Recurring Issues in the UAE concerning Arbitration

UAE Arbitration Law

UAE Arbitration Law, Recurring Issues in the UAE concerning Arbitration, By Eric Teo – Head of International Practice & Special Projects.

In my years of legal practice in the UAE, I have seen many hodgepodge agreements used in the
region arising from “recycling” old agreements or clauses that are defective or unsuitable. Such
agreements increase the risks of contracting as they may not work as intended. This situation is
most apparent when an arbitration agreement or clause is in question.

Since the UAE Arbitration Law came into force in 2018, there have been several Cassation Court
decisions on the validity of arbitration agreements where the court had to decide if it has the
jurisdiction to rule on the parties’ dispute or should the parties go to arbitration. Issues recurring
before the arbitration law became effective continue to emerge, e.g. arbitration agreements are
often challenged due to the questionable authority of the person signing the agreement, the way
the arbitration clause was included in the agreement and the contents of the clause itself.

No doubt the arbitration law has improved the workings of arbitration in the UAE. But we must not
take the law for granted and ignore the basic requirements that an arbitration agreement must be
clear and the persons signing up to it must have the authority to do so. It should also clearly specify
the language, rules, seat and number of arbitrators for the arbitration.

UAE Arbitration Law
There are drastic implications for ignoring the basic requirements. For instance, the parties may end
up litigating in the court for a long period on the validity of the arbitration agreement and the merits
of the dispute simultaneously. Based on past cases, this could lead to the court deciding that the
question on the arbitration’s validity has become redundant because the parties have accepted the
court’s jurisdiction by litigating. Conversely, a disputing party might incur substantial time and
expense running the arbitration to subsequently face the risk of the court nullifying the arbitration
award.

Given these harsh realities, I encourage parties to seek proper legal advice before “copying and
pasting” arbitration agreements or clauses. There are other aspects to consider too, such as the best
choice of seat, rules and governing law of the arbitration for the particular contract.