Did you know that the authority to conclude arbitration agreements in the United Arab Emirates can significantly impact the enforceability of such agreements, especially concerning public joint stock companies? However, ensuring the validity of such agreements requires careful consideration of the authority vested in representatives signing on behalf of juristic persons. This blog explores the intricacies of authority in concluding arbitration agreements, with a focus on public joint stock companies.
1. Authority in Arbitration Agreements:
In the United Arab Emirates (UAE), the authority to enter into arbitration agreements on behalf of juristic persons is a matter of legal significance. Article 4(1) of the UAE Federal Arbitration Law No. 6 of 2018 stipulates that only representatives with specific authority can validly conclude arbitration agreements. This requirement underscores the importance of ensuring that representatives possess the necessary authorization to bind their respective entities to arbitration.
Presumptions of Authority in Limited Liability Companies (LLCs)
In the context of limited liability companies, historical court decisions have established presumptions in favor of special authority for general managers. These presumptions, rooted in prior legislation and court precedents, emphasize that unless explicitly restricted in the company’s articles of association, general managers are presumed to have the authority to agree to arbitration. Such presumptions provide clarity and facilitate the efficient resolution of disputes for limited liability companies.
2. Authority and Public Joint Stock Companies:
Public joint stock companies present unique challenges regarding the authority to conclude arbitration agreements. Unlike limited liability companies, public joint stock companies historically faced a more restrictive approach. Courts have invalidated arbitration agreements if specific authority could not be demonstrated or if the agreement was not signed by authorized individuals.
Legal Provisions Governing Authority
The legal landscape surrounding public joint stock companies is governed by provisions outlined in the UAE Commercial Companies Law. Article 154 of the Commercial Companies Law outlines that the board of directors of public joint stock companies may only agree to arbitration if expressly authorized by the company’s articles of association or through a special resolution of the general assembly. Additionally, Article 155 designates the chairman of the board as the legal representative of the company, with specific conditions for delegation of authority.
Recent Shifts in Judicial Approach
Recent judicial decisions indicate a shift in the approach towards public joint stock companies and arbitration agreements. While the historical stance leaned towards strict adherence to authorization requirements, recent cases suggest a willingness to consider the validity of arbitration agreements even when not signed by explicitly authorized individuals. This evolving approach reflects the judiciary’s recognition of the practical challenges faced by public joint stock companies in adhering strictly to authorization requirements.
3. Practical Considerations and Recommendations
Going through the complexities of authority in concluding arbitration agreements requires a comprehensive understanding of legal provisions and recent judicial interpretations. To ensure the enforceability of arbitration agreements involving public joint stock companies, parties must adhere to the following practical considerations:
Verify the authority of representatives
Parties should diligently verify the authority of representatives signing arbitration agreements on behalf of public joint stock companies. This may involve reviewing the company’s articles of association, obtaining explicit authorization, or seeking confirmation from legal professionals.
Involve public notaries
In cases where doubts exist regarding the authority of signatories, involving public notaries can provide an additional layer of assurance. Notaries play a crucial role in verifying the authority of signatories and confirming the validity of arbitration agreements.
Consider court intervention
If uncertainties persist regarding the validity of arbitration agreements, parties may opt to file claims before local courts for clarification. Court intervention can help confirm the validity of arbitration clauses and mitigate the risk of disputes arising from inadequate authorization.
Shift Toward Practicality in Authorization Requirements
Recent judicial decisions offer insights into potential shifts in the approach towards authority in concluding arbitration agreements, particularly concerning public joint stock companies. While historical precedents favored strict adherence to authorization requirements, recent cases demonstrate a willingness to consider the practical realities faced by companies in the modern business landscape.
Case Highlight: Dubai Court of Cassation No. 236/2020 Civil
For instance, Dubai Court of Cassation No. 236/2020 Civil represents a notable departure from the restrictive approach previously applied to public joint stock companies. In this case, the court acknowledged the validity of an arbitration clause despite not being signed by the chairman of the board, citing the presumption that the signatory acted on behalf of the company. Such decisions indicate a growing recognition of the need for flexibility in interpreting authorization requirements to facilitate efficient dispute resolution.
Conclusion
Understanding the authority to conclude arbitration agreements is essential for ensuring the enforceability and effectiveness of such agreements, particularly in the context of public joint stock companies. For expert guidance on the complexities of arbitration agreements in the UAE, consider reaching out to reputable law consultants in Dubai & legal consultants specializing in commercial law and dispute resolution.