A dual legal structure exists in the United Arab Emirates (“UAE”) legal system, at the intersection of a federal judiciary and two financial free zones. The free zones (Dubai International Financial Centre (“DIFC”) and the Abu Dhabi Global Market (“ADGM”)) have independent legal systems based on common law. In contrast, the federal system is based on civil law.
This distinction is of critical importance when parties determine the law of a contract and the seat of an arbitration. The primary laws regulating arbitrations in the UAE are:
The UAE Arbitration Law (Federal Law No. 6 of 2018)
DIFC Law No. 1 of 2008 (“DIFC Arbitration Law”)
ADGM Arbitration Regulations 2015 (ADGM Arbitration Regulations)
By understanding these systems and the UAE Arbitration Law, parties can make informed decisions about legal frameworks and arbitration venues.
Arbitration Agreement
Legal Capacity to Conclude an Arbitration Agreement Under the UAE Arbitration Law
- An Arbitration Agreement may be validly concluded only by a natural person with the legal capacity to act or a statutory actor of a juristic person authorized to do so.
In the absence of such capacity or authorization, the agreement shall be void. Top law firms in Dubai could provide you with personal advice regarding such issues. - However, arbitration is still not allowed in situations where the law does not permit matters to be submitted for conciliation. Being familiar with these limitations will save you time and resources while leading law firms in Dubai can offer guiding expertise to overcome such restraints.
- When the law allows the parties to decide the procedure for resolving a specific issue, then they may empower a third party to choose or determine the process.
This third party can be any natural person or arbitration institution, either within the UAE or abroad. To ensure compliance and efficiency, consider seeking assistance from top law firms in Dubai, as they bring valuable expertise to such arrangements. - The death or withdrawal of any party does not discharge an Arbitration Agreement, unless the Parties are otherwise agreed. Otherwise, the determination may still be enforced by, or against a legal successor of, the party. This keeps things the same and the agreement binding in case something unforeseen happens.
Insights like these demonstrate the need for grasp of legal capacity, colours of the permissible matter and procedural flexibility in arbitral agreements while showing heavyweight of professional legal support.
Types of Arbitration Agreements
- Arbitration Agreement Before a Dispute Arises: A party may invoke an arbitration agreement before a dispute arises, whether such arbitration agreement is a separate agreement or is contained in a contract in question. Such an agreement can encompass all potential disputes or specific disputes that could arise between the parties.
Contracting parties often include the clause recognizing the Dubai court’s jurisdiction in their contracts until Dubai’s announced move to add this feature out of international arbitrators to complement its global arbitration services. - Besides the parties can still have an Arbitration Agreement even after a dispute has arisen, and even after a lawsuit has been filed in the court. Where the arbitration clauses deal with certain issues, the agreement must confirm all the issues that could be covered thereby and the intention of the parties.
At this stage, a Dubai arbitration clause could also be added in order to make the process easier within the framework of Dubai arbitration law. - An Arbitration Agreement can also be in the form of a reference in a contract or a document incorporating an arbitration clause. But this reference needs to be sufficiently explicit to turn the arbitration clause into part of the contract. A Dubai arbitration clause guarantee local and international practices in the agreement.
Such allows the parties to customize their arbitration agreements with full compliance and clarity, in particular with regards to a Dubai arbitration clause.
Separability of the Arbitration Agreement Under the UAE Arbitration Law
- An Arbitration Agreement is independent of the other provisions of the contract. The invalidity, rescission or termination of the contract shall not affect the validity of the Arbitration Agreement, provided that if the Arbitration Agreement is independent, it shall not be affected by the invalidity, rescission or termination of the contract.
Whereas, if the concern is with regard to incapacity of any party, there may be impact on the Arbitration Agreement. - It is important to note that the disputation of the nullity, rescission or termination of the contract, including the Arbitration Agreement. The validity of the contract is an issue that the Arbitral Tribunal may determine so that the arbitration process can continue without interruption.
Arbitration Agreement Cannot Be Settled by Arbitration in the UAE
Civil Disputes Involving Insurance
Article 1028 of the UAE Civil Transactions Code (“CTC”) states that an arbitration clause cannot be included in an insurance policy unless it is part of a separate agreement distinct from the general printed conditions of the policy.
In a dispute between an insurance company and the insurer, the latter filed a case before the Federal Court of First Instance, requesting the appointment of an arbitrator based on the arbitration clause in the general printed conditions of the policy. The insurance company objected, arguing that the arbitration clause was null and void under article 1028 of the UAE CTC because it was not included in a separate agreement. However, both the Federal Court of First Instance and the Appeal Federal Court rejected the insurance company’s defense, and thus, the insurer’s request to appoint an arbitrator was granted. This case highlights the growing importance of arbitration in Dubai for resolving commercial disputes.
Specific Disputes Related to Real Estate
Article 3 of the same law under real estate preliminary register states that all off-plan properties will be registered in the real estate preliminary register. Failure to demand upon ensures that the sale and purchase agreement for the off-plan property is deemed null and void.
This is a matter of public policy and therefore the parties cannot agree otherwise: Any agreement to the contrary as per Article 3 would also be null and void.
Hence, the arbitral award is annulled in cases of arbitration concerning the cancellation of a sale and purchase agreement for not registering an off-plan property.
This is so because the dispute “involves a matter of public policy [which is] mandatory” and such matters cannot be amicably settled by arbitration, under UAE arbitration law.
In a dispute between a purchaser and a developer regarding a sale and purchase agreement for an off-plan property in Dubai, the purchaser initiated an arbitration case against the developer.
The purchaser requested the arbitral tribunal to nullify the agreement because the developer failed to register the off-plan property in the real estate preliminary register. The tribunal issued an award in favor of the purchaser, nullifying the sale and purchase agreement for this reason.
Subsequently, the purchaser filed a case before the Dubai Court to have the arbitration award ratified. The developer objected, arguing that the arbitration case involved a matter related to a mandatory public policy rule, and requested that the court not ratify the award. However, both the Dubai Court of First Instance and the Appeal Court upheld and ratified the arbitration award.
Conclusion
The UAE Arbitration Law thus sets forth the framework within which disputes arise and may be resolved, with different systems for federal jurisdiction and financial free zones such as DIFC and ADGM.
The decisive powers of arbitration Arbitration agreements are addressed by legal capacity rules, and not all disputes can be arbitrated (e.g. insurance, real estate due to public policy). The rules are complementary, including the separability of arbitration agreements and limitations on arbitration in specific cases, and understanding them is paramount. Information and compliance under the UAE Arbitration Law can benefit from consulting with top law firms in Dubai.
Having said that, Contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.
*Disclaimer: our blogs, law updates and FAQ’s are freely distributed for educational purposes and to showcase recent updates and regulations in the UAE’s framework.
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