DIFC Courts Provide Guidance on Set-Aside of Arbitral Awards

Recent judgments of the DIFC Courts in Oheo Bank v Parker [2025] DIFC CA 006 and Princeton v Persephone (ARB 015/2026; ARB 027/2026) provide welcome guidance on how the Courts will exercise their power to set aside arbitral awards where a tribunal has relied on unpleaded arguments. Both cases confirm that doing so can deny the unsuccessful party a fair opportunity to respond.

While the DIFC Courts have previously determined such applications behind closed doors in the Arbitration Division, Oheo and Princeton are the Courts’ first publicly available set-aside decisions. Both judgments raise important practical considerations for parties and tribunals alike, particularly where awards are decided on unpleaded grounds or new arguments emerge late in proceedings.

Both decisions arise in the context of tribunals deciding cases on unpleaded grounds. However, they are indicative of the DIFC Courts’ commitment to upholding procedural fairness throughout the arbitral process.

Key Legal Framework

Article 41 of the Arbitration Law provides the exclusive mechanism for challenging a DIFC-seated arbitral award. The two grounds relevant to these cases are (i) Article 41(2)(a)(ii), which concerns an inability by a party to present its case; and (ii) Article 41(2)(a)(iii), which concerns circumstances where an award deals with matters beyond the scope of the submission to Arbitration.

The power to set aside is discretionary. Drawing on the Court of Appeal's reasoning in Oheo Bank, the Court of First Instance in Princeton distinguished between (a) errors with no possible material effect on the award, which generally should not result in set-aside; and (b) errors which had, or may have had, such an effect, which are more likely to result in set-aside. A key principle in both cases is the distinction between a party having no opportunity to address a point, and a party failing to recognise an opportunity available to it.

Case 1: Oheo Bank v Parker [2025] DIFC CA 006 — Court of Appeal

Background

Parker brought a DIFC-seated DIAC arbitration against Oheo Bank over allegedly improper advice linked to bond transactions used as collateral for vessel financing. The Tribunal dismissed all but one claim, awarding Parker EUR 1 million. That claim rested on an alleged breach of the Bank’s DFSA regulatory duties under COB 3.2 and GEN 4.2.6 — a basis Parker had not raised until its Post-Hearing Brief (the “Unpleaded Claim”). The Bank applied to set aside the award; the Court of First Instance refused, and the Bank appealed.

The Court of Appeal's Analysis

The Court of Appeal accepted that the Unpleaded Claim was a "dramatic" departure from Parker's previously advanced case. Critically, the Bank had responded to the Post-Hearing Brief by flagging that it would not engage with points it regarded as unpleaded and invited the Tribunal to direct a supplemental brief if it wished to hear from the Bank on those points. 

The Court held this was a reasonable response. The fair course would have been for the Tribunal to put the Unpleaded Claim to the Bank and invite further submissions; had it done so, the Bank had reasonably arguable defences that could realistically have affected the Tribunal’s decision. The Court allowed the appeal under Article 41(2)(a)(ii) and set aside the relevant parts of the Award. 

However, the Court rejected the Bank’s arguments under Article 41(2)(a)(iii), finding that the "real vice" was the Bank's lack of opportunity to respond and not that the Unpleaded Claim fell outside the scope of the arbitration. The Court confirmed that scope should be assessed "in the round", across pleadings, agreed issues, evidence, and submissions, rather than by rigid reference to formal pleadings alone.

Case 2: Princeton v Persephone (ARB 015/2026; ARB 027/2026) — Court of First Instance

Background

Princeton agreed to sell Persephone a cargo of ultra-low sulphur diesel. Payment was due one day after presentation of shipping documents, which occurred on 16 January 2024. Persephone made two partial payments totalling around USD 45 million on 7 and 9 February 2024, leaving roughly USD 7.5 million outstanding. On 21 February 2024, Persephone said it would only pay the balance once it received payment from its own downstream buyers. Princeton treated this as a repudiatory breach, terminated the contract, sold the cargo to mitigate its loss, and repaid Persephone approximately USD 26.5 million (the resale proceeds net of unrecoverable costs).

Persephone commenced arbitration claiming repayment of approximately USD 18.5 million, arguing the payment obligation was a warranty rather than a condition, which would limit Princeton's remedy to contractual interest. Princeton argued it was entitled to terminate on three grounds: (i) the payment obligation was a condition; (ii) Persephone's conduct was repudiatory; or (iii) alternatively, under section 48 of the Sale of Goods Act 1979.

It was common ground that a payment obligation had arisen and had been breached. The key question was therefore whether Persephone’s failure to pay breached a condition (i.e. a fundamental term of the contract) or a warranty (i.e. a secondary term of the contract). Rather than deciding on that basis, the Tribunal found the payment deadline had been rendered "moot" by the parties' subsequent conduct and that Princeton had waived the deadline by accepting late payments on 7 and 9 February. Neither argument had been pleaded by Persephone.

Significantly, the Tribunal's Procedural Order No. 1 directed the parties to set out their full cases in pleadings and reserved the Tribunal's right to invite further submissions, creating a “legitimate expectation” that the Tribunal would flag any issue it wished to explore beyond the pleadings.

Court of First Instance’s Decision

The Court accepted that the Award rested on an unpleaded basis on which Princeton had no opportunity to respond, and that the arguments Princeton had been prevented from making were "reasonably arguable and could reasonably (not fancifully) have made a difference", including reliance on the express entire agreement clause in the contract and the 21 February email which revealed Persephone's inability to pay.

Unlike in Oheo Bank, the Court considered the flawed reasoning so fundamental that severance was not possible: "the points that I have been considering form the foundation of the Tribunal's conclusions." The Award was therefore set aside in its entirety and Persephone's claim for recognition and enforcement of the Award was dismissed.

Key Takeaways

1. These decisions re-affirm the DIFC Courts' pro-arbitration approach. Set-aside remains an exceptional remedy, available only where a party can show real and material procedural unfairness. 
2. A tribunal must not decide an award on a basis that the parties have not had a fair chance to address. If a tribunal identifies any new issue — whether raised late or of the tribunal’s own making — it must invite further submissions on that issue before relying on it in any award. Failing to do so gives rise to a real risk of challenge and set-aside of the tribunal’s award.
3. Parties that encounter unpleaded arguments should expressly reserve their position on the record and invite the tribunal to direct further submissions. Equally, parties advancing new points should ensure they are properly raised so the opposing party cannot credibly claim it lacked the opportunity to respond.
4. Procedural orders matter. In Princeton, the tribunal's orders created a legitimate expectation that it would raise any issue it wished to explore beyond the pleadings. More broadly, the Court of Appeal's guidance in Oheo Bank — that scope should be assessed “in the round” across pleadings, agreed issues, evidence and submissions — means parties in complex cases should keep careful track of which issues are live and how they evolve throughout the proceedings.