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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Arbitration – Jurisdiction – Scope of arbitration agreement
The Petitioner filed a case against the Respondents before the Dubai Court of First Instance requesting an order that the Respondents jointly pay a sum of AED 850,738.45 plus interest. The Petitioner also sought an order that the case be transferred to arbitration through the nomination of a specialist arbitrator.
The First Respondent, a contractor, entered into a construction subcontract to supply and install mechanical, electrical and sanitary devices with the Second Respondent (the proprietor). The Petitioner claimed a sum of money for works that it had carried out. The Respondents refused to pay and refused to nominate an arbitrator to settle the corresponding dispute. It was on that basis that the Petitioner filed proceedings in the Dubai Court of First Instance.
The Court of First Instance held that the action was inadmissible due to the existence of an arbitration clause. It also assigned an engineering expert as an arbitrator and tasked him to complete his mandate within six months. The Petitioner appealed the judgment before the Court of Appeal on the basis that its principal pleas had been ignored because of the arbitration agreement. The Petitioner also requested that the case be remitted to the Court of First Instance and maintained there until an award was issued by the arbitrators and ratified pursuant to Article 213.1 of the Civil Procedure Code.
The Court of Appeal dismissed the appeal. The Petitioner appealed to the Court of Cassation.
The petition to cassation was dismissed.
If the litigants agree on settling a dispute by arbitration, a case concerning the substance of the dispute may not be brought before the courts. If one of the litigants files a case with no objection made by the other litigant at the first hearing, the courts may then consider the case and find the arbitration clause to be null and void. However, if an objection (on the basis of the existence of an arbitration clause) is raised by the other party at the first hearing, the courts shall find the case inadmissible due to the existence of the arbitration agreement.
The following statement in Article 203.3 of the Civil Procedure Code refers to the scope of the arbitration clause: “The litigation’s facts should be designated in the arbitration document or during the examination of the action even if the arbitrators were authorized for reconciliation, otherwise the arbitration shall be void.”
It is firmly established by the Court that, pursuant to Article 204.2 of the Civil Procedure Code, judgments passed with respect to the nomination of an arbitrator may not be challenged.
Pursuant to Article 203.5 of the Civil Procedure Code, if the litigants agree to settle a dispute by arbitration, a case concerning the substance of the dispute may not be brought before the courts. If one of the litigants files a case with no objection made by the other litigant at the first hearing, the courts may then consider the case and find the arbitration clause to be null and void. However, if an objection (on the basis of the existence of an arbitration clause) is raised by the other party at the first hearing, the courts shall find the case inadmissible due to the existence of the arbitration agreement.
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The following statement in Article 203.3 of the Civil Procedure Code refers to the scope of the arbitration clause: “The litigation’s facts should be designated in the arbitration document or during the examination of the action even if the arbitrators were authorized for reconciliation, otherwise the arbitration shall be void” Clause 18 of the contract entered into by the parties stipulated that disputes arising from the contract should be settled by arbitration. It was held that the parties to the contract had therefore agreed that arbitration shall include all disputes relating to the implementation of the project. The Court held that the Petitioner’s claim that the arbitration clause was not applicable because no dispute had arisen between the parties with respect to the funds claimed by the Petitioner as well as the Petitioner’s secondary claim that the arbitration agreement had been cancelled with the termination of the construction subcontract were therefore both incorrect and groundless.
The Court of Cassation further held that, pursuant to Article 252 of the Civil Transactions Law, a contract may not impose obligations on a third party but may grant a third party a right. In this agreement, the term “a contracting party” shall mean a party that expresses a will of obligation and participates in the formation thereof. Naming parties in a contract or getting them to sign a contract in a capacity other than a contracting party is insufficient for considering those parties to be relevant to the contract.
Pursuant to Article 891 of the Civil Transactions Law, a subcontractor may not claim dues to be payable by the proprietor (Second Respondent) unless they are assigned to the proprietor. The determination of the proper parties to an arbitration agreement is a matter for the court. It is established that the Petitioner has no relationship with the Second Respondent unless admissible documents are provided proving that the First Respondent has assigned tasks to the Second Respondent.
Interestingly, the Petitioner had also argued that the principle that it is not possible to challenge the appointment of an arbitrator by the court was unreasonable. However, it is firmly established that, pursuant to Article 204.2 of the Civil Procedure Code, judgments passed with respect to the nomination of an arbitrator may not be challenged.
In this case, the Court found that the Petitioner had requested the Court to determine whether the Respondents were liable for funds because the arbitration agreement had been “cancelled” by the termination of the contract. This argument was incorrect, and the Court of First Instance therefore found for the Petitioner by appointing an arbitrator. This appointment was not challengeable. In its appeal to the Court of Cassation, the Petitioner argued that it had not demanded the transfer of the dispute to arbitration. The Petitioner also contended that nothing in the law obliged the Court to cease considering the dispute until a judgment is passed by an arbitrator.
The Court relied on Article 213.1 of the Civil Procedure Code:
“In case of the arbitration proceeded through the court, the arbitrators should deposit the decision with the original of the arbitration record, the reports and the documents in the clerk’s office of the court authorized principally to examine the action, and that shall be within the fifteen days following the decision’s delivery and they should deposit a copy of the decision in the clerk’s office of the court to deliver them to each party side and that within fifteen days from depositing the original and the clerk’s office of the court shall compile a report with that deposit to manifest it to the judge or the division manager, according to the circumstances, in order to appoint a session within fifteen days to authenticate the decision and the two parties shall be notified therewith.”
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The Court held that this provision indicated that the jurisdiction of the Court over court-supervised arbitration should not be terminated by transferring the dispute to arbitration. Such jurisdiction shall continue even after the arbitrators deposit the award for ratification. Consequently, the Court that is hearing the subject matter should not dispose of the case proceedings until the award issued by arbitrators is deposited with the clerk of the Court.
Accordingly, the present petition to cassation was dismissed.