Canadian Court upholds Decree 34 during enforcement proceedings

A recent decision of the Ontario Superior Court of Justice in InFrontier AF LP v Rahmani (2025) ONSC 3968 (CanLII) has become the latest in a series of global judgments considering the effect of Dubai's Decree 34 on arbitration agreements providing for DIFC-LCIA arbitration.

The decision arose out of a request for enforcement of a DIAC award by UK headquartered private equity firm InFrontier against Canadian resident Roeen Rahmani, in relation to a dispute over loans guaranteed by Mr Rahmani in respect of two schools he had established in Afghanistan.

The arbitration agreement between the Parties stipulated that any dispute was to be resolved pursuant to the DIFC-LCIA Rules. However, pursuant to Decree 34 the arbitration was instead conducted under the DIAC Rules (although the Court notes that Mr Rahmani raised jurisdictional objections on this point), with a sole arbitrator ultimately issuing an award in InFrontier's favour.

Mr Rahmani challenged enforcement of the award on the basis that: (i) the arbitration was not conducted under the rules expressly agreed in the loan agreement between the parties, saying further that while Decree 34 had the effect of changing the administering institution to DIAC, it did not alter the parties' agreement to arbitrate pursuant to the DIFC-LCIA Rules; and (ii) the arbitrator was not appointed in accordance with the provisions of the DIFC-LCIA Rules, as required in the arbitration agreement. Mr Rahmani submitted that the New York Convention does not require an enforcing court to look at the law of the seat and that what is relevant is the express terms of the arbitration agreement. Mr Rahmani further argued that enforcing the award against him would be contrary to the public policy of Ontario.

In response, InFrontier submitted that the effect of Decree 34 was to substitute any reference to the DIFC-LCIA Rules with the DIAC Rules for any arbitration commencing after 21 March 2022, subject to the Parties' right to reach an alternative agreement.

The Court's decision

The Court referred to the Parties' agreement to arbitrate under the DIFC-LCIA Rules or "such amended version of those rules as the DIFC-LCIA Arbitration Centre may have adopted hereafter …" and expressed that the key question to be resolved was whether the DIAC Rules are an "amended version" of the DIFC-LCIA Rules.

On this point, Mr Rahmani argued that an amended version of the DIFC-LCIA Rules would necessarily be published by the DIFC-LCIA and that a government decree introducing a new set of rules does not meet this standard. The Court disagreed with this interpretation, concluding that the decree was intended to replace the DIFC-LCIA Rules with a new version and that the parties could therefore be taken to have agreed to conduct any arbitration in accordance with the DIAC Rules.

The Court noted that the Parties were free to agree on a different set of rules following Decree 34 if they did not wish to arbitrate pursuant to the DIAC Rules and that no such alternate agreement was reached.

While Mr Rahmani argued that the DIFC-LCIA Rules and the DIAC Rules are "materially different", the Court did not engage on this point, saying that as the DIAC Rules are an updated version of the DIFC-LCIA Rules, it would not be necessary to determine whether they are materially different.

In consideration of the argument that enforcement would be contrary to Ontario public policy, the Court said that Mr Rahmani had failed to show that the award had been obtained through an incorrect application of rules to which the parties had not agreed and that Decree 34 had not had the effect of amending the arbitration agreement without party consent. To that end, the Court held that enforcement would not be contrary to public policy.

Comment

The decision of the Ontario Superior Court of Justice continues the trend of foreign courts seeking to uphold arbitration agreements providing for DIFC-LCIA arbitration. However, each court that has looked at this issue has adopted a distinct approach and the question of enforcing a DIAC award overseas therefore remains unsettled.

Outside of the UAE, courts appear to have largely taken the approach of upholding arbitration agreements for purposive or procedural reasons. For instance, in Singapore the High Court upheld an award on the basis that both parties had participated in the arbitration without raising a jurisdictional challenge. In the United States, the US Court of Appeal upheld an agreement to arbitrate on the basis that it was still possible to arbitrate under the DIFC-LCIA Rules even if the underlying institution no longer exists. The decision of the Ontario Superior court is, at present, unique in that it considered the DIAC Rules to be an updated version of the DIFC-LCIA Rules and therefore upheld the award against Mr Rahmani despite his jurisdictional challenge.

While this decision helpfully provides further insight into the approaches that courts might adopt when asked to determine the effect of Decree 34 on an agreement to arbitrate, we nonetheless expect that this issue will continue to be a point of contention for the foreseeable future and continue to recommend that parties look to amend existing DIFC-LCIA agreements to avoid the uncertainty and cost of time-consuming jurisdictional challenges.