January 01, 2020 – Kuwait City, Kuwait

In a landmark judgment handed down by the Kuwait Court of Appeal, Meysan Partner’s litigation team, including Senior Partner Waleed Al Tattan, Senior Associate Omar Youssef and Associate Dr. Abdulwahab Sadeq, has successfully obtained a judgment ordering the recognition and enforcement of a United States of America award in Kuwait. This judgment is of particular significance as it confirms that Kuwait courts should consider the validity of the underlying arbitration clause in the context of the New York Convention and the foreign law governing the contract.

Historical background

In 1978, Kuwait ratified the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) without reservations except in relation to Israel. In principle, therefore, the Kuwaiti courts should recognize foreign arbitral awards that satisfy the conditions set out under the New York Convention as binding and enforceable. </em

Before Kuwait ratified the New York Convention, enforcement of foreign arbitral awards was dealt with in the same manner as foreign courts’ judgments under the Kuwait Civil Procedures Law (CPL). This allowed the Kuwait courts to set aside foreign arbitral awards on various grounds set out under the CPL. These grounds mostly related to the lack of reciprocity between Kuwait and the country where the award was made.

As a result, the Kuwait courts inherited a considerable number of negative precedents in relation to the enforcement of foreign arbitral awards. These precedents suggested that foreign arbitral awards may not be enforced in Kuwait.

Since the New York Convention has come into force, it has taken several years for the first case to proceed through the Kuwait courts system. In 2010, the Kuwait Court of Cassation ordered enforcement of an LCIA award in Kuwait under the New York Convention. This was a default judgment and many grounds which were traditionally used to challenge the recognition and enforcement of foreign arbitral awards were not raised.

Brief background of the case

In 2016, Ford Motor company (the “Claimant” or “Ford Motors”), terminated a Global Importer Dealer Sales and Service Agreement (GIDSSA) with Arabian Motors Group Company (the “Defendant” or “AMG”) and followed the same with filing arbitration proceedings before the International Arbitration Tribunal of the International Centre for Dispute Resolution to confirm that the termination is legal in accordance with the provisions of the GIDSSA. The GIDDSA contained an arbitration clause which provided for arbitration in accordance with the 1976 UNCITRAL Rules and was governed by the laws of the State of Michigan. The Defendant argued that the arbitration proceedings should be suspended on the basis that the arbitration agreement is invalid, and that the arbitration tribunal is not qualified and lacks the jurisdiction to review the claim. On 22 December 2016, the tribunal issued a preliminary order whereby it dismissed AMG’s objection thereby upholding the arbitration agreement.

Following lengthy arbitration proceedings, the arbitral tribunal issued an arbitration award in favor of Ford Motors.

In March 2018, AMG brought proceedings before the Kuwait Court of First Instance, requesting the court to recognize and enforce the arbitration award pursuant to the New York Convention. The proceedings were fully defended by the Kuwait based AMG.

Kuwait Court of First Instance Judgment

In December 2018, the Kuwait Court of First Instance approved the application to recognize and enforce the US arbitral award. The court concluded that the arbitration agreement was valid as concluded between the parties, on the basis that.

1. The conditions set out under Articles 199 and 200 of the CPL are fully respected and met, in particular:

        a. The arbitration agreement was duly signed by both parties who were fully authorized to enter into the arbitration agreement;

       b. The parties were duly represented; and

       c. The award gained res judicata effect pursuant to the certificate dated  June 2018 issued by the Court of the State of Michigan.

2. Kuwait has ratified the New York Convention of 1958 (pursuant to decree law No. 10/1978);

The court’s judgment recognized that, as a matter of New York Convention and Kuwaiti law, the parties had agreed to arbitration, and, therefore, the award should be recognized in accordance with the New York Convention. The judgment also confirmed that foreign arbitral awards should be recognized and enforced provided that such recognition and enforcement does not contradict Kuwaiti public policy, and that the subject matter is capable of settlement by arbitration.

Kuwait Court of Appeal judgment

The Kuwait Court of Appeal concurred with the Court of First Instance reasoning and handed down its judgment approving Ford Motors’ request to endorse the award with a writ of execution and ordered the recognition and enforcement of the Claimant’s US arbitration award.

This judgment is of particular significance as it confirms the intent of Kuwait courts to enforce foreign arbitral awards without de novo review. In so doing, it sets an encouraging precedent that Kuwait will support the aim and the spirit of the New York Convention.