First QFC Court Judgment on Setting Aside Arbitral Awards

B v C [2024] QIC (F) 20

On 5 May 2024, the Qatar International Court and Dispute Resolution Centre issued its first judgment arising from an application to set aside an arbitral award.

The Court rejected the application, but in the process gave helpful guidance on the approach the QFC will take when considering such applications.

Background

Two business partners, B and C, established a company to secure major road projects in Qatar. The partners entered into a shareholders’ agreement containing an arbitration clause stating that any disputes were to be referred to ICC arbitration, with QFC as the seat. The governing law of the contract was Qatari law.

C commenced arbitral proceedings against B in 2020 claiming loss of profits. The final award was rendered in April 2023. The Tribunal ruled that B had breached the Agreement and the company’s articles of association, finding B liable to C for loss of profits amounting to QAR24m (USD6.7m).

Application to Set Aside

In December 2023, B made an application to set aside the award under Article 41 of the QFC Arbitration Regulations 2005 on the basis that it was not in the ‘interests’ of the QFC and/or the State of Qatar. In the alternative, B submitted that the Award be set aside on grounds that neither party was registered in the QFC.  

In particular, B advanced four grounds for setting aside the Award:

1. First, B submitted that the Tribunal had failed to give effect to mandatory provisions of Qatari law from which the parties could not derogate.
2. Second, B submitted that no adequate reason, or any reason, had been given by the Tribunal for finding the Respondent’s primary witness of fact to be a reliable witness.
3. Third, B submitted that the Tribunal should not have ordered payment of pre and post-award interest as the governing law of the Agreement (Qatari Law) prohibited the award of interest as a matter of public order.
4. Fourth, B submitted that the arbitration had not been conducted in accordance with the agreement of the parties. The parties had agreed to arbitrate in accordance with the rules of the ICC (the ICC Rules), with the Regulations serving as the curial law of the arbitration. In accordance with Article 32(2) of the ICC Rules and Article 37(2) of the Regulations, the parties had agreed that the award should state the reasons upon which it was based. Contrary to both of these provisions, the Tribunal did not provide any or any adequate reasons for finding the Respondent’s primary witness to be reliable, and for preferring his evidence over that of B’s witness, despite having accredited them both with the same qualities.

The Decision

The Court began by considering the legal framework applicable to the application together with the correct interpretation of Article 41. Specifically, the reference to an award being set aside only if it was in the “interest of the QFC”.

The Court found that the appropriate starting point was that arbitration is a consensual process ending in a determination by a Tribunal “that is final with very limited and specific grounds of challenge”. The Court noted that such an approach was mirrored by Article 35(6) of the ICC Rules which states that (a) every award is binding; (b) by submitting their disputes to arbitration under the ICC Rules, parties are undertaking to carry out any award without delay; and (c) parties shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.

The Court also noted that there was no material difference between “interest of the QFC” (the language used in Article 41 of the Regulations) and “public policy [of the QFC]” (the language used in Article 34 of the UNCITRAL Model Law on International Commercial Arbitration, upon which Article 41 is based): “the intention is to preclude enforcement of awards that engage the interest of the QFC, and this interest is the same as public policy”. The Court went on to say that whilst the Regulations do make a distinction between the QFC and the State of Qatar, that distinction does not have any practical effect given it is difficult to think of a case where the interest of the QFC and that of the State of Qatar are not aligned.

The Court also stated that judicial intervention is only warranted in circumstances where the party seeking to challenge an award will suffer serious prejudice if the award is upheld. This is consistent with the policy of minimal curial intervention.

B’s application was ultimately dismissed by the Court, with the Court making the following comments on each of the grounds relied upon by B:

1. Ground 1
   
   The substance of what B was seeking to say was wrong on the law and the facts. A detailed analysis of Qatari company law was not a valid ground of challenge under the Regulations.
2. Grounds 2 and 4
   
   The Court rejected both of these grounds for similar reasons stating that they were factually misconceived and did not give rise to grounds of complaint under Article 41 of the Arbitration Regulations. Insofar as ground 2 was concerned, the assessment of evidence was a matter for the Tribunal, and not the Court, a point well established in international arbitration. Insofar as ground 4 was concerned, it was not for the Court to review or second guess procedural decisions taken by the Tribunal, including but not limited to asking questions about how a Tribunal goes about drafting an award.
3. Ground 3
   
   B had failed to establish that the Award was contrary to public policy, either of the QFC or the State of Qatar. Interest was recoverable under both QFC law and Qatari law.

In its concluding comments, the Court noted that when choosing the forum for any dispute, parties have autonomy in their decision making. A corollary of that autonomy is acceptance of the risk that the Tribunal might come to a decision that could be wrong in fact and/or law. In addition, the Court highlighted that the Arbitration Regulations provide narrowly defined grounds for judicial intervention, reflecting a pro-enforcement policy towards arbitration awards.

Conclusion

This case upholds the integrity of arbitration and arbitral awards in the QFC, and highlights the narrow circumstances in which the QFC Courts may uphold challenges to arbitration awards. 

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