Nayiri Boghossian
Al Owais, Dubai
nayiri@alowaislegal.com

General grounds of jurisdictional challenges

Arbitration in the United Arab Emirates (UAE) is governed by Federal Law 6/2018 on Arbitration (the Arbitration Law). Grounds for jurisdictional challenges are set out in various articles of the Arbitration Law. These may deserve special attention, as some of these jurisdictional challenges are used simply to disrupt proceedings and others may be specific to the UAE.

Article 19 of the Arbitration Law explains that jurisdictional challenges can be based on the non-existence of the arbitration agreement or its invalidity. A jurisdictional challenge can also be raised if the arbitration agreement does not encompass the subject matter of the dispute. The following article examines the most common grounds of challenges relating to the (non)existence of an arbitration agreement and its (in)validity.[1]

(Non)existence of the arbitration agreement: the writing requirement 

For an arbitration agreement to exist, it has to be in writing as per Article 7.1 of the Arbitration Law. The writing requirement can be satisfied in more than one manner. For example, the arbitration agreement can be included in a document signed by the parties, or in an exchange of letters or emails. It can also be concluded through reference to the arbitration clause in another document or contract. The latter means of concluding an arbitration agreement requires further examination.

Under Article 7.2(b) (as well as Article 5.3) of the Arbitration Law, an arbitration agreement can be concluded by reference to another document or contract which contains an arbitration clause, provided that the reference clearly indicates that the arbitration clause is part of the contract. Prior to the Arbitration Law being issued, there was no legal provision on this point. Instead, such principle was established through court decisions, which were not uniform in their approach to the issue. According to certain court judgments, specific reference to the arbitration clause was not a requirement; a mere reference to another document that contained an arbitration clause would suffice. For example, a reference to Fédération Internationale Des Ingénieurs-Conseils (FIDIC) terms in the contract was considered an acceptance of the applicable arbitration clause within the FIDIC terms.[2] Other court decisions required specific reference to the arbitration clause for the arbitration agreement to be validly concluded.[3]

The inconsistent approach to this issue is now resolved through the provisions of the Arbitration Law, which require clear reference to the arbitration clause. Although such a requirement is restrictive, at least it ensures uniformity and predictability.

(In)validity of the arbitration agreement

Once the arbitration agreement is concluded in writing, the question turns to its validity. A key ground to argue invalidity is whether the person concluding the arbitration agreement had the necessary authority to do so. This question is often invoked in the context of corporate entities as opposed to individuals because, pursuant to Article 4.1 of the Arbitration Law, the representative of a corporation must be specifically authorised to agree to arbitration. Otherwise, the agreement to arbitrate is not valid.

The rule set out in Article 4.1 is simply a continuation of what has been required under prior legislation and court judgmentsval. The requirement for specific authority continues to be used by parties to invalidate arbitration clauses and has often been invoked in bad faith. As a result, two key presumptions were established by the UAE courts:

• when the individual signing the agreement is the general manager of a limited liability company, there is a presumption that he or she has the authority to bind the entity to an arbitration agreement;[4] and
• when the agreement shows the name of the corporate entity without specifying the name of its authorised representative in its preamble, there is a presumption that the signatory is authorised to sign the arbitration agreement.[5] ​​​​​​​

Such presumptions were established in the context of limited liability companies, which are the most commonly used form of companies in the UAE.[6] They have not been applied to other types of companies.

Article 4 raises another ground for jurisdictional challenge as it sets out matters which are not arbitrable. According to Article 4.2, matters in which reconciliation is not allowed are not arbitrable. Such matters are determined by court decisions and include for example, criminal matters and public policy matters. Aside from matters in which reconciliation is not allowed, certain disputes are not arbitrable according to other UAE laws. For example, commercial agency disputes have on occasions been considered by the courts as non-arbitrable. In other instances, certain aspects of such disputes were treated as being arbitrable.[7] Also, there is a question mark as to whether employment disputes are arbitrable. In all of the above scenarios, an agreement to arbitrate a matter that is not arbitrable is invalid and can be used as grounds for a jurisdictional challenge.

Challenge procedures

Article 19 of the Arbitration Law authorises an arbitral tribunal to determine questions of jurisdiction, either as a preliminary matter or in the final award. If the tribunal deals with the question as a preliminary matter and decides that it has jurisdiction, a party may, within 15 days from the date of notification of the tribunal’s decision, request the competent court to decide on the matter.[8] Consequently, the arbitral proceedings are suspended until a judgment is rendered unless the tribunal decides otherwise on the basis of a request made by either party. The party requesting the continuation of the arbitral proceedings will be liable for the arbitration costs if the court decides the tribunal has no jurisdiction, and the court’s decision is final.

A party wishing to raise a jurisdictional challenge should follow the deadline set out in Article 20, which requires that a jurisdictional challenge be raised not later than the statement of defence unless the challenge arises while the proceedings are ongoing. If a party raises a matter that is not within the scope of the arbitration agreement during the proceedings, the opposing party may raise a jurisdictional challenge at the subsequent hearing following the original one where the said matter was raised. If the party is delayed in raising the challenge, the tribunal may accept to hear it, regardless of whether it finds that any delay was justified.

Article 20 assumes that hearings are scheduled throughout the proceedings, but that is not how arbitration is often conducted. It will therefore be wise to assume that any challenge should be raised as soon as practically possible after the subject matter of the challenge arises.

Final remarks

Most of the grounds of jurisdictional challenges reviewed above – such as the writing requirement, the specific authority to conclude an arbitration agreement, etc – stem from an underlying concept that arbitration is an exceptional route to resolve a dispute. It involves extracting the dispute away from the jurisdiction of the courts with all the guarantees the judiciary offers. Hence, the legislator and the courts require that a party’s intention to be bound by arbitration be expressed in an unequivocal manner. Such a restrictive approach to arbitration is neither unique to the UAE, nor is it novel. In fact, many jurisdictions maintain such a position.

A jurisdictional challenge, if upheld, can put an end to arbitral proceedings and hence, frustrate a party’s expectations that the dispute be resolved through arbitratio2n. Even if it is not upheld, a jurisdictional challenge could delay proceedings and may on occasion be used to achieve the goal of slowing an arbitration. For all of the above reasons, it is key for a practitioner to be aware of these potential grounds of challenges and ensure that they are considered and cured (if possible) prior to initiating any proceedings. ​​​​​​​