hotel management agreements - choice of law and jurisdiction
DESCRIPTION
A breakfast seminar by Henry Quinlan, Partner at DLA Piper in Dubai, and Ali Al-Zarrad, Legal Consultant, members of the Litigation and Regulatory group.TRANSCRIPT
Breakfast Seminar prepared by: Henry Quinlan and Ali Al-Zarrad
Litigation & Regulatory
DLA Piper Middle East LLP
1 October 2012
Hotel managementagreements - choice of lawand jurisdiction
Overview
• Choice of law and jurisdiction
• Drafting effective arbitration clauses
• How to choose your seat
• Recognition / enforcement of awards
• New York Convention
• Recent Developments
• Case Study / Takeaway Tips
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What do you choose?
• Governing Law
• Arbitration
• Where?
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Governing Law
• What is it?
Choice of Law - the law governing the rights and obligations of theparties under the contract.
However, mandatory laws may apply, eg:
transactions involving the grant of real rights over land ("lex situs"); and
Kingdom of Saudi Arabia.
• Significance
Determines the law which governs the interpretation of the parties'substantive contractual rights.
• Example:
"This Agreement shall be governed by, and construed inaccordance with, the laws of England and Wales."
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Jurisdiction
• What is it?
The forum that has authority to decide the dispute.
May follow negotiations/mediation/expert determination.
• Significance
Each jurisdiction has its own procedures and rules for determiningdisputes.
Experience of the jurisdiction in the likely type of dispute may bean important factor.
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Comparison
• Governing Law - v - Jurisdiction
Governing Law will determine the extent of the parties' substantiverights.
Jurisdiction is concerned with where.
The two do not have to interlink.
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Drafting Effective Arbitration Clauses
"Any and all disputes, controversies or claims arising out of or inconnection with this Agreement (including, without limitation, any
question regarding its existence, validity or termination) (a "Dispute")[1] shall [2] be referred to, and finally resolved by, arbitration under theRules of Arbitration of the [DIFC-LCIA] (the "Rules"), which Rules are
deemed to be incorporated by reference into this Agreement. [3]
The number of arbitrators shall be [one/three]. [4]
The seat or legal place of arbitration shall be [the DIFC]. [5]
The language of the arbitration shall be English." [6]
Basic Requirements:
[1] Scope [2] Compulsion [3] Arbitration Rules
[4] Number [5] Seat [6] Language
[7] Governing Law Clause [8] No court jurisdiction clause
[9] Most regional countries require that the signatory has authority to sign(POA).
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How to choose your seat
• Selection of Seat
Convenience
Cost
Quality of courts
Quality of arbitration law
Signatory to the New York Convention
• Typically:
Europe: London, Paris, Switzerland, Stockholm
Asia: Hong Kong, Singapore
Middle East: Dubai (onshore/DIFC), Egypt
North America: New York
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Arbitration – Rules / Institutions
• Popular Arbitral Rules / Institutions
UAE
DIFC-LCIA
Dubai International Arbitration Centre (DIAC)
International
ICC
LCIA
American Arbitration Association (ICDR)
UNCITRAL (ad hoc)
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Comparing the Rules of Arbitration /
Institutions
Topic LCIA ICC DIAC DIFC-LCIA
Confidentiality? Expressconfidentiality;materials createdfor the purpose ofarbitralproceedings andthe award.
No expressconfidentiality
Expressconfidentiality;materials createdfor the purpose ofarbitralproceedings andthe award.
Expressconfidentiality;materials createdfor the purpose ofarbitralproceedings andthe award.
Head officelocation
London (defaultplace ofarbitration)
Paris Dubai (defaultplace ofarbitration)
DIFC (defaultplace ofarbitration)
Costs Hourly basis,regardless ofamount in dispute
Dependant onamount in dispute
Dependant onamount in dispute(cheaper thanICC)
Hourly basis,regardless ofamount in dispute
Number ofArbitrators
Presumption ofsole Arbitratorunlessparties/institutiondecide otherwise.
Presumption ofsole Arbitratorunlessparties/institutiondecide otherwise.
Presumption ofsole Arbitratorunlessparties/forumdecide otherwise.
Presumption ofsole Arbitratorunlessparties/institutiondecide otherwise.
Default Timelimit of Award
N/A 6 months fromdate of lastsignature oftribunal.
6 months fromdate the tribunalreceives the file.
N/A
Other "Hands off" aftertribunal appointed
Terms ofreference; scrutinyof award by ICC(before arbitraltribunal sign anyaward)
Internationalstandard rules(though somequirks,recoverability oflegal fees).
New andunderused (2008);ease ofenforcement inDubai (in theory)
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Enforcement of Awards
•WHERE ARE THECOUNTERPARTY'S ASSETS
LOCATED?
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Enforcement of Awards
• International enforcement of awards
New York Convention
• Regional treaties/conventions
the Protocol on Enforcement of Judgments, Letters, Rogatory andJudicial Notices issued by the Courts of the Member States of theArab Gulf Co-operation Council, 1995 ("GCC Protocol");
the Riyadh Convention on Judicial Co-operation between States ofthe Arab League, 1983 ("Riyadh Convention"); and
bilateral conventions re enforcement of judgments/awards.
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Hotel management agreements - choice of law and jurisdiction
Dubai Law No. 16 of 2011
• Effect
Amends Dubai Law No. 12 of 2004.
Codifies the 2009 Protocol of Enforcement between the Dubai Courts andthe DIFC Courts.
• Significance
All Parties can give DIFC Courts jurisdiction to hear their disputes.
Compels DIFC Courts and Dubai Courts to enforce the applicablejudgment/arbitral award issued by the other.
• Benefits
Judgments rendered by the DIFC Courts can be ratified in the onshoreDubai courts as Dubai court judgments.
Onward enforcement.
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Route from DIFC to wider region
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DUBAI COURTS
GCC PROTOCOL
RIYADH CONVENTION
ARAB JUDGMENTS CONVENTION
DIFC COURTDIFC ARBITRALAWARD
DUBAI LAW 16 OF 2011
2009 PROTOCOL
DIFC JUDGMENT RATIFIED BY ADUBAI COURT JUDGMENT
EGYPT
IRAQ
KSA
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New York Convention (1)
• 147 of 195 UN Member States have adopted theConvention
• All countries in the region, except Iraq and Yemen
• Recognition of Decisions:
Article III - the contracting State shall recognize arbitral awards asbinding and enforce them in accordance with procedural rules ofthe State where the award is relied upon.
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New York Convention (2)
• Grounds for Rejection:
Article V: enforcement may be challenged by the party against whomenforcement is sought, only if that party provides the enforcing court, proofthat:
parties to the arbitration agreement did not have capacity to enter into it;
the party against whom the award is invoked has not been given proper notice ofthe arbitrator's appointment/arbitration proceedings/unable to present its case;
the award deals with a point outside the scope of the arbitration;
the arbitral procedure was not in accordance with the parties' agreement/the law ofthe country where the arbitration took place; or
the award has not yet become binding on the parties.
Recognition and enforcement may also be refused if the competent authorityin the country where the recognition and enforcement is sought finds that:
the subject matter is not capable of settlement by arbitration under the law of thatcountry; or
the recognition and enforcement of the award would be contrary to public policy ofthat country.
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UAE – Enforcement of Decisions – in
practice
• Fujairah Court cases – first foreign arbitral awards enforcedin UAE via NYC in late 2010. Two London MaritimeArbitration Association Awards, issued by sole arbitrator in2007
Court opined that: "The Court's supervisory role when looking torecognize and enforce a foreign arbitral award is strictly to ensure thatit does not conflict with the Federal Decree under which the UAEacceded to the NYC on the recognition and enforcement of foreignarbitral awards and satisfies the requirements of Articles IV and V ofthe Decree in terms of being duly authenticated."
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UAE – Enforcement of Decisions – in
practice
• Maxtel International FZE vs. Airmec Dubai LLC (2010)
Two arbitral awards rendered by a sole arbitrator in London underthe DIFC-LCIA Rules
Enforced by the Dubai CFI via the NYC (12/01/2011). Thedecision was appealed to the Dubai Court of Appeal
Court of Appeal rejected the appeal and upheld the enforcement
• Case 5 of 2004 – A Lebanese judgment enforced in Dubaivia the Riyadh Convention
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DIFC – in practice
• Awards
Property Concepts FZE vs. Lootah Network Real Estate andCommercial Brokerage (2010)
First DIFC-seated arbitral award recognized by the DIFC Courts and enforcedin the UAE
• Judgments
Farooq Al Alawi v (1) Lloyds TSB Bank Plc; and (2) Credit SuisseAG (2011)
A judgment issued by the Bahraini Family Courts enforced by the DIFC Courtsin accordance with the GCC Protocol and Riyadh Convention.
• At present around 40 DIFC Court Judgments have beenenforced in the UAE
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• New KSA Arbitration Law
Acknowledges right of parties to arbitrate under institutional rules
No requirement for notification through the courts prior tocommencement
No stay for criminal allegations
Restricts Board from examining facts/subject matter (merits) of thedispute
Enforcement? Board to have "due regard" to KSA's obligationsunder international agreements.
• BUT:
Theory vs. Practice
1 October 2012Hotel management agreements - choice of law and jurisdiction
Recent Developments (1)
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Recent Developments (2)
• Cassation Appeal No. 14 (2012)
Dispute between D and P over a number of units re D's failure to registerthe units in the real estate registry
DIAC award in favour of P; P sought to enforce before Dubai CFI;
CFI approved it, as did CA; D's appeal went to Court of Cassation
CC ruled award is in relation to public policy issue – denied enforcement.
• Reasoning
Art. 3 of UAE Civil Code provides that "public order shall be deemed toinclude matters relating to personal status such as…the circulation ofwealth, rules of private ownership…"
Applied wide interpretation to "wealth" and "rules relating to privateownership" and provided that regulation of these terms included rules ofregistration of land, and as such, were matters of public policy.
It was also commented that individuals have the right to go to court evenin cases where there is an arbitration clause in the agreement.
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• Facts
Hotel in Dubai
Owned by KSA national
Operated by US company
Agreement terminated without cause
LDs in Agreement for 3 years' loss of fees
Governing Law and Jurisdiction?
• Steps to consider
Governing Law: eg English v UAE (impact upon LDs)
Where are the KSA national's assets? (Hotel, shares, etc)
If outside KSA: eg London / DIFC (dependent on location of assets)
If inside KSA: risk analysis – there is no easy answer at present
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Case Study
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• Choose the Governing Law
• Draft an effective arbitration clause
ensure key elements are included (NB jurisdictional quirks)
• Choosing the seat:
Where are party's assets?
Consider the route to enforcement carefully
1 October 2012
Takeaway Tips
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The End
ANY QUESTIONS?
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