In Middle East Foundations LLC v. Meydan Group LLC (formerly Meydan LLC) (Case No. 249 of 2013), the Dubai Court of Appeal confirmed that Article 36 of the DIAC Arbitration Rules permits the DIAC Executive Committee to make multiple extensions to the time limit for the arbitral tribunal to render its award, provided that there are justifiable reasons for the extensions.
Middle East Foundations (MEF) and Meydan entered into a contract which provided for disputes to be resolved by arbitration in Dubai under the rules of the Dubai International Arbitration Centre (DIAC). A dispute arose between the parties and MEF was successful in the subsequent DIAC arbitration. MEF then sought to have the award recognised by the Dubai courts, but Meydan objected and asserted that the arbitration should be declared invalid because the DIAC Executive Committee had extended the time limit for the tribunal to issue its award on four separate occasions.
Meydan’s objections were based on Article 210 of the UAE Civil Procedure Code (CPC) and Article 36 of the DIAC Rules. Article 210(1) of the CPC provides that: “(1) If the parties to the dispute did not specify in the arbitration agreement a date for the issue of the award, the arbitrator shall pass his award within six months from the date of the first arbitration session; [and] (2) “ … The parties to the dispute may, expressly or impliedly, agree to extend the date fixed by agreement or under the law and may authorize the arbitrator to extend the same for a specified period”. The DIAC Rules also provide that the arbitral tribunal must render its award within six month of the tribunal’s appointment, although the tribunal may on its own initiative extend this time-limit for up to an additional six months (Articles 36(2) and (3) of the DIAC Rules). Further, the DIAC Executive Committee may extend this time limit further pursuant to a reasoned request from the arbitral tribunal or on its own initiative if it decides it is necessary to do so (Article 36.4 of the DIAC Rules).
Prior to the MEF v Meydan case, it was generally understood that the parties’ agreement to the DIAC Rules was sufficient to vest in the arbitral tribunal and then the DIAC Executive Committee a power to extent the six month time limit imposed by Article 210 of the CPC. However, Meydan argued that Article 36 only permitted the DIAC Executive Committee to extend the time limit for rendering the award once. The Dubai Court of First Instance agreed with Meydan’s argument and held that four consecutive extensions fell outside the scope of Article 36 and thus the award was invalid. MEF then appealed to the Dubai Court of Appeal.
Decision of the Court of Appeal
The Court of Appeal overturned the decision of the Court of First Instance. It noted that the DIAC Executive Committee is authorised under Article 36 to extend the time limit to render the award and there was no limit on the number of extensions that could be made, provided such extensions were necessary. Accordingly, provided the award was issued within the time limit as extended (which it was) then the proceedings were valid and pursuant to the arbitration agreement made between the parties.
While the Court of Appeal did not go into much detail on its analysis of Article 36, the decision seems to give effect to the logical meaning of the words in Article 36 rather than the restrictive approach taken by the Court of First Instance. In particular, Article 36.3 provides that “[t]he Tribunal may, on its own initiative, extend the time-limit [of the original six months] for up to an additional six months” and Article 36.4 empowers the Executive Committee to “extend this time-limit further pursuant to a reasoned request or on its own initiative if it decides that it is necessary to do so” (emphasis added). The use of the word “further” appears intended to allow multiple (rather than just one single) extension(s), provided there is justification.
Meydan also argued in the alternative that the arbitration clause in the contract was not valid because Meydan (which is partially owned by the government) had not complied with certain additional formalities that must be completed before a government entity can agree to arbitration. In particular, any government department entering into a contract containing an arbitration clause must first obtain the prior approval of the Council of Ministers (Council of Ministers Decision No. 406/2 2003). However, the Court of Appeal held that despite its partial governmental shareholding, Meydan qualified as a private company under UAE law (as confirmed by the terms of its trade license) and therefore Meydan was not required to complete the additional governmental formalities before entering into arbitration.
This decision helpfully confirms that Article 36 of the DIAC Rules permits the DIAC Executive Committee to grant multiple extensions to the time limit for the tribunal to render its award, provided such extensions are necessary. Arbitrators in complex disputes should now have the comfort that they will be permitted appropriate extensions of time to allow them sufficient time to deal with all the issues properly (albeit arbitrators must also always be mindful of the need for procedural expediency). The decision also confirms that commercial companies in which the government has invested do not need special governmental permissions before entering into arbitration. However, Meydan is seeking to challenge the decision before the Dubai Court of Cassation (the highest court in Dubai) – the arbitration community in Dubai will await the Court of Cassation’s judgment with interest.
For further information, please contact Craig Shepherd, Partner, Mike McClure, Senior Associate, or your usual Herbert Smith Freehills contact.
A version of this article has previously appeared in the ITA Arbitration Report published by the Institute for Transnational Arbitration.