Exception: No appeal for Court’s decision appointing arbitrator

Arbitration, described by many legal professionals as a “speedy” means of dispute resolution, has gradually evolved, becoming the most favorable recourse to adopt when seeking reconciliation, especially within the framework of international trade contracts.

Arbitration, which emerged as a distinguished type of “judicial settlement” of disputes, managed to dodge the complexities and obstacles of National Courts parties face, as well as the demanding procedures and lengthy time-frames. However, such a clear advantage of arbitration did not succeed in overcoming the challenges of the arbitration process as a whole, some of which directly related to the appointment of arbitrators. It is well-known that in “ad-hoc arbitration”, proceedings are administered by the parties who make their own arrangements for the selection of arbitrators, unlike in “institutional arbitration”, where a specialized institution intervenes and takes on the role of managing the arbitration process.

These obstacles, which impede setting the arbitration process in motion, stem from the personality or nature of the parties who agreed to refer to arbitration to solve their contractual disputes. In fact, the parties may fail, intentionally or unintentionally, to appoint one or more arbitrators. This is true in “ad-hoc arbitration” since, in “institutional arbitration”, the specialized institution undertakes the selection of arbitrators without any contribution from the parties.

Hence, when parties fail to appoint the required arbitrators, the Courts intervene to put the process back on track. The Courts become competent, upon the request of one of the parties, to appoint one or all arbitrators to form the arbitral tribunal. The Courts earned this power from the Civil Procedures Code (CPC), promulgated by Federal Law no. 11 of 1992, which regulates arbitration in the UAE.

Article 204, from Book III of the CPC, reads:

1- If a dispute arises between the parties before they agree on the arbitrators who are to be appointed, or if one or more of the nominated arbitrators refuses to act as such, withdraws, is dismissed, has his appointment revoked, or is prevented from acting due to an encumbrance, and no agreement exists between the parties in this respect, the court which has jurisdiction to consider the dispute shall appoint the necessary number of arbitrators at the request of one of the parties according to the normal procedure for filing a suit. The number of arbitrators appointed by the court shall be equal, or complementary, to the number agreed between the parties to the dispute.

2- The judgment delivered in respect of the foregoing may not be challenged by any means of appeal”.

So, in principle, parties are required to appoint their arbitrators. If they fail to do so, regardless of the reason behind this failure, the competent Court (which would have ruled on the dispute referred to ordinary courts for resolution) will intervene and appoint all or some of the arbitrators. Parties cannot appeal the Court’s appointment decision.

Dubai Court of Cassation, Appeal no. 167/2002, session of June 2nd, 2002:

“The court may interfere to form the arbitration panel, as per the provision of the first paragraph of Article 204 of the Civil Procedures Law, only in the cases stipulated in that provision which include the case where the litigants do not reach an agreement concerning the arbitrators, at the request of one of the parties and according to the normal procedure for filing a suit if the court has the jurisdiction to consider the dispute relating to the arbitration clause”.

Dubai Court of Cassation, Appeal no. 131/2009, session June 14th, 2009”

“Article 204 (1) of the Civil Procedures Law stipulates that if a dispute arises between the parties prior to the execution of an agreement between them to refer the same to arbitration and no agreement exists between the parties in this respect, the court which has jurisdiction to consider the dispute shall appoint the necessary number of arbitrators at the request of one of the parties according to the normal procedure for filing a suit”.

What if, for some reason, the parties needed to challenge the appointed arbitrator?

By virtue of the 2nd paragraph of article 204, it is clearly mentioned that parties cannot appeal the court’s appointment decision. Hence, it was an exception to the rule that all decisions of the Courts are subject to appeal.

This exception was further confirmed by judgments from the Dubai Cassation Courts, which explained that what was actually meant by “no appeal” in paragraph 2 of the above mentioned article is in fact the Court’s appointment decision only. This prohibition does not apply to all other judgments issued by the Court, even those related to the arbitration process.

Dubai Court of Cassation, Appeal no. 136/2007, session of June 19th, 2007:

“It is established as per the ruling of this court that what the legislator has meant by the judgment that may not be appealed, according to the provision of the second paragraph of Article 204 of the Civil Procedures Law, is the judgment that is delivered ordering the appointment or replacement of the necessary arbitrators in the cases stipulated in the first paragraph thereof, and it is deemed to be an exception of the general rules that allow appealing against judgments by means of appeal that are set forth in the law. So, its interpretation must not be elaborated and it should not be considered as a criterion, so that the inability to appeal against that judgment affects the subject of the arbitrator’s appointment or replacement”.

Dubai Court of Cassation, Appeal no. 342/2008, session of March 4th, 2008:

“It is not permissible to appeal against the judgment delivered by the Court of First Instance regarding the appointment of an arbitrator provided that the decision thereof is limited to the appointment of the arbitrator. If the judgment ruled on some primary matters such as the aspects of the pleas and defences that the litigants have raised or overlooked them, it may be appealed in whole. In that case, all the aspects of the pleas and defences that have been raised by the litigants before the Court of First Instance shall be transferred to the Court of Appeal which shall have to rule on them. If the court has ruled on these aspects and decided that they are groundless, it shall have to dismiss the appeal”.

Dubai Court of Cassation, Appeal no. 18/2009, session of April 14th, 2009:

“It is established that the provision of Article 204 of the Civil Procedures Law that is provided for in the Arbitration Chapter concerning the invalidity of appealing against the judgment that is delivered as regards the appointment of arbitrators by any means of appeal only applies to the judgment ordering the appointment of the arbitrators and it is the only judgment that may not be appealed among the judgments delivered by the Court of Appeal which are not related to the appointment of arbitrators. As for the judgments delivered by that court regarding the validity or admissibility of the appeal; they do not fall among the aforementioned exceptions and may be appealed in cassation”.

Yet, this in no way means the Law prohibited the parties from dismissing or replacing an arbitrator in general. In fact, the CPC outlined the specific and required conditions to dismiss or replace an arbitrator from the arbitral tribunal. These conditions were mentioned in article 207 of the CPC, which reads:

“1- The acceptance of the appointment of an arbitrator shall be in writing or may be evidenced by recording the same in the minutes of the sessions.

2- If an arbitrator, after having accepted his appointment, withdraws without good reason, he may be held liable for compensation.

3- No arbitrator may be removed except with the approval of all the parties to the dispute. However, if it is established that the arbitrator has wilfully neglected to act in accordance with the terms of reference, despite serving a written notice on him in this respect, the court which has jurisdiction to consider the dispute may, at the request of one of the parties, dismiss the arbitrator and order a replacement in the same manner as he was originally appointed.

4- An arbitrator may not be disqualified except for reasons occurring or appearing after his appointment. A request for disqualification must be based on the same grounds on which a judge may be dismissed or deemed unfit for passing judgment.

The request for disqualification shall be filed with the court which has jurisdiction to consider the dispute within five days as of notifying the parties of the appointment of the arbitrator or as of the date on which the reason for disqualification arose or as of the time it became known if subsequent to the notification of the appointment of the arbitrator. In all events, the request for disqualification shall not be granted if the court has already passed a judgment or if the hearing of pleadings has been concluded”.

So, what can be concluded from the above?

  1. The Courts’ decision in appointing an arbitrator cannot be subject of an appeal, a clear exception to the rule.
  2. Parties, who wish to challenge the appointment of an arbitrator, need to follow the general principles of dismissing or replacing an arbitrator, as stipulated in article 207 of the CPC.
  3. Following the general principles outlined in article 207, parties have to ensure that either one or more of the following conditions for dismissal or replacement are present:
  • The arbitrator has refused to accept the task delegated by the parties for arbitration.
  • Upon unanimous consent between the parties, an arbitrator may be replaced or dismissed after deliberately failing to act in compliance with the arbitration agreement.
  • Arbitrators may be dismissed in the same way a judge is recused. The conditions are set out in article 114 of the CPC.

In conclusion, even though the Court’s decision to  appoint an arbitrator – in the event  the parties failed to do so themselves – is not subject to an appeal, the parties can rely on the general rules to challenge the presence of an arbitrator, as stipulated in  articles 207 and 114 of the Code of Civil Procedures. However, they should bear in mind that those rules will no longer apply if the arbitral award was issued and the case was closed.

VPN use penalized if misused in UAE

On May 23rd, the UAE President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, issued Federal Law No. 12/2016 whereby it amended Federal Law No. 5/2012 on combatting information technology crimes.

The law has been wrongly reported by UAE media, which suggested that it was now punishable to use VPNs (Virtual Private Networks). This led to a lot of confusion, in the UAE market, about whether the use of VPNs has become illegal in the country, especially after penalizing the use of VoIP telephony (such as Viber, Skype, etc.) without a license (as per the UAE telecommunications law).

Federal Law no. 12 of 2016 amends only article 9 of Federal Law no. 5 of 2012 on combatting information technology crimes. A small comparison between the old and new texts may help clarify the definitive position on whether the use of VPNs is legitimate or not.

Article 9 of Federal Law no. 5 of 2012 (the old text) states: “Any person that circumvents the protocol address of the internet by using a delusive address or an address belonging to third party or by any other means for the purpose of committing a crime or preventing its discovery shall be punished by imprisonment and a fine not less than (AED 150.000) and not exceeding (AED 500.000) or by any of these punishments”. In contrast, the amendment introduced via Federal Law no. 12 of 2016 now reads: “A punishment of temporary imprisonment and a fine of not less than five hundred thousand Dirhams (AED 500,000) and not more than two million Dirhams (AED2,000,000), or either of these two penalties, shall be imposed on whoever uses a fraudulent computer network protocol address by using a false address or a third-party address or by any other means for the purpose of committing a crime or preventing its discovery”.

The primary change is merely an increase in the applicable fines. The legal stance on the use of VPNs has not changed. It is still considered a crime if it is used “fraudulently” or with the aim of “committing or concealing a crime”. Therefore, the use of VPNs, if licensed and for legitimate purposes, does not constitute a punishable crime under the UAE law.

In consequence, the UAE’s official Telecommunications Regulatory Authority (TRA) issued a statement to clarify the ambiguity engulfing the new amendment. It confirmed that the law governing virtual private networks (VPNs) in the country was only targeting illegitimate users.

The question is not whether the use of VPN is illegal or not; it is actually what constitutes a “crime” in information technology. In principle, any misuse of information technology, or use without license, may be considered a crime under UAE technology laws (Telecommunications Law & Combating Cyber Crimes Law). The use of VPNs falls under this same classification.