Dubai Courts issues landmark judgement on arbitration case
The Dubai Court of Cassation issued a verdict last week on an arbitration matter (Case no. 10/2023), which has been the source of discussion in the legal community. The verdict from the Court modifies a previously established legal principle which stated that if the arbitration tribunal's decision to close a case was due to non-payment of arbitration costs, it was understood that such a decision would result in the waiver of the arbitration clause. Consequently, either party would then have the right to file a case before the onshore Courts to assert their claim, and the remaining party would not be able to invoke the arbitration clause because the defendant in the arbitration case had refused to pay the costs of the arbitration centre.
However, the above legal principle has now been modified through the recent decision of the Court of Cassation. The Court has ruled that an arbitration agreement remains valid and can still be relied upon by either party even if the defendant has failed to pay its share of the arbitration costs. The determination of the arbitration tribunal to close a case due to non-payment of arbitration costs no longer results in the waiver of the arbitration clause and is no longer considered an implied relinquishment of the arbitration clause. Therefore, either party has the right to refile the dispute before the arbitration tribunal to initiate a new arbitration proceeding and pay the arbitration costs, as long as the arbitration clause has not been waived or declared null and void. As a result, acknowledging this new principle means that if one party files a case before the onshore local courts, the other party still has the right to insist on the arbitration clause.
The above decision from the Dubai Court of Cassation comes at an interesting time; last month the UAE federal government issued critical amendments to the Federal Law No. 6 of 2018 on Arbitration (“Arbitration Law”). The amendments last month to the Arbitration Law addressed the requirements to be met by the arbitrator including procedure, place of arbitration, and the arbitration hearings which have all been revamped to improve access to arbitration. The above decision from Dubai Courts of Cassation last week further reinforces the alignment between the judiciary and the legislature on improving and streamlining the arbitration processes in the UAE.