The Arbitrator's Obligation to Give Respondent the Opportunity to Defend its Case

The Arbitrator's Obligation to Give Respondent the Opportunity to Defend its Case

Motei & Associates was instructed by the Respondent in legal proceedings before the Dubai Courts in relation to the ratification of an arbitral award issued by the Dubai International Arbitration Centre (DIAC).

Principle
The Arbitrator is under obligation to give the parties a reasonable opportunity to present their case, failure to observe such obligation would give legal grounds for annulment of an arbitral award.

Facts of the Case
The Claimant, a supplier of construction material company, entered into an agreement with the Respondent, a subcontractor, in which they agreed to settle any disputes arising in relation to the agreement through arbitration in accordance with the rules of the Dubai International Arbitration Centre (DIAC).

The Claimant claimed that the Respondent has failed to perform its contractual obligations and initiated arbitration proceedings pursuant to the Rules of DIAC. The Claimant requested the Arbitrator to order the Respondent to pay the Claimant the amount of US$ 12,368.75 and Euro 63,536.24 plus legal interests in addition to all legal expenses and arbitration costs.

The Arbitrator found for the Claimant and ordered the Respondent to pay the Claimant the following:

a. US $ 12,368.75.
b. Euro 63,536.24.
c. AED 35,000 arbitration costs.
d. AED 19,106 legal fees.
e. 5% per annum legal interest on the sums mentioned under clauses (a. & b.) above from 20 November 2010 until full and final payment to Claimant.
f. 5% per annum legal interest on the sums mentioned under clauses (c. & d.) above from 3 January 2012 until full and final payment to Claimant.

In order to enforce the arbitral award, the Claimant initiated proceedings before the Dubai Court of First Instance requesting the ratification of the award rendered by DIAC.

The Court of First Instance

Before the Court of First Instance, the Respondent filed a counter claim requesting the annulment of the award on the grounds that Respondent wasn’t granted a reasonable opportunity to present and defend its case. In the counter claim, the Respondent argued that:

1. The Claimant had, erroneously, stated the name of the Respondent in both the request for arbitration and statement of claim. As a result, the Respondent was never been notified of the arbitration proceedings, hence, never been aware of such proceedings.
2. On realizing such error, the Arbitrator issued a procedural order to rectify the name of the Respondent and re notify them with the correct name.
3. Immediately upon being notified of the arbitration proceedings, the Respondent, on 27/12/2011, through its manager, has responded and requested the Arbitrator to be granted time to appoint a lawyer and submit its statement of defense. 
4. On 6/1/2012, the Arbitrator dismissed the Respondent’s request and rendered his award. In the award, the Arbitrator stated that “the Respondent’s request for time was submitted without an official power of attorney”, despite the fact that the Respondent’s manager, along his request, has submitted the Respondent’s trade license (as explicitly stated in the arbitral award) in which his name is mentioned as manager - which, certainly, gives him the capacity/ authority to represent the Respondent in the arbitration proceedings, being a manager of a LLC.

5. The Arbitrator, based on the submitted trade license, should have, the least, given the Respondent the opportunity to appear before him and present his authority, taking into account the date on which the Respondent has been officially notified of the proceedings, and the date of issuing the award.

The Court of First Instance dismissed the Respondent’s arguments and ordered the ratification of the arbitral award.

The Court of Appeal

The Respondent filed an appeal and requested that the decision of the First Instance Court to be overruled based on the grounds that the arbitral award is null and void.
Following careful review of the case and both parties’ arguments, the Court of Appeal ruled that the arbitral award is null and void because the Arbitrator failed to observe the adversarial principle (“principe du contradictoire”) which gives the parties the right to present their case fairly. It is established that the Arbitrator has issued the award on 6/1/2012, despite the receipt of the Respondent’s request on 27/12/2011 to be granted time to appoint a lawyer and submit its defense. The Arbitrator’s reasoning to reject the Respondent’s request is baseless and has no legal grounds.  
The fact that the Arbitrator didn’t respect the Respondent’s right in presenting its case is one of the events based on which an arbitral award is annulled - Article 216 of the UAE Civil Procedures Law. The ratification of an arbitral award must be issued for an award which is legally valid and free of any flaws.
The Court of Appeal has overruled the decision of the First Instance Court, rejected the ratification of the arbitral award, and ordered the Claimant to pay all court and legal fees for both degrees. 

NOTE: No appeal has been filed by the Claimant before the Court of Cassation within the legal time limit, hence, the above Court of Appeal judgment became final and subject to no further appeal.