Abu Dhabi Global Market Court accepts jurisdiction over arbitration seated onshore

ADGM Court A6 v B6 case

The courts of the United Arab Emirates have, for several years, developed bodies of jurisprudence governing the relationships between the financial free zone courts and the “onshore” courts of the Emirates of Dubai and Abu Dhabi.

The free zone courts are those of the Dubai International Financial Centre (“DIFC”) and the Abu Dhabi Global Market (“ADGM”), whose courts operate in the English language and apply, in a civil and commercial context, a form of common law and English law respectively, in distinction to the onshore courts which conduct proceedings largely (but not solely) in Arabic and operate in a civil law environment.

A recent case of the ADGM Courts develops further the jurisprudential comity of the UAE’s national courts.

In A6 v B6 [2023] ADGM CFI 0005 (13 March 2023), Justice William Stone SBS KC heard an application by an award-creditor to set aside an arbitral award (the “Award”) issued in an arbitration between the parties (the “Arbitration”) conducted under the rules of the International Chamber of Commerce (“ICC”).

The underlying contract provided that any arbitration was to be “conducted in Abu Dhabi City (U.A.E.) in accordance with [the ICC Rules] in force at the time of the claim, controversy or dispute”, and that the contract was to be “governed and construed in accordance with the laws of the Emirate of Abu Dhabi and the federal laws of the U.A.E.”.

In the Award, the tribunal awarded A6 over USD2m plus interest, considerably less than the sums A6 had claimed in the Arbitration. Disappointed, A6 sought to have the award set aside.

Proceedings in the Abu Dhabi Courts

A6 initially applied to set aside the Award in the onshore Abu Dhabi Courts. The Abu Dhabi Court of Appeal rejected the application, holding that it had no jurisdiction since the ICC branch office that administered the arbitration is located within the ADGM, meaning (in their view) that the appropriate jurisdiction to hear the application was the ADGM Courts.

A6 appealed to the Abu Dhabi Court of Cassation. The Abu Dhabi Court of Cassation had, in an earlier case (Abu Dhabi Court of Cassation, Petition No. 635 of 2022 (Commercial), 19 September 2022), found that the ADGM was the correct seat of an arbitration administered under ICC Rules and agreed to be “conducted in Abu Dhabi City (U.A.E.)”. In the present case (Abu Dhabi Court of Cassation, Case No. 1045 of 2022, 18 January 2023), it proceeded to find again that the ADGM Courts had the exclusive jurisdiction to hear any application to set aside an award issued under the supervision of the ICC. This was because:

• The parties had agreed that the ICC Arbitration Rules were to apply to the Arbitration.
• The ICC had opened a representative office in the ADGM (the “ICC Office”) prior to the rendering of the Award.
• The ICC Office was an “establishment” under the ADGM Founding Law (Abu Dhabi Law No. 12 of 2020) which establishes the ADGM Courts’ jurisdiction.
• The ICC Office was the “place of arbitration” and was (by its territory) subject to the ADGM Arbitration Regulations 2015.

A6 filed a subsequent petition for reconsideration at the Abu Dhabi Court of Cassation but this was also dismissed.

Proceedings in the ADGM Courts

Both parties agreed that, exceptionally, the ADGM Courts should hear the application despite the seat of the arbitration being onshore Abu Dhabi. Article 13(8) of the ADGM Founding Law permits parties to refer their disputes to the ADGM Courts notwithstanding a lack of connection to the ADGM.

After finding that the ADGM Courts had jurisdiction due to the parties’ consent, the ADGM Court determined that the appropriate law governing the arbitral process and the award was the UAE Federal Arbitration Law (No.6 of 2018) and not the ADGM Arbitration Regulations 2015.

The Court considered the various criticisms of the Award made by A6 (which included issues of public policy and procedural unfairness) but concluded that the application to set aside the Award must fail. In doing so the Judge noted both English (directly persuasive in the ADGM) and UAE authorities establishing a high threshold for when courts would interfere with an arbitral award, a threshold that had not been met in this case.

In any event, the Court concluded that the relief sought by A6 was not available under the Federal Arbitration Law. A6 was “cherry picking” in that it wanted to reopen parts of the Award and not others, the Judge saying that “in principle either the Award is set aside or it is not, and there can be no question of any ‘halfway house’ such as now is canvassed by A6”. B6 was awarded its costs of the Application.

Analysis

The respondent B6 was recorded as noting the “unusual” circumstances of the case, and we agree, with the caveat that the Abu Dhabi Court of Cassation has now twice directed parties to ICC arbitrations to the ADGM Courts despite the seat being onshore Abu Dhabi (in the Court of Cassation judgments identified above). Whilst UAE Court of Cassation judgments are not strictly binding in future cassation appeals, there appears to be an interpretive trend, which the A6 v B6 judgment will only serve to reinforce.

The Abu Dhabi Court of Cassation’s reliance on the location of the ICC Office as a factor when considering its own jurisdiction, and its statement that the ICC Office is a ‘seat’ of arbitration, is unconventional: not only is it contrary to the general approach that the location of any arbitral institution involved is irrelevant to the question of which national courts have oversight of an arbitration, but in this case the ICC Office had opened during the course of the Arbitration. The parties could not have intended at the time they formed the underlying agreement to arbitrate that the seat of arbitration should be determined by reference to the ICC Office’s location.

Had the parties not agreed that the ADGM Courts had jurisdiction to hear the Application, the ADGM Courts would have been faced with deciding on their jurisdiction in circumstances where there was no factual connection to the ADGM and no opt-in agreement, but where A6 would apparently have no other court to turn to, given the Abu Dhabi Courts rejection of jurisdiction. Furthermore the UAE Federal Supreme Court recently lost its statutory power to resolve conflicts of jurisdiction between “judicial authorities in one Emirate”, so that court would be unable to assist, leaving the prospect of A6 being unable to seek assistance from the national courts of the UAE.

Justice Stone recognised the ADGM Court’s “initial hesitation to jurisdiction” in circumstances where the seat of the Arbitration was agreed by the parties to be onshore Abu Dhabi, i.e. outside of the ADGM. He recorded B6’s arguments that “for the avoidance of doubt it is not suggested that ADGM is the proper seat of any ICC arbitration conducted in the Emirate of Abu Dhabi, but that in the “exceptional circumstances” of [the Application], and in light of the written consent of both parties to submit to the jurisdiction, there exists a “narrow exception” for ADGM Courts to assume jurisdiction and to decide the present application on its merits”.

Conclusion

This case highlights a risk that parties with ICC arbitrations seated in onshore Abu Dhabi may find themselves litigating in the ADGM Courts.

If there is an arbitration ongoing it would be sensible for the parties to now agree to either explicitly opt-in to the ADGM jurisdiction, or to more clearly state their preference that the Abu Dhabi onshore courts be the supervisory court and the Federal Arbitration Law be the applicable law governing the arbitration.