Samer Abou Said
The Firm – Moaza Alkhadar Advocates, Dubai
samer.as@thefirmdubai.com

Loaa Zarour
The Firm – Moaza Alkhadar Advocates, Dubai
loaa@thefirmdubai.com

Background

The dispute arose between three shareholders bound by a shareholders’ agreement (SHA) under which one shareholder would hold all shares in trust and serve as the company’s manager.^[1]

Despite a clear arbitration clause in the SHA, one shareholder (the claimant) initiated proceedings before the Dubai Court of First Instance (CFI) against both the company (the first defendant), which was not a signatory to the SHA, and the shareholder-manager (the second defendant). The claimant sought:

• payment of undistributed profits; and
• transfer of his shares into his own name in the commercial register for it to be reflected on the company’s commercial licence.

Court of First Instance

The defendants objected to the jurisdiction of the court, relying on the SHA’s arbitration clause. They argued the dispute – concerning profits and ownership – fell squarely within the scope of arbitration.

The claimant countered that the company was not a party to the SHA and that the claim against the second defendant was brought in his managerial capacity, not as a shareholder, making the case admissible before the CFI.

On 12 March 2025, the CFI (Case No 5566/2023 Commercial) dismissed the claim as inadmissible, holding that the arbitration clause ousted the court’s jurisdiction. The court also rejected the claimant’s argument about the second defendant’s managerial role, ruling that he remained a party to the arbitration agreement.

Court of Appeal

The claimant appealed. On 7 July 2025, the Dubai Court of Appeal (COA) (Case No 893/2025 Appeal Commercial) overturned the CFI’s judgment.

The COA held that arbitration clauses – being exceptions to courts’ general jurisdiction over all civil and commercial disputes – bind only their signatories. It reasoned that the company was an actual party to the dispute, since granting the claimant’s relief (the transfer of his shares to his name and distribution of the profits) would require amending the percentage of shares of the company and compelling it to award profits. Consequently, this makes the company an actual party and its inclusion in the dispute justified.

Court of Cassation

The defendants appealed, arguing the COA erred by treating the company as an actual party. They contended that the claimant’s relief, if established, could be achieved through the second defendant as the current sole shareholder who could transfer the shares, and in his capacity as the manager who could distribute profits, without involving the company itself.

On 26 August 2025, the Dubai Court of Cassation (Cassation No 956/2025 Commercial) reversed the COA and reinstated the CFI judgment. The Court emphasised that disputes comprising parties that are not party to an arbitration agreement should be resolved before one forum and not multi-forums for the fair conduct of justice, and that courts will only assume jurisdiction over non-signatories if they are actual parties to the dispute.

In this case, the Court found that the dispute was strictly between the two shareholders, with relief directed at the second defendant in his dual role as shareholder and manager. The mere inclusion of the company as a defendant did not make it an actual party.

Importantly, the Court clarified when an entity is deemed a real party:

• if it is a signatory to the arbitration agreement;
• if it has a direct interest in the dispute; or
• if it is relevant to the merits of the dispute.

Key takeaways and importance of the ruling

This ruling is significant for several reasons.

Clarification on who constitutes a ‘real party’ to the dispute

The court distinguished between genuine and nominal parties. The mere inclusion of a company in a lawsuit does not transform it into a real party if the core dispute lies between contracting shareholders. This prevents misuse of party designations as a tool to circumvent arbitration clauses.

Encouragement of contractual certainty

The judgment affirms the United Arab Emirates judiciary’s growing deference to party autonomy and contractual predictability. Parties entering into agreements – especially shareholders – can now rely on arbitration clauses being upheld, even where future disputes may involve associated corporate entities.

Guidance for drafting shareholder agreements

This case serves as a reminder for legal practitioners to clearly define the scope of arbitration clauses in partnership or shareholder agreements, and ensure proper representation authority when dealing with company matters.

Prevention of forum shopping

By closing the door on attempts to sidestep arbitration through strategic party additions, this decision helps curb forum shopping, thereby reinforcing the efficiency and purpose of arbitration.