Dubai Court of Cassation clarifies position on recoverability of costs in ICC Arbitrations

A recent judgment of the Dubai Court of Cassation has clarified that legal costs are recoverable by a party in an ICC arbitration seated in Dubai. This overturns an earlier decision of the Court of Cassation, which determined that an arbitral tribunal did not have the power to award such costs.

ICC Rules

Under Article 38 of the ICC Rules 2021, the arbitral tribunal is entitled to award costs in respect of the arbitration. Article 38(1) states that:

“the costs of the arbitration shall include the fees and expenses of the arbitrators and the ICC administrative expenses fixed by the Court………as well as the fees and expenses of any experts appointed by the arbitral tribunal and the reasonable legal and other costs incurred by the parties for the arbitration.”

Article 38(4) states that in its final award, the tribunal shall determine which of the parties shall pay the costs or how it should be apportioned between them.

Dubai Court of Cassation Judgments

The matter of ICC arbitration costs came before the Dubai Court of Cassation in February 2024. That case was a joint appeal from the Court of Appeal where the debtor (the defendant in an arbitration) sought that the costs order be quashed on two grounds:

• first, that the award was issued outside the prescribed time limit; and
• second, that the arbitrator exceeded their powers by ordering the defendant to pay the claimant's legal fees incurred for the arbitration.

The Dubai Court of Appeal had dismissed the defendant’s challenge to the first ground but found in favour of the defendant on the second ground, thereby annulling the award of legal costs. The Court of Cassation upheld this judgment, finding that under Dubai law, the only costs that could be awarded in an arbitration were the fees and expenses incurred by any member of the arbitral tribunal in the exercise of his duties and the costs for experts appointed by the arbitral tribunal. This judgment was particularly surprising given the clear wording in the ICC Rules.

However, in a subsequent case in November 2024, the Dubai Court of Cassation has reversed its earlier position. The Court has confirmed that ICC Rules permit the award of legal costs by an arbitrator, including costs paid by a party to its legal representatives. The Court confirmed that where wording is clear and unambiguous (such as in Article 38(1) of the ICC Rules), the Court must regard this a true expression of the drafter’s intent and therefore, the law cannot be interpreted in a way that alters its meaning.

Whilst this decision is undoubtedly welcome news to those involved in arbitration, it should be noted that the UAE is a civil law jurisdiction without a system of binding precedent. However, decisions of the Court of Cassation are generally of persuasive value and lower Courts are likely to apply this decision in cases with similar facts.

Conclusion

The recent decision of the Dubai Court of Cassation clarifies the position around legal costs being awarded in ICC arbitrations seated in Dubai. However, given the lack of binding precedent in the UAE legal system, it is unclear how this decision will be interpreted moving forward, particularly in cases with slightly different facts.

Parties to arbitral proceedings governed by the ICC Rules, and which are seated in Dubai, will, however, likely take some comfort in this decision. Understanding what the costs exposure might look like, and the prospects of recovering costs, in any proceedings is often a key in the decision making process when deciding whether to pursue/resist proceedings.