The Court in the US state of Louisiana has declined to enforce an arbitration award issued by the Dubai International Arbitration Center (DIAC). This is an uncommon occurrence, considering that the New York Convention of 1958 generally obligates the majority of countries that signed the agreement to uphold arbitration awards. This obligation is contingent upon following specific procedures within each country’s legislative system, ensuring alignment without contradicting the general legal framework. However, the Louisiana Court’s decision is notable, particularly because it came after the Dubai government issued a decree in 2021, which led to the merge of the DIAC center to make it not isolated from the Dubai International Financial Center, known as DIFC.
It’s important to highlight that the US Court has rejected enforcing this award. The reason is that the award comes from DIAC, and it’s not the same entity that requested the Louisiana court to enforce it. In essence, according to the US Court, DIFC-LCIA is not considered the same as DIAC.
The US Court in Louisiana sees the London Court of International Arbitration at the Dubai International Financial Center (DIFC-LCIA) and the “Transfer of Assets, Rights, and Obligations” at the Dubai International Financial Center – London Court of International Arbitration (DIAC-LCIA) as distinct entities from the DIAC Arbitration Center. Despite efforts by the claimant in the US lawsuit to clarify the matter based on the laws of the United Arab Emirates, which explicitly state that the provisions of the Dubai International Financial Center – London Court of International Arbitration are in line with those of the DIAC Center after the emirate’s decree, the US District Court maintains their differentiation.
To explore the defendant’s argument further, he based his defense on the clarity of the arbitration clause at the time the contract was formed between the disputing parties. The chosen method for dispute resolution was arbitration, specifically through the Dubai International Financial Center – London Court of International Arbitration (DIFC-LCIA). However, this was nullified by a Decree Law issued by the Dubai Government in 2021. Despite the resemblance, the situation persists after the issuance of the Decree Law, wherein the DIAC Center is not the institution the parties initially agreed upon for arbitration. This led Judge Greg Guidry of the local courts in the US state of Louisiana to conclude that, with all due respect, neither the American court nor the Dubai government has the authority to alter the arbitration agreement. The judge maintained that the proceedings should proceed through DIAC instead of DIFC-LCIA, emphasizing that despite their similarities, the two institutions are not the same, and the original agreement specified arbitration through DIFC-LCIA.
The defendant highlighted and argued that, by law, the arbitration agreement remains valid until the Dubai government issued a decree law in 2021. This decree canceled the Dubai International Financial Center – London Court of International Arbitration (DIFC-LCIA) and transferred its assets, rights, and obligations to the DIAC Foundation. Following this, the arbitration agreement became invalid, as the agreed-upon arbitration institution between the parties was no longer in existence. Consequently, the arbitration agreement lost its validity along with all its associated consequences.
This marks the first documented instance of such an occurrence. It underscores the point that arbitration, as an alternative dispute resolution method, is subject to government decisions. Governments possess the freedom to terminate or combine arbitration centers, rendering any arbitration agreements issued through them invalid. While arbitration may offer certain advantages, it is not as reliable as the traditional approach of using local courts in countries.
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