In InFrontier AF LP v. Rahmani, 2025 ONSC 3968 (CanLII) (“InFrontier”), the Court heard an application to recognize and enforce an award and considered the effect of amendments to the arbitral rules chosen by the parties in their arbitration agreement. The parties had agreed to settle disputes by arbitration seated in Dubai using a specific set of arbitration rules (the “OldRules”) administered by a specific arbitral institution. Before the arbitration commenced, a change in Dubai law led to those rules being replaced by a new set of rules (the “New Rules”) to be administered by a different institution. As described below, there was a degree of connection between the Old Rules and the New Rules and between the two institutions. The arbitration proceeded under the New Rules. Mr. Rahmani, the Respondent in the arbitration, unsuccessfully challenged the arbitrator’s jurisdiction to proceed under the New Rules. He was also unsuccessful in the arbitration. InFrontier applied for recognition and enforcement of the award in Ontario. Mr. Rahmani opposed the application, arguing: (1) the composition of the tribunal and the arbitration procedure were not in accordance with the arbitration agreement because the arbitration proceeded, without his agreement, under the New Rules, (2) recognizing and enforcing the award would be contrary to public policy in Ontario because it was obtained as a result of a retroactive amendment to the arbitration agreement without the parties’ consent, and (3) he was unable to present his case during the arbitration. The Court rejected all his arguments.
This case summary deals only with Issue 1.
Background – This case turns on the effect of changes made to the rules governing an arbitration after the arbitration agreement was made. It involves several different sets of rules and entities all with similar names. For clarity (hopefully) they are:
- The seat of the arbitration: Dubai International Finance Centre (“DIFC”) – A common law jurisdiction created within the UAE.
- The Old Rules: “Dubai International Financial Centre-London Court of International Arbitration Rules”. These were the rules referred to in the arbitration agreement.
- The creators of the Old Rules: the DIFC Arbitration Institute (“DIFCAI”), an arbitral institution in the DIFC, in partnership with London Court of International Arbitration (“LCIA”), an arbitral institution located in the UK.
- The arbitral institution under the Old Rules: the DIFC-LCIA Arbitration Centre – An arbitral institution in the DIFC created by the partnership between the DIFCAI and the LCIA.
- The creator of the New Rules and the arbitral institution under the New Rules: Dubai International Arbitration Centre (“DIAC”) – An arbitral institution established by the Dubai government.
The dispute arose out of a term loan (the “Loan Agreement”) made in September 2020, between Applicant InFrontier (the lender) and Respondent Mr. Rahmani (the guarantor) in connection with two schools (the debtors) Mr. Rahmani had founded in Afghanistan.
The Loan Agreement contained the following arbitration agreement:
“Any dispute, controversy, or claim arising out of or relating to this Agreement or the breach thereof shall be finally settled by arbitration to be held in [DIFC], United Arab Emirates under the …[Old Rules]…., by one or more arbitrators appointed in accordance with said rules, and judgement [sic] upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.”
The preamble to the Old Rules contemplated future amendments and provided that parties adopting the Old Rules were also agreeing to use “such amended version of those rules as the DIFC-LCIA Arbitration Centre may have adopted hereafter to take effect before the commencement of the arbitration.”
In September 2021, the Dubai government issued a Decree that:
- Abolished the DIFCA Institute (the arbitral institution in partnership with the LCIA) and transferred all its rights and obligations it to the DIAC (the institution that eventually made the New Rules).
- Confirmed the validity of arbitration agreements resorting to arbitration administered by the DIFCAI prior to the Decree and said the new institution, DIAC, would administer those arbitrations.
- Confirmed the New Rules would govern when the board of the DIAC declared them effective.
The New Rules came into effect on March 21, 2022.
On March 29, 2022, the DIAC and the LCIA announced the LCIA would administer all existing cases under the Old Rules from London but, unless otherwise agreed by the parties, arbitrations referring to the Old Rules commenced after March 21, 2022, would be administered by the DIAC under the New Rules. InFrontier and Mr. Rahmani made no agreement to remain under the Old Rules and did not agree to have another institution administer the arbitration
On December 15, 2022, the schools defaulted under the Loan Agreement.
On February 10, 2023, InFrontier commenced arbitration at the DIAC against Mr. Rahmani and the schools under the New Rules. The arbitrator was appointed under those rules and the arbitration proceeded under them. Mr. Rahmani unsuccessfully objected to the arbitrator’s jurisdiction on the ground the parties had not agreed to having the arbitration proceed under the New Rules.
On August 2, 2024, the arbitrator issued the Final Award, finding in favour of InFrontier.
InFrontier applied to recognize and enforce the award in Ontario.
Mr. Rahmani’s main argument was that the composition of the tribunal and the arbitration procedure were not in accordance with the arbitration agreement.
Article V.1(d) of the New York Convention provides that “[r]ecognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that . . . (d) the composition of the arbitral authority or 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 country where the arbitration took place …”
Mr. Rahmani argued:
- Because the arbitral tribunal was appointed under the New Rules and because the arbitration proceeded under the New Rules, neither the tribunal nor the procedure was as agreed so, he met the test for refusal in Art. V.1(d) of the Convention.
- The Decree expressly provided the parties’ arbitration agreement was still valid.
- The Decree changed the arbitral institution that would administer the arbitration but did not change the parties’ choice of rules under which the arbitration should proceed.
The Court said that to determine whether the “composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties” it had to determine the meaning of the arbitration agreement. To do so, the Court framed the question as whether, because of the Decree, the New Rules became an “amended version” of the Old Rules.
The Court noted the DIFC-LCIA Arbitration Centre was subject to Dubai law in the seat (i.e., the DIFC). It then used Canadian statutory interpretation law to interpret the Decree and found:
- The Decree intended the New Rules to replace the Old Rules once they became effective on March 21, 2022.
- The Decree changed the rules adopted by the DFIC-LCIA Arbitration Centre (the old arbitral institution) by replacing its Old Rules with the New Rules.
- “[The [New Rules] …became an amended version of the [Old Rules]” [par. 46] and by virtue of the Preamble to the Old Rules (see above) the parties were bound to follow them.
The Court noted the parties were free to agree to have the Old Rules apply if they wished but because they didn’t make such an agreement, the New Rules applied.
The Court concluded Mr. Rahmani did not prove “the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties” and so recognized the Award.
Of note, Mr. Rahmani argued the New Rules and Old Rules were “materially different”. However, the Court expressly declined to rule on the point saying, “[b]ecause I have concluded that the Arbitrator correctly applied the DIAC Arbitration Rules, which were the “revised version” of the agreed upon rules of arbitration, it is not necessary for me to decide whether the two sets of rules are materially different.”
Contributor’s Notes:
InFrontier arises from a unique set of facts.
From a practical perspective, the Court’s conclusion the New Rules were an amended version of the Old Rules has a certain appeal. In laying out the “legislative history” of the New Rules and the parties’ failure to agree to retain the Old Rules for their disputes, the Court seems to have concluded that in this case, on these facts, the parties intended the New Rules to apply.
However, it leaves a nagging question about “party autonomy”. Mr. Rahmani highlighted the difference between the institution administering an arbitration and the procedural rules that apply in such arbitration. He argued the Decree altered the institution that would administer arbitrations but did not change the parties’ choice as to the rules that would apply to such arbitrations.
It’s normal for arbitral institutions to periodically revise their rules. Many arbitration agreements specifying the rules to be used expressly recognize that fact in their wording by referring to, e.g., the “then current” rules, the rules “from time to time in force”, or such like. The revised rules will govern. Implicit in such wording is the parties’ trust in the institution to maintain rules appropriate for their disputes. Here, although the clause referred only to the rules themselves, the Preamble to those rules contemplated future amendments and bound the parties to “such amended version …as the DIFC-LCIA Arbitration CENTRE may have adopted.” It’s reasonable to presume the parties were putting their faith in that institution and – though this is conjecture on my part – its link to the LCIA.
The phrase “party autonomy” doesn’t appear in the decision. Party autonomy is a pillar of arbitration, not to be lightly interfered with. Intuitively, therefore, it seems odd that where the parties agreed to arbitrate under a specific set of rules, that choice could be ousted by a wholesale replacement of those rules “simply” by calling the new rules an “amended” version. In concluding the New Rules were an amended version of the Old Rules, the Court necessarily assumed a great deal about the parties’ intentions (and arguably, the Dubai government had interfered with those intentions).
In this case, both the Rand the arbitral institution to which Mr. Rahmani agreed ceased to exist. The Decree abolished the DIFCA Institute. It doesn’t appear to have referenced the DIFC-LCIA Arbitration Centre. There’s nothing in the InFrontier decision to establish the DIAC was in fact a successor to the DIFC-LCIA Arbitration Centre, and the Court doesn’t explain how abolishing the Institute meant the Centre had adopted the New Rules. With respect, that analysis simply isn’t there.
It’s also noteworthy the Court expressly declined to undertake a comparison of the two sets of rules. That suggests the Court was alive to the risk that material differences between the two could either seriously undermine the fairness of the proceedings or fundamentally change the nature of the arbitral process. (It’s easy to imagine how two sets of rules could significantly differ in either of those regards.) To mitigate that risk one would expect there to be a significant measure of continuity from one set to the next.
But without comparing the two to establish the degree of continuity, how can a court say party autonomy (in this case, Mr. Rahmani’s choice of rules and institution) is being respected?
To take the point further, even if a comparison is made, what then? Inevitably one can expect some differences between the two sets of rules. How close must they be? What test should a court use to determine if they’re “close enough”? Particularly where the chosen arbitral institution no longer exists, what factors should be weighed to divine the parties’ intentions at the time the arbitration agreement was made?
Time and space don’t permit a fuller examination of the issue so, suffice to say I find something unsatisfactory about the decision in InFrontier.