Claim
Two Dubai trading companies (the "Claimants") filed a
commercial action against another local company (the
"Defendant"). The Claimants requested the Court to order
the Defendant to pay them a specified amount as compensation for
breaching an employment contract which they had executed.
Due to the fact the contract contained an arbitration clause, the
Defendant requested the Court to dismiss the case for lack of
jurisdiction.
Facts of the case
The Claimants argued that they had concluded an employment/labor
contract with the Defendant to prepare and carry out interior
design works, and to develop the Claimant's private hotels. The
Claimant further submitted that the Defendant had failed to adhere
to its obligations as stipulated in the contract, delivered the
assigned work late and delivered a defective work product which was
below the standards recognized by the hotel industry. As a
consequence the Claimants terminated the contract.
Court of First Instance
The Court of First Instance ruled in favor of the Defendant and
dismissed the case for lack of jurisdiction. The Claimants
subsequently appealed the decision.
Court of Appeal
The Court of Appeal upheld the lower's court decision. The
Claimants appealed to the Court of Cassation.
Court of Cassation
The Claimants argued that the Court of Appeal had erred in its
decision to uphold the lower's court decision in that reliance
had been placed on Article 13 of the employment contract (the
arbitration clause) instead of Article 14 of it. The Claimants'
submitted that Article 14 gave Dubai Court the jurisdiction to
oversee any dispute arising out of that contract.
The Court of Cassation interpreted Article 203 (1) and 203 (5) of
the Civil Procedure Law (CPL) to mean that if parties agreed to
arbitrate a dispute it shall not be possible to initiate an action
before the Court. If, notwithstanding the arbitration clause, one
party did file an action in Court and the other party did not
object at the first hearing, then the Court would consider the
arbitration clause as void and take jurisdiction of the case.
However, if the other party did raise an objection at the first
hearing the Court should dismiss the case for lack of
jurisdiction.
The Court held also that arbitration is a final and binding form of
dispute resolution which is conducted outside the usual forum (i.e.
the local courts). The Court clarified, however, that what the
parties intend should be meant by "dispute" should be
clearly specified in the arbitration deed.
Finally the Court referred to reasoning handed down by the Lower
Court. The Lower Court had found that Article 14 of the contract
dealing with the arbitration clause was written in a very detailed
manner, where as Article 13, which dealt with the Dubai Court's
jurisdiction was very short.
The Court found that the recourse to the Dubai Court as stated in
Article 13 could be sought only to explain the contract and have a
binding decision in relation to this explanation, whereas the
adjudication of disputes arising out of the contract should be
dealt with by arbitration as per Article 14.
The Court of Cassation held that any explanation to the contrary
would result in conflict between the two Articles. However, the
Court held that the clearer clause and the more detailed clause
should be applied rather than the ambiguous clause as it did not
need any explanation or clarification from the Court.
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