Q1. What are the conditions for the enforceability of an arbitration agreement?

Arbitration agreements must satisfy the following criteria:

  • The arbitration agreement must be in writing, which may be in the form of paper or electronic communication.
  • An arbitration agreement may be incorporated by reference to another document that contains an arbitration clause, provided that the reference is explicit in indicating that the arbitration clause is being incorporated.
  • The individual consenting to Arbitration on behalf of a corporation must have express permission to do so. Generally, this power must be established by a shareholder vote or through the company’s articles of organization.
  • If a natural person enters into an agreement, the natural person must be legally capable of disposing of his or her rights.
  • Furthermore, the arbitration agreement’s language must be unambiguous and straightforward. Arbitration agreements are liberally interpreted.

When an arbitration clause is incorporated by reference, the courts often compel the parties to sign the arbitration clause document, even if the necessity for signature is not specified in the Arbitration Law. Additionally, the Court will require that the arbitration clause be unambiguous. As a result, it is relatively uncommon for parties to originate basic terms attached to the primary contract.

Arbitration agreement executed separately.

Arbitration agreements may be executed separately or as a provision inside a contract before the occurrence of a dispute. An arbitration agreement may be integrated by reference to another document that contains an arbitration clause, provided that the reference is explicit in indicating that the arbitration clause is being incorporated. An arbitration agreement may be executed even after the occurrence of a dispute, even if court action has already been brought.

Q2. What is the parties’ ability to enter into an arbitration agreement?

A natural person or the authorized representative of a legal entity can enter into an arbitration agreement under UAE law. You must be able to do so in either case if you enter into an arbitration agreement with someone else.

If a legal entity representative is not the general manager or has been given a special power of attorney explicitly allowing them to carry out arbitration agreements, the UAE courts have traditionally determined that they lack the necessary authority. A growing body of case law suggests that courts are coming around to the idea of apparent authority, but this will depend on the facts of each case.

Q3. Can someone who isn’t a party to an arbitration agreement be part of the arbitration process?

Some people think that Arbitration is an excellent way to deal with a problem. The law says that an agreement to arbitrate must be in writing and signed by the parties who have the legal power to deal with the disputed right, so it must be done this way. Without a written agreement, a party can’t be forced to go to Arbitration and can’t be forced to do so. If a third party wants to get involved in the Arbitration, the arbitral tribunal has the power to let them do so, as long as they are a party to the arbitration agreement. In any situation, the authority may be employed after all parties, including the third party, have been heard.

Q4. Does the law recognize that arbitration agreements can be separate from each other (Separability of arbitration agreements)?

The Arbitration Law states that:

  • An arbitration clause must be treated as a separate agreement from the rest of the terms of a deal.
  • It doesn’t matter if a contract with an arbitration clause is terminated or cancelled. The arbitration clause is still valid.

Sharjah’s Court of Appeal recently ruled that a party relying on a contract that has an arbitration clause to make a claim can’t say that the arbitration clause isn’t valid.

Q5. What are the legal ramifications in case of breach of an arbitration agreement?

According to the Arbitration Law, every dispute filed before a court shall be dismissed if the respondent states the existence of an arbitration agreement before presenting any defence unless the Court finds the arbitration agreement to be illegal.  Additionally, when an arbitration agreement exists, bringing a lawsuit in Court does not preclude the beginning or continuation of Arbitration or the issuing of an arbitral judgment.

According to Article 8(1) of the Federal Law on Arbitration, No. 6 of 2018 (“UAE Arbitration Law”) directs courts are to reject claims where an arbitration agreement is in place, and the defendant invokes it before bringing any other claim or defense.

However, in a recent judgement of Dubai Court of Cassation No. 209/2021 (dated 21 April 2021). The Court ruled that if a dispute arises between a contractor and an employer, the Court has jurisdiction to hear it. The reason is that the contractor is a joint defendant with the consultant (who does not have an arbitration clause in their contract) and because having two separate disputes that are “closely related” is against the public interest.

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. Notary Public Dubai specialized in dealing with issues relating to Arbitration. Should you want to know more about the Doctrine of Separability and the procedure for filing an arbitration request before the Court or at the Arbitration centre, don’t hesitate to contact Experts.

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