Privacy Settings

Claim No: ARB 004/2022

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

MUZAMA

Claimant

and

MIHANTI

Defendant

---

JUDGMENT OF H.E. JUSTICE SHAMLAN AL SAWALEHI

---

UPON reviewing the Claimant’s arbitration claim dated 10 February 2022 seeking an order setting aside an ICC arbitral award dated 2 November 2021 (the “Application”)

AND UPON the Defendant’s Application No. ARB-004-2022/1 dated 25 March 2022 contesting the DIFC Courts’ jurisdiction (the “Jurisdictional Challenge”)

AND UPON the Consent Order dated 27 May 2022 withdrawing the Jurisdictional Challenge

AND UPON the Defendant’s Acknowledgment of Service dated 7 June 2022

AND UPON hearing counsel for the Claimant and counsel for the Defendant at the hearing listed on 12 and 13 September 2022

AND UPON reviewing the relevant material filed in support of the case file

AND PURSUANT TO the Rules of the DIFC Courts (“RDC”)

IT IS HEREBY ORDERED THAT:

1. The Application is dismissed.

2. The Claimant shall pay the Defendant’s costs of the Application on the standard basis, to be assessed by a registrar if not agreed.

3. The costs of the Jurisdictional Challenge shall be dealt with separately.

Issued by:
Hayley Norton
Assistant Registrar
Date of issue: 8 February 2023
At: 11am

SCHEDULE OF REASONS

Introduction

1. This is the Claimant’s (“C”) application to set aside an arbitration award dated 2 November 2021 (the “Award”) or, in the alternative, to set aside parts of it (the “Application”).

Background

The Contract works

2. The Defendant (“D”) is a Dutch company and C is an Iraqi company owned by the Iraqi Ministry of Oil.

3. On 14 December 2013, C and D entered into a contract (the “Contract”), governed by Iraqi law, by which D agreed to recover and remove the wreck of an oil tanker (the “Wreck”), the Mahrt, which had been bombed and sank during the first Gulf War in 1991. The site of the Wreck was within a marine exclusion zone (the “Zone”) established around an oil terminal (the “Terminal”). In order to enter or leave the Zone, permission was required from the Iraqi Navy.

4. D mobilised in February 2014. In March 2014, D informed C that it had located a 70-foot wooden dhow (the “Dhow”) lying within the Wreck. D cleared the Dhow, but there was a dispute about whether the Contract obliged C to compensate D for the clearance costs beyond the original Contract price.

5. Disputes arose between the parties in the course of the works. On 3 August 2015, D gave notice that it was suspending work and commenced its suspension on 4 August 2015. D reduced on-site personnel on 15 August 2015. On 18 August 2015, it notified C that its vessels were being prevented from departing from the Zone. It was common ground before the tribunal in the arbitration that the Iraqi Navy then detained D’s fleet and another two vessels it had chartered (the “Two Vessels”), preventing them from leaving the port. The tribunal found as a fact that C caused that detention.

6. In this context, D engaged an Iraqi member of parliament (the “Iraqi MP”) to arrange meetings with the Ministry of Oil. This subsequently led to an investigation by the Dutch Public Prosecutor’s Office (“DPPO”).

7. Ultimately, the Iraqi Navy lifted the blockade and D finished the works by 30 June 2017 and left the site. However, the parties remained in dispute.

The Arbitration

8. The contract contained an ICC arbitration agreement in relation to “any disputes concerning or arising from this Contract.” The seat was originally agreed to be Amman, Jordan. However, in January 2019, the parties agreed to change the seat to the DIFC.

9. In August 2018, D filed a Request for Arbitration (the “Request”). The claims made included claims for losses alleged to have been suffered as a result of the inability of D to remove its vessels from the Zone. On 17 and 24 August 2018, C filed proceedings in the Netherlands, seeking damages from the Iraq state for wrongful detention of vessels.

10. D advanced various claims against C. For the purposes of the application, the following are relevant: (i) fees claimed in respect of the removal of the Dhow (D’s Claim No. 2, referred to below as “the wooden dhow claim”) and (ii) losses suffered by D as a result of the Iraqi Navy refusing to allow its vessels to leave the Zone (D’s Claims Nos. 6 to 8, referred to as “the detention claim”).

11. C initially objected to the tribunal determining these claims and sought early determination of its objections. The tribunal instead indicated it would hear those arguments with the merits.

12. C brought four counterclaims. Counterclaim No. 4 (“CC4”) related to D’s dealings with the Iraqi MP and the then ongoing DPPO investigation. C alleged that D had bribed the Iraqi MP in an attempt to influence C to agree to D’s demands in relation to the suspension and detention and had thereby breached ethical obligations in the Contract. Given the ongoing investigation, the tribunal agreed to deal with CC4 in a confidential award (the “CC4 Award”).

13. Hearings took place between September 2020 and December 2020 at which the parties’ lawyers made oral submissions and cross-examined witnesses. The parties filed pre-hearing skeleton arguments and post-hearing and reply briefs. The parties prepared lists of issue. D’s was contained in its pre-hearing skeleton. C’s list was served separately.

The Award

14. On 2 November 2021, the tribunal rendered the Award and the CC4 Award. The tribunal made corrections by addenda dated 28 February 2022.

15. The tribunal found that the parties had agreed a variation for the removal of the Dhow: the Award at [606]. The tribunal awarded USD 2,015,767 under this head.

16. The tribunal further concluded that D was entitled under the Contract to a variation in relation to the detention of D’s marine spread (Claim No. 6): the Award at [950]. As a result, the tribunal awarded D its costs of repeating work after the restart which had deteriorated (Claim No. 8): the Award at [1091].

17. D’s Claim No. 7 related to the detention of the Two Vessels. The tribunal rejected the contractual basis for the claim, but found C was liable to D in tort for the cost.

18. The tribunal awarded the following in respect of Claims Nos. 6 to 8:

19. In respect of CC4, the tribunal found the complaint made out: D had entered into a business arrangement with the Iraqi MP and his son in an attempt to influence an action of C in a way which was “unethical and illicit” and in breach of the Contract: the CC4 Award at [584], [588] and [604].

20. The CC4 Award was intended to deprive D of any profit on the Contract: CC4 Award at [641]. In its reasoning, the tribunal stated at [644]:

21. The tribunal then applied a profit ratio of 25% to all sums paid and due under the Contract. In respect of D’s Claims Nos. 2, 6 and 8, the tribunal found that D should not be entitled to its expected 25% profit on those sums. It therefore awarded C a total of USD 19,381,458 in respect of those claims.

22. In total, the sum awarded over the whole Contract on this counterclaim was USD 37,738,777 together with a direction that C was entitled to withhold USD 1,144,031.25 in respect of a certain invoice.

23. The Award and the CC4 Award were the subject of various subsequent addenda and subsequent decisions.

24. The Court understands that C has not taken any steps to pay D the sum due under the Award or any part of it.

The present claim

25. On 8 February 2022, C brought the Application, asking the Court to set aside the Award, or alternatively parts of it.

Waiver

26. D submits that C has waived its right to make several of the objections that feature in the Application. It is common ground that the waiver point was first raised in D’s skeleton argument for the hearing of the Application; it did not feature in D’s evidence in response to it. Leading counsel for C said at the hearing that it was too late and unfair for the waiver point to be raised in this way, which requires a different factual inquiry to the one the Court had been asked to undertake. There may be parts of the record not currently before the Court relevant to the issue. Leading counsel for D responded in this way. Waiver is a legal argument, and the place for legal argument is in a skeleton argument. Waiver is a legal result of the facts, and the suggestion that there may be some evidence indispensable to deciding the waiver point missing is not correct: the facts from which waiver results, D argued, are before the Court in the pleadings, the lists of issues and the Award.

27. Waiver is potentially brought into play in this case through two provisions, Article 9 of Arbitration Law - Law No.1 of 2008 (the “DIFC Arbitration Law”) and Article 39 of the ICC Rules 2012. The former provision provides that:

And Article 39 of the ICC Rules 2012 provides that:

28. Article 9 of the DIFC Arbitration Law apparently makes waiver conditional upon the waiving party knowing that a provision or requirement had not been complied with which, in my view, necessitates a factual inquiry capable of ascertaining that party’s knowledge. Article 39 of the ICC Rules 2012, however, does not seem to have such a condition. On my reading, it is enough under this rule that there was a relevant failure of compliance and the waiving party proceeded with the arbitration without raising an objection which he then had or later has to it. I appreciate that the words “its objection” in the first clause of Article 39 can be construed as referring to either an objection which existed at the time of the breach but which was not raised (which would necessarily require the party’s awareness of the breach at the time it occurred, like Article 9 of the DIFC Arbitration Law) or to an objection made any time including later (which would not necessarily require contemporaneous awareness). However, I think the second of these constructions is better as an objection is something which is ordinarily made, or raised, not bottled up. It follows, in my view, that an objection is more easily waived under Article 39 and such a waiver, not requiring the party’s knowledge of the non-compliance at the time it occurred, as I have found, may even be demonstrable largely from the pleadings and submissions in the arbitration, as D has contended, without the need for further factual inquiry.

29. For the foregoing reason, I do not think it is too late for D to raise its waiver arguments. And in any event, to the extent there are facts missing from the record which are necessary to establish waiver, that is a factor which will prevent, not facilitate, a finding of waiver on C’s part in D’s favour.

29. For the foregoing reason, I do not think it is too late for D to raise its waiver arguments. And in any event, to the extent there are facts missing from the record which are necessary to establish waiver, that is a factor which will prevent, not facilitate, a finding of waiver on C’s part in D’s favour.

The wooden dhow claim

30. In C’s written arguments in support of the Application, it was stated that the parts of the Award dealing with the wooden dhow claim should be set aside on the bases that those parts “[dealt] with a dispute not contemplated by or not falling within the terms of the submission to Arbitration” and contain “decisions on matters beyond the scope of the submission to Arbitration.” In other words, C’s case was that the tribunal’s decision in relation to the removal of the wooden dhow engaged what I consider to be both limbs of Article 41(2)(a)(iii) of the DIFC Arbitration Law, which provides:

In the witness statement of Muhit Reyes Landicho dated 8 July 2022, made in support of the Application and in reply to evidence filed by D in response, it was said that the tribunal’s disposal of the wooden dhow claim must be set aside “because the Tribunal’s finding in the Award fell outside of the terms of submission to arbitration … the Tribunal did not decide the dispute submitted to arbitration” i.e. under the first limb of Article 41(2)(a)(iii). There was no mention of or reference to the second limb. In the written submissions of C’s leading counsel for the hearing of the Application, however, the wooden dhow complaint was advanced under the second limb: “[the tribunal’s] finding was outside the scope of the submission to arbitration.”

31. In my judgment, the first and second limbs of Article 41(2)(a)(iii) are not interchangeable. The first limb is concerned with a dispute, in my view at large, while the second limb is concerned with the matters, or issues, which feature in a dispute which the tribunal decides. Accordingly, where an award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, the Court may set that whole award aside, but where an award contains decisions on matters beyond the scope of the submission to arbitration, the Court can only set aside those offending decisions and any which cannot be separated from them. This must be because an award engaging the second limb of Article 41(2)(a)(iii), unlike one engaging the first limb, deals with the correct dispute and only exceeds the submission to arbitration to some extent rather than completely.

32. The tests under Article 41(2)(a)(iii) for determining whether an award deals with a dispute or contains decisions on matters beyond the submission to arbitration are different also. The first breach is ascertained by asking the question whether the dispute was contemplated by or fell within the terms of the submission to arbitration. The first limb essentially inquires, on my reading, whether the dispute which an award deals with is identifiable in the actual terms which comprise the submission to arbitration. The second breach is ascertained, on the other hand, by asking the question whether a decision on a matter was beyond the scope of the submission to arbitration. In my judgment, the term “scope” points to something less explicit than the term “term” which appears in the first limb. While the submission to arbitration may ultimately be reducible to terms, I think the second limb is concerned with the area or range that the cluster of terms necessarily creates, comparable to a village and its boundaries which exist because there is a group of houses which constitutes it. In other words, and to stay with the analogy, I think the first limb asks whether a dispute that the award deals with is from an address in the village while the second limb gives some leeway and asks whether a decision on a matter is from within the boundaries of the village, which would include its buildings, land, roads and so on.

33. It has not been argued, and in my judgment cannot be argued, that the Award deals with a dispute, that is, at large, not contemplated by or not falling within the terms of the submission to Arbitration which warrants the setting aside of the Award in its entirety. C’s complaint in respect of the wooden dhow decision is that it is a decision on a matter beyond the scope of the submission to arbitration and that the relevant part of the Award should be set aside on that ground. I think it was right, therefore, for focus to have shifted to the second limb of Article 41(2)(a)(iii) in submissions. While D does not appear to have taken issue with the different articulations of C’s case under Article 41(2)(a)(iii), I think it is helpful, when considering a challenge under this provision, to distinguish between both of its limbs which, in my view, each bring the other into relief.

34. To proceed, C’s case in relation to the removal of the wooden dhow is as follows. The claim originally advanced was that C refused in bad faith to agree a variation to the Contract between the parties. The “substance of” or “basis for” the wooden dhow claim, C says, was recorded in the Terms of Reference at [48(b)] in this way: “[C] refused in bad faith to agree to a contractual variation for [D’s] additional costs in removing the wooden dhow, despite agent’s prior approval.” And so, D’s case, C submits, was that no variation had been agreed by C.

35. The tribunal ultimately made no finding on that claim, C contends, and found instead that a variation had been agreed. C says that the only basis for the claim properly advanced was the one recorded in the Terms of Reference and that the tribunal’s finding did not correspond to a claim that had been advanced and was therefore outside the scope of the submission to arbitration.

36. C relies on Article 23(4) of the ICC Rules 2012 which provides:

It is common ground that D made no application to advance any additional claim. As such, C submits, D’s claims should have been limited to the claim for a variation on the ground that C had refused in bad faith to agree to one.

37. To make good its case, C must furnish proof that the tribunal’s decision in relation to the wooden dhow removal was beyond the scope of the submission to arbitration. Implicit in this overriding requirement is one, in my view, that C furnishes proof that the scope of the submission to arbitration was confined to what is contained in the Terms of Reference. I do not think that C has cleared this hurdle for the following reasons.

38. First, as D has argued, nothing in the DIFC Arbitration Law confines “submission to arbitration” to terms of reference, as opposed to, say, the totality of the parties’ pleadings and submissions before the tribunal. The authorities make clear that a wide view should be taken of the matters submitted to arbitration. In England, it was regarded as sufficient in a different but comparable context that “the point is ‘in play’ or ‘in the arena’ in the proceedings, even if it is not precisely articulated” (Reliance Industries Ltd v India [2018] 1 CLC 648 at [32]) (emphasis added). This approach accords, in my judgment, with the language of the second limb of Article 41(2)(a)(iii) which, as I explained above, is concerned with the area created by the terms of the submission to arbitration rather than the precise terms themselves.

39. Second, as also argued by D, nothing in the ICC Rules 2012 limits the submission to arbitration to the terms of reference. Article 23(1) states that the terms will contain a “summary” of the parties’ claims, not that it will exhaustively record each argument. Moreover, Article 23(4) of the ICC Rules, which C relies on, expressly contemplates the tribunal deciding matters not contained in the terms of reference. It 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, for example through the tribunal proceeding to determine a new claim, would suffice.

40. Third, and to comment on Article 23(4) further, I do not think that C has established that this rule evidences that, in the absence of authorisation from the tribunal, terms of reference define the submission to arbitration in terms of claims or otherwise. There was debate between the parties about what exactly a claim within the meaning of Article 23(4) was. The answer to this question is made more difficult by the fact that the rule concerns “new claims which fall outside the limits of the Terms of Reference” which, in my view, suggests there is such thing as a new claim which nevertheless does not fall outside the limits of the terms of reference and which would not, therefore, engage Article 23(4).

41. The foregoing is sufficient to dismiss this ground of the Application. For completeness, I make a few further remarks.

42. I do not think that the Terms of Reference confined D to the bad faith point in any event. As D has pointed out, the Terms of Reference made clear at [43] that it was “without prejudice” to the pleadings already filed and to further arguments. By the time the Terms of Reference were signed, D had already filed its Statement of Claim, which squarely pleaded the point: D’s pleaded case was “[D] claims a Variation in respect of its costs of removing the Dhow.”

43. Moreover, the Terms of Reference apparently defined the submission to arbitration as including the totality of issues raised on the pleadings and submissions when it said at [74]: “the questions of fact or law to be resolved by the Arbitral Tribunal shall be those appearing from the Parties’ submissions, statements and pleadings and, in addition, any further questions of fact or law which the Arbitral Tribunal in its own discretion may deem necessary or appropriate to decide upon.”

44. Furthermore, in my judgment C waived any complaint, if the contractual variation claim was a new claim, by failing to object when D pursued that claim and by arguing the point fully. Indeed, in C’s own list of issues for the Tribunal it included the following question: “Did [C] ever agree that the Dhow removal was a Variation?” It is worth mentioning that, in my view, there can be no doubt that C was aware that the tribunal’s authorisation was required before any party could make a new claim after the Terms of Reference had been signed as C itself was obliged, as it has pointed it, to make an application to advance CC4.

45. For the foregoing reasons, I do not think C has established that the submission to arbitration was confined to the Terms of Reference and, even if it was, I do not think it confined D to the bad faith point and, even if it did, I think C waived its right to make the objection it now makes. The wooden dhow objection is accordingly dismissed.

The detention claim

46. The other three heads of claim which are the subject of the Application relate to the blockade of D’s vessels by the Iraqi Navy. D claimed contractual variations, damages for breach of contract or damages in tort resulting from the detention. C says the tribunal lacked jurisdiction to try these claims; that it was not afforded a proper opportunity to deal with these claims; and that, in respect of Claim No. 7, the tribunal’s decision was impermissible in as much as it was a “surprise” point not based on a case advanced by either party.

Jurisdiction

47. C’s case is that the tribunal lacked jurisdiction to decide the detention claims because they entailed adjudicating on an act of state. The detention awards were, C argues, outside of the terms of the submission to arbitration within the meaning of Article 41(2)(iii). This argument was not advanced in the arbitration in respect of D’s contractual claims and it was rejected by the tribunal in respect of D’s tort claims.

48. The tribunal’s reason for rejecting the jurisdiction argument was stated at [1049] of the Award:

49. C contends that, in this analysis, the tribunal wrongly focussed on C’s motivations, not on the character of the act in question, and that a naval blockade is a state act regardless of the reasons for it or the identity of the actor. C submits that, having found that C controlled the actions of the Iraqi Navy to implement a shipping blockade, it logically followed that the tribunal could not adjudicate on claims flowing from that action.

50. I respectfully disagree. In my view, there are two sets of actions referred to in the tribunal’s analysis at [1049] of the Award: first, that of C, namely giving information and making a request to the Iraqi Navy, and, second, the Iraqi Navy’s, namely imposing the naval blockade. In my judgment, even if a naval blockade is a state act, it does not necessarily follow that causing one is. I query if caution about motives and focus on the character of the act in question are more important where the issue is whether an entity, distinct from the executive organs of the state, has exercised sovereign authority and where, if it did, it would be immune from suit rather than where, as here, the argument is that an entity, C, caused another to exercise sovereign authority. I see no conceptual difficulty in C being liable for causing a naval blockade and the Iraqi Navy being immune from suit notwithstanding that it imposed the naval blockade at one and the same time.

51. I think it is helpful to consider the tribunal’s conclusion at [1049] in its context. The tribunal’s main conclusion in this discussion appears two paragraphs later at [1051]. It stated, “Consequently, it can be concluded that the Arbitral Tribunal does have jurisdiction to hear Claimant's tort claim.” What was the tribunal’s conclusion that it had jurisdiction a consequence of? That is explained in the preceding paragraph, [1050]. The tribunal stated there: “In light of the above, the Arbitral Tribunal concludes that (i) it has not been furnished with evidence to support that Respondent exercised sovereign powers; and (ii) it has not been established that Respondent exercised any state authority when it informed the Iraqi Navy that Claimant's vessels were not allowed to leave.” And so, the tribunal’s conclusion at [1051] that it had jurisdiction to decide D’s tort claim was based on its conclusions that it had not been proved that C had exercised either sovereign powers or state authority.

52. What were these conclusions made in light of? The passage from [1049] cited above provides a part of the answer to this question. Another part of the answer is in the preceding paragraph, [1048]: “the evidence on file does not allow it to clearly establish Respondent's role with respect to the Iraqi Navy's task to control the MEZ.” In my judgment, it is clear when considering [1048] and [1049] of the Award together that the tribunal had an open mind on the question whether C’s actions were state actions but concluded, partly on the basis of insufficient evidence supporting C’s case, that C’s actions were not. It is important in this regard that, as D has stressed, C conceded before the tribunal that whether it was acting in a commercial capacity or a sovereign capacity was a factual question (see [4.275] of C’s State of Defence). In my judgment, the tribunal was entitled to find against C on this question.

53. Leading counsel for D gave the following analogy at the hearing. If somebody telephones the police with a false allegation about someone else and the police proceed to arrest that person, the alleger has thereby caused the state to act. But it would be wrong to say that the alleger was in direct control of the police, counsel said, because there is an “enormous conceptual distinction” between causing an event to happen and controlling the state body that undertakes it. It would be absurd to describe the false alleger’s action as a state action. If sued in tort, he cannot say that he was acting in a sovereign capacity.

54. Leading counsel for C pointed out that the tribunal had in fact found, albeit when dealing with liability rather than jurisdiction, that C was in “direct control” of the detention (see, for example, the Award at [930]). And so it would have to be said that the false alleger in the analogy not only caused the police to make the arrest but that he was in direct control of the police’s action. Counsel contended that, if the tribunal found that C was in direct control of the detention in respect of C’s liability then it was required to carry that finding across into the jurisdiction analysis and find that C must have been exercising state authority, without which a naval action cannot be controlled.

55. I disagree that the tribunal’s finding that C was in direct control of the detention necessarily required a finding that C thereby exercised a state authority. What the tribunal meant by “direct control” is explained in the Award. For example, at [930] itself the tribunal stated that it concluded “that [C’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 Respondent's ‘direct control.’” And so it was by C’s provision of information to the Iraqi Navy, not an order, that the tribunal found C was in direct control of the detention. Moreover, this information, the tribunal found, was based only on “technical reasons” between the parties (see the Award at [915]). D’s case in the arbitration, it is noteworthy, was that a certain directive of C would evidence that C had ordered the detention (see the Award at [919]). C, however, refused to disclose that directive (see the Award at [917]). The tribunal concluded that the document withheld by C would likely only have confirmed that C’s director general stated that D's vessels were not allowed to leave the MEZ, not that it ordered the Iraqi Navy’s detention (see the Award at [919]). When looking at the Award more broadly, I am unable to conclude, as C invites me to, that the tribunal’s finding that C was in direct control of the detention necessitated a finding that C accordingly exercised a state authority. 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.

56. For the foregoing reasons, I do not think that C has furnished proof that the tribunal decided claims which entailed adjudicating on an act of the state. It is clear to me that the tribunal considered the issue and reached the conclusion that the detention claims required adjudicating on the actions of C which, based on the evidence and its opinion, where commercial rather than a sovereign or state actions. This ground of the Application is accordingly dismissed. There is no need to consider the various other arguments that featured in this ground.

Scope of submission / procedural fairness – “acts of the sovereign State”

57. The tribunal stated in its Procedural Order No. 3 dated 7 June 2019 (“PO3”) that it would “not judge on any acts of the sovereign State or third parties” ([73]) (emphasis added). C submits that the consequences of and responsibility for the naval blockade, an act of the sovereign State, were essential parts of the awards ultimately made. As a result, C contends, the tribunal failed to act consistently with its earlier finding and judged the acts of the sovereign State which had the result that C was not given a fair opportunity to present its case within the meaning of Article 41(2)(a)(ii) of the DIFC Arbitration Law which provides that the Court met set aside an award where, as material, “the party making the application … was … unable to present his case.”

58. The sentence from [73] of PO3, cited above, continues, “…but only [i.e. the Arbitral Tribunal will only judge] on claims between the Parties arising out of and in relation to the Contract governed by the applicable Iraqi law.” I think it is clear from the full passage that, as D contends, the tribunal only stated that it would not determine causes of action against the Iraqi state or third parties. In other words, it was only going to determine causes of action against C. In my view, that is what the tribunal did and C is wrong to contend that the tribunal “judged” the acts of the Iraqi state.

59. Moreover, and perhaps most importantly, C did present its case on this point, as D has demonstrated. It raised them in its pleadings and its written submissions. It engaged Professor Murti QC, Professor of Public International Law at Oxford University and barrister at Essex Court Chambers, to draft written submissions and argue the points at an oral hearing held on 21 September 2020. The Tribunal ruled on all those arguments and rejected them (see the Award at [1041] to [1051]). In my judgment, therefore, C’s complaint falls outside of the scope of Article 41(2)(a)(ii).

60. This ground of the Application must, therefore, be dismissed.

Scope of submission / procedural fairness – safety hazard

61. D’s Claims Nos. 6 and 8 succeeded on contractual grounds. D was found to be entitled to variations based on clause 23.3 of the Contract. Clause 23.3 responded to different types of events. It provided:

62. D’s right to a variation under this clause therefore depended on it establishing either: (i) security conditions changing significantly; (ii) an event directly controlled by C having an adverse effect on the performance of the work; (iii) or an event directly controlled by C creating a safety hazard.

63. C argues that in the Terms of Reference D’s contractual case was limited to alleging the first and/or second of these tests had been satisfied. At [49(f)], D’s contractual case was recorded as follows: D was said to be “entitle[d] to variations for security conditions on site.” At [48(g)], it was stated: “[C] instructed the Iraqi Navy to prevent Claimant from departing the site. This gave rise to events directly controlled by Respondent which caused an adverse effect on the performance of the works…”

64. In the Award, the tribunal found that D was entitled to a variation in respect of Claims 6 and 8 on the basis of the third of the tests under clause 23.3. The tribunal expressly rejected D’s case that the detention had an adverse effect on the performance of D’s work or that there were significant changes to security conditions including procedures and protocols, but found that the detention created a safety hazard.

65. C says that the case that the blockade caused a safety hazard was not within the reference to arbitration and was not a case of which C had proper notice and that the awards in respect of Claims 6 and 8 should accordingly be set aside under Article 41(2)(a)(ii) and/or (iii). The former provision provides that the Court may set aside an arbitral award where, as material, “the party making the application was not given proper notice … of the arbitral proceedings.”

66. As explained above in relation to the wooden dhow complaint, in my judgment the submission to arbitration constituted more than just what was said in the Terms of Reference. The Tribunal was entitled to look at the parties’ pleadings and the submissions. As C has conceded, the safety hazard issue was present, for example, in D’s Reply to Statement of Defence and Counterclaim dated 3 February 2020. Moreover, in C’s own list of issues, C included the question, at [10(C)(i)], “If [D] has proven a ‘significant change,’ has [D] proven that the change event was ‘directly controlled by the Employer’ having ‘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?’” (emphasis added) In my judgment, it is clear that the safety hazard point was squarely raised and therefore “in play”. And to the extent C had a valid objection, in my view it has clearly waived it.

67. This ground would fail under Article 41(2)(a)(ii) for the same reason. I query whether, even if C never had proper notice of the safety hazard case, that complaint would fall within Article 41(2)(a)(ii) in any event, which appears to be concerned with arbitral proceedings rather than cases advanced within such proceedings.

68. For these reasons, this ground is dismissed also.

Procedural fairness – tort claim

69. The tribunal dismissed D’s contractual basis for claim No. 7 but went on to find that C was liable in tort for the consequences of the Iraqi Navy’s detention of the Two Vessels. The tribunal found that C had caused the blockade and that this was unlawful for the purposes of Article 7 of the Iraqi Civil Code. The tribunal also found a breach of Article 204 of the Iraqi Civil Code. However, this was based on its finding of unlawfulness under Article 7.

70. Under Article 7, the exercise of a right could be unlawful in three defined circumstances. Article 7 reads, in the translation used by the tribunal:

71. The tribunal considered each of the three circumstances. It found, considering 2(a), that it had not been established that C intended to cause D injury. And it found, considering 2(b), that it was not clear whether C had obtained any benefits or whether any benefits would be proportionate to any injury. In other words, D’s claims under Article 7(2)(a) and (b) were dismissed by the tribunal. But in doing so, C submits, the tribunal in fact dispensed with 2(c) also. The tribunal’s previous finding that it was not clear that C had obtained any benefit eliminated the prospect of D establishing liability in accordance with Article 7(2)(c).

72. In considering 2(c), the tribunal found that “[C’s] information and request to the Iraqi Navy was not supported by lawful reason.” The detention was in this way found to be an unlawful act under Article 7. C says that, in essence, the tribunal found C’s acts unlawful because C had not established they were lawful. C submits that the legal basis on which the tribunal found that C’s acts were unlawful is “totally unreasoned” and that C has never had any notice of it.

73. C submits that it had no opportunity to meet the case that its acts were unlawful. This was a “surprise” point based on a case not advanced by either party. That approach is impermissible, C contends, relying on Miral Enterprises Ltd v Burton [2021] EWCA Civ 287 where the English Court of Appeal discussed such decisions at [32] to [39]. The following passages from [36] and [38] adequately summarise the Court’s ruling:

74. C contends that as a result of all this the award on Claim 7 should be set aside under Article 41(2)(a)(ii) on the basis that C had no opportunity to present its position on the case which was finally accepted for this part of the Award.

75. D’s response to this objection is brief. It says that, not only was C able to present its case on whether the legal requirements for tortious liability were met, but that it in fact presented its case on each element of tortious liability. D says that this objection is in reality an impermissible attempt to appeal the tribunal’s clear conclusion on the merits.

76. In respect of C’s reliance on Miral Enterprises, D submits that the Court does not get any assistance from that decision. Miral Enterprises was a judgment handed down in an appeal in English court proceedings. The present proceedings are neither an appeal nor within the context of litigation proper. Miral Enterprises concerned technical English rules of High Court pleading not the DIFC arbitration law.

77. I agree with D’s evaluation of the relevance of Miral Enterprises. It is clear to me that the Court was not making a statement on the impermissibility of surprise points which it considered to be universal. The Court stated at [36], cited above, for example, “In our system of civil litigation [deciding the case on a basis that had neither been pleaded nor canvassed before the judge] is impermissible.” (emphasis added) Which system was the Court referring to? This is explained immediately after in [36] in a citation from Al-Medenni v Mars UK Ltd [2005] EWCA Civ 1041 where that Court of Appeal had referred to “our adversarial system of justice” and in [37] where the Court stated:

78. As D submits, the context of these proceedings is different. The Application is not an appeal. If a surprise point is to be regarded as impermissible, that will be because the DIFC Arbitration Law has that effect. The only grounds for challenging an award are those set out in Article 41 of the DIFC Arbitration Law. A party’s lack of opportunity to present his case, the terms and scope of the submission to arbitration, the arbitral procedure and the public policy of the UAE, for example, may provide avenues through which a surprise point in an award can be challenged. But the English Court of Appeal’s position on the same question from the context of High Court litigation is, in my judgment, not of direct or independent relevance to this inquiry.

79. The ground that C relies on to challenge the tribunal’s decision on the tort claim is, as we have seen, from Article 41(2)(a)(ii). C says that it was unable to present its position on the case which was finally accepted for this part of the Award. In my view, however, this grievance falls outside of the relevant part of Article 41(2)(a)(ii), which is concerned with the question whether the applicant was “unable to present his case.” (emphasis added) In my judgment—and assuming that the case referred to in Article (2)(a)(ii) can be any part of a case and not only a party’s case at large—the correct question under this ground of the Application is, as D has posed, whether C was unable to present its case on the question whether any of the requirements of Article 7(2) of the Iraqi Civil Code were met.

80. C has not claimed that it was unable to present its case on Article 7(2). And it is evident from the evidence before the Court that C was not deprived of an opportunity to make its case on this question, and that it did. It is sufficient to reference [2.270] to [2.276] of C’s Statement of Rejoinder and Reply to Counterclaims dated 26 April 2020 and [3.85] to [3.87] of its Post-Hearing Brief dated 29 January 2021 in this regard. For this reason, in my judgment this ground of the Application must be dismissed.

Public policy

81. C alleged that D bribed an Iraqi Member of Parliament (the “Iraqi MP”) in an attempt to influence C to agree to D’s demands in relation to the suspension of works and detention of D’s vessels. False invoices were then fabricated to justify the payments made. C counterclaimed for breach by D of a Business Ethics clause and an Ethical Conduct Declaration in the Contract.

82. The tribunal issued a separate award in respect of this counterclaim, being the CC4 Award. It found the complaint made out: D had entered, it held, into a business arrangement with the Iraqi MP and his son in an attempt to influence an action of C in a way which was “unethical and illicit” and in breach of the Contract. Below I proceed on the presumption, without deciding, that C’s allegations of bribery are established.

83. The Counterclaim Award was intended to deprive D of any profit on the Contract. In its reasoning, the tribunal stated at [644] that:

84. The tribunal then applied a profit ratio of 25% to all sums paid and due under the Contract. In respect of D’s Claims Nos. 2, 6 and 8, the tribunal found that D should not be entitled to its expected 25% profit on those sums. It therefore awarded C a total of USD 19,381,458 in respect of those claims.

85. In total, the sum awarded over the whole Contract on this counterclaim was USD 37,738,777, together with a direction that C was entitled to withhold USD 1,144,031.25 in respect of a certain invoice.

86. C’s case in the Application is that the Award—not the CC4 Award—should be set aside because it is in conflict with the public policy of the UAE. The argument goes as follows.

87. The Court may set aside an award where it conflicts with the public policy of the UAE pursuant to Article 41(2)(b)(iii) of the DIFC Arbitration Law. That provision is based on the Model Law, which is turn is based on the New York Convention, Article V(2)(b).

88. The reference to public policy in the Convention is generally understood to refer to “transnational” or “international” public policy; that is, the fundamental principles of law or morality or justice. The inexhaustive list of qualifying cases has been said to include bribery and corruption. In the UNCITRAL Digest of the Case Law on the Model Law, it states at [132]: “For example, the public policy defence would be applicable in case of corruption, bribery, fraud and serious procedural irregularities.”

89. Bribery and corruption are plainly, C contends, matters which engage the public policy of the UAE in the relevant sense. The UAE’s penal code includes a number of offences related to bribery, for example. Moreover, by Federal Decree No. 8 of 2006 the UAE has ratified the UN Convention Against Corruption. It is also a signatory to the Arab Convention to Fight Corruption of 2006.

90. In World Duty Free v Kenya ICSID Case No. ARB/00/7 (4 October 2006), the tribunal undertook a thorough review of the position, concluding at [157]:

91. The present case is, C acknowledges, different in that the Contract was not for corruption or obtained by corruption. It is however tainted by corruption as a result of D’s bribery, C submits. The question for the Court is whether the connection between the Contract and the corruption is such that the Contract should be rendered unenforceable.

92. C says that that question is answered by the CC4 Award. The Tribunal’s rationale for depriving D of its profit was that D should not benefit from its wrongdoing. C says that the tribunal treated the profits as being the result of D’s conduct. On that basis, the entire Contract must also be treated in that way. There is no logical basis on which to distinguish between the two, C contends. In the circumstances, D should be deprived of the whole of its claim on the Contract, in accordance with the principles applied in World Duty Free.

93. The test under Article 41(2)(b)(iii) is whether the award is in conflict with the public policy of the UAE. In Lucineth v Lutina Telecom Group Ltd [2019] DIFC ARB 005 (8 Aug 2019), it was held at [13] that complaining party must show that the 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.”

94. In Egan v Eava [2013] DIFC ARB 002 (29 Jul 2015), it was indicated at [65] that the objecting party would generally need to show that a public policy defence was grounded in some “intrinsic characteristic of the award,” “an alleged procedural defect in the course of the arbitration” or the “conduct of the arbitrators.” In my judgment, it is not enough that public policy concerns are present in a case, however central the position those concerns might assume. I think the integrity or validity of the award must be in question on public policy grounds. And hence the Court is concerned, as Egan shows, with the award itself, the procedure of which it was a fruit and the conduct of the arbitrators who made it.

95. In Lachesis v Lacrosse [2020] DIFC ARB 005 (22 Mar 2021), I held at [38] that, even if an award conflicted with UAE public policy: “unless the conflict was sufficiently serious – for example, if recognising the Award and enforcing it would require abandoning the very fundaments on which this legal system is based – it is unlikely that the Court would exercise its discretion to set aside the Award.”

96. Because the Court is required to consider public policy not just in the DIFC but across the UAE, the Court of Appeal in Lachesis v Lacrosse [2021] DIFC CA 005 (29 Dec 2021), at [37(ii)], recently endorsed the Deputy Chief Justice’s earlier observation that: “this commercial and civil Court will rarely be in a position to make findings related to the public policy of the UAE without the assistance of expert evidence.”

97. C has not adduced expert evidence to support its case that the connection between the bribery and the Contract is such that the Award should be set aside. C says, however, that there is no need for such evidence in this case. Bribery is, as was held in World Duty Free, contrary to the international public policy. This is not an area of discrete practice of UAE law which might require the evidence of an expert.

98. D’s response to this is that C has framed the question incorrectly. What C needs expert evidence for, D submits, is to establish that the circumstances of the Award offend UAE public policy, not that bribery generally offends UAE public policy.

99. In my judgment, C has not established that the connection between the Contract and the bribery is such that the Contract should be rendered unenforceable and the Award set aside.

100. In the submissions in support of the Application, C argued as follows:

101. In my view, however, the “acts and circumstances” that gave rise to the Award were C’s failure to pay sums due under the Contract and its tortious liability for causing the detention of D’s vessels, as D has argued. No element of those causes of action involved D’s dealings with the Iraqi MP, which was an attempt to resolve the dispute after it had arisen. C does not assert, for example, that D procured the Contract by the alleged wrongdoing.

102. D says that the Court can test the point by considering what the position would have been if D had never approached the Iraqi MP. D would still have been entitled to advance its causes of action for non-payment and in tort upon which it succeeded in the Award. C does not allege that D succeeded in the arbitration because it approached the Iraqi politician. In my view, those dealings had nothing to do with the Tribunal’s award to D in the form of the Award.

103. The only consequence for the arbitral proceedings of D’s approach to the Iraqi MP is that it gave rise to a cause of action in C’s favour for breach of contract. Therefore, even if D had committed an offence, those “acts and circumstances” only gave rise to the CC4 Award, an award that C does not seek to set aside.

104. Further, the mere fact that an award is in some way associated with illegal conduct (and it should be noted that D denies its conduct was illegal) does not necessarily give rise to a public policy objection. For instance, in Honeywell International Middle East Limited v Meydan Group LLC [2014] 2 Lloyds Rep 133, the English Court held at [173] to [185] that it was not contrary to public policy to enforce a DIAC award based on a claim under a contract procured by bribery. If there is no objection to enforcing a contract procured by bribery, there can be no objection where there is merely an allegation of bribery post-dating the dispute and relating to attempts to resolve it.

105. If C took the position that the Contract should be rendered unenforceable, that is a claim it should have made in the arbitration. But rather than do that, C in fact relied on the Contract to make a counterclaim. And inasmuch as the tribunal turned its mind to the question, I think it is likely that revisiting the same question would be tantamount to reviewing the merits of the tribunal’s determination. That is something the Court cannot do under the DIFC Arbitration Law. I think when C made a decision to make CC4 it made a decision to turn the bribery over to the arbitration and deal with it under the Contract and it should not be able to resile from that decision.

106. Moreover, nothing C alleges shows that the Award itself “fundamentally offends” the “most basic and explicit principles of justice and fairness” in the UAE. C does not allege that there was any error of procedure or misconduct by the Tribunal. C does not allege that D committed any misconduct regarding the arbitral proceedings. For instance, C does not allege that D misled the tribunal in any way about its dealings with the Iraqi MP. Indeed, D voluntarily disclosed the DPPO investigation and settlement to the tribunal, which considered them and awarded damages in relation to CC4 in the CC4 Award.

107. Finally, C does not allege that D committed any offence under UAE law. The matters of which C complains took place outside the UAE and did not involve any UAE-based entities or individuals. Although C cites provisions of the UAE Criminal Code, C does not allege that D committed any of those offences. Further, even if C could show that D committed an offence under a foreign law, there is no reason why that should offend public policy in the UAE. I have been shown no authority to the effect that public policy in the UAE includes foreign criminal laws.

108. For the foregoing reasons, this ground of the Application is dismissed also.

Conclusion

109. The Application is dismissed. C shall pay D its costs of the Application, on the standard basis, to be assessed by a Registrar if not agreed.