Headnote

Arbitration – Scope of the arbitration agreement

Summary of facts

Three parties entered into a general partnership agreement pursuant to which they established a company. By virtue of the terms of the articles of association of the company, all decisions taken at the general meeting required the attendance of all partners. The partnership had agreed to appoint a named person as the authorized manager of the company, who was not to be dismissed without the unanimous consent of the partners. When the Petitioner withdrew from the company, his shares passed to both the First and Second Respondents, who then became the owners.

Four years later, both the First and Second Respondents held a meeting under the guise of “calling the general meeting”. The Petitioner was not summoned to that meeting, during which the decision to dismiss the authorized manager of the company and appoint the Second Respondent as the general manager and chairman of the company was made.

The Petitioner instituted an action before the Dubai Civil Court of First Instance against the First and Second Respondents requesting several orders. In summary, the Petitioner sought the appointment of a receiver for the company and an order setting aside the decision to appoint the Second Respondent as general manager and chairman of the company.

The Court of First Instance dismissed the action because of the existence of an arbitration clause. This decision was appealed. The Court of Appeal upheld the decision of the Court of First Instance. The Petitioner filed the present petition to cassation.

Held

The judgment of the Court of Appeal was overturned.

The motion to impose receivership on the company and to set aside the decision appointing the general manager is beyond the scope of the arbitration clause because it is interim in nature and therefore can be heard by the courts.

Judgment

The arbitration agreement contained in the articles of association of the company provided that in the event that any disputes or disagreement should arise in respect of the interpretation, management, performance or application of the company’s memorandum of association, the dispute shall be first referred to arbitration. This means that arbitration is a possible approach in connection with the substantive disputes pertinent to the interpretation, management, performance or application of the company’s memorandum of association. However, this does not prejudice the right of the parties to resort to a summary court to avert a present or imminent risk through the taking of interim proceedings.

Accordingly, the Court of Appeal’s decision is overturned and the case is transmitted to the summary courts pursuant to Articles 28 and 29 of the Civil Procedure Code.