Abu Dhabi Court of Cassation Annuls an Arbitral Award for Violating Public Policy (4/10)

4 min 21 sec February 18, 2026 (Edited) الترجمة العربية

Written by

Dr. Hassan Arab

Partner, Regional Head of Dispute Resolution

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Hend Al Mehairi

Associate

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Dina Assar

Senior Knowledge Lawyer

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The concept of public policy is variable and not fixed. It is a broad and flexible notion that often lacks a single, clear definition. What may be considered contrary to public policy in one country might not be so in another. Even within a single country, what is deemed a violation of domestic public policy does not necessarily equate to a breach of international public policy.

In general, determining whether an issue violates public policy is subject to the discretion and oversight of the judiciary in the country exercising control. It is the national court that sets the standards and criteria for whether something falls within a public policy violation.
It’s important to note that a public policy violation may sometimes arise from procedural irregularities—such as breaching a mandatory procedural rule. For example, if an arbitral tribunal fails to have witnesses take an oath, and the law of the arbitral seat considers such an oath a mandatory rule, then neglecting that step may constitute a public policy violation.
Alternatively, the subject matter of the dispute itself may violate public policy—such as if the contract’s subject is illegal or immoral in the country where enforcement of the award is sought. Examples include contracts for the distribution of obscene films or the establishment of illicit venues, in violation of public moralityin the state where enforcement is sought. Or if the matter in dispute is non-arbitrable under national law and cannot be adjudicated other than exclusively by national courts—such as bankruptcy, criminal law, or family matters.

In this context, the Abu Dhabi Court of Cassation1 issued a ruling annulling an arbitral award because the dispute in question fell outside the jurisdiction of the arbitral tribunal. Instead, the jurisdiction belonged exclusively to the Bankruptcy Court, which had already issued a final judgment on the matter, rendering it res judicata (i.e., the issue could not be re-litigated by the arbitral tribunal). The ruling explained:

“The challenged arbitral award contradicts Article 156[1] of the Financial Restructuring and Bankruptcy Law, which prohibits, following a declaration of bankruptcy, the initiation or continuation of lawsuits against the debtor. This is a mandatory provision tied to public policy, as it governs the right of access to courts and regulates how disputes must be brought before the judiciary, including the required procedures.

Public policy is a fundamental standard that must be respected in all legal actions and decisions, as it relates to the overarching public interest and the social, political, economic, and moral foundations upon which the state is built.

Once a bankruptcy declaration is issued, the bankrupt party is legally stripped of authority over their assets and may not initiate or pursue litigation concerning them, to protect the rights of the creditors. Only precautionary actions that benefit the creditors and do not harm their rights—or that involve property not subject to bankruptcy restrictions—may be undertaken.

Likewise, no creditor is permitted to take individual legal action against the bankrupt party to secure a personal advantage, circumventing the collective nature of bankruptcy proceedings. This is to prevent a race among creditors to seize the debtor’s assets, which could lead to unfair outcomes. This stay continues until the bankruptcy proceedings conclude and the bankrupt’s assets are liquidated.
The arbitration award, therefore, violates the public policy established by the Bankruptcy Law, particularly regarding collective liquidation and the exclusive jurisdiction of the Bankruptcy Court. This is a matter the court examining the request for annulment must raise on its own initiative. Since the court below failed to do so and rejected the appellant’s request to annul the award despite its clear breach of public policy, its ruling is legally flawed and must be overturned.”

Conclusion: 

In light of the Abu Dhabi Court of Cassation’s decision, the case confirms that the UAE judiciary will not hesitate to set aside an arbitral award when the tribunal ventures into matters that the law reserves exclusively for state courts—most notably bankruptcy proceedings. By characterising Article 156 (1) of the Financial Restructuring and Bankruptcy Law the Court affirms  two key principles: (i) the collective nature of insolvency, which forbids individual claims or parallel dispute-resolution mechanisms once bankruptcy is declared; and (ii) the obligation to comply with court-ordered stays, which serve to protect creditors and preserving the unity of the debtor’s estate. Accordingly, any arbitral award rendered in defiance of such rules will be nullified, even if the parties had previously agreed to arbitration, thereby reaffirming the supremacy of public policy over party autonomy.

[1] In Commercial Appeal No. 1154 of 2024, dated on 16 December 2024, the Court held that once a judgment declaring the debtor bankrupt is issued, all disputes relating to the debtor’s debts fall within the exclusive jurisdiction of the Bankruptcy Court. This includes disputes that were previously subject to arbitration agreements. Consequently, the arbitration clause is rendered ineffective, and recourse to arbitration in respect of such disputes is no longer permissible. Any continuation of arbitration proceedings after the issuance of the bankruptcy judgment constitutes a violation of public order and necessitates the annulment of any arbitral award rendered in this regard, in deference to the principle of the unity of the bankruptcy estate and the exclusive subject-matter jurisdiction of the Bankruptcy Court.