Wednesday, October 9, 2013

Annulment of Arbitration Award

The Oman Arbitration Law is contained in Royal Decree No. 47 of 1997, as amended (the “Arbitration Law”). For arbitration to be an effective and predictable alternative to Court adjudication of disputes, it is important that properly rendered arbitral awards are enforceable and certain and, in most cases, final. This means that the parties’ ability to challenge and overturn an award should be limited. Chapter 6 of the Arbitration Law sets out the limited instances in which a party may apply to nullify an arbitral award.

Article 52.1 of the Arbitration Law contains the starting point and provides that "… arbitration awards pronounced pursuant to the provisions of this law shall not be challenged in any way.” The Arbitration Law contemplates that arbitral awards are to be treated as final and binding and cannot be appealed.

The only recourse available to an aggrieved party is to seek to nullify the arbitral award pursuant to Article 52.2 of the Arbitration Law.

Grounds for Nullification

Article 53.1 prescribes very limited grounds upon which a party may apply to nullify an arbitral award:

  1. If there is no agreement to arbitrate between the parties or if such agreement is void or rescindable or has lapsed due to expiration of its duration.
  2. At the time of concluding the arbitration agreement, if one of the parties to such agreement is incapacitated or incompetent according to the law that determines his capacity.
  3. If it becomes impossible for either of the parties to present his case as a result of not being properly notified about the appointment of the arbitrator or the arbitral proceedings or for any other reason beyond his control.
  4. If the arbitrator did not apply the law which was agreed by the parties to be applied to the dispute.
  5. If the formation of the arbitration board or the appointment of arbitrators took place in a manner contrary to the law or agreement between the parties.
  6. If the arbitrator decides on issues which are out of the scope of the arbitration agreement or if he exceeds the limits of such agreement. However, if it is possible to separate the parts of the award relating to the issues subject to the arbitration from the parts relating to the issues not included in the arbitration, the nullity shall apply to the latter parts only.
  7. If there is a contradiction in the arbitration award or if the arbitral proceedings are null in a way which affects the judgment.
Our interpretation of (g) above is that an application can be made for nullification if:
  • the arbitral award contains contradictory statements which go to the matters at issue; and/or
  • if the arbitration proceedings were conducted in a manner contrary to the procedure agreed by the parties.
Additional Grounds for Nullification

Article 53.2 further provides that, if the award includes anything that violates public order in the Sultanate of Oman, the Court adjudicating upon the action for nullity shall, on its own initiative, annul the arbitration award.

The Arbitration Law does not define what might constitute a matter which “violates public order” however, in commercial disputes, such instances should be very rare indeed. We have observed that on occasion the Courts in neighbouring countries have evoked a similar provision to Article 53.2 above to justify the nullification of Arbitral Awards in their jurisdictions. We understand, however, that this practice is decreasing and is the subject of much legal debate. Fortunately, and quite correctly in our view, the Omani Courts appear to be very reluctant to invoke this provision, and we expect that it would be used very sparingly and only in very limited circumstances.

Application for Nullification

Article 54(1) of the Arbitration Law provides that any application for nullification of an arbitration award shall be filed within 90 days following the date of notification of the award to the aggrieved party. An action for annulment shall not be inadmissible by reason of the party so claiming having waived his right to bring such action prior to the rendering of the arbitral award.

The Appellate Circuit of the Commercial Court has jurisdiction to hear applications for nullification of an arbitral award. As touched on above, nullification of an arbitral award is granted in only very limited circumstances and the process should not be relied upon as a way to appeal the merits of an award.