Under UAE law, arbitration is allowed only for disputes that can be amicably settled. Disputes involving public policy, criminal acts, family law, and certain civil cases in UAE are excluded. This article highlights types of disputes that cannot be arbitrated under UAE law. Any arbitration agreement for these disputes is void, and courts may annul related arbitration awards.
Legal Disputes Linked to Public Policy
A well-established principle in UAE law is that disputes involving mandatory rules concerning public policy are non-amicable and as such cannot be arbitrated. Consequently, in the UAE, arbitrators have neither the competency nor the jurisdiction to consider or rule on such disputes.
This limitation on the subject matter of arbitration is known internationally as “arbitrability.” This article will explore two types of disputes that cannot be arbitrated due to their relationship to immutable rules of positive public policy, including civil cases in UAE, and civil disputes.
In a dispute that arose between the partners of a limited liability company located in UAE, one of the partners filed an arbitration case against the other partners, in their personal capacity, without involving the company (“Company”).
The claimant relied on the arbitration clause set forth in the company’s article of association. The claimant requested the arbitrators to order his withdrawal from the company and order the remaining partners, in their personal capacity, to pay the value of his shares and outstanding amounts that included profits, market value of the company’s reputation, etc.
During the arbitration proceedings, the respondents argued that the arbitral tribunal lacked jurisdiction to review the dispute since the related governing articles of the UAE Companies Law are mandatory rules related to public policy.
The arbitral tribunal rejected the respondents’ defense. The claimant obtained an arbitration award in its favor, and the claimant thus filed a case before the Dubai Court of First Instance to ratify the arbitration award. The respondents filed a counterclaim to nullify the arbitration award.
The Court of First Instance and the Appeal Court ratified the arbitration award. The dispute relating to the ratification of the arbitration award was escalated to the Dubai Cassation Court.
Commercial Agency Disputes: Civil Case in UAE
Article 1 of the UAE Commercial Agency Law No. 18 of 1981 and its amendments (“CAL”) actively defines a commercial agency (“Commercial Agency”) as the representation of a principal by an agent to distribute, sell, present, or provide a commodity or service within the UAE in exchange for a commission or profit.
According to Articles 27 and 28 of the UAE CAL, a specialized committee holds exclusive jurisdiction to review and resolve disputes related to Commercial Agencies additionally, Article 6 grants UAE local courts exclusive jurisdiction over disputes arising from certain Commercial Agency contracts. Any agreement contradicting this provision is considered null and void.
Consequently, the UAE legislator intended to prohibit parties in a Commercial Agency contract from arbitrating their disputes, as such disputes are governed under civil law in UAE and cannot rely on the provisions of the UAE arbitration law.
A dispute developed between a commercial agent based in the UAE, and the principal which led to the commercial agent seeking to rely on an arbitration clause which had been agreed in their Commercial Agency contract. The agent sought ratification from the Federal Court of First Instance, seeking AED 329 million that the tribunal had awarded.
The principal claimed that a dispute involving registered Commercial Agencies could not be resolved by arbitration and sought the award’s nullification. This request was rejected by both the Federal Court of First Instance and the Appeal Court, which ratified the award.
On the contrary, in the case of number (814) of 2011, the Federal Supreme Court ruled that disputes related to registered Commercial Agencies are considered non-arbitrable and hence, voiding the arbitral reward, thus, ruling it as a noteworthy civil case in UAE.
Rental Disputes in Abu Dhabi
The Abu Dhabi Lease Law No. 20 of 2006, as amended by Law No. 6 of 2009 (“Abu Dhabi Lease Law”), mandates that rental disputes be referred to the Rental Disputes Committee, which the law established. However, Article 2 specifies that the law applies to all property rented for commercial, industrial, or professional activities, with exceptions.
These exceptions, outlined in the law, are not governed by the Abu Dhabi Lease Law. Additionally, any disputes not covered by this law may be subject to UAE arbitration law.
Agricultural lands and their associated buildings, all government-owned properties rented for residential purposes, properties related to ADNOC rented for manufacturing purposes in petroleum services, properties rented for hotel and tourist purposes (including furnished apartments), and certain residential properties are all excluded from the scope of the Abu Dhabi Lease Law.
Based on this, precedents set by the Abu Dhabi Cassation Court and the Federal Supreme Court confirm that if the Abu Dhabi Lease Law applies to a rental dispute, the dispute cannot be arbitrated. Instead, it must be referred to the Rental Disputes Committee.
Conclusion
UAE law excludes certain civil cases from arbitration, including those that involve public policy, commercial agencies and rental disputes. The law provides that these sorts of disputes cannot be arbitrated as they are subject to mandatory provisions of the law.
Public policy disputes, commercial agency laws, and rental laws are among others specifically directed to specialized committees or local courts. It emphasizes that in the UAE, some cases are not arbitrated, including some that are not traversed to arbitration — that is, considering the strictness of the legislation, the exercise to be in an arbitral tribunal.
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.
If you have any questions and need assistance, contact us at our number or book an appointment online.
