UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Archive for January 19, 2010

The Story of Bechtel’s Arbitration Award in the UAE, the US, and France. How an award can be challenged and overturned in one country, however, enforced in other countries.

 

Knowledge of the procedural law of the seat of arbitration is essential in helping to ensure successful enforcement of an arbitral award in the UAE.  However, does it really matter if one can enforce an overturned arbitral award in another country? Perhaps it would be more advantageous to know in which countries one can enforce an overturned arbitral award and the procedures of these countries.

In the 2004 case of International Bechtel Co. Ltd. v. Department of Civil Aviation of the Government of Dubai 300 F. Supp. 2d 112[1] (DDC. 2004), a USD$25 million dollar arbitration award rendered in favor of the claimant (Bechtel) was set aside by the Dubai Court of Cassation on the grounds that the arbitrator had failed to swear witnesses in the manner prescribed by UAE law for court hearings, namely Article 41(2) of the Civil Procedure Code.[2]    Bechtel simultaneously appealed to the Courts of France and the US District Court.  

At first in the US, Judge Robertson granted motion to dismiss Bechtel’s petition, finding that, in the absence of a governing treaty regime, the Federal Arbitration Act could not be invoked to confirm and enforce an arbitral award that had been annulled under contractually selected foreign law.[3]  However, in International Bechtel Co., Ltd. v. Dep’t of Civil Aviation of the Govt. of Dubai, 360 F.Supp.2d 136 (D.D.C.2005)[4], Bechtel obtained dismissal of the petition by the Department of Civil Aviation to set aside the award and obtained confirmation and enforcement of the arbitration award in Bechtel’s favor that had been annulled by the Dubai Court of Cassation.[5] 

The Paris Court of Appeal also upheld the award in favor of Bechtel, setting aside the Dubai Court of Cassation’s decision and dismissing the petition of the Department of Civil Aviation to annul the award.  The Paris Court of Appeal ruled that the arguments set forth by the Department of Civil Aviation were invalid.  The Paris Court ruled that the arbitral award did satisfy the requirement in Article 13(1)(c ) of the mutual enforcement treaty concluded on 9 September 1991 between France and the UAE (the “UAE-France” treaty) in that an arbitral award can be subject to appeal in a country and at the same time be recognized in France.   The provision which the Department of Civil Aviation was referring to dealt with judicial decisions.  Article 13(1)(c ) of UAE-France treaty  provides that a judicial decision can be recognized in France only once it can no longer be appealed in the UAE and is accordingly capable of enforcement in its country of origin.  In this case, the parties were not required to wait for the decision of the Dubai Court of Cassation, as the Court was concerned with an arbitral award rather than a judicial decision, before applying to enforce the award in another country, specifically France.  The Paris Court also ruled that the enforcement of the award was not contrary to international public policy.[6] 

This brings up an interesting issue in international arbitration.  If an award is set aside by the courts of the place where the arbitration takes place, should it then be invalid and unenforceable worldwide?  How is it that courts in Austria, Belgium, the United States, and France have all enforced awards which have been set aside by the courts of the place where they were made in other countries?[7]  Are there any sovereignty issues at play here? 


[1] International Bechtel Co. Ltd. v. Department of Civil Aviation of the Government of Dubai 300 F. Supp. 2d 112[1] (DDC. 2004).

[2] George Anthony and Matthew A. Marrone, “Recent Developments in Arbitration Law in the Middle East,” p. 8.

[3] http://www.pattonboggs.com/

[4] International Bechtel Co., Ltd. v. Dep’t of Civil Aviation of the Govt. of Dubai, 360 F.Supp.2d 136 (D.D.C.2005).

[5] http://www.pattonboggs.com/bwood/

[6] Michael Polkinghom, ‘Enforcement of Annulled Awards in France: The Sting in the Tail,” International Construction Law Review, Jan. 2008.

[7] Jane Jenkins and Simon Stebbings, “International Construction Arbitration Law,” Kluwer Law International, p. 284.

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance