Abu Dhabi Court of Cassation Confirms Seven-Day Time Limit to Raise Objections to The Commencement of Arbitration Proceedings
On 7 July 2022, the Abu Dhabi Court of Cassation (Court of Cassation) rendered its judgment in Commercial Case No. 492 of 2022, in which the parties disputed the date of commencement of the seven-day period for raising an objection to the arbitration proceedings pursuant to Article 25 of United Arab Emirates (UAE) Federal Law No. 6 of 2018 (the Arbitration Law), which generally applies to arbitrations in the UAE, unless the parties have agreed to apply another arbitration law. The Court of Cassation confirmed that the seven-day period begins upon notice of the commencement of the arbitration and not upon the establishment of the arbitral tribunal. Accordingly, as the respondent failed to raise its argument that the arbitration was premature due to noncompliance with the contractual pre-conditions to arbitration until the first hearing before the arbitral tribunal, it had waived its right to do so and therefore had no basis on which to seek annulment of the arbitral award.
The agreement at issue in Commercial Case No. 492 of 2022 contained a tiered dispute resolution provision. The parties had agreed in the provision that they would have an initial period of 14 days following receipt of a written notice of a dispute in which to seek to amicably resolve the dispute. In the event of a failure to reach a settlement, the matter would then be referred to a settlement board for a determination. The claimant did not comply with these steps, and no settlement board was formed. Instead, the claimant proceeded directly to commence arbitration proceedings.
The claimant notified the respondent that it was commencing arbitration proceedings and the respondent acknowledged receipt on 14 March 2021. The respondent verbally raised its objection to the arbitration on the basis of noncompliance with the contractual pre-conditions to arbitration during the first hearing before the arbitral tribunal on 20 April 2021. Although the judgment does not describe how the arbitral tribunal handled this objection, it can be assumed to have been rejected as the tribunal determined the merits of the dispute and rendered an award in favor of the claimant.
The respondent sought annulment of the award before the Abu Dhabi Court of Appeal (Court of Appeal). The Court of Appeal held that the respondent failed to raise its argument that the arbitration was premature within the seven-day time period, which began on the date that the respondent acknowledged the commencement of the arbitration. The respondent had therefore waived its right to object to the arbitration proceedings. The Court of Appeal’s decision was subsequently upheld by the Court of Cassation.
The Court of Cassation confirmed that, pursuant to Article 25 of the Arbitration Law, a party shall be deemed to have waived its right to object to the arbitration, on the basis that a requirement under the arbitration agreement has not been complied with, if such objection is not raised within seven days of becoming aware of the noncompliance. The Court of Cassation expressly rejected the respondent’s argument that the seven-day time period ran from the date of the first hearing. The Court of Cassation further noted that Article 27 of the Arbitration Law—which provides that, unless otherwise agreed by the parties, the arbitral proceedings commence on the day following completion of the constitution of the arbitral tribunal—had no bearing on the application of Article 25, which expressly provides that the time period runs from the date of awareness of the noncompliance.
The Court of Cassation further confirmed that Article 53 of the Arbitration Law contains an exhaustive list of grounds for annulling an arbitral award, and none of those grounds had been satisfied. Accordingly, there was no basis on which to seek annulment of the award.
The case serves as a reminder to parties in dispute that arguments regarding prematurity and noncompliance with contractual pre-conditions to arbitration must be raised promptly and within seven days of notice of the commencement of the arbitration for any arbitration proceedings subject to the Arbitration Law.