Arbitration Clause under Uae Law

Appeal No. 302/2015 of the UAE Administration, which was heard before the Federal Court of Justice of the United Arab Emirates, is an example of a case in which the courts of the United Arab Emirates applied a legally valid arbitration clause in a contract of the Government of the United Arab Emirates. 10.3.1 The ratification and enforcement provisions of the Arbitration Act do not apply to arbitral awards made in foreign jurisdictions. Cabinet Decision No. 57 of 2018 (Cabinet Decision) was issued towards the end of 2018 with the effect of updating the Code of Civil Procedure. The Cabinet decision expressly provides that it applies to the enforcement of foreign arbitral awards, 148 Cabinet Decision, art. 86, which can be enforced if it has been verified that: 3.4.1 The Arbitration Act stipulates that a dispute brought before a court must be dismissed if the defendant invokes the existence of an arbitration agreement before filing a defence. unless the court concludes that the arbitration agreement is invalid. 25 Ibid., Article 8(1) It may be presumed that an arbitration clause means that no tendering agreement is required. The purpose of a submission agreement is to define and specify the scope of the arbitration so that the tribunal can – later – ensure that the award was made within the limits set by the parties.

Arguably, an arbitration clause serves this purpose because it limits any arbitration to matters arising out of or related to the agreement, although the limits are broad. It then contains the same essential details as an arbitration clause, such as the legal seat and the number of arbitrators. A submission agreement that does not clearly state the details of the dispute submitted to arbitration may subsequently be declared null and void with any award made under the arbitration. The engineer invoked the arbitration clause of the agreement and challenged the jurisdiction of the court, arguing that the arbitration clause was binding on the insurer.1)This argument is based on the assignment of the promoter`s rights to the insurer, which would lead to the assignment of the arbitration clause. Some of the other defendants also relied on arbitration clauses in their contracts with the developer. The Court of First Instance (`the CFI`) issued a provisional decision dismissing the plea dismissing the action on the basis of the arbitration clauses. The Court of First Instance concluded that the arbitration clause of the agreement is invalid.2)It was declared invalid due to doubts as to the signatory`s powers to bind the promoter to arbitration. It went on to state that there was no need to consider the arbitration defences presented by the other defendants, since the presence of arbitration clauses in their contracts did not prevent the Dubai courts from hearing the case as a whole against all the defendants.

3.1.2 To be effective, an arbitration agreement must be concluded in writing, 16 Ibid., art. 7 para. 1, what happens if: 3.1.4 Finally, on this point, it is not permissible to conclude an arbitration agreement with regard to matters which cannot be settled by arbitration. 21 Ibid., Article 4(2), 3.2.1 An arbitration agreement may be concluded by a natural person or by the authorised representative of a legal person. In both cases, the person entering into the arbitration agreement must be able to do so. 22 Ibid., Article 4(1) It is therefore always recommended, even if there may be an arbitration clause, to sign a tender agreement (generally referred to in this context as an `arbitration instrument` or `specifications`) in each arbitration, whether or not the contract at issue contains an arbitration clause. While this issue was eventually resolved, this case shows how a poorly worded arbitration clause results in a number of undesirable obstacles. In order to avoid similar obstacles, the parties should have agreed that in the event of disagreement on the election of an arbitrator, the arbitrator would be chosen by the institution to conduct the proceedings. 7.5.4 After issuance, each party shall receive an original or copy of the award signed by the court within 15 days. 109 Ibid., Article 44 However, if the costs of arbitration have not been paid by the parties at the time of the award, the tribunal may suspend service. 110 Ibid., Article 47(1) A party has the right to apply to the court if a court has refused to serve services, but the arbitral award shall be released only after proof of full payment of the costs of arbitration or costs determined by the court.

111 Ibid., Article 47(2) and, in that regard, point 7.6. The United Arab Emirates (“UAE”) has taken steps to increasingly accept arbitration as a dispute settlement mechanism chosen by the parties. It is now common knowledge that the uae courts would abide by the parties` arbitration agreement and comply with valid arbitration clauses. In fact, Article 8(1) of the Federal Arbitration Act No. 6 (2018) (“UAE Arbitration Act”) requires the court to dismiss an action applicable to it if the parties have entered into an arbitration agreement and the defendant invokes the arbitration agreement before bringing a claim or defense on the merits. The Arbitration Act does not provide for the amalgamation of separate arbitration proceedings. To the extent that the relevant institutional rules allow for consolidation, the consolidation of separate arbitration procedures may be possible. For example, the DIFC-LCIA Rules and the ICC Arbitration Rules specifically provide for the consolidation of separate arbitration procedures. Although there is no concept of binding precedent in the UAE onshore, there are a number of decisions of the Dubai Court of Cassation that recognize the consolidation of arbitration in certain circumstances. This case is important for a number of reasons. First, the Supreme Court has recognized that arbitration is an exceptional means of resolving disputes outside of normal jurisdiction (i.e., local courts) and that if the parties have agreed to submit all disputes to arbitration, this also includes disputes regarding the conclusion or termination of the contract.

Similarly, in a 2021 decision of the Dubai Court of Appeal, the creditor, which was a hotel chain, obtained an order for payment against a tour operator, even though there was an arbitration clause in the contract between the parties. Although the debtor had the opportunity to present the contract to the Court of Appeal and invoke the arbitration clause, he did not. Since the Court of Appeal was not informed of the arbitration clause. The creditor received an order for payment. (Dubai Court of Appeal Case No. 795/2020 Payment Order). Despite all the progress made, UAE courts still ignore the parties` choice of arbitration in a particular scenario: they appear to exercise jurisdiction over a defendant who has a valid arbitration agreement with a claimant when legal proceedings are brought against a number of defendants, including one or more parties that are not part of the arbitration agreement. The blog recently published an article on a recent case arising from such a practice, the Dubai Court of Cassation No.

209/2021 (of 21 April 2021). This article will examine another case where the same practice has been implemented by the Dubai courts and highlight the prevalence of this practice by referring to other similar cases. 3.1.1 Arbitration law provides that an arbitration agreement may be concluded before or after the opening of a dispute. 15 Ibid., art. 5(1) and (2) This article is a third in a recent series of decisions of the Dubai and Abu Dhabi Court of Cassation, see our first update here and our second update here. It is somewhat worrying that the tide seems to be turning against maintaining arbitration agreements, despite the previous mood among UAE courts. The repetition of the Court of Cassation`s “exception” is also likely to affect parties who invoke the provisions of the New York Convention that a “written agreement” is sufficient. All parties wishing to resolve their disputes in arbitration should be aware of the intricacies of entering into a valid and binding arbitration agreement while doing business (or dealing with parties) in the UAE. The most important rules are those of the Dubai International Arbitration Centre (DIAC) and the Abu Dhabi Commercial Conciliation and Arbitration Centre. Other UAE emirates, such as Ras Al Khaimah or Sharjah, have established their own arbitration centres and rules.

Finally, and importantly, Islamic financial disputes should also be referred to the International Islamic Center for Reconciliation and Arbitration. This will further increase the choice of arbitration arrangements for parties in the UAE. 7.6.2 It is important to note that the Arbitration Act does not provide that the tribunal may apportion or award costs arising from the legal representation of the parties. However, to the extent that the institutional rules governing arbitration permit the award of legal costs, the Arbitration Act does not preclude the exercise of this power of arbitration. At the first hearing, both the first defendant and the second defendant argued that the court did not have jurisdiction to rule on the case and that, consequently, the plaintiff`s action should be dismissed in accordance with Article 203(5) of the Code of Civil Procedure, since the dispute had to be settled by arbitration in accordance with the arbitration clause of the contract. Article 203(5) of the Code of Civil Procedure provides as follows: `If the parties agree to settle the dispute, it is not permissible to bring legal proceedings in this regard, but if one of the parties resorts to a dispute without taking into account the arbitration clause and the other party does not object to it at the first hearing, the action must be heard: and the arbitration clause is deemed to be annulled. Finally, it should be noted that under Islamic law, to the extent that it applies in the legal system of the United Arab Emirates, arbitration agreements are binding on its parties and no party is allowed to withdraw from an agreement it has entered into with others by its own free and valid will.4 Furthermore, Islamic law does not restrict the selection of arbitrators on the basis of religion or sex.