A defendant that pleads on the merits before invoking the arbitration clause loses the right to rely on it

The principle

Under Article 8(1) of the Federal Arbitration Law (Federal Law No. 6 of 2018), a court seised of a dispute covered by an arbitration agreement must declare the claim inadmissible if the defendant so pleads before making any request or defence on the merits, unless the agreement is void or impossible to perform. The plea is procedural, akin to a challenge to jurisdiction. A defendant who first addresses the merits waives it, and the clause is treated as cancelled for that dispute. When an appeal court sets aside a first-instance ruling that stopped at the arbitration plea, it must send the case back to the first-instance court, which has not exhausted its jurisdiction (Article 166 of the Civil Procedure Law).

The case and the decision

A company sued several defendants in the Fujairah federal court for about USD 1.12 million with 9 per cent interest, saying it had paid that sum under a letter of intent signed by the second defendant on behalf of the first for the purchase of an aircraft that was never delivered. At a hearing before the case management office and then at a hearing before the first-instance court, counsel for the third defendant, the first defendant's manager, filed defences that disputed the claimant's documents as photocopies, asked for the claim to be dismissed and, in the alternative, for the copies to be declared forged; the arbitration clause was invoked only at a later hearing. After appointing an expert, the first-instance court declared the claim inadmissible because of the arbitration clause, and the Fujairah Court of Appeal affirmed. The Federal Supreme Court quashed that judgment. A plea based on an arbitration clause is a procedural plea that, under Article 8(1) of the 2018 Arbitration Law, must be raised before any request or defence on the merits; a party that first addresses the merits is taken to have waived the clause, and what has lapsed does not revive. As the first and third defendants had pleaded on the merits before invoking arbitration, they had impliedly waived the clause and the courts below were wrong to uphold the plea. Deciding the appeal itself, the Court set aside the first-instance judgment and, because that court had stopped at the plea without examining the merits and so had not exhausted its jurisdiction, sent the case back to it under Article 166 of the Civil Procedure Law.

Laws applied

In the court’s words

“فإن لم يدفع بذلك قبل التعرض للموضوع يعتبر شرط التحكيم لاغياً، ولا يجديه بعد ذلك التمسك بشرط التحكيم لأن الساقط لا يعود”

Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.

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