What was the specific nature of the dispute between Loralia Group and Landen Saudi Company that led to the USD 7,356,016.22 arbitral award?
The dispute originated from a Distributor Agreement dated 6 May 2014, concerning the promotion and sale of the Applicant’s products within the Kingdom of Saudi Arabia. Following a breach of contract claim initiated by the Respondent on 16 June 2016, the matter proceeded to a three-member tribunal under the DIFC-LCIA Arbitration Rules. The tribunal ultimately found in favor of the Respondent, awarding significant damages alongside costs and interest.
The core of the current litigation involves the Applicant’s attempt to invalidate the tribunal's financial findings. As noted in the case records:
The Applicant, Lorelei Group LLC (hereafter the “Applicant”) filed its Part 8 Claim (hereafter the “Set Aside Application”) on 11 October 2018 seeking to set aside the Arbitral Award (hereafter the “Award”) issued in favour of the Respondent, Landen Saudi Company (hereafter the “Respondent”), on 5 June 2018 in the matter of Landen Saudi Company v Lorelei Media Group LLC, DIFC-LCIA arbitration proceedings no. 1678.
The financial stakes are substantial, as the tribunal ordered the Applicant to pay:
The Award found in favour of the Respondent on liability and awarded it USD 7,356,016.22 plus costs and post-award interest at a rate of 8% per annum.
[Source: https://www.difccourts.ae/rules-decisions/judgments-orders/arbitration/loralia-group-llc-v-landen-saudi-company-2018-difc-arb-004]
Which judge presided over the Loralia Group v Landen Saudi Company [2018] DIFC ARB 004 proceedings in the DIFC Court of First Instance?
The matter was heard by H.E. Justice Shamlan Al Sawalehi in the DIFC Court of First Instance. The substantive hearing for the Set Aside Application and the Cross-Application for recognition and enforcement took place on 1 May 2019, with the final judgment delivered on 20 June 2019.
How did Loralia Group and Landen Saudi Company frame their respective legal arguments regarding the validity of the arbitral costs award?
The Applicant, Loralia Group, challenged the award primarily on the basis of public policy, arguing that the tribunal’s inclusion of a success-based fee component in the costs award was prohibited under UAE law. Specifically, the Applicant contended that the tribunal’s calculation method—which factored in a percentage of the damages awarded—constituted a contingency fee arrangement that offended the public policy of the UAE. As stated in the record:
It is this portion of the costs award that the Applicant contests as being a contingency fee, which the Applicant alleges is against the public policy of the UAE.
Conversely, the Respondent, Landen Saudi Company, maintained that the tribunal acted well within its discretionary powers under the DIFC-LCIA Arbitration Rules. The Respondent argued that the tribunal had sufficient evidence to support its costs determination and that the award was procedurally sound and unimpeachable. As noted in the proceedings:
The Respondent argues that the Arbitral Tribunal acted within the scope of its powers in determining the costs award, considering plentiful evidence in the process. The decision was well within the scope of the applicable DIFC-LCIA Arbitration Rules. The costs award is therefore correct and unimpeachable.
What was the precise legal question the Court had to answer regarding the intersection of Article 41(2)(b)(iii) of the DIFC Arbitration Law and UAE public policy?
The Court was tasked with determining whether a tribunal’s decision to award costs based on a percentage of the total damages—effectively a success fee—constitutes a violation of UAE public policy sufficient to trigger the set-aside mechanism under Article 41 of the DIFC Arbitration Law. The doctrinal issue centered on whether the DIFC Courts should intervene in the internal cost-allocation decisions of an arbitral tribunal when the losing party characterizes those costs as an illicit contingency fee arrangement. The Court had to balance the principle of minimal judicial interference in arbitration against the mandatory requirement that awards not conflict with the fundamental public policy of the UAE.
How did H.E. Justice Shamlan Al Sawalehi apply the public policy test to the costs award in Loralia Group v Landen Saudi Company?
Justice Al Sawalehi examined the nature of the Applicant's challenge, which sought to invoke the "public policy" exception to prevent the enforcement of the tribunal's decision. The Court scrutinized whether the specific fee structure adopted by the tribunal—which included a portion calculated as 7% of the damages—crossed the threshold of illegality. The Court found that the Applicant’s characterization of the costs award as an impermissible contingency fee did not meet the high bar required to set aside an award on public policy grounds.
The Applicant’s position was summarized as follows:
The Applicant seeks to set aside the Award pursuant to Article 41(2)(b)(iii) of the DIFC Arbitration Law on the grounds that the Award “is in conflict with the public policy of the UAE,” specifically the public policy against contingency fees. Furthermore, the Applicant resists the Respondent’s Cross-Application for enforcement of the Award pursuant to Article 44(1)(b)(vii), claiming also that enforcement of the Award would be “contrary to the public policy of the UAE.”
The Court concluded that the tribunal had acted within its authority and that the costs award was a legitimate exercise of its discretion under the governing rules, thereby rejecting the public policy challenge.
Which specific statutes and rules did the Court apply to resolve the dispute between Loralia Group and Landen Saudi Company?
The Court relied primarily on the DIFC Arbitration Law (DIFC Law No. 1 of 2008). Specifically, the Court addressed:
* Article 41(2)(b)(iii): Regarding the grounds for setting aside an arbitral award on the basis of conflict with UAE public policy.
* Articles 42 and 43: Governing the recognition and enforcement of arbitral awards.
* Article 44(1)(b)(vii): Concerning the refusal of enforcement if the award is contrary to public policy.
* DIFC-LCIA Arbitration Rules: Used to determine the scope of the tribunal’s power to award costs.
How did the Court utilize the procedural history of the arbitration to support its decision to enforce the award?
The Court looked to the procedural history to confirm that the parties had agreed to the DIFC-LCIA rules and that the arbitration had been conducted in accordance with those rules. By referencing the fact that the Respondent had filed for enforcement after the Applicant’s initial challenge, the Court established the procedural legitimacy of the Cross-Application:
The Respondent filed an Acknowledgment of Service on 13 December 2018 stating its intent to defend all of the claim and to cross-claim for recognition and enforcement of the Award.
The Court used this to demonstrate that the Respondent had followed the correct procedural path for seeking recognition, thereby validating the enforcement process under the DIFC Arbitration Law.
What was the final disposition of the Court regarding the monetary relief and costs awarded to Landen Saudi Company?
The Court dismissed the Applicant’s Set Aside Application in its entirety and granted the Respondent’s Cross-Application for recognition and enforcement. The Court ordered the Applicant to pay the full amount of the original award plus costs and interest. The specific breakdown of the costs awarded by the tribunal was:
Costs were awarded to the Respondent in the amount of USD 692,002.66, with USD 514,921.11 calculated on the basis of 7% of the amount awarded to the Respondent (excluding interest and costs).
The Court further ordered that if the Applicant failed to pay the sums within 14 days, the Respondent could proceed with execution. Additionally, the Applicant was ordered to pay the Respondent’s costs of the DIFC Court proceedings.
What are the practical implications of this judgment for practitioners dealing with public policy challenges in DIFC-seated arbitrations?
This judgment reinforces the high threshold required to successfully challenge an arbitral award on public policy grounds in the DIFC. Practitioners should note that the Court is reluctant to re-examine the merits of a tribunal’s cost-allocation decisions, provided those decisions fall within the scope of the governing arbitration rules. The ruling clarifies that characterizing a tribunal’s costs award as a "contingency fee" is unlikely to succeed as a public policy defense if the tribunal acted within its procedural mandate. Litigants must anticipate that the DIFC Courts will prioritize the finality of the arbitral process over attempts to relitigate the reasonableness of specific cost calculations.
Where can I read the full judgment in Loralia Group v Landen Saudi Company [2018] DIFC ARB 004?
The full judgment is available on the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/arbitration/loralia-group-llc-v-landen-saudi-company-2018-difc-arb-004
CDN link: https://littdb.sfo2.cdn.digitaloceanspaces.com/litt/AE/DIFC/judgments/arbitration/DIFC_ARB-004-2018_20200423.txt
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| Landen Saudi Company v Lorelei Media Group LLC | DIFC-LCIA 1678 | The underlying arbitral award subject to the set-aside application. |
Legislation referenced:
- DIFC Arbitration Law, DIFC Law No. 1 of 2008 (Articles 41, 42, 43, 44)
- DIFC-LCIA Arbitration Rules