The Dubai International Financial Centre Courts (DIFC Court) has clarified that, in the case of the arbitration agreement under discussion, the law of the arbitral seat governs the arbitration agreement itself—even when the principal contract stipulates a different governing law. The ruling, delivered in Oswin vs Otila & Ondray, was handed down by Justice Sir Jeremy Cooke in a dispute arising out of a joint-venture for operating a hazardous-waste facility.
In the joint-venture agreement (JVA) between the claimant Oswin and the defendants Otila & Ondray, the parties agreed that any dispute not resolved within thirty days of notice would be referred to arbitration under the DIFC-LCIA (now DIAC) Rules, with the DIFC as the seat. The governing law of the JVA and ancillary agreements was UAE federal law, and some of the ancillary contracts also nominated Abu Dhabi courts for jurisdiction. The defendants sought to challenge the DIFC Court’s jurisdiction, arguing that the UAE law governing the contract and the Abu Dhabi venue should prevail.
Justice Cooke rejected the jurisdictional objection, holding that the arbitration clause in the JVA is a standalone agreement separate from the underlying contract. He emphasised that “in my judgement it is now clear, both as a matter of common law as well as English statute, that it is the law of the seat which constitutes both the lex curiae (lex arbitri) and the law of the arbitration agreement, absent clear indicia to the contrary.” The Court observed that having chosen the DIFC as the seat, the parties had effectively conferred supervisory jurisdiction on the DIFC Courts. Since the JVA was the overarching agreement from which the ancillary contracts derived, and the arbitration clause (Clause 26.3) clearly designated arbitration under DIFC-LCIA rules seated in the DIFC, the DIFC Court held that its jurisdiction was properly engaged.
The Court further noted that while other agreements like the O&M agreement might contain their own jurisdiction clauses, they did not override the clear and exclusive arbitration mechanism laid out in the JVA. It stressed that the dispute resolution mechanism must be viewed in context of the overarching document, and unless later agreements expressly vary the arbitration clause, the JVA’s terms govern. As a result, the DIFC Court maintained the injunction granted to the claimant to restrain unilateral action by the defendants, pending arbitration to be commenced after expiry of the thirty-day notice period.
This decision underscores the principle that in international arbitration the law of the seat of arbitration plays a pivotal role in determining the law of the arbitration agreement itself. It emphasises that parties selecting a particular seat and arbitration mechanism should be aware that the procedural and supervisory regime of the seat will govern key aspects of arbitration—even when the contract designates a different substantive governing law.
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