Claim
A commercial action was filed by a local company ("the
Claimant") before the Abu Dhabi Court against a Hotel
operating in the UAE ("the Defendant"). The contract
between the parties contained an arbitration clause. Accordingly,
the Claimant sought assistance from the court to appoint an
arbitrator. The dispute between the parties related to the
Defendant's unilateral termination of usufruct contracts
between the parties. The Claimant, who considered the
Defendant's termination to be unlawful, also desired that the
arbitrator assess the quantum of damages suffered by virtue of the
purported unlawful termination.
Facts of the Case
The Claimant was the owner of a Hotel. It had entered into four
usufruct contracts with the Defendant with respect to that Hotel.
The Claimant argued that it had fulfilled all its contractual
obligations, but that the Defendant had taken possession over three
out of four outlets and closed them down. It was the Claimant's
case that this was done without any legal basis or justification.
Accordingly, the Claimant sent the Defendant a warning letter
terminating the contracts and requesting hand over of the
outlets.
Court of First Instance and the Arbitration Award
The Court of First Instance referred the case to the Judicial
Department of the Emirate of Abu Dhabi to appoint a sole arbitrator
to arbitrate the dispute between the parties.
The Court also held:
- That the arbitrator should deposit the Award and the appendices with the Court within 15 days from the date of issuance.
- That within 15 days of the arbitrator depositing the Award a hearing session to authenticate this award would be set.
The Claimant appealed this decision to the Court of Appeal and
the Court of Cassation but both appeals were dismissed. The
arbitrator issued the award and the Court of First Instance
authenticated the award. The Claimant then lodged an appeal with
the Court of Appeal.
Court of Appeal
The Court of Appeal upheld the lower's court decision.
Consequently, the Claimant appealed to the Court of
Cassation.
Court of Cassation
The Claimant argued that the Court of Appeal had erred in its
decision to uphold the decision of the Court of First Instance. The
basis for the Claimant's appeal was that the Award was null and
void. The grounds for this argument were as follows:
- The authentication of the arbitral award should not be filed after the issuance of the final decision that ended up the dispute by appointing an arbitrator as it is not admissible to accept the interlocutory application that was submitted by the Defendant requesting the court to authenticate the arbitral award after the issuance of the final decision;
- The procedure for authenticating the Award as imposed by the Court had not been requested by the parties.
- That the Defendant should have had to initiate its own independent set of proceedings to demand that the Court authenticate the arbitral award.
- That the Court lacked the jurisdiction to oversee the case as the Tenancy Dispute Resolution Committee (TDRC), as per law No 20 of 2006 was the appropriate legal entity for the resolution of the dispute. The Claimant argued that this was notwithstanding the presence of an arbitration clause.
- Finally, the Claimant argued that the arbitration was void due to the invalidity of the arbitration clause in the contracts as Claimant's representatives were not authorized in their Power of Attorney to sign these the arbitration clause.
In relation to the first point, the Court of Cassation relied on
Article 213 of the UAE Civil Procedure Law in holding that
arbitration can be conducted either through the Court (Articles
213.1 and 213.2) or through an independent institution (Article
213.3).
The Court of Cassation stated that if parties participating in an
institutional arbitration wanted to enforce or set aside the
arbitral award, they should file a claim in the relevant Court.
However, the Court of Cassation held that the subject arbitration
proceedings had been conducted through the Court. The
Claimant's plea to set aside the Award was therefore rejected
because of Article 213.1 of the UAE Civil Procedure Law, which
permit a party to enforce the award without the need to file a new
case with the court in this regard.
The Court rejected the Claimant's plea that the procedure for
authenticating the Award as imposed by the Court had not been
requested by the parties. In this regard the Court relied on
Article 85 of the Civil Procedure Law in ruling that it could, at
any stage of proceedings, determine its jurisdiction (even if pleas
to this end were not made by any of the parties).
The Court of Cassation held that the TDRC was the legal entity that
is entitled to oversee disputes emanating from the tenant-landlord
relationship. Moreover, the Court held that the mandatory
provisions of Article 25 of this law prohibit parties "to
agree to arbitrate any dispute arising out of the tenancy
agreement".
However, the Court noted that Article 2 of the same law excluded
from its provision leases for hotels and building for tourism
purposes, including furnished apartments. The Court found that the
effect of Article 2 was such that the TDRC did not have
jurisdiction over cases related to leases for hotels and building
for tourism purposes, including furnished apartments. In this
respect the Court also stated that parties ought to be granted a
limited time within which to agree to arbitrate the dispute arising
out of the tenant-landlord relationship those lease types covered
by Article 2.
In this case, the Court ruled that as the subject property was a
hotel for tourism purposes the TDRC did not have
jurisdiction.
The Court of Cassation also rejected the Claimant's capacity
argument. The Court held that pursuant to Article 203(4), only
those who have capacity/competence to participate in dispute
resolution proceedings can agree on arbitration. The Court
clarified that this authority could be expressed or implied.
Such authority would be considered express when it is conveyed
verbally or in writing, and as implicit when inferred from the
circumstance, such speech and conduct. The Court further held that
arbitration is capable of being incorporated as a 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 found that
in this case, all contracts concluded between the parties were
signed by the representatives of the Claimant and sealed with its
company stamp. The Court also found that all communications between
the parties which related to the arbitration clause and the
appointment of an arbitrator were exchanged between duly authorised
representatives.
The result of the case was that the Court of Cassation rejected the Claimant's pleas. The award was held to be valid and enforceable
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