Headnote

Arbitration – Jurisdiction of the court – Arbitration agreement – Validity

Summary of facts

The Petitioner appointed the Respondent as a subcontractor for the execution, supply, installation, testing and commissioning works in the project by way of subcontract. The Respondent fulfilled its obligations under the subcontract by completing the agreed work but received only an advance payment. The Petitioner failed to make payment of the balance due to the Respondent and the Respondent brought Commercial Action No 2525-2012 before the Abu Dhabi Court of First Instance seeking the outstanding payments. The Petitioner argued that the action was barred by an arbitration clause.

The First Instance Court appointed an expert and after receiving the expert’s report, the Court of First Instance directed the Petitioner to pay to the Respondent. The Petitioner filed an appeal and the Court of Appeal upheld the First Instance Court judgment. The Petitioner then filed a petition to cassation based on the following arguments:

  1. The Court of Appeal erred in dismissing the arbitration plea on the basis that the prime contract was not incorporated by reference into the subcontract which contained no explicit provision requiring the Respondent’s compliance with the terms of the prime contract, including the arbitration clause. A clause in the prime contract between the Appellant and the Employer provided for the settlement of disputes through Abu Dhabi arbitration and therefore the action should have been dismissed on the basis of a prior agreement to arbitrate.
  2. The Petitioner contended that the Appeal Court’s reasoning reflects an incorrect interpretation of the contract as the court dismissed the action on the basis that the subcontract failed to contain a back-to-back clause and argued the Respondent may not claim its dues until the Appellant has received their respective outstanding from the Employer.
  3. The Petitioner argued that the Court of Appeal had directed the Appellant to pay to the Respondent the judgment amount based on a flawed expert report that relied on documents which are all photocopies, without originals.

Held

The petition to cassation was dismissed.

An arbitration agreement, whether contained in a document signed by the parties or in an exchange of letters, telegrams or other means of written communication, must be in writing. The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is clear and explicit.

A generic reference that does not specifically refer to the arbitration clause such that parties are made aware of its existence would not extend to the clause and there would be no arbitration agreement between the parties to the contract.

Judgment

The court considered the arguments of the Petitioner as baseless on the following grounds.

Firstly, arbitration involves an explicit agreement to resolve a dispute through an arbitrator in place of the courts and whether the agreement is drafted as a clause or a submission agreement, it must be in writing and contained in a document signed by the parties or in an exchange of letters, telegrams or other means of written communication. The reference in a contract to any document containing an [Page127:] arbitration clause constitutes an arbitration agreement in writing, provided that the reference is clear and explicit, i.e. with specific mention of the arbitration clause contained in the referenced document. A general reference to the terms of the document without specific reference to the arbitration clause such that parties are made aware of its existence would not extend to the clause and there would be no arbitration agreement between the parties to the contract. In the present case, the reference in the subcontract to the terms of the prime contract containing the arbitration clause does not mean the Respondent’s consent to that clause. Hence, the arbitration clause in this case does not operate to divest the courts of jurisdiction over the dispute and the Court of Appeal was right to assume jurisdiction.

Secondly, it is settled principle that the trial court interprets documents, contracts and disputed terms in harmony with the intention of the parties and draws appropriate conclusions. The trial court exercises its discretion without review by the Court of Cassation as long as the language of the document bears out the meaning ascribed to it by the trial court.

The Cassation Court noted that the record confirms that the Petitioner had commissioned the works in question to the Respondent under subcontract dated 14 June 2011 setting out the payment terms: “20% upfront and the balance by LC 120 days on a corresponding basis with the client upon the approval of the Project Consultant.” Therefore, the Petitioner’s payment obligation towards the Respondent is not a condition that would suspend the obligation until a certain event occurred as claimed by the Petitioner. The Court observed that it is clear from the report of the court-appointed expert that the expert had undertaken a site inspection and determined that the Respondent had completed the subcontract and that the works were installed and commissioned by the management of the facility and therefore the Court of Appeal has reached the right conclusion.

Finally, it is settled by the Court of Cassation that in accordance with Article 177 of the UAE Civil Procedure Law, notice of appeal at cassation must set out grounds for appeal. The purpose of this requirement is to clearly identify the grounds for appeal and consequently the alleged error invalidating the decision and its effect on the court’s findings. The Petitioner’s challenge is couched in general and ambiguous wording that does not clearly identify the photocopies they are contesting which the expert took as evidence in support of his finding and accordingly unacceptable.

Based on the above grounds, the petition to cassation was dismissed.