WHO CAN BIND A COMPANY TO ARBITRATION IN THE UAE?
The consent of the parties to arbitration is considered the foundation stone of the entire arbitration process. Consent is usually evidenced by a written arbitration clause, either in the contract or agreed between the parties after the dispute has arisen. But where one of the parties is a corporate entity, who has the right to bind that company to the arbitration clause? This is important because if the signatory is not properly authorised then the clause may not be binding and any award made pursuant to it will likely be annulled.
Each country will have its own rules on this issue, and often it will be whichever officer in the company has the ostensible authority to bind the company to an agreement. In the UAE however the situation is very different. Arbitration is seen as an exceptional form of dispute resolution, an opt-out from the court’s jurisdiction which deprives a party of its right to refer disputes to court. As such any agreement to arbitrate must be clearly expressed in writing (rather than incorporated by reference), and the person signing on behalf of the company must be authorised with the power to bind the company to the arbitration clause.
This article sets out when an officer of a UAE company has the power to bind that company to an arbitration clause under UAE law, and also discusses a recent case in which a party was bound to an arbitration clause it had not signed. The article concludes with some practical tips.
Apr-Jun 2013 issue
Al Tamimi & Company