was heard without the Claimants on 18 February 2020.

19. By judgment handed down on 13 May 2020, the Dubai Court of Appeal dismissed the First Claimant’s case on the basis that the DIFC Court had supervisory jurisdiction over the Arbitration as, amongst other things, the DIFC-LCIA is a DIFC establishment.

20. On 25 May 2020, the Claimants issued a challenge to the Tribunal’s appointment. The complaint was dismissed on 29 July 2020.

21. The Award was issued on 22 September 2020. The Tribunal awarded the Defendants AED 4,576,000 together with interest of AED 1 million and costs of AED 1.4 million.

22. On 27 September 2020, the Dubai Court of Cassation upheld the Dubai Court of Appeal’s judgment.

The Award and the DIFC Courts Proceedings

23. On 18 October 2020, the Claimants filed this claim, requesting the Court to set aside the Award.

24. On 28 October 2020, the Defendants filed an acknowledgement of service, indicating therein that they intended to contest the jurisdiction of the DIFC Court. An application contesting the jurisdiction of the DIFC Court was required to be filed within 14 days of filing the acknowledgment of service, pursuant to RDC r. 12.4(1). No application was made within time.

25. On 26 November 2020, the Defendants filed a petition with the Dubai Court, requesting ratification of the Award.

26. On 7 December 2020, the Defendants filed an application for relief from sanctions on account of them having missed the deadline for submitting an application contesting the Court’s jurisdiction (the “Relief Application”).

27. On 8 December 2020, the Defendants filed a jurisdiction application (the “Jurisdiction Application”).

28. The order to ratify the Award was made by the Dubai Court on 17 December 2020.

29. On 10 January 2021, the Defendants obtained from the Dubai Court an execution seal order to open an execution file ordering that “all competent authorities have to execute this document and have to help execute it by force when requested” (the “Execution Order”).

30. The Claimants filed a grievance against the Execution Order which was listed to be heard on 3, then 17, February 2021, then 31 March 2021.

31. The Claimants made an urgent without notice application for an interim injunction which was heard by myself on 24 January 2021. An order in these terms was granted:

Until the Return Date or further order of the Court, the Respondents must not take any further steps towards enforcement in the Dubai Courts of the [Award] or any part thereof.

(the “Injunction”)

32. On 14 February 2021, the Defendants filed an application for the Injunction to be discharged (the “Discharge Application”).

33. On 16 February 2021, the parties agreed to a variation of the Injunction so that the Defendants were permitted to file an answer to the grievance filed by the Claimants in the Dubai Court.

34. On 28 February 2021, I heard: the Relief Application, dismissing it at the hearing, with reasons to follow, and causing the Jurisdiction Application to fall away; the Set Aside Application; and the Discharge Application (the “Hearing”).

35. By order dated 22 April 2021, I granted the Discharge Application and accordingly discharged the Injunction.

The Relief Application

36. Although the intention to file a jurisdiction challenge was announced with the Defendants’ acknowledgment of service on 28 October 2020, no application was filed until 7 December 2020, that is, approximately 26 days out of time. Where a party does not file such an application within time, by RDC r. 12.5(1), “he is to be treated as having accepted that the Court has jurisdiction to try the claim.”

37. The Defendants’ evidence was that this delay was the result of the lawyers with conduct of the case contracting COVID-19. The Defendants submitted, moreover, that both lawyers were the only lawyers in the firm with qualifications and experience to deal with DIFC litigation.

38. The Claimants argued that this explanation did not explain the long delay in filing the Defendants’ Jurisdiction Application or why it was not possible for another lawyer to file the Defendants’ application on time. They said that whilst it is regrettable that the Defendants’ lawyers fell ill, their firm has 10 lawyers with at least six of them actively conducting litigation, as well as a number of paralegals: the illness of two members of staff was not an explanation.

39. I agreed with the Claimants. It is not credible that no one in the whole firm of solicitors was able to assist in putting together the application or, at the very least, notify the Claimants and the Court of the situation and the firm’s inability, if such was the case, to make the application within time, and, if required, make an application under RDC r. 4.2(1) for an extension of time; an application which I do not think would have required DIFC experience. Courts have been more flexible with time limits provided for in rules, practice directions and court orders during the COVID-19 pandemic. But in my view, this flexibility should be contingent on COVID-19 or responses to it, as the case may be, substantially and understandably causing the failure rather than merely being factors which made compliance more difficult.

Costs of the Relief Application and the Jurisdiction Application

40. In accordance with the general rule provided for by RDC r. 38.7(1), the Defendants, who are the unsuccessful parties in the Relief Application and also the Jurisdiction Application which was dependent on it, shall pay to the Claimants, who are the successful parties, their costs of these applications, on the standard basis and to be assessed by a registrar if not agreed.

The Jurisdiction Application

41. Notwithstanding that the Jurisdiction Application fell away as a consequence of the Relief Application being dismissed, as the Claimants’ counsel correctly observed, in opposing the Claimants’ Set Aside Application, the Defendants’ counsel nevertheless advanced the arguments that comprised the Jurisdiction Application. I should comment briefly on this because, firstly, I do not think that my decision on the Relief Application and that decision’s impact on the Jurisdiction Application had, for reasons explained immediately below, any bearing on the appropriateness of arguments that comprised the Jurisdiction Application being advanced in the Set Aside Application and, secondly, and following on from this, and indeed more importantly, those arguments will inform my decision on the Set Aside Application.

42. Where a defendant fails to challenge the jurisdiction of the DIFC Court within 14 days of filing an acknowledgement of service, as required by RDC r. 12.4, and is then, pursuant to RDC r. 12.5(1), treated as having accepted that the Court has jurisdiction to try the claim against him, such a defendant has only submitted to the Court’s authority over him such that he is precluded from objecting to the Court trying the claim, even where he might otherwise not have been subject to its authority (I will refer to this as “Authority-Jurisdiction”). What such a defendant has not done and cannot do is confer on the Court jurisdiction beyond its competency and power (I will refer to this as “Power-Jurisdiction”): see Hardt v Damac [2009] DIFC CFI 036 (31 March 2010) at [32] to [35] and Investment Group Private Ltd v Standard Chartered Bank [2015] CA 004 (19 November 2015) at [61] to [62].

43. The DIFC Courts’ Power-Jurisdiction is derived from Article 5 of Dubai Law No. 12 of 2004, being the Judicial Authority Law (the “JAL”). The “jurisdictional gateways” of the Court of First Instance are found at Article 5(A)(1) to (2) specifically. For arbitration claims, Article 5(A)(1)(e) of the JAL is the relevant jurisdictional gateway:

44. As to the DIFC law which confers on the Court jurisdiction over arbitration claims generally, this is DIFC Law No. 1 of 2008, being the DIFC Arbitration Law. In respect of the Court’s supervisory powers, Article 7 of the DIFC Arbitration Law delineates this jurisdiction. And regarding the Court’s power to set aside arbitral awards specifically, this is derived from Article 41.

45. Article 7 of the DIFC Arbitration Law provides:

Article 41 is in Part 4 of the DIFC Arbitration Law and therefore applies only where the seat of the arbitration is the DIFC.

46. Even if Article 7 of the DIFC Arbitration Law did not limit the Court’s power to set aside to arbitral awards made in the seat of DIFC, Article 41 itself produces the same result:

47. Though I do not think that it modifies the Court’s Power-Jurisdiction as delineated by Articles 7 and 41 of the DIFC Arbitration Law, Article 10 should also be cited: “In matters governed by this Law, no DIFC Court shall intervene except to the extent so provided in this Law”.

48. The consequence of these provisions, in my judgment, is that the DIFC Court only has Power-Jurisdiction to set aside arbitral awards if the relevant claim passes through the jurisdictional gateway provided for by Article 5(A)(1)(e) of the JAL which in turn requires that the claim falls within the ambit of Articles 7 and 41 of the DIFC Arbitration Law. If either of these elements is absent, in my view the Court accordingly has no power to set aside a challenged award, which will be out of this court’s reach. And a defendant’s deemed acceptance of the Court’s Authority-Jurisdiction over him cannot cause the Court to acquire additional Power-Jurisdiction to reach any further.

49. It follows that irrespective of whether the Jurisdiction Application had been made, the question of whether the Court has the Power-Jurisdiction to set aside the Award is an indispensable element of the Claimants’ application to set aside the Award and was required to be answered in it. Counsel for the Defendants alluded to this in his skeleton argument when discussing the Relief Application, where he said: “There is no real consequence if relief is not granted. The Court will not be given jurisdiction simply as a result of a delay in making the application. Submission cannot create jurisdiction which would not otherwise exist.”

50. In conclusion, as stated above, I do not think that my dismissal of the Relief Application rendered the Defendants’ reliance in the Set Aside Application on arguments that comprised the Jurisdiction Application improper. To the extent that there was a consequence to those arguments being formally separated from the Defendants’ response to the Set Aside Application, as far as I can tell, it is one of costs, and inasmuch as the Jurisdiction Application was unsuccessful, one that ended up being to the Claimants’ advantage.

The Set Aside Application

51. The Claimants’ primary contention is that the Court should set aside the Award under Article 41(2)(a)(iv) of the DIFC Arbitration Law on the basis that the arbitral procedure was not in accordance with the agreement of the parties, the Tribunal having applied onshore Dubai rather than the DIFC as the seat of arbitration, contrary, they submit, to the parties’ agreement to the DIFC. The Claimants also argue, however, that, leaving aside the wrong seat point, the Award should be set aside under Article 41(2)(a)(iii) because it contains decisions on matters beyond the scope of the submission to Arbitration. These grounds are premised on the DIFC being the seat of arbitration (the “DIFC Seat Grounds”). Alternatively, if the Court concludes that onshore Dubai was the seat of arbitration, the Claimants submit that the Award should be set aside in any event as the Award was not issued within one year of the “first session of arbitration”, in breach, they submit, of Article 42(1) of the UAE Arbitration Law (the “Onshore Dubai Seat Ground”).

The DIFC Seat Grounds

52. Article 41(2)(a)(iii) and (iv) provide, as material, as follows:

53. In my view, for the Claimants to be successful on either of the DIFC Seat Grounds, it must first be established that the Award was made in the seat of the DIFC. If this is made out, and if the Court could in theory set aside the Award, the Court must then see proof, produced by the Claimants, that the arbitral procedure was not in accordance with the parties’ agreement or that the Award contains decisions on matters beyond the scope of the submission to Arbitration. If such proof is furnished, and if the Court’s discretion to set aside the Award is therefore enlivened, finally the Court must be persuaded that its discretion should be exercised in favour of the Claimants rather than the Defendants.

Was the Award made in the seat of the DIFC?

54. The wrong seat point has been articulated by the Claimants in various ways, in the Second Affidavit of dated 21 February 2021 (“KB2”), being the director of the Second Claimant and authorised to make KB2 in support of the Set Aside Application, and by the Claimants’ counsel in written and oral submissions.

55. At [23] of KB2, for example, says that onshore Dubai was the “seat applied by the Tribunal”. Similar statements are made at [40] and [51] of the affidavit. At [40], comments further that “It is obvious in the [Award] that the Tribunal assumed that the seat of arbitration was onshore Dubai”. In written and oral submissions, the Claimants’ counsel formulated the wrong seat point in the following additional ways: (i) “the [Award] was issued in the wrong seat,” (ii) “the Tribunal was not composed in the DIFC”; and (iii) “the Tribunal… declared the seat to be on-shore Dubai.”

56. In my view, these statements, which I think it is safe to say the Defendants will generally if not entirely agree with, put beyond doubt that the Claimants take the position that the Award was made in the seat of onshore Dubai, not the DIFC. And it is clear too that the Tribunal, who made the Award, took the same position. For example, a reference to the UAE Arbitration Law at [22] of the Award in a short section entitled “Arbitration Agreement” and a statement that the Arbitration Agreement is a valid arbitration agreement under that law cannot, in my view, be explained as anything other than a reference by the Tribunal to the law of the seat of the Arbitration and an application of that law, which in the present case means the Tribunal held that the seat of arbitration was onshore Dubai and proceeded accordingly.

57. Nor does there appear to have been a single lapse in the Claimants, the Defendants and the Tribunal’s consensus on the identity of the seat of arbitration until some time between the Dubai Court of Cassation handing down its judgment on 27 September 2020—that is, five days after the Award was issued—a judgment which dismissed the Claimants’ appeal and upheld the Court of Appeal’s decision that the DIFC was the seat of the Arbitration, and these DIFC proceedings being issued. While most references to the seat of arbitration during the currency of the proceedings—whether in the parties’ submissions or the Tribunal’s awards—were to “Dubai”, in the manner of the Arbitration Agreement, any more specific identification of the seat makes clear that it was always understood to be onshore Dubai.

58. For example, at [5] of a partial final award issued on 13 December 2018 (the “Partial Award”), the Tribunal dismissed DIFC Court caselaw that had been referred to it on the basis that “the Tribunal has not found those cases to be of assistance”, unlike caselaw of the Dubai Court which was “of assistance”, albeit that, consistent with UAE civil-law principles applicable in onshore Dubai, “they are not binding upon us”. Elsewhere in the Partial Award, the Tribunal determined that the Arbitration Agreement was executed for the Claimants by an authorised person, crucially, under the UAE Arbitration Law. The Partial Award was included as “Annex 1” to the Award which, as the Claimants themselves argued in oral submissions, supports the proposition that references to Dubai as the seat of arbitration in the Award are references to onshore Dubai.

59. Moreover, and as counsel for the Defendants has put it, that the Arbitration was seated in onshore Dubai rather than the DIFC is the Claimants’ primary basis for asserting that the Award is defective.

60. It follows, in my judgment, that whatever the agreement of the parties, the Award itself was not made in the DIFC and the DIFC Seat Grounds cannot therefore logically surmount the seat hurdle of Article 41(1) of the DIFC Arbitration Law and, in turn, the Court cannot have the Power-Jurisdiction to grant the Claimants the remedy sought under that provision. The Set Aside Application insofar as it relies on the DIFC Seat Grounds is dismissed on this basis.

61. This leaves the Claimants who dispute the Award in an undeniably unenviable position. Whatever the proper construction of “Dubai” in the Arbitration Agreement, one thing which is certain is that the parties agreed to Dubai-court supervision, while both courts of Dubai have now determined that they do not have the jurisdiction to provide it.

62. While as a matter of Power-Jurisdiction I believe it is correct for this court to dismiss the Claimants’ DIFC Seat Grounds purely on the basis that the seat of arbitration was not, in fact, the DIFC, I think the following considerations would have justified dismissing them, even if the seat of arbitration was the DIFC.

63. While this may be the first arbitration to fall into Dubai’s latent DIFC-LCIA-supervisory cavity, if the Award was set aside by the Court on the basis that “the wrong seat was applied”, I imagine that it would by no means be the last. While the Claimants may have been taken by surprise by the Dubai Courts’ decisions, I think it would in fact be quite easy for debtors under DIFC-LCIA “Dubai”-seated awards to replicate this case’s vital steps and manufacture set aside applications bound to be successful. Parties to DIFC-LCIA “Dubai”-seated arbitrations would in effect be given a detonate button, tempting in case of unsuccess, which is to say for at least one party to every DIFC-LCIA “Dubai”-seated award.

64. The problem that the Claimants now face originates, in my view, further upstream than either of the courts of Dubai are situated. Parties that would like the DIFC to be the seat of arbitration should state “the DIFC” and parties who agree to DIFC-LCIA arbitration and want onshore Dubai to be the seat must make that absolutely clear. If either of Dubai’s courts’ jurisdictions is not unambiguously designated in an arbitration agreement when executed, parties should amend those agreements. A clear identification of the seat, I am sure, will be the surest way of guaranteeing the court supervision desired.

65. To comment on this instant case more specifically, the only prejudice which the Claimants aver that they suffered on account of the Tribunal allegedly applying the wrong seat was their inability to defend their position in the latter part of the Arbitration, having withdrawn from it in pursuit of relief available in that “wrong seat”. I accept that the Claimants’ absence from the final stage of the Arbitration was of substantial prejudice to them. But when the reason for withdrawal is looked at, it is not clear that there was a sound basis for the Claimants risking that prejudice. As stated above, the Claimants’ case is that they withdrew from the Arbitration because they were “concerned” that further participation “had the potential” to prejudice the Dubai Court claim. Put differently, the Claimants decided to forgo defending the Defendants’ extant and advancing claim against them on the basis that doing so might impact a claim being made in the Dubai Court, the result of which itself was uncertain. This strikes me as looking more like an act of sabotage than a reasonable step for parties to take in pursuit of their rights. Accordingly, I do not think that the prejudice suffered should be the basis of setting aside the Award.

66. Furthermore, when asked by the Tribunal to explain the deficiencies on account of which they were withdrawing from the Arbitration, the Claimants declined to do so. This is not insignificant as the provision relied on by the Claimants in its application to the Dubai Court for the Arbitration to be terminated, Article 42(1) of the UAE Arbitration Law, provides that “The Arbitral Tribunal may decide to extend the period of the proceedings…”. As such, by concealing their grievance from the Tribunal, the Claimants also apparently obscured the means by which the Tribunal could have addressed it. Nor is it insignificant that, pursuant to Article 42(2) of the UAE Arbitration Law, the Dubai Court is empowered to extend the timeframe for issuing of an award at the request of either party. The rule in Article 42 of the UAE Arbitration Law was probably legislated to protect defendants from dormant and/or drawn-out proceedings against them. It seems clear, however, that the Claimants invoked the provision instead to escape the Arbitration at the earliest possible opportunity.

67. In respect of the Claimants’ argument that the arbitral procedure was not in accordance with the agreement of the parties to the DIFC as the seat of arbitration, in my view, this is incorrect. As the Defendants have argued, the facts of this case support the conclusion that the agreed seat was to onshore Dubai. For example, the Hotel is in Dubai and the governing law of the SPA is UAE law, that is, the law applicable in Dubai. The single reference to the DIFC in the SPA is “DIFC-LCIA” in the Arbitration Agreement. In Dhir at [91], the Court relevantly stated:

There is no inexorable or symbiotic link between the DIFC-LCIA Arbitration Centre and the DIFC leading to the result that choice of either the DIFC-LCIA Arbitration Centre or the DIFC-LCIA Rules would mean that the DIFC Arbitration Law would apply and/or that the DIFC Courts would have jurisdiction

68. Moreover, the evidence points to the parties having understood that they agreed to onshore Dubai as the seat of arbitration. The Claimants’ statement to the Tribunal as it formally withdrew from the Arbitration shows this clearly: “being the court of the seat of the arbitration, the matter is pending consideration before the Dubai court”. And neither the Defendants nor the Tribunal objected to the Claimants’ statement, in my view, because they agreed.

69. If the laws applicable in Dubai and the Dubai Courts’ jurisprudence caused the Dubai Courts to construe “Dubai” in this case as meaning “the DIFC”, in my view that is separate from a conclusion which this Court might arrive at applying its own laws and jurisprudence. In my view, the Claimants’ true case is that the Dubai Courts’ decisions were not in accordance with the agreement of the parties, which cannot be a basis under DIFC law for setting aside an arbitral award. And this being the case, in my view, ST Group Co Ltd and others v Sanum Investments Limited and another [2019] SGCA 65, on which the Claimants have relied for the proposition that the application of the wrong seat means that any ensuing award should not be enforced, is, in my judgment, distinguished. That policy concern behind that ruling was, according to my reading, giving effect to parties’ agreements, party autonomy being “of central importance to the legitimacy and binding nature of an arbitral award”: [102]. In the present case, the parties agreed to “the wrong seat”, so to speak, which is to say that the wrong seat’s application was in fact in accordance with the agreement of the parties, which, in my judgment, takes the case outside the ambit of Article 41(2)(a)(iv) of the DIFC Arbitration Law.

70. Staying with this provision, the Claimants have invited the Court to adopt and apply the guidance set out in “The UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards” (the “Guide”) on Article 41(2)(a)(iv)’s corresponding recognition and enforcement provision in the New York Convention, Article V(1)(d). The Court was taken to [39], [40] and [42] of the chapter on Article V(1)(d)—which discuss type, degree and consequence of procedural irregularities—but, in my view, [12] and [13] are even more instructive:

71. The same distinction between the parties’ agreement on procedural rules and procedural rules that apply as a consequence of the seat of arbitration is present in Article 41(2)(a)(iv) of the DIFC Arbitration Law: the Court may set aside an arbitral award if the arbitral procedure was not in accordance with the agreement of the parties or, in the absence of such agreement, was not in accordance with the DIFC Arbitration Law. To this extent that this guidance can be applied, and I think it can, it strikes me that so long as parties had agreed to procedural rules, it would be difficult to challenge an award under Article 41(2)(a)(iv) of the DIFC Arbitration Law on the basis that the wrong seat was applied, inasmuch as presumably any consequence or prejudice that flowed from that would fall under the law of the seat rather than the agreement of the parties.

72. As to the Claimants’ arguments that the Award should be set aside on the basis that it contains matters beyond the scope of the submission to arbitration—in the briefest terms possible, that whereas the Defendants sought termination of the SPA in their request for arbitration, the Tribunal awarded recission in the Award—as the Defendants have highlighted, [50] of the Defendants’ Reply made clear that the claim was for the parties “to be returned to the position they were in before the contract was made.” The Claimants’ Rejoinder did not take issue with that statement. As such, in my judgment, even if the Claimants are in principal correct, Article 9 of the DIFC Arbitration Law and Article 32.1 of the DIFC-LCIA Rules are engaged.

73. Article 9 of the DIFC Arbitration Law provides:

A party who knows that any provision of this Law, including one from which the parties may derogate, or any requirement under the Arbitration Agreement has not been complied with and yet proceeds with the Arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is provided therefor, within such period of time, shall be deemed to have waived his right to object.

And Article 32.1 of the DIFC-LCIA Rules provides:

32.1 A party who knows that any provision of the Arbitration Agreement has not been complied with and yet proceeds with the arbitration without promptly stating its objection as to such non-compliance to the Registrar (before the formation of the Arbitral Tribunal) or the Arbitral Tribunal (after its formation), shall be treated as having irrevocably waived its right to object for all purposes.

74. In my judgment, even if the Award does contain matters beyond the scope of the submission to the Arbitration, the Claimants lost the right to advance this objection when they proceeded with the Arbitration without objecting at that time the scope of the submission to arbitration was exceeded.

The Onshore Dubai Seat Ground

75. The Claimants’ alternative case, if the Court rejects their primary case that the seat of arbitration is the DIFC, is that the Award should be set aside under Article 53(1)(g) of the UAE Arbitration Law as, in breach of Article 42(1) of that legislation, the Award was not issued within 1 year of the date of the first session of arbitration.

76. Article 42(1) of the UAE Arbitration Law has been cited above. Article 53(1)(g) provides as follows:

77. The Claimants submit that “the first session of arbitration” was a preliminary meeting that occurred on 22 January 2019, such that, they say, the Award was required to be rendered by 22 January 2020. In the event, the Award was issued on 22 September 2020.

78. The Defendants contend that “the first session of arbitration” was rather the first hearing, which was on 18 February 2020 and therefore around seven months before the Award was issued on 22 September 2020. Moreover, Article 42 of the UAE Arbitration Law is subject to any agreement which provides for the extension of the time limit. The Defendants argue that the one-year time limit in Article 42 therefore does not apply as the DIFC-LCIA Rules permits a tribunal to extend any time limit.

79. For my part, firstly, the legal basis for this court hearing and determining an onshore Dubai-seated arbitration has not been shown to me. Secondly, even if it had been, it was not settled what “the first session” meant. If this phrase applies to any type of meeting, six months strikes me as a very short amount of time for arbitral proceedings to be given from that point to reach a conclusion, which would be the length of time they have absent an extension of time by the Tribunal under Article 42(1) of the UAE Arbitration Law or by the Dubai Court under Article 42(2). In any case, the phrase will no doubt have a meaning and I decline determining whether the Award was issued within the specified time without reference to it. Thirdly, even if the first session of arbitration in this case was the preliminary meeting on 22 January 2019, it seems that, pursuant to Article 25 of the UAE Arbitration Law, the Claimants are deemed to have waived their right to object to the Arbitration going over time inasmuch as they did not state their objection to the Tribunal within seven days of becoming aware of the alleged breach. Fourthly and finally, in my view, Article 42 will unlikely apply where parties have agreed to comprehensive arbitral procedural rules: silence on a timeframe in such rules is, in my opinion, a form of provision. I think Article 42 of the UAE Arbitration Law was legislated to protect defendants in arbitral proceedings where comprehensive rules, including those concerning timeframes, have not been agreed and therefore where there may not be mechanisms in place by which they or tribunals deciding cases against them can, where appropriate and in the interests of justice, draw to a close proceedings. This will not, of course, apply to DIFC-LCIA arbitrations.

Conclusion

80. For the reasons given above, the Set Aside Application is dismissed.

Costs of the Set Aside Application

81. The Claimants shall pay the Defendants their costs of the Set Aside Application on the standard basis, to be assessed by a registrar if not agreed.