UAE courts continue to address key procedural issues encountered in arbitration proceedings. One of the topical issues usually addressed relate to the authority to enter into an arbitration agreement.
Under UAE law, the validity of an arbitration clause always depended on whether the signatory to the clause had the special power of attorney to do so. There are many instances where arbitration awards were nullified on the basis that the arbitration clause was signed by parties who lacked the capacity to do so.
However, UAE courts have started to take a more positive approach and started to reject challenges against arbitration awards on grounds of lack of capacity on the basis of general principles of law such as good faith. In addition, the courts went a step further, and in a recent case issued a judgement upholding that a party cannot challenge the validity of the arbitration agreement if the alleged defect to the validity was attributable to the parties' own action.
Court sets the course
As a major step, the court confirmed in the same judgment that the issue of capacity to enter into arbitrations is not considered a matter of public policy, which has been the position taken by courts previously to set aside an arbitration award on its own motion. Having said that, it is best practice to ensure that the person entering into the arbitration has the requisite capacity to do so by reviewing the company’s Articles of Association to ascertain whether the manager or another representative is empowered to bind the company into arbitration.
Moreover, UAE courts have always emphasized the importance of complying with re-dispute settlement negotiations before commencing arbitration, which are commonly referred to as ‘conditions precedent’. We have seen a number of cases where arbitration proceedings were dismissed on the basis that they were prematurely filed for failure of the claimant to comply with the notice requirements set out in the contract before commencing arbitration.
Onus on claimant
These requirements to adhere with notice provisions still apply under the Federal Arbitration Law, but should be raised by the claimant during arbitration proceedings before issuance of the final award. The final topic that has always been - and continues to be - a hot topic, particularly in domestic arbitrations pertaining to the signature of arbitration awards.
Article 41 of the Federal Arbitration Law simply provides that an arbitration award needs to be signed by the arbitrators. No further guidance other than this can be found in the law. As such, it was uncertain whether arbitrators would still be required to sign each and every page of the final award.
This was until the Dubai Court of Cassation clarified the situation in a recent judgment, where it confirmed the strict requirement of signing each page of the award and basically asserted that this issue remains a matter of public policy. The court had adopted a positive approach in dealing with this issue and did not nullify the arbitration award. And referred it back to the Court of Appeal to suspend the annulment proceedings and allow the Tribunal to rectify this procedural formality.
By doing so, the court confirmed the application of a newly introduced procedure under the Federal Arbitration Law, which allows the Tribunal to rectify any procedural formalities instead of exposing the final award to the risk of being completely nullified or set aside.
UAE courts are no doubt becoming more arbitration friendly. However, it is important to keep an eye on case law developments and understand how UAE courts apply arbitration procedures to minimize risks of having a resultant arbitration award set aside at the enforcement stage on grounds of procedural irregularity.
