Abu Dhabi Cassation Court: That the Abolition of the Arbitration Institution Does Not Invalidate the Arbitration Clause (10/10)

4 min 9 sec February 18, 2026 (Edited) الترجمة العربية

Written by

Dr. Hassan Arab

Partner, Regional Head of Dispute Resolution

h.arab@tamimi.com View LinkedIn Profile

Hend Al Mehairi

Associate

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Dina Assar

Senior Knowledge Lawyer

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Introduction:

The Abu Dhabi Court of Cassation’s judgment in Case No. 586 of 2024 affirms a clear pro-arbitration stance on two recurring issues: (1) the continued enforceability of arbitration clauses referring disputes to Dubai arbitration institutions abolished under Decree No. 34 of 2021; and (2) the scope of LLC managers’ authority to agree to arbitration. The Court rejected the appellants’ challenges to jurisdiction and authority, upheld the lower courts’ dismissal for lack of jurisdiction in favour of arbitration, and ordered the appellants to pay costs. The decision clarifies the transitional mechanics following Decree 34/2021 and reiterates that LLC managers have full authority to enter into agreements containing arbitration clauses unless their authority is expressly restricted.

Factual Background and Procedural Posture

The dispute arose from investment management relationships involving equity transactions, commissions, and alleged unauthorized disposals of securities. Two companies sued before the Abu Dhabi Commercial Court seeking expert appointment to quantify the highest value reached by specified shares after the first defendant allegedly sold them without authorization, to determine missed profits and “opportunity loss,” and to reconcile and refund allegedly excessive commissions deducted by both defendants since 2018. They sought price‑differential damages between the alleged unauthorized sale prices and subsequent peak valuations, plus interest and further compensation against the second defendant for lost investment opportunities.

The claimants alleged that in 2018, funds were transferred for investment and instructions were given in June 2019 to purchase a basket of shares, but that, during 2018, the first defendant sold the claimant’s shares without knowledge or consent, causing loss as the shares later appreciated materially, while substantial commissions were deducted beyond what was due. The defendants raised an arbitration objection, and the court of first instance and the Court of First Instance dismissed the action as inadmissible / declined jurisdiction due to the arbitration agreement.

On appeal, the Court of Appeal affirmed the dismissal in chambers on 8 May 2024. The claimants petitioned for cassation. The Cassation Court found the petition admissible for consideration, received briefs from the defendants seeking rejection, and, after deliberation, delivered its decision on 8 July 2024.

The Arbitration Agreements and Decree No. 34 of 2021

Three portfolio management agreements were central. The first, dated 23 January 2018 between the first claimant and the first defendant, contained a clause referring disputes—including issues of validity, breach, or termination—to arbitration under the DIFC-LCIA rules, with three arbitrators, seat at the DIFC, and proceedings in English.

Two further non‑discretionary portfolio management agreements, both dated 7 December 2021—one between the first claimant and the second defendant, and the other between the second claimant and the second defendant—replicated materially identical arbitration language, referring disputes to arbitration under the rules of the DIFC-LCIA with three arbitrators, seat at the DIFC, and English language.

The claimants argued that Decree No. 34 of 2021 abolished the DIFC Arbitration Center and the DIFC-LCIA, rendering the designated forum and rules inoperative and the arbitration agreement impossible to perform, especially for the two agreements concluded after the Decree’s effective date. They contended that such post‑Decree clauses were void and that, for reasons of indivisibility, the entire dispute should proceed before the courts.

The Court rejected these arguments by giving effect to Article 6(a) of Decree No. 34 of 2021, which validates agreements to arbitrate with abolished institutions as of the Decree’s effective date and substitutes the Dubai International Arbitration Centre (DIAC) for those institutions in administering disputes under such clauses, unless parties agree otherwise. The Court held that agreements pre‑dating the Decree, as well as those concluded after its entry into force, remain valid and effective, with DIAC stepping into the designated institution’s role. Consequently, the arbitration clauses remained enforceable despite institutional changes.

The reasoning is anchored in a fundamental principle: party consent to arbitration is paramount; institutional identity is secondary where the legislative framework provides a seamless substitution mechanism. The Court emphasized that the parties’ intention in resorting to arbitrate persisted, and the Decree supplies the administrative bridge to effectuate that intention through DIAC’s assumption of the predecessor institution’s functions.

Authority to Agree to Arbitration

The appellants further contended that the signatories lacked the special authority required to bind the claimant companies to arbitration clauses, arguing the company documents did not delegate such authority and that neither the CEO nor the manager possessed a specific mandate to arbitrate.

The Court grounded its analysis in Article 83 of Federal Law No. 2 of 2015 on Commercial Companies, confirming that, unless restricted by the company’s incorporation documents or internal regulations, an LLC manager holds full powers to manage the company and bind it, including the capacity to agree to arbitration, provided that the signatory’s representative capacity is disclosed. The Court also reiterated that determining whether the requisite authority exists is a fact‑intensive inquiry for the trial court, which retains wide latitude to interpret contract terms and weigh the evidence, such matters are not subject to the review of the Court of Cassation. Accordingly, the judgment was rendered dismissing the appeal, upholding the appealed judgment, and ordering the appellants to pay the fees and costs.