Welcome to the Saudi Arabia focus edition of Law Update.
One of the key markets in the Middle East and North Africa (MENA) that continues to lead from the front is the Kingdom of Saudi Arabia (KSA). As the largest country in the Middle East and the 18th largest economy in the world, the progress KSA continues to make is underpinned by its Vision 2030 that envisions developing the country as an investment powerhouse and hub that ultimately connects Asia, Europe, and Africa. Given Saudi Arabia’s significance to the regional economy, our team of experts have prepared a range of pertinent articles that provide insights into new laws, regulations, and the legal landscape in the Kingdom.
This edition will provide you with an up-to-date guide on matters such as; the framework issued by the Saudi Central Bank on IT governance, the anti-corruption landscape under Vision 2030; we also provide practical tips for dispute avoidance. This is only a snapshot; there are many more articles within the KSA focus section for you to read, which we hope you will find valuable and enjoyable.Read the edition
Marwa El Mahdy
July – August 2013
Facts of the case
The claimants (two individuals) and the respondent (a real estate company) entered into a purchase agreement for 16 real estate units. They agreed on December 2007 as the completion date for the project. Due to the respondent’s delay in handing over the units, the claimant initiated legal action before DIAC seeking the termination of the purchase agreement and a refund of the amount paid.
The arbitration tribunal rendered an award terminating the agreement and ordering the respondent to refund the amount paid for the purchase price with interest and arbitration costs. The claimants initiated legal action against the respondent before the Dubai Court of First Instance seeking ratification of the DIAC arbitral award.
The respondent filed a counterclaim before the Dubai Court of First Instance seeking to set aside the arbitral award on the grounds that the person who signed the arbitration deed (terms of reference) and who attended the arbitration proceedings on behalf of the respondent was not legally authorized.
The Dubai Court of First Instance ratified the arbitral award and dismissed the counterclaim. The respondent appealed to the Dubai Court of Appeal which upheld the lower court’s decision. The respondent appealed to the Dubai Court of Cassation.
Court of Cassation
The respondent argued that the Court of Appeal erred in the application of the law and breached the principle of equality of arms by disregarding the respondent’s plea in respect to the lack of legal capacity of the person who represented the respondent during the arbitration proceedings. The representative had not presented any documentation proving his entitlement to attend the arbitration proceedings on behalf of the respondent.
The Cassation Court rejected this and upheld the appealed judgment on the following basis:
Accordingly, the appeal was dismissed and the award ratified.
This judgment shows the Dubai Court of Cassation being supportive of arbitration by removing one of the most common technical arguments used to annul awards – that a party’s representative during the arbitration was not properly authorized.
Although submitting a power of attorney may not be strictly necessary, it is the best proof that a representative is authorised. It therefore remains good practice in the UAE for parties to submit powers of attorney for their representatives so as to remove any possible doubt. A tribunal can also order that powers of attorney be submitted using its powers under article 7.3 of the DIAC Rules.