Enforcement of arbitration awards in the UAE

Enforcement of arbitration awards in the UAE

The ability to enforce claims is usually an important consideration when entering an international sale of goods contract. A party needs to know that, if his counterparty defaults, he will not only be able prosecute a claim under the contract, but also that he will be able effectively to enforce any resulting judgment or award where the defaulting party has its assets.

Some international organisations provide mechanisms for the mutual recognition of court judgments: for example, the EU Judgments Regulation (EC No. 44/2001) and the Riyadh Convention between Arab states. However, court judgments will not always be recognised and enforced overseas.

It is largely with a view to overcoming this difficulty that parties make provision in their contracts for disputes by arbitration. The 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is usually referred to as the New York Convention, should enable arbitration awards to be enforced in any of the 144 signatory countries to the Convention.

However, enforcement in New York Convention states is not always straightforward. The United Arab Emirates signed the Convention in 2006 and is in the process of drafting a new federal arbitration law, based on the UNCITRAL model law. In the meantime, the arbitration provisions currently contained in the UAE Civil Code will continue to apply.

The UAE Civil Code sets out several conditions which must be satisfied before a UAE court may recognise an arbitration award. It is unclear whether the UAE Civil Code applies to New York Convention awards. If it does, enforcement of foreign arbitration awards would be hindered.

A recent case in the UAE Emirate of Ajman gives reason for cautious optimism. The First Instance Court in the Emirate of Ajman gave judgment enforcing a foreign arbitration award in default of an appearance by the defendant, apply the New York Convention. This is an encouraging step, but should not necessarily be seen as a precedent. The judgment is not binding on other Courts in the Emirates and it will require other parties to look to enforce arbitration awards under the New York Convention in the UAE Courts, before we will see a pattern developing. The willingness of the Ajman court to apply the New York Convention is nevertheless encouraging.

The question of whether it is possible to enforce arbitration awards in the UAE should be clarified when the new federal, UNCITRAL-inspired, arbitration law comes into force. Before then, parties seeking enforcement can take encouragement that there seems to be a willingness in UAE courts to apply the New York Convention where appropriate.

For more information, please contact Simon Cartwright, Partner, on + 971 4 423 0520 or simon.cartwright@hfw.com, or Sam Wakerley, Associate, on + 971 4 423 0530 or sam.wakerley@hfw.com, or your usual contact at HFW