Dubai Court of Appeal

Appeal No. 19-2020

[Annulment of Arbitral Award]
9 September 2020

Ishtar Decor LLC

- Claimant

Shapoorji Pallonji Mideast LLC

- Defendant

Background:

The Claimant brought an action against the Defendant, filed online on 21.04.20,
seeking judgment, primarily, setting aside an Arbitral Award for being illegal or,
alternatively, setting it aside in part pertaining to the ruling that a single arbitration
proceeding may not be filed for the six Subcontracts in question. The Claimant, a
Subcontractor, had entered into six Subcontract Agreements with the Defendant, a
contractor, to execute fit-out work on the Dubai Inn Hotel project: 1-
Subcontract Agreement dated 14.05.15; Dubai Inn Hotels – Za’abeel Project, 2-
Subcontract Agreement dated 17.06.15; Dubai Inn Hotels - Za’abeel Project (Public
Areas), 3- Subcontract Agreement dated 13.06.15; Dubai Inn Hotels - Port Saeed
Project, 4- Subcontract Agreement dated 25.11.15; Dubai Inn Hotels - Port Saeed
Project (Public Areas), 5- Subcontract Agreement dated 13.06.15; Dubai Inn Hotels -
Oud Metha Project, and 6- Subcontract Agreement dated 20.11.15; Dubai Inn Hotels
- Oud Metha Project (Public Areas). The Subcontracts all contained a standard
Arbitration Clause (clause 20) which states:

“1- If a dispute of any kind whatsoever arises between the Contractor and the
Subcontractor in connection with, or arising out of, the Subcontract or the execution
of the Subcontract works, whether during the execution of the works or after their
completion and whether before or after a repudiation or other termination of the
Subcontract, then the Contractor or the Subcontractor may give a notice of such
dispute to the other party, in which case the parties shall attempt for the next 56 days
to settle such dispute amicably before the commencement of Arbitration.”

“2- Any dispute which has not been amicably settled within 56 days after the day on
which notice of dispute is given pursuant to Sub-clause 20(1), shall be finally settled
under the Rules of Commercial Conciliation and Arbitration of the Dubai Chamber of
Commerce and Industry, or such other arbitration institution that may be substituted
for the Dubai Chamber, by an Arbitral Tribunal consisting of three members, one
member from each party being appointed within 28 days of one party receiving a
written notice from the other party to commence Arbitration proceedings. The third
member shall be mutually chosen by the first two members and shall chair the
Tribunal and issue its decision which shall be by a majority vote and shall be binding
on both parties.”

Appeal No. 19-2020 Translation dated 9 December 2020

The Claimant (Claimant in the Arbitration) fulfilled their obligations in accordance with
the Subcontract Agreements. The Defendant (Respondent in the Arbitration),
however, defaulted on their obligations in failing to pay sums of money owed to the
Claimant. When all attempts at amicable settlement, since 2017, failed, the Claimant
submitted a Request for Arbitration, dated 30.10.18, claiming AED 9,949,390.29,
plus interest and costs from the Defendant and seeking the return of letters of
guarantee and other security. The Defendant filed an Answer to the Request for
Arbitration, objecting to the Arbitral Tribunal’s jurisdiction on the grounds that the
Claimant did not comply with the pre-conditions to commencing an ad-hoc arbitration
in terms of giving notice of the dispute to the Defendant in order for amicable
settlement to be attempted within 56 days. The Defendant’s other reason for
objection was that the Claimant consolidated six separate Subcontracts, each of
which has its own stand-alone Arbitration Agreement, into a single set of arbitration
proceedings, which is not permissible under the rules of the Dubai International
Arbitration Centre (DIAC) and the UAE Arbitration Law (Federal Law No. 6 of 2018).

The proceedings ran their course and the Arbitral Tribunal issued an award on
01.04.20 ruling that it does not have jurisdiction to determine the Claimant’s claims in
the arbitration proceedings.

Court of Appeal:

The Claimant was not satisfied with the award and challenged it on the following
grounds:

1- The parties used the word “may” in the preconditions to arbitration clause. The
term “may” has a clearly defined meaning. It expresses possibility, not necessity.
Therefore, the Arbitral Tribunal’s interpretation of this term as expressing
necessity is unsound and goes beyond the meaning intended by the contracting
parties. And so, the notice of dispute to be given before commencing arbitration
proceedings is not mandatory, but optional. Either party may, at its discretion, give
such notice to the other. This accords with the dissenting opinion of the panel
member who held that the Respondent’s submissions on jurisdiction should be
rejected. Further, the precondition has been met because notices were sent by
email to the Defendant, to which they did not respond. Given the significant period
of time that has elapsed, which exceeds the agreed notice period, the Claimant
may commence arbitration proceedings.

2- The Arbitral Tribunal contradicted the law by finding, in a majority opinion, that the
Arbitral Tribunal did not have jurisdiction because the Claimant has no right to
arbitrate claims arising out of a number of separate Subcontracts, each of which
has its own stand-alone Arbitration Clause. The Arbitral Tribunal’s rationale for its
finding is that both the DIAC Rules and the UAE Arbitration Law (Federal Law No.
6 of 2018) refer to the Arbitration Agreement in the singular. However, nothing in
the DIAC Rules or the UAE Arbitration Law explicitly prohibits the Claimant from
filing a proceeding based on multiple contracts, each containing an Arbitration
Clause. The Arbitral Tribunal’s interpretation of the term “Arbitration Agreement,”

Appeal No. 19-2020 Translation dated 9 December 2020

 found in the DIAC Rules and the UAE Arbitration Law, as referring to a singular
agreement has no legal basis. This accords with the dissenting opinion of the
panel member. Moreover, the parties selected UAE law as the governing law and
UAE law permits this procedure. Thus, the Arbitral Award, which violates the
applicable law, is void under Article 53(e) of the UAE Arbitration Law. The award is
also void under Article 53(h) of the UAE Arbitration Law for having dealt with a
matter not falling within the scope of the Arbitration Agreement, namely the issue
of whether it is permissible to initiate a single arbitration based on multiple
contracts.

The Claimant filed, in support of their action, a docket comprising a copy of the
Subcontract Agreements in question, the Arbitral Award, the notification of the
Arbitral Award issued to the parties, and the arbitration invoice.

The matter ran its course before the Court of Appeal, as recorded by the minutes of
hearings, with each party represented by its respective counsel. Counsel for the
Defendant filed a brief in defense of his client and at the final hearing, the matter was
reserved for judgment today.

As to form, the Claimant received notice of the Arbitral Award on 08.04.20 and filed
their action on 21.04.20. Thus, the action was filed within the statutory time limit and
is admissible in form.

Turning to the merits, it is settled, according to Article 204 of the Civil Procedure Law,
that arbitration is an express agreement by the parties to have their disputes decided
by an arbitrator, rather than the courts, and that the parties may impose
preconditions to commencing arbitration. Therefore, a provision for amicable
settlement of disputes would not preclude or conflict with another provision, in the
same contract, for recourse to arbitration if no amicable settlement is reached.

It is further settled that the essence of Articles 258(1), 259, and 265(1) of the Civil
Transactions Law is that the trial court retains discretion to interpret contracts
according to their plain meaning, viewing their wording and terms as a whole, without
giving regard to individual words to the exclusion of others. The court’s interpretation
must not go beyond the meaning borne out by the language of the writing or contract
and must be based on sound reasoning which is supported by the contract
(Cassation No. 165-2015 [Commercial] – 12.02.16).

It is further settled that while, normally, each action must, by law, be filed separately,
multiple actions may be filed under a single statement of claim provided that it
includes the necessary particulars of each action, as required by law under Article 42
of the Civil Procedure Law (Cassation No. 129-2012 [Property] – 09.12.12).

Clause 20 of the Subcontract s in question provides:

“1- If a dispute of any kind whatsoever arises between the Contractor and the
Subcontractor in connection with, or arising out of, the Subcontract or the execution

Appeal No. 19-2020 Translation dated 9 December 2020

of the Subcontract works, whether during the execution of the works or after their
completion and whether before or after a repudiation or other termination of the
Subcontract, then the Contractor or the Subcontractor may give a notice of such
dispute to the other party, in which case the parties shall attempt for the next 56 days
to settle such dispute amicably before the commencement of Arbitration.”

“2- Any dispute which has not been amicably settled within 56 days after the day on
which notice of dispute is given pursuant to Sub-clause 20(1), shall be finally settled
under the Rules of Commercial Conciliation and Arbitration of the Dubai Chamber of
Commerce and Industry.”

Therefore, the parties had agreed to settle any disputes that may arise between them
out of the Subcontracts through amicable settlement within 56 days after the day on
which notice of dispute is given to the other party. If an amicable solution cannot be
reached, the dispute shall be finally settled under the Rules of Commercial
Conciliation and Arbitration of the Dubai Chamber of Commerce and Industry.

As per the record, the Claimant (Claimant in the Arbitration) had given notice to the
Defendant (Respondent in the Arbitration) before proceeding to arbitration, as
confirmed by the parties’ email exchanges, on 12.03.17 and 11.05.17, concerning
the Claimant’s claim for AED 7,456,075.2 in outstanding payments owed by the
Defendant on the projects in respect of which the Subcontract Agreements were
concluded and the Claimant’s request to receive payment amicably and, should the
Defendant so agree, schedule a meeting that week. Therefore, the requirement to
give notice of the dispute before the commencement of arbitration has been met, per
the above precondition, but the Defendant did not respond to the notice. This points
to a failure of the parties’ negotiations with a view to reaching an amicable settlement
of the dispute. Further, the fact that the Claimant proceeded to arbitration after giving
notice of its intent to the Defendant means that negotiations failed to lead to an
amicable settlement of the dispute and that the Claimant could then commence
arbitration. Therefore, the Claimant’s Request for Arbitration, dated 30.10.18, filed
after the deadline agreed upon in the notice, was duly filed.

The Defendant is not served by arguing that said notice was given by Ittihad
International Investment, which is not a party to the dispute. Clearly, after all, Ittihad
International Investment sent the notice and appeared before the Arbitral Tribunal on
the Claimant’s behalf as its legal representative, represented by Ayman Makarim and
Azza Al Sayed. Ittihad International Investment was served notice of the Arbitral
Award as the Claimant’s representative. The Arbitral Tribunal ruled that it did not
have jurisdiction to determine the Claimant’s claims because the Claimant failed to
comply with the contractual pre-conditions to arbitration, even though those pre-
conditions were met, as noted earlier. In so doing, the Arbitral Tribunal has
contradicted the law and the evidence. As regards the Defendant’s assertion that the
Claimant has no right to file an arbitration proceeding based on multiple Subcontract
Agreements, each with its own stand-alone Arbitration Clause, it is clear to us that
nothing in the DIAC Rules or the UAE Arbitration Law explicitly prohibits or bars the
filing of a single Request for Arbitration based on multiple contracts, each containing

Appeal No. 19-2020 Translation dated 9 December 2020

an Arbitration Clause. As to the Defendant’s further point that the Arbitral Tribunal’s
rationale, in this regard, is that both the DIAC Rules and the UAE Arbitration Law
refer to the Arbitration Agreement in the singular, not plural, which makes it a single
agreement and bars the Claimant from filing an arbitration proceeding based on
multiple contracts, this argument finds no support in fact or in law and reads more
into the provisions than is actually there. This is confirmed by Section 2 of Article 1
(“Definitions”) of the DIAC Rules. Section 2 reads: “Words used in the singular
include the plural and vice versa.” Furthermore, the parties had agreed that UAE law
shall apply to the arbitration and its administration. UAE law does not prevent the
filing of multiple actions under a single statement of claim or an action based on
multiple separate contracts that exist on a standalone basis, provided that the action
is valuated on the basis of the price of each contract and the fee is assessed on such
basis. Accordingly, the Arbitral Tribunal should have applied UAE law when
determining whether the Claimant was entitled to file an arbitration proceeding based
on multiple contracts, given that there is no express provision in the DIAC Rules or
the UAE Arbitration Law governing the issue. Therefore, the Arbitral Tribunal has
violated the governing law specifically chosen by the parties, which renders invalid its
award in which it determined that it did not have jurisdiction to hear the dispute. The
Claimant proceeded correctly by filing DIAC Arbitration No. 135-2018 pursuant to the
parties’ agreement and the Arbitral Tribunal may not then rule that it has no
jurisdiction for the reasons mentioned and explained above. Our conclusion is
reinforced by the dissenting opinion of the Arbitral Tribunal’s third member who found
that the Arbitral Tribunal had jurisdiction. After reviewing all documents, submissions,
and evidence filed and recorded on the Arbitration file by both parties, said panel
member held that the Respondent’s submissions on jurisdiction ought to be refused
due to the following reasons:

“The Claimant and the Respondent entered into six Subcontract Agreements related
to the same project (Dubai Inn Hotels), and the Arbitration Clauses are identical in all
the six Subcontract Agreements. Even the DIAC Rules or Federal No. 6 of 2018 on
Arbitration have not specified definitively that no more than one agreement may be
consolidated into a single arbitration request. So, in the light of the above and as a
matter of law, equity and good conscience, I found that the Claimant has the right to
file an Arbitration proceeding for the six subcontract agreements as a single
Arbitration Proceeding for determination by one Arbitral Tribunal, and the Request for
Arbitration is valid, and the Arbitral Tribunal has the right to hear the dispute, and the
Respondent’s submissions on jurisdiction are rejected.”

These findings are correct as a matter of law. Based upon, and in view of the above,
the Arbitral Tribunal’s award ruling that it has no jurisdiction to determine the
Claimant’s claims is invalid because the Arbitral Tribunal did not apply the rules
designated by the parties as applicable to the substance of the dispute. Therefore,
the Claimant’s action was filed on a proper basis in fact and in law and, as such, the
Arbitral Award issued in DIAC Arbitration No. 135-2018, dated 01.04.20 will be set
aside, as hereafter set out in the dispositive section.

Appeal No. 19-2020 Translation dated 9 December 2020

The Court fees and costs shall be borne by the Defendant pursuant to Article 55-1 of
the executive regulations of Federal Law No. 11 of 1992 (Civil Procedure Code) and
Article 168 of said law.

Wherefore, judgment is hereby rendered, in the presence of the parties, admitting the
action in form and, on the merits, setting aside the Arbitral Award issued in DIAC
Arbitration No. 135-2018, dated 01.04.20. Defendant to pay the Court fees, costs,
and AED 1,000 as advocate’s fees.

Appeal No. 19-2020 Translation dated 9 December 2020