Abu Dhabi Court of Cassation, Commercial Appeal No. 902 of 2024, judgment of 19 September 2024
An arbitration agreement is valid only if made by a person with capacity to dispose of the right in dispute, and an agent may include an arbitration clause only with special authority. But a principal may ratify an act exceeding the agent's authority, expressly or by conduct, and ratification is equivalent to prior authority (Articles 215 and 217 of the Civil Transactions Law). A party that takes part in the arbitration for months without raising an objection within the time in Article 25 of the Arbitration Law waives it; failure to object before the tribunal that the award is late likewise bars that ground in annulment proceedings. Omitting the arbitrators' nationalities from the award does not make it void.
A company commissioned a contractor under a 2018 build, own, operate and transfer agreement to process by-products to specification. After the company terminated the agreement, the contractor started arbitration at the Abu Dhabi Commercial Conciliation and Arbitration Centre (No. 3 of 2023) and obtained an award in its favour in June 2024. The company's action to annul the award was dismissed by the Abu Dhabi Court of Appeal in August 2024, and it appealed in cassation.
The company argued, first, that the arbitration agreement was void because its chief executive, who signed the agreement, had no board authority to agree to arbitration. The Court of Cassation held that an arbitration agreement is valid only if made by a person entitled to dispose of the right, and an agent needs special authority to include an arbitration clause; but under Articles 215 and 217 of the Civil Transactions Law a principal may ratify an agent's act beyond his authority by words or conduct, and ratification counts as prior authority. The agreement bore the company's unchallenged seal, the company had produced nothing to show the CEO lacked authority, and it had taken part in arbitration proceedings over several months without objecting within the time set by Article 25 of Federal Law No. 6 of 2018; it had thus waived the objection and ratified the clause.
The Court also held that the pre-arbitration amicable settlement step had been followed, as the parties' correspondence showed; that under Article 42 the parties had authorised the tribunal, in amended terms of reference, to extend the time for the award, and a party that does not object before the tribunal that the time has expired loses that ground; that procedural rules in the Arbitration Law favour validity, so omission of the arbitrators' nationalities and addresses under Article 41 did not annul the award; and that the tribunal could award legal and expert costs as the terms of reference allowed. The appeal was dismissed.
Companies sometimes try to escape an adverse award by arguing that the executive who signed the contract had no authority to agree to arbitration. This judgment shows that such an argument will fail where the company took part in the arbitration without promptly objecting, or otherwise behaved as bound by the clause. Board authorisations, and early objections where authority is genuinely lacking, therefore matter from the outset of a dispute.
| Articles 25, 41 and 42 of Federal Law No. 6 of 2018 on Arbitration — text of articles 25, 41, 42 |
| Articles 215 and 217 of Federal Law No. 5 of 1985 (Civil Transactions Law) — text of articles 215, 217 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
| Articles 27 and 28(6) of the Arbitration Rules of the Abu Dhabi Commercial Conciliation and Arbitration Centre |
“وأنه ولئن كان لا يجوز للوكيل تضمين العقد الموكل في ابرامه شرط التحكيم إلاّ بناء على تفويض خاص من الموكل يخوله ذلك إلاّ أنه متى أجازه الموكل فإنه يتعين عليه التقيد بهذا الشرط”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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