ADGM Court Accepts Supervisory Jurisdiction Over Onshore Abu Dhabi Arbitration (A6 v. B6)
Freshfields Bruckhaus Deringer LLP has secured a victory for its client in a precedent-setting judgment issued by the Abu Dhabi Global Market (“ADGM”) courts. In A6 v. B6, the ADGM Court of First Instance (“CFI”) accepted jurisdiction over an application to set aside an arbitral award rendered in ICC proceedings seated in onshore Abu Dhabi.1 The decision, which was handed down on 13 March 2023, is an important response to the potential lacuna that may arise if the onshore Abu Dhabi courts relinquish their jurisdiction over annulment (or ratification) applications regarding proceedings seated in onshore Abu Dhabi.
The risk of a jurisdictional mix-up between the courts of onshore and offshore Abu Dhabi has come to the fore in recent months following at least two cases where the onshore Abu Dhabi courts declined jurisdiction over set-aside applications (despite the underlying arbitrations being seated in onshore Abu Dhabi) simply because the proceedings were subject to the Arbitration Rules of the International Chamber of Commerce (“ICC”) which has a representative and overseas case management office in the ADGM.
A dispute arose between the main contractor and its subcontractor in relation to the execution of works on an integrated gas pipeline project in Abu Dhabi. The subcontract provided for the resolution of disputes by arbitration in “Abu Dhabi City (U.A.E.)” in accordance with the ICC Arbitration Rules, as follows:
The Arbitration shall be conducted in Abu Dhabi City (U.A.E.) in accordance with the Rules of International Chamber of Commerce (ICC Rules) in force at the time of the claim, controversy, or dispute.
In 2019, the subcontractor (the “Claimant”) commenced an arbitration and, in 2022, a majority of the arbitral tribunal rejected most of its claims and ordered the main contractor (the “Defendant”) to pay a small fraction of the claim to the Claimant (the “Award”).
The Claimant filed an application for setting aside in the onshore Abu Dhabi courts in accordance with the UAE Federal Law No. 6 of 2018 on Arbitration (the “Federal Arbitration Law”).
On 6 July 2022, the Abu Dhabi Court of Appeal decided, on its own motion, that (i) it lacked jurisdiction over the Claimant’s application for setting aside, and (ii) jurisdiction rested exclusively with the ADGM courts (the “CoA Judgment”):
Since the arbitral body that issued the award [...] is the International Chamber of Commerce – International Court of Arbitration, which has its headquarters in the Abu Dhabi Global Market, and which is considered one of the local courts of the Emirate of Abu Dhabi as explained above, therefore it alone, and to the exclusion of other courts, possesses jurisdiction to decide the present annulment application, because this is an exclusive jurisdiction by law. Accordingly, the Abu Dhabi Court of Appeal lacks jurisdiction, which rests with the courts of the Abu Dhabi Global Market.2
The Claimant appealed to the Abu Dhabi Court of Cassation which upheld the CoA Judgment on 19 September 2022 for the following reasons (the “CoC Judgment”):3
- the arbitration agreement provided for the resolution of disputes in accordance with the ICC Arbitration Rules;
- the ICC opened its fifth representative office in the ADGM before the Award was issued;
- the ICC representative office is an “establishment” of the ADGM in accordance with Article 1 of Abu Dhabi Law No. 4 of 2013, as amended by Abu Dhabi Law No. 12 of 2020 (the “ADGM Founding Law”);
- the ICC representative office became the “place of arbitration”, which in turn is subject to ADGM law;
- therefore, the ADGM courts have exclusive jurisdiction over any application for setting aside arising from that arbitration.
The CoC Judgment was surprising especially because the seat of arbitration was not contested during the arbitration and was understood by all concerned parties to be onshore Abu Dhabi.
The Claimant filed a Petition for Reconsideration, an exceptional form of appeal under the Federal Civil Procedure Code, with the Abu Dhabi Court of Cassation, which was also dismissed.
Proceedings in the ADGM Courts
On 13 October 2022, the Claimant brought proceedings before the ADGM CFI seeking, among other things, to set aside the Award (the “Application”). The Application relied on the analysis of the onshore Abu Dhabi courts as a basis for the jurisdiction of the ADGM courts and invoked the ADGM Arbitration Regulations 2015.
The Defendant, who was represented by Freshfields, voluntarily submitted to the jurisdiction of the ADGM courts relying on the 2020 amendment to the ADGM Founding Law4 that allows parties to “opt in” to the jurisdiction of the ADGM through their express written agreement without any prior nexus to the ADGM.5 Although the ADGM courts lacked jurisdiction in principle over the Application, the Defendant submitted to the jurisdiction of the ADGM courts to reach a final resolution of the matter on the merits.
To accept jurisdiction over the case, the ADGM CFI had to address two central questions:
- whether, through the mutual consent of the Parties after the Award had been rendered, the ADGM courts could exercise curial functions over an arbitration seated in onshore Abu Dhabi; and
- if the answer to the first question was yes, whether the Application should be governed by the Federal Arbitration Law or the ADGM Arbitration Regulations 2015.
In answering these questions, the Defendant argued that the special circumstances of the case as well as certain policy considerations created a “narrow exception” that allowed the ADGM courts to assume jurisdiction and decide the Application on the merits. The Defendant clarified that, for the avoidance of doubt, it did not suggest that the ADGM was the proper seat of every ICC arbitration conducted in the Emirate of Abu Dhabi.
While the Parties agreed that the ADGM CFI had jurisdiction following the Parties’ decision to “opt in”, they disagreed over the applicable procedural law. The Claimant insisted that the ADGM Arbitration Regulations 2015 applied whereas the Defendant’s view was that the Federal Arbitration Law applied because it was the arbitration law of the seat.6 The Defendant further explained that (i) unless agreed otherwise, Part 3 (Arbitration) of the ADGM Arbitration Regulations 2015 only applied to ADGM-seated arbitrations,7 (ii) here, it was not disputed that the arbitral seat was onshore Abu Dhabi, (iii) the Parties’ mutual agreement to submit to the jurisdiction of the ADGM courts did not alter their original choice of seat, and (iv) ADGM law did not prohibit the application of a foreign procedural law.
In addition to these difficult questions on jurisdiction and procedural law, the case involved other complex questions concerning limitation periods, advance waiver of the right to seek to set aside the Award and choice of law.
Decision of the ADGM CFI
The ADGM CFI accepted jurisdiction over the Application based on the Parties’ express agreement to submit to the jurisdiction of the ADGM courts, which was in the form of written submissions exchanged during the proceedings and confirmed through counsel. The ADGM CFI considered that such mutual written consent satisfied one of the jurisdictional gateways under Article 13(8) of the ADGM Founding Law, which reads as follows:8
The Global Market’s Courts may hear and adjudicate any civil or commercial claim or dispute where the parties agree in writing to file such claim or dispute with them whether before or after the claim or dispute arises.
The ADGM CFI also noted that it did not need to consider whether other jurisdictional gateways were satisfied.
As for the applicable procedural law, the ADGM CFI accepted the Defendant’s argument that the Application should be decided under the Federal Arbitration Law. The court noted that recourse to the ADGM Arbitration Regulations 2015 was not applicable in this case because the arbitration in question was seated in onshore Abu Dhabi.
The ADGM CFI also accepted the Defendant’s arguments on the merits and dismissed the Application. The ADGM CFI observed that:
It is well established that courts faced with applications to set aside arbitral awards are loath to trespass upon the duly constituted tribunal’s assessment of the case before it except in instances in which egregious and particularly obvious errors have occurred which clearly can be seen to impact upon the intrinsic fairness and veracity of the arbitral process. This basic principle underpins both legislative provision and the substance of judicial pronouncement, and on this point there is a substantial correlation of view between different jurisdictions.9
Finally, the ADGM CFI held that the Defendant was entitled to recover its costs of and occasioned by the Application in accordance with the principle that costs follow the event.
Significance of this Judgment
This judgment is important for several reasons. It is the first instance where an ADGM court has assumed supervisory jurisdiction over an arbitration seated in onshore Abu Dhabi. Although the onshore and offshore Abu Dhabi courts are “courts of the Emirate [of Abu Dhabi]”,10 they technically belong to separate jurisdictions.
The ADGM CFI’s judgment in A6 v. B6 is commendable for providing a solution to what could have been a judicial limbo for the Parties. Without the intervention of the CFI, the Parties could have been left with a negative conflict of jurisdiction. The fate of the dispute in those circumstances would have been uncertain because (i) there is no judicial tribunal in Abu Dhabi (similar to the Joint Judicial Committee in Dubai) in charge of resolving conflicts of jurisdiction between its onshore and offshore courts; (ii) it is unclear whether the Abu Dhabi Court of Cassation would have stepped in to resolve such a negative conflict of jurisdiction between the onshore and offshore courts of Abu Dhabi; and (iii) the UAE Federal Supreme Court has recently lost its statutory power to resolve conflicts of jurisdiction between “judicial authorities in one Emirate”.11
The CFI judgment also provides some guidance for similar cases in the future. As much as it is unusual, this is not the only case in which the onshore Abu Dhabi courts have rejected jurisdiction over an application to set aside an award made in onshore Abu Dhabi. For example, the Abu Dhabi Court of Cassation has reached the same result in a more recent decision on 18 January 2023.12
The decision in A6 v. B6 goes some way in providing comfort to parties to ICC arbitrations seated in onshore Abu Dhabi. In doing so, it protects the pro-arbitration policy of the UAE and promotes its status as an arbitration hub.
However, unless the onshore Abu Dhabi courts revisit the approach of referring onshore ICC arbitrations to the ADGM, uncertainty will remain.
2Abu Dhabi Court of Appeal, Case No. 6 of 2022 (Annulment of Arbitral Award), 6 July 2022.
3Abu Dhabi Court of Cassation, Petition No. 635 of 2022 (Commercial), 19 September 2022.
4Law No. 12 of 2020 Amending Some of the Provisions of Law No. 4 of 2013 Concerning the Abu Dhabi Global Market.
5This is a unique jurisdictional gateway provided under Article 13(8) of the ADGM Founding Law (Abu Dhabi Law No. 4 of 2013 as amended by Abu Dhabi Law No. 12 of 2020) and Section 16 of the ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015 (the “ADGM Court Regulations”) (as amended by ADGM Courts Regulations Amendment No. 1 of 2020), and which does not require any nexus to the ADGM.
6The Defendant also argued that the Federal Arbitration Law was the default procedural law governing arbitrations conducted in the UAE unless the parties had agreed a different procedural law, or the arbitration was seated in one of the UAE financial free zones.
7ADGM Arbitration Regulations 2015 (as amended by Amendment No. 1 of 2020), Section 8.
8ADGM Founding Law (Abu Dhabi Law No. 4 of 2013, as amended by Abu Dhabi Law No. 12 of 2020), Article 13(8).
9A6 v. B6  ADGMCFI 0005, Judgment of Justice William Stone SBS KC, 13 March 2023, para 32.
10ADGM Founding Law (Abu Dhabi Law No. 4 of 2013, as amended by Abu Dhabi Law No. 12 of 2020), Article 13(1).
11Article 33(10) of Federal Law No. 10 of 1973 on the Federal Supreme Court (repealed) provided that: “The Supreme Court only shall have the jurisdiction to adjudicate the following matters: [...] conflicts of jurisdiction between a judicial authority in an Emirate and a judicial authority in another Emirate, or between judicial authorities in one Emirate”. This Article has been replaced by new provisions under Federal Decree Law No. 33 of 2022 on the Federal Supreme Court which no longer empower the Federal Supreme Court to resolve conflicts of jurisdiction between judicial bodies within the same Emirate. Instead, the new provisions only allow the Federal Supreme Court to resolve conflicts of jurisdiction between the federal judiciary and local judicial authorities in the Emirates (Article 4(10)), or between a judicial body in an Emirate and a judicial body in another Emirate (Article 4(11)).
12Abu Dhabi Court of Cassation, Petition No. 1045 of 2022 (Commercial), 18 January 2023.