United Arab Emirates: The Signatory Requirement for Arbitration Agreements

Arbitration is an exclusive form of dispute resolution which, under UAE law, attracts certain conditions. One of the most important conditions is that an agreement to arbitrate be in writing and signed by the concerned parties.

Article 203 of the UAE Civil Procedure Law ("CPL") prescribes that an agreement to arbitrate is only valid if it is in writing. The CPL does not, however, specifically deal with the issue of a party's signature on an arbitration clause. In fact, it is entirely silent in this regard. However, this issue is set to enjoy clarity with the recent issue of a significant judgment by the Court of Cassation. This judgment, which is explained below, establishes a new and important legal precedent in this regard. Al Tamimi successfully represented the Claimant at all levels of the proceedings.

Background
A commercial action was filed by a local company (the "Claimant") against the Defendant company (the "Defendant"). The Claimant requested that the Court order the Defendant to pay to it the amount of AED 401,538.90 plus 12% interest until full payment.

Facts of the Claim
The Claimant argued that the Defendant had approached her to hire Electric Cradles ("Equipment") to complete some aluminum work in a project ("the Project"). Following the conclusion of an agreement setting out the parameters of the Equipment hire ("the Agreement"), the Claimant supplied the Defendant with the Equipment on the Project site.

On 16 April 2007 the parties concluded a new and additional agreement ("the New Agreement") for the hire of additional equipment ("the New Hired Equipment"). The Claimant submitted that after she had supplied the Defendant with the New Hired Equipment the Defendant had paid only a small amount of the invoices covering the monthly rental fee. The Claimant further submitted that under separate agreements ("Subsequent Agreements" ) she had also supplied the Defendant with Support Beams and various other materials, products and equipment that the Defendant had requested for several other projects. The Claimant alleged that the Defendant had also failed to pay the outstanding monthly rental fees under the Subsequent Agreements.

The Court of First Instance
The Court of First Instance ruled in favor of the Claimant and ordered the Defendant to pay AED 401,538 plus 9% interest effective from the date the Claimant had initiated the legal proceedings until full payment. The Defendant consequently appealed the decision.

The Court of Appeal
The Court of Appeal overturned the decision of the Court of First Instance and dismissed the case due to the existence of an arbitration clause in the Agreement concluded between both parties. Subsequently, the Claimant appealed the decision to the Court of Cassation.

The Court of Cassation
The Claimant argued that the Court of Appeal had erred in its decision to reverse the decision handed down by the Court of First Instance. The grounds for the Claimant's defense can be summarised as follows:

• The Claimant alleged that she was not aware of the existence of the arbitration clause and had not agreed with the Defendant that any disputes arising between them should be subject to arbitration.
• The Claimant further argued that the Defendant had failed to submit to the court any document proving the existence of an arbitration clause, or any proof that it had received a specific purchase order, which the Court of Appeal had relied on to draw the conclusion that there was a valid arbitration agreement between the parties.
• Importantly, the Claimant argued that she had not signed any such arbitration clause.
• That the Court of Appeal's conclusion that the Claimant had agreed on arbitration was wrong as for such a clause to be valid it is required to be in writing and further, that the conditions incorporated in the purchase order were not accepted by the Defendant.
• That the Court of Appeal had not clarified why it considered the Purchase Order (containing a reference to arbitration) as part of the Agreement, especially as it had not been sent to the Claimant.
• That the Claimant's case related to four different claims arising from the Agreement, the New Agreement and the Subsequent Agreements, but that the Defendant had argued the existence of an arbitration clause in relation to the Agreement only.

The Court of Cassation held that arbitration is a final and binding form of dispute resolution which takes place outside the usual dispute resolution forum (i.e. the local courts). The merits of any arbitration proceeding cannot be re-heard either by another tribunal or by the Court. The Court further held that arbitration is capable of either being incorporated as a clause ("arbitration clause") in the contract between parties or as a separate independent agreement in the course of a dispute between both parties (this is not to be confused, however, with the doctrine of separability which prescribes that an arbitration clause in a contract is to be treated as separate from that main contract).

The Court of Cassation held further that Article 203 of the CPL stipulates that an agreement to arbitrate is only valid if it is in writing, regardless whether that written agreement is contained within a contract or is a separate document. It was also held that parties can agree to arbitrate by simply signing a document where the existence of an arbitration clause can be evidenced by letters, telegrams and any other written communications, if such letters, telegrams or other written communications are signed or are proven to have been delivered by the sender.

In addition, the Court established that a party's acceptance to arbitrate cannot be drawn if the party was silent on the offer to arbitrate sent to him. After the Court of Cassation reviewed the Agreements it concluded that such Agreements did not incorporate a valid arbitration clause. The result of this finding was that it was open to the Claimant to have initiated legal proceedings before Dubai Court of First Instance for the outstanding amount. The Court of Cassation held that the Claimant's right to file proceedings before the Dubai Court of First Instance was not affected by the fact that the purchaser order, which was not signed by the Claimant, contained an arbitration clause. The Court also found that the Agreements did not refer in any way to the purchase orders. The result of this finding was that the fact the Claimant had not signed the purchase orders meant that the Claimant had not consented to arbitration.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.