Arbitration is a popular method of resolving disputes without going to court, and it all starts with an arbitration agreement. But who can agree to arbitration? How do you make sure your agreement is valid? And what happens if you end up in a dispute? This blog will break down everything you need to know about arbitration agreements in the UAE law in a way that’s easy to understand.
Who Can Agree to Arbitration?
Let’s start with the basics: who has the right to agree to arbitration? According to Article (4) of UAE Arbitration Law, only certain people can enter into an arbitration agreement:
Natural Persons
If you’re an individual, you need to have the legal capacity to exercise your rights. This means you must be of legal age and mentally competent to make decisions. If you don’t have this capacity, any agreement you make could be considered null and void.
Legal Representatives
If you’re representing a company or any other legal entity, you must be authorized to enter into agreements on behalf of that entity. For instance, a company’s CEO or legal counsel typically has this authority.
Third-Party Authorization
Sometimes, a party might authorize a third party to choose or decide on arbitration procedures. This third party can be anyone, including individuals or entities based inside or outside the UAE.
However, not every issue can be arbitrated. Some matters—like those where conciliation isn’t allowed—can’t be settled through arbitration.
How Are Arbitration Agreements Formed?
An arbitration agreement can be set up in a few different ways, as outlined in Article (5). Here’s how it works:
- Before a Dispute: You can include an arbitration clause in a contract before any dispute arises. This is a common practice in business contracts where both parties agree that if a disagreement occurs, it will be resolved through arbitration.
- After a Dispute: Even if you didn’t include an arbitration clause initially, you can still agree to arbitrate after a dispute has arisen. This is possible even if the case has already been brought to court—both parties just need to agree on what issues will be arbitrated.
- Reference to Other Documents: Sometimes, a contract might refer to another document that contains an arbitration clause. If this reference is clear, it’s as if the arbitration clause is part of your original contract. For example, a sales contract might refer to a standard agreement used in the industry, which includes an arbitration clause.
What Happens If the Contract Is Invalid?
This is where things can get a bit tricky. According to Article (6), an arbitration agreement is independent of the main contract. This means that even if the main contract is found to be invalid or terminated, the arbitration agreement can still be valid—unless it’s specifically tied to the legal capacity of one of the parties.
For instance, if a contract is canceled due to fraud, the arbitration clause might still hold up. The Arbitral Tribunal (the body handling the arbitration) can decide whether the contract’s invalidity affects the arbitration process.
The Importance of Having It in Writing
One of the most critical aspects of an arbitration agreement is that it must be in writing (Article 7). If it’s not, it won’t be considered valid. But what does “in writing” mean exactly?
- Signed Documents: The agreement can be in a signed document, like a contract.
- Correspondence: It can also be in emails or letters exchanged between the parties.
- Court Acknowledgement: If the agreement is made during court proceedings, the court can confirm it, and the parties must then follow the arbitration process.
What If There’s a Dispute and a Court Case?
So, what happens if a dispute arises and one party decides to take the matter to court, even though there’s an arbitration agreement in the UAE? According to Article (8), the court must dismiss the case if the defendant (the party being sued) points out that there’s an arbitration agreement—but they need to do this before making any other legal arguments or motions.
However, just because there’s a court case doesn’t mean the arbitration process has to stop. Arbitration can continue alongside the court proceedings, and the Arbitral Tribunal can still issue its award.
Conclusion
Arbitration Agreements in the UAE are a powerful tool for resolving disputes outside of court, but it’s essential to get them right. Make sure your agreement is clear, written, and that all parties involved have the legal capacity to enter into it.
For businesses operating in the UAE, it’s wise to consult with Dubai legal experts or a Dubai Lawyer when drafting or entering into arbitration agreements. This ensures that your agreements are enforceable and that your rights are protected.
If you need help with arbitration or any legal matters in the UAE, don’t hesitate to reach out to a top law firm in Dubai for expert advice.