UAE courts continue to address critical procedural issues encountered in arbitration proceedings. One of the topical issues discussed usually relates to the authority to enter into an arbitration agreement. The legality of an arbitration provision under UAE law has always predicated on whether the signatory to the clause possessed the necessary special power of attorney. Many arbitration verdicts have been overturned because the arbitration clause was signed by parties who lacked the legal ability. However, UAE courts have begun to take a more favorable stance, rejecting appeals to arbitration decisions based on a lack of capacity based on basic legal principles such as good faith. Furthermore, the courts have gone even farther, ruling in a recent instance that a party cannot dispute the legality of an arbitration agreement if the purported fault is due to the parties’ actions.
- The Court sets the principle on Ability of Parties to enter into Arbitration:
The Court also confirmed in the same ruling that the ability to enter into arbitrations is not considered a matter of public policy, which had previously been the stance used by courts to set aside an arbitration award on their initiative. It’s always advisable to double-check that the individual entering the Arbitration has the legal authority to do so by looking over the business’s Articles of Association to see if the management or another representative can tie the firm to Arbitration.
In another Case Judgement of 922 of 2020, the Abu Dhabi Court of Cassation looked at the conditions for concluding an arbitration agreement using powers of attorney. The decision is the latest in a long line of precedents indicating that the establishment of arbitration agreements is subject to unique rules. In summary, the Court of Cassation concluded that:
i. Determining whether a party has the authority to conclude an arbitration agreement is a matter for the Court, not the Tribunal.
ii. As a form of waiver of the right to access the courts, an arbitration agreement is an “extraordinary arrangement.” As a result, a party’s desire to arbitrate must be unambiguous.
iii. An agent (such as a Company director or general manager) must have a special power of attorney or permission to bind a company to an arbitration agreement, rather than a generic power of attorney or authorization. An arbitration agreement will be invalid and unenforceable if it lacks the necessary specific power.
- Adherence to Condition Precedent
Furthermore, UAE courts have consistently highlighted the significance of adhering to pre-arbitration dispute settlement agreements, often known as ‘conditions precedent.’ In several situations, arbitration proceedings were rejected because the Claimant failed to comply with the contract’s notification requirements before starting Arbitration.
- The burden of proof is on the Claimant.
These notification requirements continue to exist under the Federal Arbitration Law but must be addressed by the Claimant during arbitration procedures before issuing the final award. The last point that has always been – and continues to be – a source of contention, particularly in domestic arbitrations, is the signing of arbitration decisions.
Article 41 of the Federal Arbitral Law merely states that the arbitrators must sign an arbitration award. Other than this, there is no more instruction in the legislation. As a result, it was unclear whether arbitrators needed to sign every page of the final decision.
It was until the Dubai Court of Cassation addressed the problem in a recent ruling of Ali & Sons Marine Engineering Factory LLC (Appellant) v E-Marine FZC (Respondent), Case No 1083/2019 deiced on 14 June 2020. This case upheld the stringent necessity of signing each page of the award and said that the issue is still a matter of public policy. In dealing with this matter, the Court ruled that the arbitrators should sign the operative portion and reasons underlying the arbitral award in the UAE as a matter of public policy. The failure to do so may lead to the annulment of the decision. However, the Court ruled that the Tribunal might correct such an omission if the Court so allowed.
By such act, the Court affirmed the implementation of a newly adopted process under the Federal Arbitration Law, which permits the Tribunal to correct any procedural formalities rather than subjecting the final judgement to the possibility of being totally invalidated or set aside.
Arbitration is undoubtedly growing more popular in UAE courts. However, it is critical to monitor case law developments and better understand how UAE courts utilize arbitration processes to reduce the danger of an arbitral decision being thrown aside at the enforcement stage due to procedural irregularities.
This informative article contains general information. It is not intended to be used as legal advice and should not be relied upon as such. Before taking any legal action, it is always advisable to obtain legal counsel from a knowledgeable lawyer on the legal concerns impacting you. HHS arbitration lawyers in Dubai specialized in dealing with issues relating to Arbitration. Should you want to know more about the case or face any problem regarding the procedure for filing an arbitration request before Court or at the Arbitration center, don’t hesitate to contact experts.