In this article we discuss the perennial issue relating to the recoverability of lawyer's fees in arbitrations administered by the Dubai International Arbitration Centre (the DIAC). We will look at yet another cautionary tale of where the Dubai Court of Cassation held that providing the Tribunal with the express authority to award “Legal Costs” in a terms of reference did not mean that the parties had provided the Tribunal with the authority to award lawyer’s fees.
This case concerned an annulment application brought by an unsuccessful respondent in arbitration proceedings that had been administered by the DIAC pursuant to the 2007 DIAC Rules (the Rules) (the Arbitral Proceedings). The seat of the Arbitral Proceedings was Dubai and the Arbitral Proceedings were to be conducted in the English language.
During the Arbitral Proceedings, the parties’ legal representatives had executed terms of reference which provided the Tribunal with the express authority to award “Legal Costs”.
The Claimant was successful in the Arbitral Proceedings and as a result was awarded its legal fees in the amount of AED 837,716.
A few months prior to Federal Law No.6 of 2018 (the UAE Arbitration Law) coming into force, the Respondent filed an application to the Dubai Court of First Instance seeking annulment of the final award (i.e. under the provisions Federal Law No. 11 of 1992 (as amended) (the Civil Procedure Code).
The Respondent asserted that the Tribunal did not have authority to award lawyer’s fees because:
The Claimant contested this stating that: (1) the terms of reference clearly provide the Tribunal with the authority to award lawyer’s fees with reference to the term “Legal Costs” and the email sent by the Respondent’s legal representatives was contrary to the signed agreement reached in the terms of reference and should be ignored because it was sent in Arabic and not English; and (2) Article 19 of the new UAE Arbitration Law (which by now had been enacted) provides the Tribunal with the discretion and authority to award lawyer’s fees.
The Dubai Court of First Instance agreed with the Claimant's arguments and dismissed the case.
However, the Respondent appealed the decision to the Dubai Court of Appeal which found in its favour and annulled the part of the award ordering lawyer’s fees. The Claimant appealed this decision to the Dubai Court of Cassation.
In summary, the Dubai Court of Cassation upheld the Court of Appeal’s decision and concluded that:
In light of the above decision, and a more recent decision issued by the Dubai Court of Cassation whereby an award concerning lawyer’s fees was partially annulled because the Claimant’s legal representatives were not authorised by their power of attorney to grant the Tribunal the authority to award legal costs, legal practitioners should consider adopting the following mitigating measures in DIAC arbitrations:
We should also highlight that there are court cases which also go the other way. In particular, there is a Dubai Court of Cassation decision in which it was found to be reasonable, and in accordance with the law, that awarding legal costs by the Tribunal on the basis that the relevant terms of reference set out the parties’ agreement to empower the Tribunal to do so. Nevertheless, despite the UAE Arbitration Law, parties still need to be cautious when dealing with lawyer's fees in DIAC arbitrations as they are often significant.
Dubai Court of Cassation No.990 of 2019