Headnote

Arbitration – Validity of arbitration clause – Authority to agree to arbitration – Presumption of authority

Summary of facts

The Petitioner and the Respondent entered into four sale contracts of plots of land in Dubai containing arbitration clauses. The Respondent brought proceedings before the Dubai Court of First Instance claiming payment of sums of money allegedly owed by

the Petitioner under the sale contracts.

The Petitioner argued that the courts had no jurisdiction to hear the dispute due to the existence of arbitration clauses in the sale contracts whereas the Respondent alleged that the arbitration clauses were invalid on the ground that they were not signed by the then manager of the company. Following dismissal of the case by the Dubai Court of First Instance due to the existence of the arbitration clauses, the Respondent appealed before the Dubai Court of Appeal which remanded the case to the Dubai Court of First Instance for adjudication on the merits on the ground that the arbitration clauses contained in the sale contracts were invalid for not having been signed by the manager of the company.

Held

The Court of Appeal’s decision was overturned.

Where the preamble and body of the contract mentions the name of the corporate entity without the name and capacity of its legal representative and the contract is signed with an illegible signature and contains an arbitration clause, a conclusive presumption shall arise that such signature belongs to the legal representative of the corporate entity who has the authority to agree to arbitration.

Judgment

The Respondent argues that the Court of Appeal’s judgment cannot be appealed as it was not final in that it did not end the dispute between the parties.

It is provided under article 151 of the UAE Civil Procedure Law that rulings made in the course of proceedings that are not final, i.e. that they do not conclude the proceedings, may be challenged only after a final ruling has been issued with the exception of rulings dealing with summary and provisional remedies, rulings granting a stay of proceedings, rulings which are subject to compulsory enforcement and rulings declaring lack of jurisdiction or those conferring jurisdiction to another forum.

The plea that the matter could not be heard due to the existence of an arbitration clause was a plea for lack of jurisdiction since its purpose was to deny the court’s jurisdiction to hear the matter. In dismissing such a plea and by adjudicating the merits of the dispute, the court impliedly declared itself as having jurisdiction to issue a final ruling.

Further, arbitration is an agreement providing to arbitrators to hear the dispute and excluding the authority of the courts. That agreement requires that the signatory of the contract containing the arbitration clause or the arbitration agreement have capacity and authority to do so.

The Court of Cassation has held in line with article 216(4) of the Civil Procedure Law that arbitration may only be agreed by persons having authority to dispose of the [Page154:] right which is the subject of the dispute rather than the authority to refer to courts since an arbitration agreement entails a waiver of the right to bring an action in courts and consequently a waiver of all guarantees that courts afford to litigants.

Arbitration is an exceptional method for dispute resolution which by virtue of UAE law may only be agreed upon on the basis of a special proxy. The manager of limited liability company is the person having authority to manage the company and as such, has the sole power to agree to arbitration in the name and on behalf of the company, within the scope of its activities, unless the company’s articles of association restricts his/her authority by preventing him/her from undertaking specific actions including agreeing to arbitration.

It is further settled in the Court of Cassation that where the name of a particular company appears in the preamble and body of a particular contract and a different person signs at the bottom of the contract, a presumption shall arise that the person who signed the contract did so in the name and on behalf of the company irrespective of whether his/her name was associated with the company’s name or was added to it. In such a case, the effects of the contract, in terms of rights and obligations, shall devolve directly upon the company. This necessarily means that where name of a corporate entity appears in the preamble or body of the contract followed by the name and capacity of its legal representative but the contract is signed by a different person and contains an arbitration clause, the corporate entity may invoke the nullity of the arbitration clause on the basis that it was not signed by its legal representative who is authorised to agree to arbitration.

By counter-implication, where the preamble and body of the contract mention the name of the corporate entity only without the name and capacity of its legal representative and the contract is signed with an illegible signature and contains an arbitration clause, a conclusive presumption shall arise that such signature belongs to the legal representative of the corporate entity who has the authority to make dispositions and agree to arbitration. In such a case, no argument may be entertained that the signature is not that of the person legally authorised by the corporate entity to make dispositions and agree to arbitration.

This is due to the fact that contracts must be concluded in accordance with the requirements of good faith where the mutual agreement of the parties to the contract is not marred by mistake (khata’), coercion (ikrah), inequality in power (ghubn) or fraud (taghrir) and the contract complies with applicable principles. Under Article 70 of the Civil Transactions Law, if a person seeks to set aside what he has (conclusively) performed, his attempt shall be rejected. And as per the rules of evidence, no person may rely upon his own acts as proof of the validity of his allegations against a third party.

We note from the four sale contracts that the seller’s and purchaser’s names are not followed by the name and capacity of their respective legal representatives and the contracts contain an arbitration clause and are signed with illegible signatures. Therefore, in harmony with the principles set out in the above legal context, the two signatures must be attributed to their respective legal representatives who are authorised to act and agree to arbitration. It follows that the arbitration clause in those contracts is valid and binding on the parties. Consequently, the dispute is to be submitted to arbitration since jurisdiction does not lie with the court and the Respondent’s plea that the appeal may not be entertained is dismissed. The Court of Appeal contradicted this view and has accordingly misapplied the law. Its ruling is overturned and, with respect to Appeal No. 130-2015, the appeal is dismissed on its merits and the primary ruling is upheld.