Book an appointment with us, or search the directory to find the right lawyer for you directly through the app.Find out more
We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
Claim and facts of the case
A Commercial Action was filed before the Dubai Court by a Subcontractor (“Party A”) against (“Parties B and C” together the “Parties”). Party A requested the Court to ratify an arbitral award issued on 18 June 2008 in which the Parties were ordered to jointly and severally pay AED843,912 plus 9% legal interest from 12 July 2003 until full payment. Party A was also awarded its legal costs in the amount of AED30,000.
Party A submitted that it had concluded a Sub Contracting Agreement (“The Agreement”) with the Parties. The Agreement contained an arbitration clause. Party A’s obligations under the Agreement were to execute carpentry work, being the supply and installation of wooden doors and cupboards in a residential complex in Sharjah. Party A pleaded it carried out all the works as stipulated in the Agreement but that the Parties refused to make the final installment payment, amounting to AED843,912. As stated above, Party A received an award to this effect in its favour.
Consequently, a representative of the Parties filed an interlocutory application before the Court, requesting the Court set aside the arbitral award. A number of grounds were put forward in support of the application:
Court of First Instance
The Court of First Instance dismissed Party A’s plea that the award be enforced and ruled in favor of the Parties. Consequently Party A appealed to the Court of Appeal. Although the award was set aside, the Parties also appealed on the basis the Court of First Instance had failed to adequately address the Parties’ reasons for arguing that the award be set aside.
Court of Appeal
The Court of Appeal overturned the Court of First Instance’s decision and ratified the arbitral award. Furthermore, the Court of Appeal dismissed the Parties’ interlocutory claim. Subsequently, the Parties appealed to the Court of Cassation.
Court of Cassation
The Parties argued that the Court of Appeal had erred in reversing the decision of the Court of First Instance. The Parties put forward a number of propositions in support of this plea:
The Court of Cassation found one exception to this crucial and important rule. Where the grounds or reasoning for the ultimate decision are continued on the same page as the relief ultimately ordered, and the page containing the ultimate relief is signed, that signature shall be deemed to cover the reasoning for the granting of the relief.
If the reasoning and grounds for the ultimate decision and the ultimate decision itself appear on separate pages, then all pages of the award should be signed by all arbitrators. Failing this, such award shall be invalid.
In this case, the final page of the award, which contained the ultimate decision, also contained part of the reasoning for the ultimate decision. The final page was signed; therefore the signature was deemed to cover both the grounds for the ultimate decision and the ultimate decision itself. Importantly, the Court of Cassation ruled the format of the award complied with Article 212.
The Parties’ second argument was dismissed. The Court of Cassation determined that an arbitration agreement is capable of either being incorporated as a clause (“arbitration clause”) in the contract between parties or as a separate independent agreement in the course of a dispute between both parties (this is not to be confused, however, with the doctrine of separability which prescribes that an arbitration clause in a contract is to be treated as separate from that main contract). Importantly, the Court of Cassation held that when the arbitration agreement is incorporated as a clause in the contract it exempts the participants from drafting a separate independent agreement or terms of reference in order to validate the procedure.
In this case, the Court of Cassation found that because the Court of First Instance had appointed the arbitrator on the basis that the Agreement contained an arbitration clause, there was no need to enter into separate terms of reference.
From a further procedural standpoint, the Court of Cassation held that there was no provision in the law requiring the arbitrator to document, in the minutes of the arbitration hearings, that he had submitted terms of reference to the parties for their signature.
The Parties’ third and final argument was also dismissed. The Court of Cassation, with reference to Article 210 of the Civil Procedure Code, held as follows:
The Court found that the arbitrator had requested an extension from the Court within the 6 month period of the proceedings. In this regard, the Parties’ time bar argument was dismissed.
To learn more about our services and get the latest legal insights from across the Middle East and North Africa region, click on the link below.