The Dubai Court of Cassation has recently issued a judgment that tackles the effect of incorporating arbitration clauses by means of referring to the general conditions of a FIDIC (or the International Federation of Consulting Engineers) contract including the arbitration clause therein.

In the case in question, the parties had agreed that the 1987 FIDIC Red Book General Conditions of Contract would govern the transaction. Clause 67 of the 1987 FIDIC Red Book General Conditions contained a multi-tiered dispute resolution clause which required all disputes to be referred to the engineer in the first instance for a decision and then subsequently to arbitration under ICC rules.

The Dubai Court of Appeal found that incorporating an arbitration clause by general reference to the entirety of the 1987 FIDIC Red Book General Conditions was sufficient to bind the parties to the arbitration clause contained in the General Conditions on the basis of Article 7(2)(b) of Federal Law No. 6 of 2018, which allows arbitration clauses to be incorporated by reference.

The Court of Cassation overturned the Court of Appeal judgment on the basis that the arbitration clause was not enforceable and the Dubai Courts had jurisdiction to adjudicate the dispute. The Court had held that if the referral to the FIDIC general conditions was merely a referral in general for the texts of this document without specifying the arbitration clause in particular which established the parties’ knowledge of its existence in the general conditions, the referral did not extend to the arbitration clause. Therefore, arbitration was not considered to be agreed on between the parties to the contract.

The significance of this judgment is that it establishes that a referral to an arbitration clause must be specific to a clause stipulated in another document. Given the risks associated with the application of arbitration clauses in the UAE, and in case the parties wish to refer to terms drafted in another document and these terms include the arbitration clause, we highly recommend to explicitly refer to the arbitration clause enclosed in a document to avoid any potential challenges as regards the jurisdiction at the time a dispute arises.

To speak to us in relation to the recent judgment, any Construction or Arbitration matters, or issues generally, please feel free to contact Sally Kotb or Marina Gaballah at the first instance.

*This alert is prepared by Sally Kotb (Counsel, Dubai) and Marina Gaballah (Associate, Dubai).

Author

Dr. Habib Al Mulla is the Executive Chairman of Baker McKenzie Habib Al Mulla and the Head of the Dispute Resolution practice in the UAE. He is one of the UAE’s most highly respected legal authorities with over 34 years’ experience in UAE law and has drafted many of the modern legislative structures in place in Dubai today. Dr. Habib focuses his practice on litigation and arbitration. He is Chairman of the CIArb (Chartered Institute of Arbitrators) UAE Committee and most recently served as Chairman of the board of trustees for the Dubai International Arbitration Centre (DIAC).

Author

Andrew Mackenzie is the UAE Head of the International Arbitration and Construction practices of Baker McKenzie Habib Al Mulla, based in Dubai. He specialises in international arbitration law, with a particular focus on construction, energy, technology and financial institution disputes. Andrew has been based in the UAE for over 10 years and also has full rights of audience in the DIFC courts. He has advised on complex commercial disputes under a variety of civil and common law systems from across MENA and Africa, tried cases in all of the major arbitration forums (both treaty-based and commercial) and also sits as an arbitrator.

Author

Sally Kotb is a counsel in Baker McKenzie's Dubai office, specializing in international commercial arbitration with a particular focus on energy and construction disputes. She has drafted expert legal opinions in support of both international and domestic arbitrations, and is experienced in enforcement of foreign and domestic awards in the UAE. She is the regional representative of the LCIA Young International Arbitration Group (YIAG) and a Fellow of the Chartered Institute of Arbitrators (FCIArb).

Author

Marina Gaballah is an associate in Baker McKenzie Habib Al Mulla's Dispute Resolution Practice Group, based in Dubai, with a focus on real estate, construction and civil and commercial litigation matters. She has been involved in various complex disputes that were reviewed before the courts and other judicial entities, such as the Rental Committee in Dubai and the Dispute Resolution Centre in Dubai.

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