DIFC Court upholds USD1.6 billion ICC award and rejects claims of unlawful evidence

*Reproduced from Practical Law with the permission of the publishers. For further information visit practicallaw.com.

In ARB 012/2023 (1) Novak (2) Nola (3) Nadim v (1) Norwood (2) Numair, the DIFC Court dismissed an application to set aside a USD1.6 billion ICC award rendered in a DIFC-seated ICC arbitration, finding that the applicants had failed to establish that the tribunal had breached the act of state doctrine and UAE public policy when finding it had jurisdiction to determine claims underpinned by corruption allegations.

The DIFC Court has issued an order (Order) dismissing an award debtors’ application to set aside a USD1.6 billion ICC award (Award) rendered in a DIFC-seated ICC arbitration. The application raised unique questions about the existence and scope of the act of state doctrine in DIFC law.

In the arbitration, the award creditors claimed that the award debtors had bribed officials in an Iraqi state entity, leading to a decision that caused the award creditors significant losses. In response, the award debtors argued that the arbitral tribunal lacked jurisdiction to hear the corruption claims because this would violate the foreign act of state doctrine (AOS Doctrine), which prevents any tribunal from adjudicating the lawfulness or validity of sovereign acts by a foreign state, or from hearing claims of unlawful actions by a foreign state. The tribunal dismissed this argument and issued the Award, which was recognised by the DIFC courts under a recognition and enforcement order made in April 2023.

The award debtors applied to set aside the Award, arguing that, under the AOS Doctrine, national courts must not adjudicate on the validity of official acts by a foreign state within its own territory unless that validity violated public policy. They contended that the tribunal exceeded its jurisdiction and violated the UAE’s public policy in dismissing their jurisdictional objections.

The DIFC Court held that the AOS Doctrine exists in DIFC law as part of UAE public policy. However, the court confirmed that the threshold to set aside any award is high and concluded that the award debtors had not established that the tribunal acted beyond its jurisdiction and breached the AOS Doctrine and UAE public policy when rendering the Award.

The DIFC Court also:

• Dismissed an argument that the tribunal had improperly relied on hearsay evidence.
• Endorsed the decision in Lachesis v Lacrosse (2021) DIFC CA 005, confirming that the DIFC courts need not overturn awards based solely on errors of law or fact.
• Upheld an enforcement order and worldwide freezing order issued by the DIFC Court of First Instance in May 2023, rejecting the request to set them aside.

The court’s decision underscores the DIFC’s commitment to maintaining the integrity of arbitration awards and its stringent standards for challenging such decisions. By reaffirming the validity of the Award and rejecting claims of procedural impropriety, the DIFC courts have reinforced their role as a robust forum for resolving high-stakes international disputes.