On 8 August 2021, H.E. Justice Shamlan Al Sawalehi issued a definitive rebuke to a defendant attempting to derail the enforcement of a DIFC-LCIA award. The defendant, Liwanu, had sought to set aside the recognition of the award by claiming that the claimant, Lirit, failed to adhere to mandatory tiered dispute resolution processes prior to the commencement of arbitration. Justice Al Sawalehi dismissed the application in its entirety, finding the defendant’s arguments both conceptually flawed and procedurally barred by the doctrine of waiver.
For arbitration counsel and cross-border litigators, this decision serves as a critical boundary-marker for the interpretation of Article 44(1)(a)(iv) of the DIFC Arbitration Law. By distinguishing between the 'arbitral procedure'—which governs the conduct of the tribunal—and pre-arbitration contractual conditions, the Court has effectively insulated arbitral awards from collateral attacks based on alleged failures in the preliminary stages of dispute resolution. The ruling underscores the high threshold for challenging enforcement and reinforces the DIFC Courts' pro-enforcement stance, signaling that tactical delays disguised as procedural objections will not be tolerated.
How Did the Dispute Between Lirit and Liwanu Arise?
The conflict between Lirit and Liwanu crystallised in the aftermath of a DIFC-LCIA final award issued on 22 December 2020. Having prevailed in the underlying arbitration, Lirit successfully obtained an ex parte order from the DIFC Courts on 5 May 2021, which formally recognised the award and paved the way for its enforcement. Faced with the imminent execution of the arbitral decision, the defendant, Liwanu, launched a collateral attack. Rather than challenging the substantive merits of the tribunal’s findings—a notoriously difficult threshold to meet under the DIFC Arbitration Law—Liwanu applied to the Court to set aside the recognition order entirely.
The analytical framework of Liwanu’s challenge represents a classic, albeit conceptually flawed, attempt to weaponise pre-arbitration contractual conditions as a shield against the enforcement of a final award. The defendant sought to set aside the order enforcing the DIFC-LCIA award by arguing that the claimant had failed to follow mandatory tiered dispute resolution steps prior to initiating the arbitration. Specifically, Liwanu pointed to Articles 26.1 and 26.2 of the underlying commercial agreement, which mandated that any dispute must first be subject to an attempt at amicable settlement by designated senior officers before formal arbitral proceedings could commence.
Liwanu’s legal strategy relied on shoehorning this alleged contractual breach into the narrow enforcement exceptions provided by Article 44(1)(a)(iv) of DIFC Law No. 1 of 2008 (the DIFC Arbitration Law). The core argument was that the claimant’s failure to exhaust the mandatory tiered dispute resolution steps meant that the arbitration itself was procedurally defective. The defendant attempted to link these contractual failures directly to the validity of the arbitral procedure, arguing that the resulting award was fundamentally tainted and therefore unenforceable within the DIFC.
In written submissions, the Defendant summarised Ground 2 in this way: “the parties did not comply with the mandatory tiered process of dispute resolution prior to commencing arbitration… such that the arbitral procedure was not in accordance with the agreement of the parties” (emphasis added).
H.E. Justice Shamlan Al Sawalehi was tasked with dissecting this argument, which conflated the admissibility of a claim—or the jurisdictional prerequisites for commencing arbitration—with the procedural rules governing the arbitration once it was underway. The distinction is not merely semantic; it is foundational to international arbitration practice. If courts were to accept that a failure to hold a pre-arbitration settlement meeting constitutes a defect in the "arbitral procedure" itself, every multi-tiered dispute resolution clause would become a latent landmine, capable of detonating at the enforcement stage long after the parties had fully litigated the merits of their dispute before a tribunal.
Justice Al Sawalehi firmly rejected Liwanu’s premise, drawing a sharp doctrinal line between contractual conditions precedent and the statutory definition of arbitral procedure. The Court clarified that arbitral procedure strictly concerns the manner in which arbitration is conducted—encompassing matters such as the constitution of the tribunal, the exchange of pleadings, the conduct of hearings, and the admission of evidence. It does not extend backward in time to govern the commercial negotiations or settlement efforts that predate the filing of a request for arbitration.
In my judgment, if articles 26.1 and 26.2 of the Agreement had been breached, that is a matter altogether separate from whether the arbitral procedural applied in the Arbitration was in accordance with the agreement of the parties: articles 26.1 and 26.2 do not concern arbitral procedure.
Liwanu also advanced a secondary argument, framed as "Ground 1", asserting that the arbitration’s procedure was not in accordance with the law of the jurisdiction where the arbitration took place, which in this instance was "onshore" Dubai. This argument similarly sought to leverage Article 44(1)(a)(iv) of the DIFC Arbitration Law to block enforcement. However, this approach fundamentally misread the statutory hierarchy embedded within the New York Convention and mirrored in the DIFC Arbitration Law. The statute dictates that the law of the seat is only engaged as a fallback mechanism to assess procedural regularity when the parties have not explicitly agreed upon a set of procedural rules.
As the Claimant has argued, the law of the state or jurisdiction where the arbitration took place can only be engaged under Article 44(1)(a)(iv) of the DIFC Arbitration Law in the absence of an agreement by the parties on arbitral procedure.
Because Lirit and Liwanu had expressly agreed to arbitrate under the DIFC-LCIA rules, they had established a binding agreement on arbitral procedure. Consequently, the procedural laws of onshore Dubai were entirely displaced for the purposes of an Article 44(1)(a)(iv) challenge. The Court noted that this interpretation aligns with global enforcement standards, referencing the UNCITRAL Secretariat Guide, which confirms that courts routinely reject arguments demanding compliance with the procedural law of the seat when the parties have actively chosen alternative institutional rules. The absence of an agreement by the parties is a strict prerequisite for invoking the default law of the seat under this specific enforcement exception.
Beyond the conceptual failure of Liwanu’s primary arguments, the Court identified a fatal procedural barrier to the defendant’s application: the doctrine of waiver. Even if one were to entertain the legal fiction that the pre-arbitration settlement obligations under Articles 26.1 and 26.2 somehow constituted part of the "arbitral procedure," Liwanu had actively participated in the DIFC-LCIA arbitration without raising a timely objection to the tribunal regarding Lirit’s alleged non-compliance. Under Article 25 of the UAE Arbitration Law, a party who proceeds with an arbitration knowing that a provision of the arbitration agreement has not been complied with, and who fails to state an objection without unjustified delay, is deemed to have waived their right to object.
And even if the articles 26.1 and 26.2 obligations were part of the parties’ agreement on arbitral procedure, it is clear that the Defendant waived its right to challenge the Award now on that basis, as the Claimant has contended.
To circumvent the devastating effect of the waiver doctrine, Liwanu attempted to argue that it lacked the requisite knowledge of the breach during the arbitral proceedings. The defendant submitted a witness statement from Mr. Lilast, a senior contracts engineer for Liwanu, who claimed that the company was entirely oblivious to the mandatory tiered dispute resolution process while the arbitration was ongoing. According to the defendant's narrative, the realisation that Lirit had bypassed the amicable settlement phase only dawned on them after the tribunal had issued its final decision.
In the witness statement of Mr Lilast, a senior contracts engineer of the Defendant, made in support of the Application and dated 31 May 2021, and apparently with Article 25 of the UAE Arbitration Law in mind, Mr Lilast stated at [15] that it “was only after the award was published did, we appreciate the requirement under 26.1 had not been complied with by the Claimant [sic].
Justice Al Sawalehi subjected this factual assertion to intense scrutiny and found it wholly unpersuasive. The Court observed that the arbitration clause itself, Article 26.3, explicitly began with the words "Subject to Article 26.1 and 26.2." Furthermore, Lirit had expressly invoked this very clause when commencing the arbitration. For Liwanu to claim that it participated in a lengthy arbitration without ever reading the foundational clause that established the tribunal's jurisdiction defied commercial logic. The Court noted that a party cannot artificially bifurcate its knowledge, claiming ignorance of a contract it co-authored simply because its current legal advisors purportedly discovered the issue belatedly. The assertion that the defendant only appreciated the non-compliance after the award was published was dismissed as a transparent attempt to manufacture a retroactive defense.
It follows, in my judgment, and with respect, that Mr Lilast’s statement that the co-author of the Agreement was unaware of the content of the Arbitration Agreement contained within it, and therefore of articles 26.1 and 26.2, and notwithstanding that this clause had been invoked by the Claimant in commencing the Arbitration, is frankly incredible.
The dismissal of Liwanu’s application reinforces a consistent theme in DIFC jurisprudence: the Court’s profound intolerance for parties who hold procedural objections in reserve as an "insurance policy" against an adverse award. This dynamic closely mirrors the judicial posture seen in ARB-027-2024: ARB 027/2024 Nalani v Netty, where the DIFC Courts similarly penalised post-award procedural obstruction. By strictly enforcing the waiver doctrine and refusing to expand the definition of "arbitral procedure" to include pre-arbitration commercial negotiations, Justice Al Sawalehi protected the finality of the arbitral process. The ruling ensures that parties cannot litigate the merits of a dispute to conclusion, only to cry foul over a missed settlement meeting when the final award does not fall in their favour. Ultimately, the Court reaffirmed that the unsuccessful party pays the successful party its costs, ordering Liwanu to bear the financial burden of its failed, conceptually flawed application on the standard basis.
Why Does the Distinction Between 'Arbitral Procedure' and Contractual Obligations Matter?
The architecture of international arbitration relies heavily on the predictability of enforcement. When a party seeks to resist the enforcement of an award, the grounds available are intentionally narrow, designed to catch fundamental violations of due process or jurisdiction rather than mere contractual breaches. In Lirit v Liwanu, the Defendant attempted to blur this critical boundary by weaponising a standard commercial contract clause against the enforcement framework of the DIFC Arbitration Law. Specifically, Liwanu sought to resist the order that recognised and, subject to the outcome of any set aside application, would enforce the DIFC-LCIA final award by pointing to a missed pre-arbitration settlement meeting.
The Defendant’s strategy hinged on a creative, albeit flawed, interpretation of Article 44(1)(a)(iv) of DIFC Law No. 1 of 2008. This provision, which mirrors Article V(1)(d) of the New York Convention, allows a supervisory court to refuse enforcement if the "arbitral procedure was not in accordance with the agreement of the parties". Liwanu argued that because the underlying contract contained a tiered dispute resolution clause requiring senior officers to attempt amicable settlement before filing for arbitration, the Claimant’s failure to exhaust this step meant the subsequent arbitration was procedurally defective.
The exact framing of the Defendant's objection was captured by H.E. Justice Shamlan Al Sawalehi:
The Defendant argued that, in breach of the Agreement’s dispute resolution provisions, the parties failed to attempt to settle their dispute according to a mandatory tiered process prior to commencing arbitration, such that the arbitral procedure was not in accordance with the agreement of the parties for the purposes of Article 44(1)(a)(iv) of the DIFC Arbitration Law.
To understand why the Court rejected this argument, one must examine the fundamental difference between a contractual covenant and an arbitral procedure. Tiered dispute resolution clauses—often referred to as escalation clauses—are common in complex commercial agreements, particularly in construction and joint venture contracts. They typically require parties to engage in negotiation, mediation, or executive-level meetings before initiating formal proceedings. These obligations are entirely contractual. They dictate what the parties must do before the jurisdiction of an arbitral tribunal is invoked.
Arbitral procedure, conversely, governs the mechanics of the arbitration itself once it has commenced. It encompasses the rules of evidence, the constitution of the tribunal, the timetable for pleadings, and the conduct of the final hearing. Conflating the two concepts poses a severe threat to the integrity of the arbitral process. If a failure to hold a preliminary settlement meeting were classified as a defect in "arbitral procedure," every enforcement action could devolve into a protracted evidentiary dispute over whether pre-arbitration negotiations were sufficiently "amicable" or whether the correct "senior officers" attended the meetings.
H.E. Justice Shamlan Al Sawalehi recognised this danger and drew a definitive doctrinal line, isolating the contractual obligations found in articles 25 and 26 of the Agreement from the procedural conduct of the arbitration:
In my judgment, if articles 26.1 and 26.2 of the Agreement had been breached, that is a matter altogether separate from whether the arbitral procedural applied in the Arbitration was in accordance with the agreement of the parties: articles 26.1 and 26.2 do not concern arbitral procedure.
This narrow interpretation is essential for maintaining the efficacy of the DIFC as a pro-enforcement jurisdiction. By strictly defining arbitral procedure, the Court prevents award debtors from retrofitting contractual breaches into statutory grounds for refusal. The ruling aligns with a broader judicial philosophy within the DIFC Courts that heavily penalises procedural gamesmanship, a theme similarly explored in ARB-027-2024: ARB 027/2024 Nalani v Netty, where the limits of arbitration appeals were starkly defined against obstructive tactics.
The Defendant's attempt to recharacterise the breach was further undermined by its own written submissions, which inadvertently highlighted the chronological flaw in its argument. As the Court noted:
In written submissions, the Defendant summarised Ground 2 in this way: “the parties did not comply with the mandatory tiered process of dispute resolution
prior to
commencing arbitration… such that the arbitral procedure was not in accordance with the agreement of the parties” (emphasis added).
The phrase "prior to commencing arbitration" is fatal to the Defendant's position. An event that occurs—or fails to occur—before the arbitration even exists cannot logically constitute the procedure of that arbitration. If a party believes a claimant has jumped the gun by ignoring a mandatory tiered process prior to commencing arbitration, the correct legal mechanism is to raise an objection to the admissibility of the claims before the arbitral tribunal at the earliest opportunity. The tribunal can then decide whether to stay the proceedings to allow the contractual steps to be fulfilled or to dismiss the claims as premature.
What a party cannot do is remain silent, participate fully in the arbitration, await the final award, and then ambush the enforcement proceedings with a complaint about a missed pre-arbitration meeting. This brings the analysis to the Court's secondary, yet equally devastating, ground for dismissing the Defendant's application: the doctrine of waiver.
Even if one were to entertain the conceptual fiction that pre-arbitration settlement obligations formed part of the agreed arbitral procedure, the Defendant's conduct throughout the DIFC-LCIA proceedings stripped it of any right to complain. The Court was unequivocal on this point:
And even if the articles 26.1 and 26.2 obligations were part of the parties’ agreement on arbitral procedure, it is clear that the Defendant waived its right to challenge the Award now on that basis, as the Claimant has contended.
The factual matrix surrounding the waiver reveals the often cynical nature of post-award challenges. The Defendant attempted to excuse its failure to raise the tiered dispute resolution clause during the arbitration by claiming ignorance. A senior contracts engineer for the Defendant submitted a witness statement asserting that the company only realised the Claimant had bypassed the amicable settlement requirement after the final award was published.
H.E. Justice Shamlan Al Sawalehi gave this excuse exactly the weight it deserved. The Court observed that the Defendant was a co-author of the very agreement containing the arbitration clause. To suggest that a sophisticated commercial entity, engaged in high-stakes arbitration, was unaware of the dispute resolution mechanics it had drafted itself stretches credulity past the breaking point. The judge dismissed the engineer's assertion as frankly incredible, cementing the view that the Defendant's challenge was an opportunistic afterthought rather than a genuine grievance about procedural fairness.
The strict demarcation between contractual preconditions and arbitral procedure serves a vital gatekeeping function. It forces parties to litigate admissibility and jurisdictional issues in the proper forum—before the arbitral tribunal—rather than hoarding them as insurance policies against an adverse award. If the DIFC Courts were to adopt a broader, more porous definition of "arbitral procedure," it would invite endless challenges to enforcement, effectively transforming the supervisory court into an appellate body tasked with auditing every step of the parties' pre-dispute relationship.
By confining the definition of arbitral procedure to the actual conduct of the arbitration, Lirit v Liwanu reinforces the finality of arbitral awards. It sends a clear message to practitioners and commercial parties operating within the jurisdiction: the enforcement stage is not a venue for resurrecting waived contractual arguments. The integrity of the arbitral process depends on courts respecting the boundaries of their supervisory role, ensuring that the New York Convention grounds for refusal remain a narrow exception rather than a routine strategy for delaying payment.
How Did Justice Al Sawalehi Address the 'Onshore' Law Argument?
The defendant’s strategy to resist enforcement in Lirit v Liwanu hinged on a bifurcated, yet ultimately self-defeating, attack on the arbitral procedure. Liwanu’s primary line of defense—categorized in the judgment as "Ground 1"—attempted to import the procedural requirements of “onshore” Dubai into the DIFC enforcement framework. By arguing that the arbitration was not conducted in accordance with the law of the jurisdiction where the arbitration took place, Liwanu sought to leverage the strict, often formalistic procedural hurdles characteristic of onshore UAE arbitration practice to invalidate a DIFC-LCIA award.
This maneuver required the Court to interpret the precise mechanics of Article 44(1)(a)(iv) of DIFC Law No. 1 of 2008 (the DIFC Arbitration Law). The provision mirrors Article V(1)(d) of the New York Convention, establishing the grounds upon which recognition or enforcement of an arbitral award may be refused. Specifically, it allows refusal if the party against whom the award is invoked proves that the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the State or jurisdiction where the arbitration took place.
Liwanu’s reliance on the second limb of this provision—the law of the seat—fundamentally misapprehended the hierarchical nature of the statutory test. The architecture of Article 44(1)(a)(iv) enshrines party autonomy as the paramount consideration. The lex arbitri or curial law of the seat functions strictly as a default mechanism, activated only when the parties have failed to stipulate their own procedural rules. H.E. Justice Shamlan Al Sawalehi identified this doctrinal flaw immediately, dismantling the defendant's attempt to bypass the parties' agreed framework.
As the Claimant has argued, the law of the state or jurisdiction where the arbitration took place can only be engaged under Article 44(1)(a)(iv) of the DIFC Arbitration Law in the absence of an agreement by the parties on arbitral procedure.
The fatal contradiction in Liwanu’s position was exposed by its own secondary argument. In "Ground 2", the defendant asserted that the claimant had breached the specific dispute resolution provisions contained within Articles 25 and 26 of their underlying contract. By invoking these contractual clauses to argue that a mandatory tiered dispute resolution process had been ignored, Liwanu explicitly acknowledged the existence of an agreement between the parties regarding how disputes should be handled.
In written submissions, the Defendant summarised Ground 2 in this way: “the parties did not comply with the mandatory tiered process of dispute resolution prior to commencing arbitration… such that the arbitral procedure was not in accordance with the agreement of the parties” (emphasis added).
Justice Al Sawalehi seized upon this logical inconsistency. The Court noted that Ground 2 was entirely premised on the fact that the parties did have an agreement. Because the first limb of Article 44(1)(a)(iv) was satisfied by the existence of this agreement, the second limb—the fallback to the law of the seat—was legally inaccessible. The Court ruled that onshore Dubai’s law could not be engaged, rendering Ground 1 conceptually void from the outset. The absence of an agreement by the parties is a strict condition precedent for invoking the procedural law of the seat under the DIFC Arbitration Law, a threshold Liwanu could not cross while simultaneously wielding the contract's dispute resolution clause as a weapon.
To fortify this strict reading of the statute, Justice Al Sawalehi looked beyond domestic precedent, anchoring his reasoning in international arbitration norms. The judgment explicitly references the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. By citing the Guide's commentary on Article V(1)(d) of the New York Convention, the Court aligned the DIFC's enforcement regime with global consensus. The Guide confirms that courts internationally routinely reject arguments attempting to impose the procedural law of the seat when the parties have expressly agreed on alternative procedural rules. This alignment reinforces the DIFC's reputation as a jurisdiction that fiercely protects arbitral autonomy against unwarranted domestic interference, a trajectory well-documented in foundational cases like ARB-001-2014: (1) Fiske (2) Firmin v (1) Firuzeh.
Having dispatched the onshore law argument, the Court was left to address the substance of Ground 2: the assertion that the failure to engage in a mandatory tiered process prior to arbitration constituted a breach of the agreed "arbitral procedure." Liwanu argued that Article 26.1 of the Agreement required senior officers to attempt an amicable settlement before arbitration could commence. Because Lirit allegedly bypassed this step, Liwanu contended the resulting arbitration was procedurally defective under Article 44(1)(a)(iv).
This argument required the Court to define the temporal and conceptual boundaries of "arbitral procedure." Does a contractual obligation to negotiate before initiating arbitration form part of the arbitral procedure itself? Justice Al Sawalehi provided a definitive negative answer, drawing a sharp distinction between pre-arbitral contractual obligations and the procedural rules governing the arbitration once commenced.
In my judgment, if articles 26.1 and 26.2 of the Agreement had been breached, that is a matter altogether separate from whether the arbitral procedural applied in the Arbitration was in accordance with the agreement of the parties: articles 26.1 and 26.2 do not concern arbitral procedure.
By classifying the tiered dispute resolution steps as a matter altogether separate from arbitral procedure, the Court effectively insulated the enforcement process from collateral attacks based on pre-action conduct. A breach of a negotiation clause might give rise to a separate claim for breach of contract, or potentially impact the tribunal's jurisdiction if framed as a condition precedent to the agreement to arbitrate, but it cannot be retrofitted into a procedural challenge under Article 44(1)(a)(iv) at the enforcement stage.
The underlying contract in this dispute contained a governing law clause (Article 25.1) stipulating the Laws of the United Arab Emirates applicable in the Emirate of Dubai. Liwanu’s attempt to conflate the substantive governing law of the contract with the procedural law governing the arbitration is a common tactic deployed by award debtors seeking to exploit the perceived rigidities of onshore UAE law. Justice Al Sawalehi’s ruling systematically dismantles this tactic. The judgment clarifies that an agreement to be bound by onshore substantive law does not implicitly import onshore procedural law into an arbitration, especially when the parties have adopted institutional rules (such as the DIFC-LCIA rules) that provide a comprehensive procedural framework.
The rejection of the onshore law argument in Lirit v Liwanu serves as a critical boundary marker for practitioners navigating enforcement in the DIFC. It confirms that the DIFC Courts will not permit parties to selectively invoke the law of the seat to undermine an award when an agreed procedural framework exists. Furthermore, it clarifies that the statutory grounds for refusing enforcement are to be construed narrowly, preventing the expansion of "arbitral procedure" to encompass pre-arbitration commercial negotiations. This strict adherence to the text of the DIFC Arbitration Law and the New York Convention ensures that the DIFC remains a predictable and robust jurisdiction for the recognition of arbitral awards, free from the procedural unpredictability that award debtors often attempt to introduce via onshore legal arguments.
What Role Did the Doctrine of Waiver Play in the Court's Decision?
While H.E. Justice Shamlan Al Sawalehi’s primary holding dismantled the conceptual premise that pre-arbitration negotiation tiers constitute "arbitral procedure," the Court deployed a secondary, equally fatal mechanism to dismiss the defendant’s application: the doctrine of waiver. In international commercial arbitration, waiver acts as a strict procedural safeguard against opportunistic litigation strategies. It prevents a party from participating in an arbitral proceeding, keeping a known procedural defect in reserve, and only deploying that defect to challenge the award if the tribunal’s final decision is unfavorable. In Lirit v Liwanu, the defendant’s attempt to set aside the order that recognised and, subject to the outcome of the application, enforced the DIFC-LCIA award, collided directly with this fundamental principle.
The defendant’s core grievance rested on the assertion that the claimant bypassed a mandatory tiered process prior to commencing arbitration. However, Liwanu did not raise this objection at the outset of the DIFC-LCIA proceedings. Instead, the defendant participated fully in the arbitration. Pleadings were exchanged, evidence was submitted, and the tribunal was permitted to expend considerable time and resources adjudicating the substantive merits of the dispute. Only after the final award was issued on 22 December 2020, and enforcement proceedings were initiated in the DIFC Courts, did Liwanu suddenly discover the alleged procedural irregularity.
The Court viewed this timeline with intense skepticism, anchoring its analysis in the statutory framework of waiver. Justice Al Sawalehi established a robust dual-layered defense of the award. Even if one were to entertain the defendant's flawed premise that pre-arbitration negotiations fall under the umbrella of arbitral procedure, the failure to object contemporaneously cured the defect entirely:
And even if the articles 26.1 and 26.2 obligations were part of the parties’ agreement on arbitral procedure, it is clear that the Defendant waived its right to challenge the Award now on that basis, as the Claimant has contended.
To circumvent the strictures of waiver—specifically under Article 25 of the UAE Arbitration Law (Federal Law No. 6 of 2018), which bars challenges where a party proceeds with arbitration without objecting to a known non-compliance without undue delay—Liwanu was forced to adopt an extreme factual posture. The defendant had to argue that it simply did not know about the mandatory negotiation clause during the arbitration. To support this narrative, Liwanu relied on the testimony of its own personnel.
In the witness statement of Mr Lilast, a senior contracts engineer of the Defendant, made in support of the Application and dated 31 May 2021, and apparently with Article 25 of the UAE Arbitration Law in mind, Mr Lilast stated at [15] that it “was only after the award was published did, we appreciate the requirement under 26.1 had not been complied with by the Claimant [sic].
This assertion required the Court to accept that a sophisticated corporate entity, engaged in high-stakes commercial arbitration, remained entirely ignorant of the dispute resolution mechanics embedded within its own contract until after it had lost the case. The evidentiary burden of proving such profound corporate amnesia is exceptionally high, particularly when the clauses in question are prominently featured under headings such as Article 25. Law Governing Agreement and Article 26.
Justice Al Sawalehi scrutinized the origins of the underlying contract to test the veracity of Mr. Lilast’s statement. The factual matrix revealed that Liwanu was not merely a passive signatory to a standard-form agreement; the defendant was a co-author of the contract. The notion that the very party who helped draft the requirement to attempt to settle the Dispute amicably was unaware of its existence during a subsequent arbitration stretched the limits of judicial credulity. The Court delivered a definitive and severe rebuke to this line of defense:
It follows, in my judgment, and with respect, that Mr Lilast’s statement that the co-author of the Agreement was unaware of the content of the Arbitration Agreement contained within it, and therefore of articles 26.1 and 26.2, and notwithstanding that this clause had been invoked by the Claimant in commencing the Arbitration, is frankly incredible.
The characterization of the defendant's evidence as "frankly incredible" serves as a stark warning to practitioners litigating before the DIFC Courts. Manufactured ignorance cannot be retrofitted as a shield against the doctrine of waiver. Corporate parties are strictly imputed with the knowledge of the contracts they draft, sign, and subsequently litigate. When a claimant invokes a specific contractual mechanism to commence arbitration, the respondent is immediately put on notice of the entirety of that dispute resolution framework.
Furthermore, the Court refused to allow Liwanu to sever its own purported lack of knowledge from the knowledge of the legal counsel who represented it during the arbitration. A party cannot reset the clock on procedural objections by changing law firms or claiming a disconnect between internal corporate officers and external advisors. The agency principle in arbitration dictates that the knowledge of the counsel is binding upon the client.
The Defendant has not shown why its previous advisors’ knowledge of the article 26.1 requirement should be considered distinct from its own knowledge thereof at the relevant time for the purposes of Article 25 of the UAE Arbitration Law.
By dismantling the artificial distinction between the client's knowledge and the advisors' knowledge, Justice Al Sawalehi closed a potential loophole that recalcitrant award debtors frequently attempt to exploit. If the previous advisors knew, or ought reasonably to have known, about the pre-arbitration tier, that knowledge triggered the obligation to object promptly under Article 25. The failure of those advisors to raise the issue constitutes a binding waiver on behalf of Liwanu.
This strict application of the waiver doctrine aligns seamlessly with the DIFC Courts' broader intolerance for procedural obstruction and strategic gamesmanship. The jurisdiction has consistently penalized parties who attempt to derail enforcement through late-stage procedural ambushes, a doctrinal trajectory similarly explored in ARB 027/2024 Nalani v Netty. The underlying policy imperative is clear: arbitration is designed to be an efficient, final, and binding method of dispute resolution. Permitting a party to hoard jurisdictional or procedural objections transforms the arbitral process into a mere dry run, undermining the finality of the award and inflating the costs of enforcement.
Liwanu’s reliance on Article 44(1)(a)(iv) of the DIFC Arbitration Law, arguing that the arbitral procedure was not in accordance with the agreement of the parties, was ultimately neutralized by its own conduct. By participating in the arbitration without objection, the "agreement" of the parties effectively evolved. The mutual participation in the DIFC-LCIA proceedings constituted an implicit agreement to dispense with the bypassed amicable settlement tier. The doctrine of waiver ensures that the definition of the parties' procedural agreement is not frozen at the moment of contract execution, but is dynamically shaped by their subsequent conduct before the tribunal.
Ultimately, the Court's handling of the waiver issue in Lirit v Liwanu provides a critical lesson in arbitral strategy. Jurisdictional and procedural objections are perishable assets. They must be deployed at the earliest possible opportunity before the arbitral tribunal. Attempting to resurrect a waived objection at the enforcement stage before the DIFC Courts will not only fail, but will likely invite judicial condemnation of the underlying evidence as "frankly incredible," cementing the enforcing court's mandate to uphold the integrity of the arbitral process.
How Does the DIFC Approach Compare to International Standards?
The New York Convention’s Article V(1)(d) serves as the bedrock of international enforcement defenses regarding procedural irregularities, allowing a party to resist recognition if the arbitral procedure diverged from the parties' agreement. In the Dubai International Financial Centre, this international standard is codified verbatim in Article 44(1)(a)(iv) of DIFC Law No. 1 of 2008. However, the precise boundaries of what constitutes "arbitral procedure" remain a frequent battleground in cross-border disputes. Defendants routinely attempt to stretch this definition to encompass pre-arbitration contractual obligations, seeking to weaponize multi-tiered dispute resolution clauses as a shield against enforcement.
In Lirit v Liwanu, the defendant attempted exactly this maneuver. Liwanu argued that the claimant’s failure to engage in a mandatory tiered dispute resolution process—specifically, amicable settlement meetings between senior officers—vitiated the arbitral procedure itself. The defendant's strategy relied on conflating the contractual prerequisites to arbitration with the procedural rules governing the tribunal's mandate.
The Defendant argued that, in breach of the Agreement’s dispute resolution provisions, the parties failed to attempt to settle their dispute according to a mandatory tiered process prior to commencing arbitration, such that the arbitral procedure was not in accordance with the agreement of the parties for the purposes of Article 44(1)(a)(iv) of the DIFC Arbitration Law.
This argument touches upon a highly debated area in international commercial arbitration: the legal nature of escalation clauses. Are they conditions precedent to jurisdiction, or merely contractual obligations whose breach sounds in damages but does not invalidate the tribunal's authority? By framing the alleged breach as a defect in the arbitral procedure, Liwanu sought to bypass the complex jurisdictional debate entirely and attack the award directly at the enforcement stage. To support this, the defendant relied heavily on the specific phrasing of its objection, attempting to bridge the temporal gap between pre-arbitration negotiations and the arbitration itself.
In written submissions, the Defendant summarised Ground 2 in this way: “the parties did not comply with the mandatory tiered process of dispute resolution
prior to
commencing arbitration… such that the arbitral procedure was not in accordance with the agreement of the parties” (emphasis added).
H.E. Justice Shamlan Al Sawalehi’s response was unequivocal and firmly rooted in the prevailing international consensus favoring the finality of awards. He drew a sharp, impenetrable distinction between the procedural rules governing the arbitration and the contractual steps preceding it.
In my judgment, if articles 26.1 and 26.2 of the Agreement had been breached, that is a matter altogether separate from whether the arbitral procedural applied in the Arbitration was in accordance with the agreement of the parties: articles 26.1 and 26.2 do not concern arbitral procedure.
This strict demarcation is vital for preventing the over-judicialization of the arbitral process. If enforcement courts were required to scrutinize pre-arbitration correspondence to determine if parties had sufficiently engaged in a first attempt to settle the Dispute amicably before filing a Request for Arbitration, the efficiency of the New York Convention framework would be severely compromised. Courts would be forced to conduct mini-trials on the adequacy of commercial negotiations, entirely defeating the purpose of choosing arbitration for streamlined dispute resolution.
The DIFC Court's refusal to conflate pre-arbitration contractual obligations with the lex arbitri aligns seamlessly with the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The judgment explicitly references this Guide to demonstrate how courts globally handle conflicts between agreed procedures and statutory defaults. Justice Al Sawalehi observed that international courts have rejected arguments that… the procedure did not comply with the law of the place of the arbitration where the parties had agreed on other procedural rules. This reliance on UNCITRAL materials underscores the DIFC Court's commitment to interpreting its arbitration law in harmony with global jurisprudence, rather than developing an idiosyncratic or overly interventionist local standard.
The strategic deployment of procedural objections at the enforcement stage is a known hazard in cross-border disputes. As demonstrated in related jurisprudence such as ARB-027-2024: ARB 027/2024 Nalani v Netty, the DIFC Courts have consistently penalized parties who attempt to re-litigate procedural grievances after an award is rendered. In Lirit v Liwanu, the defendant's strategy was particularly flawed because it involved a failure to raise the objection during the arbitration itself. The concept of waiver is fundamental to international arbitration standards. A party cannot participate in an arbitration, wait to see if the outcome is favorable, and then deploy a known procedural defect to resist enforcement.
Justice Al Sawalehi addressed this secondary pillar of international arbitration practice directly, applying the waiver principles embedded in the UAE Arbitration Law to foreclose the defendant's challenge even if the primary doctrinal argument had succeeded.
And even if the articles 26.1 and 26.2 obligations were part of the parties’ agreement on arbitral procedure, it is clear that the Defendant waived its right to challenge the Award now on that basis, as the Claimant has contended.
Liwanu attempted to circumvent the waiver doctrine by claiming total ignorance of the contractual prerequisite. A senior contracts engineer for the defendant submitted a witness statement asserting that the company only realized the claimant had not complied with the amicable settlement requirement after the final award was published. The Court found this assertion factually unsupportable and legally irrelevant, noting that the defendant's previous legal advisors were fully aware of the contractual terms during the arbitration. The Court's dismissal of this manufactured ignorance was scathing.
It follows, in my judgment, and with respect, that Mr Lilast’s statement that the co-author of the Agreement was unaware of the content of the Arbitration Agreement contained within it, and therefore of articles 26.1 and 26.2, and notwithstanding that this clause had been invoked by the Claimant in commencing the Arbitration, is frankly incredible.
By holding the defendant to the knowledge of its advisors and enforcing the waiver, the DIFC Court reinforces the international standard that procedural objections must be raised promptly before the tribunal. The failure to do so constitutes a binding waiver under Article 25 of the UAE Arbitration Law. This strict approach to waiver is essential for maintaining the efficacy of arbitration as a binding dispute resolution mechanism. It prevents the "keep it in the back pocket" strategy that sophisticated commercial parties sometimes employ to derail enforcement if the substantive outcome goes against them.
Furthermore, the Court's handling of the defendant's alternative argument illustrates a sophisticated understanding of the hierarchy of procedural rules in international arbitration. Liwanu argued that the procedure was not in accordance with the law of the jurisdiction where the arbitration took place, namely onshore Dubai. However, Article 44(1)(a)(iv) of the DIFC Arbitration Law only engages the law of the seat in the absence of an agreement by the parties on arbitral procedure. Because the parties had agreed to institutional rules—specifically the DIFC-LCIA Rules—the default application of onshore procedural law was entirely displaced.
This ruling protects party autonomy, a cornerstone of the New York Convention. When commercial actors select institutional rules, they expect those rules to govern the proceedings, insulated from the default procedural laws of the seat unless mandatory public policy provisions are violated. By swiftly dismissing the attempt to import onshore procedural requirements into an institutional arbitration, Justice Al Sawalehi affirmed that the DIFC Courts will not allow the supervisory law of the seat to override the parties' express procedural agreements during enforcement proceedings. The decision cements the DIFC's reputation as a jurisdiction that rigorously applies international standards, prioritizing the finality of arbitral awards and rejecting creative but conceptually flawed attempts to expand the grounds for refusal under the New York Convention framework.
Which Earlier DIFC Cases Frame This Decision?
The jurisprudence of the Dubai International Financial Centre (DIFC) Courts has long been defined by a rigorous defense of arbitral finality and a strict interpretation of the statutory grounds available to resist enforcement. H.E. Justice Shamlan Al Sawalehi’s ruling in Lirit v Liwanu [2021] DIFC ARB 011 does not emerge in a vacuum; rather, it represents the maturation of a doctrinal framework designed to insulate valid arbitral awards from creative, post-hoc procedural attacks. By systematically dismantling the defendant’s attempt to conflate pre-arbitration contractual obligations with the statutory definition of "arbitral procedure," the Court reinforced the high threshold required to successfully challenge an award under DIFC Law No. 1 of 2008 (the DIFC Arbitration Law).
To understand the gravity of the Court's approach in Lirit, one must look to the foundational precedents that established the DIFC as a premier, pro-enforcement jurisdiction. The DIFC Courts’ willingness to act as a robust conduit for enforcement was famously cemented in ARB-003-2013: Banyan Tree Corporate PTE Ltd v Meydan Group LLC [2013] DIFC ARB 003. That landmark decision signaled to the international commercial community that the DIFC would not entertain jurisdictional gymnastics designed to evade liability. Building upon that foundation, cases such as ARB-001-2014: (1) Fiske (2) Firmin v (1) Firuzeh established a powerful constitutional shield around the autonomy of the arbitral process, strictly limiting judicial intervention to the narrow grounds explicitly codified in the DIFC Arbitration Law.
In Lirit, the defendant, Liwanu, sought to bypass this established shield by weaponizing Article 44(1)(a)(iv) of the DIFC Arbitration Law. Liwanu advanced two primary arguments to set aside the order recognizing the DIFC-LCIA award. First, under "Ground 1," the defendant asserted that the arbitration's procedure failed to comply with the law of the jurisdiction where the arbitration took place, which in this instance was onshore Dubai. Second, under "Ground 2," Liwanu argued that the arbitral procedure was not in accordance with the agreement of the parties. The factual basis for Ground 2 rested on the claimant’s alleged failure to exhaust a mandatory tiered process prior to commencing arbitration, specifically the requirement under Article 26.1 of their Agreement to attempt amicable settlement between designated senior officers.
Justice Al Sawalehi’s treatment of Ground 1 reflects a strict adherence to the statutory text and international arbitration norms. Article 44(1)(a)(iv) permits refusal of enforcement if the arbitral procedure was not in accordance with the agreement of the parties, or, in the absence of agreement, was not in accordance with the law of the seat. Because the parties had expressly agreed on procedural rules—a fact Liwanu itself relied upon for Ground 2—the default application of onshore Dubai law was never triggered. To fortify this reading, the Court looked beyond domestic precedent, citing the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. By aligning the DIFC’s interpretation with global standards—specifically noting that courts routinely reject arguments demanding compliance with the law of the seat when parties have agreed on other procedural rules—the judgment reinforces the DIFC’s status as a predictable, internationally integrated forum.
However, it is the Court’s disposal of Ground 2 that provides the most significant doctrinal contribution, drawing a hard conceptual line between contractual conditions precedent and the mechanics of the arbitration itself. Liwanu attempted to stretch the definition of "arbitral procedure" to encompass the pre-arbitration negotiation phase. If accepted, this interpretation would have created a massive loophole, allowing losing parties to comb through years of pre-dispute correspondence to find minor deviations from tiered resolution clauses, thereby manufacturing grounds for set-aside. Justice Al Sawalehi firmly rejected this conflation:
In my judgment, if articles 26.1 and 26.2 of the Agreement had been breached, that is a matter altogether separate from whether the arbitral procedural applied in the Arbitration was in accordance with the agreement of the parties: articles 26.1 and 26.2 do not concern arbitral procedure.
This distinction is vital for practitioners navigating complex construction or commercial contracts in the region, which frequently feature multi-tiered dispute resolution clauses. The ruling clarifies that while a failure to negotiate amicably might constitute a breach of contract—potentially sounding in damages or impacting costs—it does not infect the structural integrity of the subsequent arbitral procedure. The tribunal’s mandate and the procedural rules governing the hearing remain distinct from the commercial posturing that precedes the filing of a Notice of Arbitration.
Beyond statutory interpretation, the decision serves as a severe warning against procedural obstructionism, particularly regarding the doctrine of waiver. Even if one were to entertain the flawed premise that pre-arbitration negotiations formed part of the "arbitral procedure," Liwanu’s challenge was fatally undermined by its own conduct during the arbitration. Under Article 25 of the UAE Arbitration Law, a party that proceeds with an arbitration without stating a timely objection to a procedural non-compliance is deemed to have waived its right to object.
To circumvent this waiver, Liwanu deployed a highly questionable evidentiary strategy. The defendant submitted a witness statement from Mr. Lilast, a senior contracts engineer, who claimed that the company only realized the claimant had failed to comply with the Article 26.1 requirement after the final award was published. This assertion required the Court to believe that a sophisticated commercial entity, actively participating in a DIFC-LCIA arbitration, was entirely ignorant of the very dispute resolution clause contained within its own contract—a contract that the claimant had explicitly invoked to commence the proceedings. Justice Al Sawalehi’s response was unequivocal in its skepticism:
It follows, in my judgment, and with respect, that Mr Lilast’s statement that the co-author of the Agreement was unaware of the content of the Arbitration Agreement contained within it, and therefore of articles 26.1 and 26.2, and notwithstanding that this clause had been invoked by the Claimant in commencing the Arbitration, is frankly incredible.
The use of the word "incredible" by a DIFC judge is a stark indicator of the Court's intolerance for bad-faith litigation tactics. It underscores a fundamental principle of arbitral practice: parties bear the responsibility for knowing their own contracts and raising jurisdictional or procedural objections at the earliest possible juncture. The DIFC Courts will not allow a party to keep a perceived procedural defect in its back pocket, participate fully in the merits of the dispute, and then deploy the defect only after receiving an unfavorable award. Such behavior strikes at the heart of arbitral efficiency and finality.
Ultimately, the fact that the Application was dismissed in its entirety, with the defendant ordered to pay the claimant's costs on the standard basis, sends a clear economic signal. The DIFC Courts continue to penalize conceptual overreach and evidentiary implausibility. Lirit v Liwanu stands as a testament to the jurisdiction's maturing jurisprudence, where the broad pro-enforcement principles established in earlier landmark cases are now being applied with surgical precision to shut down highly specific, technical attempts to derail the recognition of valid arbitral awards.
What Does This Mean for Practitioners and Enforcement Strategies?
The enforcement phase of an arbitral award is frequently treated by unsuccessful respondents as a second bite at the apple, an opportunity to comb through the procedural history of the dispute for any misstep that might justify resisting recognition. In Lirit v Liwanu [2021] DIFC ARB 011, the Defendant attempted precisely this strategy, seeking to set aside an order that recognised and, subject to the outcome of the application, would enforce a DIFC-LCIA final award. The tactical maneuver relied on a strict interpretation of a tiered dispute resolution clause, arguing that the Claimant’s failure to engage in amicable settlement negotiations prior to arbitration fatally tainted the proceedings. H.E. Justice Shamlan Al Sawalehi’s dismissal of this application provides a masterclass in the limits of post-award procedural challenges, establishing clear boundaries for what constitutes "arbitral procedure" and strictly enforcing the doctrine of waiver.
For counsel advising clients on cross-border enforcement within the Dubai International Financial Centre, the judgment dictates a fundamental shift in how pre-arbitration conditions are categorized and litigated. The Defendant’s primary attack vector was grounded in Article 44(1)(a)(iv) of DIFC Law No. 1 of 2008 (the DIFC Arbitration Law). The Defendant asserted that because the parties did not attempt to settle the Dispute amicably between senior officers as required by Article 26.1 of their agreement, the resulting arbitration was procedurally defective.
The Defendant argued that, in breach of the Agreement’s dispute resolution provisions, the parties failed to attempt to settle their dispute according to a mandatory tiered process prior to commencing arbitration, such that the arbitral procedure was not in accordance with the agreement of the parties for the purposes of Article 44(1)(a)(iv) of the DIFC Arbitration Law.
This argument conflates substantive contractual obligations with the procedural mechanics of the arbitration itself. Justice Al Sawalehi systematically dismantled this conflation, drawing a hard line between the steps required to trigger an arbitration agreement and the rules governing the conduct of the arbitration once commenced. Pre-arbitration conditions—such as cooling-off periods, mandatory mediation, or executive negotiation tiers—are contractual conditions precedent. They are not rules of arbitral procedure. If a claimant breaches a tiered dispute resolution clause, the respondent’s remedy is to raise a jurisdictional objection before the arbitral tribunal at the very outset of the proceedings, or potentially to seek damages for breach of contract. It is not a valid ground to resist enforcement under the guise of a procedural defect.
In my judgment, if articles 26.1 and 26.2 of the Agreement had been breached, that is a matter altogether separate from whether the arbitral procedural applied in the Arbitration was in accordance with the agreement of the parties: articles 26.1 and 26.2 do not concern arbitral procedure.
By categorizing tiered clauses as substantive rather than procedural, the DIFC Courts insulate arbitral awards from a common species of enforcement ambush. Counsel must recognize that Article 44(1)(a)(iv) is a narrow gateway. It is designed to police deviations from agreed procedural rules—such as the LCIA Rules or specific evidentiary protocols adopted by the parties—not to relitigate whether the claimant properly exhausted pre-action correspondence.
The Defendant’s secondary argument further exposed the perils of misunderstanding the hierarchy of procedural laws in international arbitration. Liwanu contended that the arbitral procedure was not in accordance with the agreement of the parties, and alternatively, that it failed to comply with the law of onshore Dubai, which it claimed was the jurisdiction where the arbitration took place. This argument fundamentally misreads the statutory text. Justice Al Sawalehi clarified that the law of the state or jurisdiction where the arbitration took place is only relevant under Article 44(1)(a)(iv) if the parties have not agreed on an arbitral procedure. Because the parties had agreed to institutional rules, the default application of the seat's procedural law was displaced.
To fortify this reading, the Court looked to international consensus, specifically citing the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Guide confirms that courts routinely reject arguments demanding compliance with the procedural law of the seat when the parties have expressly adopted other procedural rules. For practitioners, the directive is absolute: when drafting arbitration clauses, the selection of institutional rules will override the default procedural statutes of the seat, and attempting to resurrect those default statutes at the enforcement stage will fail.
Beyond the conceptual classification of tiered clauses, the judgment delivers a severe warning regarding the doctrine of waiver. Even if one were to entertain the fiction that pre-arbitration negotiations constitute "arbitral procedure," Liwanu’s challenge was doomed by its own conduct during the arbitration. The Defendant participated fully in the DIFC-LCIA proceedings, defending the claims on their merits, only to raise the alleged failure to negotiate amicably after the final award was published against them.
And even if the articles 26.1 and 26.2 obligations were part of the parties’ agreement on arbitral procedure, it is clear that the Defendant waived its right to challenge the Award now on that basis, as the Claimant has contended.
The mechanics of waiver in this context are governed by Article 25 of the UAE Arbitration Law (Federal Law No. 6 of 2018), which requires parties to object to procedural irregularities promptly. To circumvent this, the Defendant deployed a highly unorthodox factual defense: it claimed actual ignorance of its own contract. A senior contracts engineer for the Defendant submitted a witness statement asserting that the company only appreciated the requirement for amicable settlement under Article 26.1 after the award was published.
Justice Al Sawalehi’s reaction to this defense illustrates the evidentiary threshold required to overcome a waiver. The Court noted that the Defendant had co-authored the underlying agreement and that its previous legal advisors were fully aware of the clause. The attempt to bifurcate the knowledge of the company’s current officers from the knowledge of its prior counsel and its own drafting history was rejected outright.
It follows, in my judgment, and with respect, that Mr Lilast’s statement that the co-author of the Agreement was unaware of the content of the Arbitration Agreement contained within it, and therefore of articles 26.1 and 26.2, and notwithstanding that this clause had been invoked by the Claimant in commencing the Arbitration, is frankly incredible.
Counsel must internalize the reality that the DIFC Courts will impute knowledge of the contract to the corporate entity and its legal representatives. Feigning ignorance of a dispute resolution clause to excuse a late jurisdictional or procedural objection is a strategy that will not only fail but will likely damage the credibility of the party deploying it. The obligation to object is affirmative and immediate. If a respondent believes a claimant has jumped the gun by initiating arbitration without fulfilling a mandatory negotiation tier, that objection must be the very first item raised in the response to the notice of arbitration.
The intolerance for procedural gamesmanship at the enforcement stage aligns with a broader jurisprudential trend within the DIFC. As seen in cases like ARB-002-2015: Edward Dubai LLC v Eevi Real Estate Partners Limited [2015] DIFC ARB 002, the Court consistently penalizes parties who hold procedural objections in reserve. Participating in an arbitration while secretly harboring a perceived procedural defect is treated as an unequivocal waiver. The arbitral process is not a free option where a respondent can wait to see if they win on the merits before deciding whether to challenge the tribunal's jurisdiction or the procedural compliance of the claimant.
Strategic enforcement planning must therefore begin the moment a dispute crystallizes. For claimants, while Lirit v Liwanu provides comfort that technical breaches of tiered clauses will not easily derail an award at the enforcement stage, the safest course remains strict compliance with all pre-arbitration conditions to avoid costly jurisdictional battles before the tribunal. For respondents, the mandate is clear: audit the claimant’s compliance with the dispute resolution clause immediately upon receipt of a notice of arbitration. If a mandatory tier has been skipped, raise the objection forcefully and explicitly reserve all rights. Failing to do so, and proceeding to litigate the merits, will permanently extinguish the right to rely on that non-compliance under Article 44 of the DIFC Arbitration Law. The enforcement court will not rescue a party from its own strategic silence.
What Issues Remain Unresolved in the Wake of Lirit v Liwanu?
The definitive dismissal of Liwanu’s application by H.E. Justice Shamlan Al Sawalehi establishes a formidable barrier against parties seeking to weaponise pre-arbitration procedural missteps at the enforcement stage. By strictly interpreting the statutory grounds for refusal, the Court insulated the arbitral process from collateral attacks based on tiered dispute resolution clauses. However, the precise boundaries of the judgment reveal distinct doctrinal gaps. The ruling deliberately confines itself to the specific arguments raised under Article 44(1)(a)(iv) of DIFC Law No. 1 of 2008, leaving several critical questions regarding jurisdiction, collateral litigation, and the limits of statutory waiver entirely open for future litigants to test.
The most glaring unresolved issue concerns the precise drafting of pre-arbitration tiers and their potential to act as strict jurisdictional bars. In the present dispute, Liwanu framed its challenge around the concept of procedural irregularity. The defendant asserted that the failure to engage in the mandatory tiered process meant the arbitration was not conducted in accordance with the agreement of the parties. Justice Al Sawalehi systematically dismantled this approach by ruling that pre-arbitration negotiations do not constitute "arbitral procedure," which strictly concerns the manner in which the arbitration itself is conducted once commenced.
Yet, the Court did not address what would happen if a pre-arbitration condition was explicitly drafted as a condition precedent to the tribunal's jurisdiction. Commercial contracts frequently employ language stating that "no tribunal shall have jurisdiction unless and until the parties have engaged in mediation for thirty days." If a claimant bypasses such a strictly worded condition precedent, a defendant might bypass Article 44(1)(a)(iv) entirely and instead mount a challenge under Article 44(1)(a)(i)—arguing that the arbitration agreement itself had not yet become valid or operative—or under Article 44(1)(a)(iii), asserting that the dispute fell outside the scope of the submission to arbitration because the temporal or procedural trigger for submission had not occurred. Because Liwanu relied on the "arbitral procedure" limb, the DIFC Courts have yet to definitively rule on whether a clearly articulated condition precedent could successfully derail enforcement on jurisdictional grounds. The distinction between a procedural obligation and a jurisdictional prerequisite remains a fertile ground for future appellate scrutiny.
Beyond the immediate mechanics of enforcement, the judgment inadvertently illuminates a novel pathway for collateral litigation. By severing pre-arbitration obligations from the definition of arbitral procedure, the Court effectively categorised them as standard contractual covenants. Justice Al Sawalehi articulated this separation with absolute clarity:
In my judgment, if articles 26.1 and 26.2 of the Agreement had been breached, that is a matter altogether separate from whether the arbitral procedural applied in the Arbitration was in accordance with the agreement of the parties: articles 26.1 and 26.2 do not concern arbitral procedure.
This strict bifurcation leaves open the possibility of separate litigation for breach of pre-arbitration clauses. If articles 25 and 26 of the Agreement constitute binding contractual obligations that exist independently of the arbitral procedure, a party that ignores them commits a breach of contract. While the breach cannot be used to set aside the resulting arbitral award under Article 44(1)(a)(iv), the aggrieved party theoretically retains the right to sue for damages arising from that breach.
The mechanics of such a claim present profound complexities. A claimant pursuing damages for a bypassed mediation or negotiation tier would face the formidable task of proving causation and quantifiable loss. They would need to convince a court that, had the amicable settlement period been respected, the dispute would have been resolved without incurring the costs of arbitration. While proving that a hypothetical negotiation would have succeeded is notoriously difficult, a party might successfully claim the wasted costs of the arbitration as damages, arguing that the premature commencement of arbitral proceedings forced them to incur legal fees unnecessarily. The DIFC Courts have not yet been asked to quantify damages for the breach of a dispute resolution clause where the resulting award remains fully enforceable, making this a highly anticipated area of future commercial litigation.
The third, and perhaps most factually sensitive, unresolved issue lies in the application of the waiver doctrine. Because the seat of the arbitration was onshore Dubai, the Court applied Article 25 of the UAE Arbitration Law, which dictates that a party who proceeds with an arbitration without stating a timely objection to a procedural violation is deemed to have waived their right to object. Liwanu attempted to circumvent this statutory waiver by claiming profound ignorance. The defendant submitted a witness statement of Mr Lilast, a senior contracts engineer, asserting that the company only appreciated the claimant's failure to comply with the pre-arbitration requirements after the final award was published.
Justice Al Sawalehi rejected this defence on purely evidentiary grounds, focusing on the specific factual matrix of Liwanu's corporate knowledge:
It follows, in my judgment, and with respect, that Mr Lilast’s statement that the co-author of the Agreement was unaware of the content of the Arbitration Agreement contained within it, and therefore of articles 26.1 and 26.2, and notwithstanding that this clause had been invoked by the Claimant in commencing the Arbitration, is frankly incredible.
By dismissing the ignorance claim as "frankly incredible" due to the engineer's role as a co-author of the underlying contract, the Court avoided ruling on the theoretical limits of the waiver doctrine in cases of genuine, non-negligent ignorance. What happens when a party's lack of awareness is objectively credible? Consider a scenario involving a complex corporate acquisition where the entity defending the arbitration inherited the contract and genuinely lacked access to the pre-arbitration correspondence, or a situation where a claimant actively concealed its failure to trigger a mandatory tiered process.
If a defendant can prove that their failure to raise a timely objection was the result of excusable ignorance or the opposing party's fraud, does the strict statutory waiver under Article 25 still apply? The current judgment relies heavily on the implausibility of Liwanu's specific factual assertions, leaving the door slightly ajar for future litigants who can present a more compelling narrative of excusable delay. The tension between the strict textual application of statutory waiver and the equitable protection of genuinely uninformed parties remains unresolved.
The high bar for resisting enforcement established here mirrors the broader judicial philosophy currently dominating the jurisdiction. As seen in recent enforcement disputes, such as ARB 004/2024 Naqid v Najam, the DIFC Courts consistently demand overwhelming evidence before interfering with the finality of arbitral or court orders. Litigants attempting to rely on technical procedural defects, whether to resist enforcement or to pursue contempt, face an increasingly hostile judicial environment.
Ultimately, the ruling forces commercial drafters and litigators to recalibrate their strategies. Defendants can no longer hold pre-arbitration procedural breaches in reserve as a final shield against enforcement. If a tiered dispute resolution clause is to have any teeth at the enforcement stage, it must be drafted explicitly as a condition precedent to jurisdiction, forcing the debate out of the realm of "arbitral procedure" and into the fundamental validity of the tribunal's mandate. Until such a clause is tested before the DIFC Courts, the precise utility of mandatory negotiation tiers remains suspended between contractual theory and arbitral reality.