Dubai Court of Cassation dismisses claim for damages made against arbitral tribunal

Dubai’s Court of Cassation dismisses Meydan Group’s claim against Doug Jones, Humphrey Lloyd QC and Stephen Furst QC who were acting as arbitrators in a dispute between Meydan Group and WCT Holding.

The United Arab Emirates (UAE), and Dubai in particular, is fast building a reputation as a preferred seat for international arbitration. It is, however, crucial in attracting users that the UAE courts are seen to be supportive of arbitration. The absence of UAE legislation granting immunity to arbitrators has recently created uncertainty for both arbitrators and parties engaged in arbitration in the UAE following two recent cases in which a party to Dubai International Arbitration Centre ("DIAC") arbitration proceedings brought proceedings in the UAE courts seeking damages against the sole arbitrator in one case and tribunal in the other.

This latest case was brought by Meydan Group against the arbitral tribunal. This case was concluded in December 2015 and is summarised below.

Meydan Group V WCT Holding

In September 2007, WCT Holding (“WCT”) was awarded the contract to build the Nad Al ASheba racecourse. However, on 25 December 2008, Meydan Group (“Meydan”) issued a notice cancelling the contract. In response, WCT initiated arbitration proceedings in the DIAC against Meydan and claimed amounts owed for work done, repayment of the performance bond, loss of profit, damages and interest on those sums.

Following the Request for Arbitration, the arbitral tribunal was constituted, comprising Doug Jones, Humphrey Lloyd QC and Stephen Furst QC. In April 2010, midway through the arbitration, Meydan and WCT made a joint application seeking to stay the arbitration proceedings so that confidential settlement negotiations could take place. The tribunal approved the application and made an order staying the proceedings and confirming that the substance of the negotiations would not be brought before the tribunal. However, after the stay and following the settlement negotiations, the tribunal issued a second order stating that it had jurisdiction to review the record of the confidential negotiations in order to establish if an agreement/settlement had been reached.

Meydan believed that the two orders contradicted each other and claimed that the tribunal had, by ordering that they would review the record of the confidential settlement negotiations, breached its earlier order stating that the settlement negotiations were confidential. Meydan therefore initiated proceedings in the UAE national courts against the tribunal claiming USD16.3 million in damages.

After issuing the claim in the UAE national courts against the tribunal, Meydan applied to DIAC requesting that the tribunal be disqualified on the grounds that the tribunal members were no longer independent and impartial. However, Meydan’s application was unsuccessful and the tribunal continued to act in the arbitration.

In January 2015, Dubai’s court of first instance dismissed Meydan’s claim against the tribunal. In response, Meydan appealed to Dubai’s appeal court and in June 2015 the appeal court dismissed Meydan’s claim. Undeterred, Meydan proceeded to Dubai’s court of cassation.

In the interim, in September 2015 the tribunal issued an award in the arbitration proceedings in favour of WCT and ordered Meydan to pay WCT USD313 million in damages. WCT are now seeking to enforce the award against Meydan.

Following this, in December 2015, Dubai’s Court of Cassation dismissed Meydan’s claim for damages against the tribunal.

Meydan’s previous claim against an arbitrator

The previous case against a sole arbitrator was also brought by Meydan. In 2014, Meydan brought proceedings against Alexis Mourre who was acting as sole arbitrator in a DIAC arbitration. DIAC had extended the parties’ agreed time schedule several times. Meydan considered this to be a breach of the Arabic version of DIAC’s rules and so issued proceedings against Alexis Mourre for USD191,000 for delaying in issuing the arbitral award. As in the case against WCT, Dubai’s Court of Cassation dismissed Meydan’s claim against Mr Mourre and stated that arbitrators will only be held responsible for “major errors”. The court described ‘major errors’ as “a failure to follow up clear legal principles [...] with clear facts”.

Impact of the decision

This latest decision is welcome and will no doubt provide further comfort to practitioners that the UAE courts are indeed increasingly pro-arbitration. However, the risk remains that in the UAE a party who feels that an arbitrator has caused it loss is free to seek to recover this loss directly from the arbitrator in the UAE national courts. This can only harm Dubai’s reputation as a centre for international dispute resolution and the selection of Dubai as a seat of arbitration in international contracts. Parties considering arbitration will be looking to ensure that their arbitrations are seated in jurisdictions in which satellite disputes are unlikely. Therefore, in order for Dubai to remain competitive it may need to address the issue of arbitrator immunity.

For further information, please contact Caroline Kehoe, Partner, Robert Stephen, Senior Associate, Michael Hartley, Associate or your usual Herbert Smith Freehills contact.