Headnote

Arbitration – Defence of an arbitration agreement – Jurisdiction

Summary of facts

The Petitioner filed an action against the Respondent before the Abu Dhabi Court of First Instance requesting the Court to order the Respondent to pay back sums received in return for reserving two residential units pursuant to an agreement that they had entered into.

The Court of First Instance ordered the Respondent to pay back the sums received from the Petitioner. Both the Respondent and the Petitioner appealed the judgment before the Abu Dhabi Court of Appeal, which reversed the judgment and dismissed the case due to the existence of an arbitration agreement between the parties.

Held

The Court of Appeal’s decision was overturned.

It is settled law under Article 203.5 of the UAE Civil Procedure Code that, if the parties agree to arbitrate a dispute, it will not be permissible to bring the action before the courts. Nevertheless, if one of the parties does have recourse to the courts and brings an action without regard to the arbitration clause, and the other party does not object at the first hearing, it will be permissible for the court to try the action, and the arbitration clause will be deemed inoperative.

Judgment

The Respondent argued that the Court of Cassation should not accept the appeal on the grounds that it was filed outside the statutory time limit for appealing to the Court of Cassation.

The Court referred to Article 176 of the UAE Civil Procedure Code, which provides that the time limit for an appeal in cassation is 60 days commencing from the day following the date of the judgment and that, if the last day of the time limit for appeal falls on an official public holiday, it is permissible to file the appeal the following day. Since the Petitioner filed the appeal on a Saturday, which is an official public holiday, and since the appeal was registered the following day, it is deemed to have been filed within the statutory time frame. The Respondent’s argument in this regard was therefore rejected.

The Petitioner challenged the lower court’s judgment for contradicting the law and erring in its application of the law on the grounds that the Court of Appeal dismissed the case due to the parties’ agreement to arbitrate despite the fact that the Respondent did not object to the Petitioner’s action before the Court of First Instance.

The Court of Cassation noted that it is stipulated in Article 203.5 of the Civil Procedure Code that, if the parties agree to arbitrate a dispute, it will not be permissible to bring the action before the courts. Nevertheless, if one of the parties does have recourse to the courts and brings an action without regard to the arbitration clause and the other party does not object at the first hearing, it will be permissible for the court to try the action, and the arbitration clause will be deemed inoperative.

The Court construed from the documents presented that the Court of First Instance rejected the Respondent’s jurisdictional objections based on the arbitration agreement on the basis that the Respondent submitted its defence before the Court of First Instance during the second hearing, although its legal representative attended the first hearing and requested adjournment of the hearing to respond to the Petitioner’s submission.

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The Court of Cassation clarified that the jurisdictional objections should be raised at the first hearing, i.e., the first hearing before the court at which the parties are allowed to argue and which is attended by the defendant or his representative, not the first date scheduled by the court to hear the case. It makes no difference if the attorney applies for an adjournment to submit his arguments and response to the action or to comment on a memorandum submitted by his opponent, because the requirement is that he should rely on the arbitration clause at the first hearing, whether or not that party submitted an argument on the merits of the dispute. The Respondent’s attorney did not rely on the arbitration agreement at the first hearing. Accordingly, the Court of Appeal erred in its decision to overturn the Court of First Instance’s decision.

The Court of Appeal’s judgment was overturned and the case referred back to the lower court.