Headnote

Arbitration – Jurisdiction

Summary of facts

The Petitioner , the owner of a plot of land, entered into an agreement with the Respondent under which the Respondent would invest in and rent the land owned by the Petitioner for a period of 31 years in return for the construction of a residential compound worth AED 35 million.

A dispute arose between the parties in relation to the construction of the residential compound. The Petitioner alleged that the Respondent failed to complete the construction of the compound as agreed between the parties. The Petitioner therefore initiated an action before the Court of First Instance requesting the annulment of the agreement. The Court of First Instance held that it did not have jurisdiction to hear the case since there was an arbitration clause in the parties’ agreement. The Petitioner appealed this decision before the Court of Appeal, which annulled the decision and sent the case back to the Court of First Instance to settle the dispute.

The Petitioner filed a petition to cassation.

Held

The judgment of the Court of Appeal was overturned.

The Court does not have jurisdiction to hear a dispute where the parties have agreed that their dispute will be settled by arbitration. The courts are precluded from determining the jurisdiction of the arbitration tribunal before the latter hear the dispute.

Judgment

Articles 203.1 and 203.5 of the Civil Procedure Code provide that an arbitration agreement in respect of a specific dispute, whether in the form of a clause contained in an agreement or in the form of a separate agreement, will in principle preclude the competent court from having jurisdiction over it. That is the negative effect of the arbitration agreement. By way of exception, the dispute may be tried before the courts if the other party does not raise an objection at the first hearing, denying the right of his opponent to recourse to the courts.

It is a well-settled rule that analogies may not be drawn from exceptions, nor may the interpretation thereof be expanded beyond their strict words. The positive effect of an arbitration agreement is that jurisdiction is transferred away from the courts to the arbitration tribunal. That is a consensual jurisdiction agreed upon by the parties, and it is the arbitration panel that is the body having authority to settle the dispute in respect of which the arbitration agreement was made.

The tribunal alone will have the power to adjudicate the dispute. Therefore, the courts are precluded from determining the jurisdiction of the arbitration tribunal before the latter makes a determination on the dispute. However this does not prevent the courts from subsequently determining the jurisdiction of the arbitration tribunal when ratifying the award of the arbitrators or nullifying it pursuant to Articles 215 and 216 of the Civil Procedure Code.

Accordingly, the judgment of the Court of Appeal is overturned.