There is no doubt that the real estate market in the United Arab Emirates in general, and Dubai in particular, has witnessed — and continues to witness — significant growth, especially in recent years. This growth has led to increased investment by property developers and attracted individual investors to purchase off-plan real estate units due to the high return on investment and a legal environment that protects investors' funds, particularly in cases where the developer faces delays or fails to complete the real estate project.
In many cases, the parties to an off-plan property sale agreement include an arbitration clause to resolve any disputes or disagreements arising from or related to the execution of the agreement. This is often due to various considerations, most commonly driven by the preferences of the property developer, who typically imposes non-negotiable terms in sales agreements. However, parties sometimes overlook that the validity and enforceability of an arbitration clause are always subject to compliance with public order and imperative legal provisions of the State. If the clause violates such provisions, it is deemed null and void and will not be recognized by local courts.
For example, Article 3 of Law No. 13 of 2008 concerning the regulation of initial real estate registration in the Emirate of Dubai mandates the registration of off-plan property sale agreements in the initial real estate register. If this mandatory registration is not carried out in accordance with the aforementioned article, and a dispute arises between the developer and the buyer, with the latter filing a lawsuit seeking annulment of the sale contract due to failure to properly register it, the Dubai courts will have jurisdiction to hear the dispute. In such a case, both the arbitration clause and the agreement may be considered void. Even if a final arbitration award has been issued, it may be annulled by filing a lawsuit to set aside the arbitral award.
However, if the subject of the lawsuit is a demand to terminate the contract due to the developer's failure to fulfill obligations or due to delay in delivery, this is a matter that can be submitted to arbitration. In such cases, the arbitration clause is considered valid and effectively removes jurisdiction from the onshore courts.
It is also worth noting that if there is a violation of public order or imperative rules of the state, the court has the authority to raise the issue on its own, even if the parties do not bring it up, and at any stage of legal proceedings.
In summary, investors should consult qualified professionals before entering into binding real estate sales agreements to review various aspects, including the agreements and documents involved, so that they are fully aware of what they are committing to and the legal consequences that may arise.
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.
