Ensuring Validity of Arbitration Agreements in the UAE

January 21, 2020

Recognizing the importance and the growing preference for arbitration as a form of dispute resolution, UAE authorities promulgated Federal Law No. (6) of 2018, otherwise known as the UAE Arbitration Law. This law repealed Articles 203 to 218 of Federal Law No. (11) of 1992 or the UAE Code of Civil Procedures and further has provided better guidance for arbitration in the UAE. Unlike the more traditional forms of dispute resolution, Arbitration allows the parties to confer jurisdiction on settlement of their disputes to an arbitral tribunal, and in the process, take away the jurisdiction from the regular courts. As an extraordinary remedy, the choice of arbitration has not always been given efficacy in the past due to various reasons. The most notable of which are (1) the dispute concerns a matter of public policy, (2) the lack of capacity of the signatory, and (3) a defective arbitration agreement. It is also interesting to note that, in the past, not being able to plead the existence of an arbitration clause at the first hearing is treated by the Courts as waiver of the arbitration agreement. An arbitration agreement is defined in Article 1 of the UAE Arbitration Law as the agreement of the parties to refer a matter to arbitration, whether such agreement is made before or after the dispute arises [should this be in quotes?] It can be contained in a particular contract in respect of all or some disputes that may arise between the parties, by separate agreement, or through an explicit referral considering such clause as a part of the contract [what is an explicit referral?]. Since arbitration as a choice of dispute resolution is agreed by both parties consent, an arbitration agreement can be entered into even after a dispute arises and even if a claim is already before the courts. In order to give effect to the choice of arbitration as alternative dispute resolution, the following points should be considered in entering into an arbitration agreement: The dispute should be a matter where composition or settlement is allowed, and Article 4(2) of the UAE Arbitration Law stipulates that arbitration will not be permitted on matters that are non-conciliatory. Thus, issues concerning public policy cannot be submitted for arbitration. For example, employment issues and criminal matters are not arbitrable. The arbitration agreement should be entered into by a natural person only who enjoys the capacity to dispose of rights or the representative of a juristic person authorized to agree on arbitration. [what is a non-natural person? Perhaps clarify this] There are two aspects of capacity contemplated in this requirement of the law. First, the person signing must have the capacity to contract based on the law governing such person’s capacity. For example, in the UAE, the capacity to contract without need of guardian or court order for locals is when they reached the age of 21 (lunar years). Hence, an Emirati below the age of 21, by himself, does not have the capacity to sign an arbitration agreement. If the party entering into the arbitration agreement is from the United Kingdom, UK laws will determine whether […]

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