Headnote

Arbitration – Public policy – Claims relating to registration of property – Arbitrability of disputes relating to real estate contracts

Summary of facts

The Petitioner purchased an off-plan property and sought to have the sale declared void because it was not registered on the interim real estate register in the Emirate of Dubai, a matter relating to public policy in which no conciliation is permitted. In the alternative the Petitioner sought to terminate the contract as the work had not been completed. The Respondent invoked the arbitration clause in the sale and purchase agreement and claimed that the matter could not be heard by the Court. The Court of First Instance and, in turn, the Court of Appeal, dismissed the claim for arbitration on the basis that the claim was not arbitrable. The Court of Appeal then dismissed the underlying claim on the basis that the property was in fact registered on the interim real estate register but refused to hear the alternative claim due to the existence of the arbitration clause.

Held

The Court of Appeal’s ruling was overturned in part and the matter remanded to the Court of First Instance for the overturned part.

Where parties have agreed to arbitrate a dispute and the dispute concerns arbitrable and non-arbitrable issues, whether raised, in part, as a primary request and in the other part as an alternative request, due process requires that the action not be divided and that jurisdiction be assumed by a single judicial authority. Jurisdiction to hear such a dispute would therefore belong to the Courts as the forum for exercising general jurisdiction. The arbitrable part of the claim would be referred back to the Court of First Instance for determination.

Judgment

Arbitration is an exceptional means for resolving disputes and is a departure from the general rule that it is the courts that have jurisdiction over all disputes save those excepted by a special provision of the law and that the arbitration clause must be construed narrowly.

It is further settled that conciliation is not permitted in matters relating to public policy and that the essence of Subsection 4 of Article 203 of the UAE Civil Procedure Law is that arbitration is not permissible in matters in which conciliation is not allowed. On that basis, the sale of off-plan units, without complying with the mandatory registration requirement, as provided for in Article 3 of Law No. (13) of 2008 regulating the interim real estate register in the Emirate of Dubai, cannot be a subject matter for arbitration as this is contrary to the principles of public policy. Where the parties have agreed to arbitrate a dispute, and the dispute involves both arbitrable and non-arbitrable issues, whether raised, in part, as a primary request and in other part as an alternative request, due process requires that the action not be divided and that jurisdiction be assumed by a single judicial authority. Therefore, jurisdiction to hear such dispute would belong to the courts as the forum exercising general jurisdiction.

The sale contract in question relates to an off-plan property unit and the Petitioner had requested, in its prayer, primarily that the sale be declared void because it was not registered on the interim real estate register in the Emirate of Dubai, a matter relating to public policy in which no conciliation is permitted. The Petitioner sought, in the alternative, that the contract be terminated because the construction work was not completed. Therefore, the entire dispute cannot be a subject matter for arbitration [Page85:] which necessarily entails that the effect of the arbitration clause in that contract does not extend to the instant action and the clause may not be invoked by the Respondent.

The Court of First Instance and, in turn, the Court of Appeal, took this view with regards to the primary request that the sale be declared void by dismissing the plea that the action could not be heard due to the arbitration clause. The Court of Appeal ultimately decided to dismiss that request based on the fact that the sale had been registered in the Claimant’s name on the interim real estate register on 13 July 2009 but incorrectly decided, with respect to the alternative request (that the contract be terminated due to failure to complete the construction work), to dismiss the action due to the existence of the arbitration clause. The Court of Appeal has contradicted and misapplied the law in this respect and its ruling will be overturned, with remand to the Court of First Instance which has not yet had its say on the merits of the alternative request.

The Court of Appeal’s ruling is overturned in part pertaining to the alternative request and the Respondent shall bear the costs and AED 2,000 as advocate’s fees. The matter will be remanded to the Court of First Instance for adjudication of the overturned part and the Respondent shall bear half the costs of the initial appeal and AED 500 as advocate’s fees.