In a recent case filed before the Dubai International Arbitration Centre (“DIAC“) by our law firm Al Dhaheri International Advocates & Legal Consultants, representing a prominent shipping company (the “Claimant”), we have achieved a significant procedural milestone in the pursuit of outstanding payments under several charterparties/contracts (the “Contracts“) entered by the Claimant and the Respondent (together the “Parties”).
Background of the case
The dispute arises from Contracts between the Parties, covering voyages using the Claimant’s vessels. These Contracts included multiple addendums and voyage extension requests, forming an integral part of the Contracts. Over the span of the Contracts, the Respondent have been exploiting the vessels and the Claimant issued invoices per the agreed payment terms. Notably, the Respondent did not raise any performance issues regarding the vessels during or after their use. However, the Respondent failed to clear outstanding dues. Even after the Claimant issued a notarized legal notice and a letter of claim notifying of intention to institute arbitration case, the Respondent remained silent. The Claimant thus filed a request for arbitration (“RFA“) and statement of claim (“SOC“), demanding that the Respondent settle unpaid dues under the Contracts. Since the Contracts are concluded between same parties for the same scope of service on substantially the same terms, consequently, the Claimant requested the Arbitration Centre to determine all claims in one dispute resolution procedure under the DIAC Rules 2022 (the “DIAC Rules”).
Consolidation of claims
In the RFA and SOC, the Claimant emphasized that all Contracts were between the same parties, for the same scope of services, and on substantially same terms; which undeniably met the criteria outlined in Article 8.2 of the DIAC Rules viz. “…or it is satisfied on a prima facie basis that (a) all claims in the arbitrations are made under the same agreement to arbitrate; or (b) the arbitrations involve the same parties, the agreements to arbitrate are compatible, and (i) the disputes arise out of the same legal relationship(s); or (ii) the underlying contracts consist of a principal contract and its ancillary contract(s); or (iii) the claims arise out of the same transaction or series of related transactions.”
The word “or” means there are choices. Precisely, all elements forecited need not be strictly present for consolidation of multiple contracts rather having one or more of them will suffice. If all elements need to be strictly present, the drafters of the DIAC Rules would have inserted the word “and” instead of the word “or”.
The Claimant has rightly elucidated every facet concerning the compatibility of the Contracts and the absolute appropriateness of jointly reviewing said Contracts; and the Arbitration Court has rightly grasped the essence and spirit of the Claimant’s request for Contracts consolidation. The Arbitration Court has proceeded with arbitration having prima facie satisfied that an agreement to arbitrate existed under the DIAC Rules, and the requirements of Article 8.2 have been met; and therefore, the Arbitration Court decided that the claims arising from the Contracts shall be consolidated into a single arbitration.
Delay tactics
Despite being afforded abundant time to contest the Claimant’s application for the consolidation of Contracts, the Respondent languished in silence, neglecting to respond to it within the designated timeframe. With a belated awakening, the jurisdictional objection (“JO”) was raised stating that, “as it presently stands, there cannot have been any valid consolidation pursuant to the DIAC Rules because there is only one set of arbitration proceedings. As such, there has been nothing capable of being consolidated.” This objection was based on an outdated interpretation of the DIAC Rules of 2007, which did not provide for claim consolidation. Respondent’s request to resolve the JO by a preliminary award was potentially to prolong the arbitration case timeline, as either party may seek to challenge the preliminary award and consequently halt the arbitration proceedings. The Respondent’s actions thus exhibited bad faith.
Respondent’s jurisdictional objection
The Claimant’s steadfast stance is that its choice of DIAC stands as an undisputable choice, well-grounded, firmly rooted on the Parties’ contractual agreement, and is logically sound. Conversely, the Respondent’s JO was built solely upon the alleged ambiguousness of the wording in the Contracts referring disputes to arbitration in the Dubai Arbitration Centre and the DIFC; and stands unsubstantiated, groundless, flawed, and only to obstruct the swift resolution of the arbitration case. Respondent, in general, contented that the Parties agreed to refer disputes to ad hoc arbitration seated in the DIFC.
Claimant asserted that the “place of settlement” in all Contracts that the Respondent raise JO is DIFC, UAE. This indicates that the Parties opted for two different institutions, one located in Dubai, namely the Dubai Arbitration Centre (Contracts No. 1, 2, 3, and 4), and the other situated in the DIFC (Contract No. 5). Precisely, pursuant to the dispute resolution clause of the Contracts, the institution for dispute resolution were as follows:
Contract 1: Dubai Arbitration Center.
Contract 2: DIAC.
Contract 3: Dubai Arbitration Centre.
Contract 4: Dubai Arbitration Centre.
Contract 5: Dubai International Financial Center (“DIFC”).
In accordance with Article 4 of the Dubai Decree No. 34 of 2021 concerning the DIAC (“Decree No.34”), the Emirates Maritime Arbitration Centre and the DIFC Arbitration Institute (“DIFCAI”) were abolished (the “Abolished Arbitration Centres”), with DIAC assuming responsibility in considering and determining all disputes arising out of the said agreements. Article 6 of the Decree No.34 provides that all agreements to resort to arbitration at the Abolished Arbitration Centres, concluded by the effective date of the Decree No.34, shall be deemed valid. The DIAC will replace the Abolished Arbitration Centres in considering and determining all disputes arising out of the said agreements unless otherwise agreed by the parties thereto.
Defining common intention to the applicable procedural rules
The principle that the “Rules” refers to the procedural rules governing the arbitration process. It is noteworthy that the DIFC – London Court of International Arbitration (“DIFC-LCIA”) Rules were prevalent while the Contracts were entered into between the Parties. However, with the promulgation of Decree No.34 such Rules along with DIFCAI have been abolished; and DIAC Rules have assumed jurisdiction over the procedural aspects of arbitration for all contracts having DIFC as seat of arbitration. Therefore, the Contracts shall be construed as resorting
to arbitration at DIAC, under the DIAC Rules, with the place of arbitration be DIFC, Dubai, UAE.
Respondent’s allegation, interpreting the arbitration agreements as referring disputes to ad hoc arbitration would render arbitration agreements (as well as the entire Contracts) ineffective and unenforceable. Therefore, the Claimant’s position was that the Parties referred their disputes to institutional arbitration and never intended ad hoc proceedings. Such position is supported by the plain direct wording of the Contracts, and taking any word away would amount to a neglection of the Parties’ true intention. Respondent further contented that “the choice of the seat for an arbitration is irrelevant to the interpretation of the Parties choice of arbitral centre (if any).” In this regard, Article 20.1 of the DIAC Rules comes into play by offering a broader spectrum for the arbitration agreements concluded between parties, specifying the place of arbitration as either mainland Dubai or the financial free zone, DIFC. In cases of arbitration in Dubai where no seat or location/venue is specified, the initial seat of the arbitration defaults to DIFC. This entails that the procedural law governing the arbitration becomes DIFC Arbitration Law No. 1 of 2008, as amended by DIFC Law No. 1 of 2013. However, the Rules governing the arbitration proceedings shall remain DIAC Rules.
Tribunal to interpret the Contracts
It is agreed that the wording of the Contracts is deficient. In order to give them efficacy, the Tribunal is reasonably required to interpret the Contracts and delineate the procedures selected by Parties for the resolution of their disputes. The Claimant has provided case law to establish the principle that “missing to name an arbitral institution by its full title does not affect the overall validity of an arbitration clause as long as the parties’ intention to arbitrate in a particular institution is ascertainable from other factors.”
In Aston Martin Mena Ltd v Aston Martin Lagonda Ltd [2023] EWHC 3285 (Comm), the Court relies upon the judgment of Lord Hodge JSC in Wood v Capita Insurance Services Limited [2017] UKSC 24 in the matter of contractual interpretation, reaffirming that: “The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality, and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning…” The Claimant thus raised the point that the purpose and intention of the Parties should prevail over any other requirements as to formal or standard wordings of arbitration clause usually expected to be there.
Arbitral institution selected by Parties
The initial and most straightforward reading of the arbitration agreements prompts the understanding that the Parties selected two institutions, one of which with location in Dubai: the Dubai Arbitration Centre, which can be safely pronounced as an Arbitration Centre of Dubai (Contracts No. 1, 2, 3 and 4), and the other one with the location in the DIFC (Contract No.5). The reason why Parties opted for the Rules of the institution by locality rather than by an exact name may be found in the wording of the concerned subclause 34(c) of BIMCO terms: “This Contract shall be governed by and construed in accordance with the laws of the place mutually agreed by the Parties and any dispute arising out of or in connection with this Contract shall be referred to arbitration at a mutually agreed place, subject to the procedures applicable there.”
The forecited BIMCO Terms 2005 were incorporated by Parties as general conditions applying to all Contracts. The subclause’s language enlightens about the choice of words used by the Parties, who literally replicated guidelines of clause 34(c) of general conditions saying that: “…(Place of settlement) any dispute arising out in connection with this CPA shall be settled at Dubai Arbitration Center by one arbitrator appointed in accordance with these Rules …”
As far as UAE Federal Arbitration Law No. 6 of 2018 as amended by Federal Decree-Law No. 15 of 2023 is concerned, as the law applicable in the forum, Article 23 thereof reaffirms that, “the parties may agree on the procedures that the Arbitral Tribunal shall follow to conduct the arbitration proceedings, including subjecting these procedures to the rules implemented in any arbitration organization or arbitration institution in the State or abroad.”
Based on the above, there is no conflict nor ambiguity in the arbitration agreements of the Contracts consistently subjecting Parties’ disputes to the arbitration Rules at the mutually agreed locations of Dubai and DIFC. Respondent’s arguments are rebutted, as no one needs to delve into the frivolous interpretation of the arbitration agreements where obvious and straightforward reading thereof directs us to the arbitral institution operating in a certain locality.
Choice of administering institution by locality does not impair arbitration agreements
It is a well-established principle widely applied in international arbitration all over the world that missing to name an arbitral institution by its full title does not affect the overall validity of an arbitration clause as long as the parties’ intention to arbitrate in a particular institution is ascertainable from other factors. It is evident that by referring to the “Dubai Arbitration Centre”, the Parties obviously intended DIAC. This is evident as during the span of years from 2014 to 2017 when the Contracts were executed between the Parties, DIAC stood as the sole and preferred Arbitration Centre in Dubai. Respondent pathetically asserted that the Claimant’s contention, suggesting interpreting the arbitration agreements as referring to an ad hoc Arbitration, “would render arbitration agreements (as well as the entire contract) ineffective and unenforceable.” Respondent mentioned the Saudi Centre for Commercial Arbitration, and the Russian Arbitration Centre having an office in the DIFC. The branches of foreign arbitration centres in the DIFC were not even in remote consideration of the Parties when selecting their arbitration institution. Therefore, the term “Dubai Arbitration Centre” specifically refers to DIAC, and not to any foreign centres that happen to have branches in Dubai, such as the Saudi Centre for Commercial Arbitration, and newbie representative office of the Russian Arbitration Centre that obtained DIFC certificate of registration less than a year ago. The alternative arbitration institutions cherry picked by the Respondent was thus irrelevant to the case.
Conclusion
The circumstances of the Claimant’s case aligned precisely with the provisions outlined in Article 8.2 of the DIAC Rules pertaining to “Multiple Contracts and Consolidation”. The Tribunal in its preliminary award determined that the Respondent’s JO in relation to Contracts 1 to 4 are rejected, and held that the Tribunal has jurisdiction to determine the claims made in connection with the said Contracts. Consolidation of the claims prima facie perceives a positive indication of the Tribunal’s acknowledgment, recognition, and adherence to the DIAC Rules with meticulous scrutiny and in-depth evaluation.
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