Dubai: Divergent paths in arbitration enforcement: public policy in UAE onshore vs DIFC Courts
The United Arab Emirates (“UAE”) is unusual among major arbitration centres in featuring a dual judicial system: the federal onshore courts operating within a civil law framework (“Onshore Courts”), and the courts that operate in the Dubai International Financial Centre (“DIFC”) and Abu Dhabi Global Market (“ADGM”), which are two financial freezones that adopt the common law system. This article focuses on the Onshore and DIFC courts.
Arbitration plays a central role in commercial dispute resolution in each of those systems. However, given the radically different legal personalities of this dual judicial system, there are inevitable instances where there is tension between the two systems concerning the court’s application of legal principles in the context of international arbitration.
One such instance is the seldom successful and often misunderstood public policy exception, which is one of the limited grounds on which parties can challenge enforcement of arbitration awards in each of the above systems.
This article discusses the public policy exception and compares how the Onshore Courts and the DIFC courts approach the doctrine of public policy, examining the nuances in how these two courts interpret and apply the public policy exception in practice.
Sixty second summary
Onshore Courts: public policy as a broad, mandatory constraint
The recognition, enforcement and nullification of arbitration awards in the Onshore Courts are governed by Articles 52–57 of Federal Law No. 6/2018 (as amended by Federal Law No. 15 of 2023) (“UAE Arbitration Law”). Article 53(1) of the UAE Arbitration Law sets out grounds to challenge enforceability which are aligned with international norms. One of the grounds to nullify an award is if the award contravenes public policy. 1
The definition of public policy under UAE law is broad and fluid:
- The UAE Arbitration Law does not define public policy save for a reference to “the public order and morality of the State”.
- However, Article 3 of the UAE Civil Code describes it as encompassing:
2
- “…matters relating to personal status such as marriage, inheritance, and lineage, and matters relating to sovereignty, freedom of trade, the circulation of wealth, rules of private ownership and the other rules and foundations upon which society is based, in such a manner as not to conflict with the definitive provisions and fundamental principles of the Islamic Shari’ah.”
- The Dubai Court of Cassation 3 has previously noted that, whilst the law does not explicitly define ‘public policy’ it is generally understood to encompass rules aimed at achieving the higher interests of the country, political, social, or economic where these interests supersede individual interests. Public policy is based on the interest of the entire community and relates to the state’s existence or a fundamental and general interest of society.
This lack of clarity has led to the Onshore Courts applying Article 3 of the Civil Code widely treating issues involving interest rates, real estate and bankruptcy/insolvency as matters of public policy.
The case study below provides an example of when public policy has been used as the reason for setting aside an arbitration enforcement:
Commentators have debated whether the Dubai Court of Cassation has erred in its interpretation in this instance given that the scope of Article 3 of the Civil Code is limited to matters of personal status, freedom of trade, individual ownership in a manner “as not to conflict with the definitive provisions and fundamental principles of Islamic Shari’ah”.
DIFC: A narrow, exceptional public policy defence
The DIFC Arbitration Law (Law No. 1 of 2008, as amended by Law No. 6 of 2013), which is based on the UNCITRAL Model Law, also recognises public policy as a potential ground to set aside or refuse recognition of an arbitral award. Although the underlying policy may be the same, in contrast to the broader onshore approach taken in Baiti vs Zarooni, the DIFC courts apply the defence sparingly emphasising a pro-enforcement bias consistent with the New York Convention.
Conclusion: divergent thresholds and practical implications
Although both legal regimes recognise public policy as an exception, the Onshore Courts and DIFC courts apply public policy in meaningfully different ways.
Onshore Courts appear to adopt a wider interpretation of public policy. Guided by a broad Civil Code formulation and a tradition of treating certain issues as implicating public order, the Onshore Courts are willing to intervene where awards encroach on non-arbitrable subject matters. Whether this approach will continue remains unclear given that there is no concept of binding precedent in the UAE.
In contrast, the DIFC courts frame public policy as an exceptional safety valve, not a routine ground to re-open awards. The public policy defence is confined to rare and exceptional cases reaffirming the DIFC courts’ commitment to the pro-enforcement regime of the New York Convention.
For practitioners, the consequences are concrete:
- Award creditors must consider the forum’s likely approach to public policy when deciding where to recognise and enforce an award.
- In the Onshore Courts, opponents may find traction with arguments rooted in non-arbitrability, statutory registration regimes, insolvency interfaces and strict procedural compliance.
- In the DIFC, resistance on public policy grounds will rarely succeed unless the award itself or the arbitral process is fundamentally compromised.
