REUTERS | Ali Hashisho

Apparent authority under UAE Federal Arbitration Law: from mirage to reality

What was once a mirage on the horizon of the arbitration landscape of the United Arab Emirates (UAE) has now become reality under the UAE Federal Arbitration Law (FAL), which entered into force with effect from 16 June 2018. Following a consistent line of recent case law precedent, there can be no more doubt that the doctrine of apparent authority applies to the formation of arbitration agreements under the FAL and as such relaxes the strict requirement for a special power of attorney in the terms of article 58(2) of the UAE Civil Procedures Code (CPC). That requirement, which used to exist under the former UAE Arbitration Chapter on the basis that arbitration qualifies as an exceptional form of dispute resolution in derogation from the fundamental right to go to court, persists under the FAL in the terms of article 4(1), pursuant to which “on the pain of nullity”, only an original rightsholder or “a representative with a specific authority to arbitrate” is empowered to bind to arbitration.

Position under former UAE Arbitration Chapter

As I reported in a previous blog, some successful attempts were already made by the UAE courts to alleviate the burden of the strict application of the special authority requirement under the former UAE Arbitration Chapter (see Case Nos. 107/2019 and 293/2019, Dubai Court of Cassation, ruling of 30 June 2019; and Case No. 581/2019, Commercial, Dubai Court of Cassation, ruling of 15 September 2019) albeit that some early, unreported experiences under the FAL appeared to reverse this trend.

Position under FAL

Nevertheless, a more consistent line of recent case law precedent suggests that the UAE courts now recognise a legal presumption in favour of the binding effect of a person’s signature upon a body corporate where either:

  • That person is not specifically designated as the company’s legal representative in the preamble of the underlying contract that contains an arbitration agreement, yet, regardless of its true association with the body corporate, signs the contract (see  DCC Case No. 236/2019, Real Estate, 11 December 2019; DCC Case No. 293/2019, Commercial, 30 June 2019; DCC Case No. 581/2019, Commercial, 15 September 2019; DCC Case No. 51/2020, Real Estate, 14 May 2020; and DCC Case No. 276/2020, Commercial, 20 May 2020):

“[…] if the name of a specific company is mentioned in the preamble of the contract and another person signed at the end of this contract, this establishes a legal claim that whoever signed it signed in the name and account of the company, regardless of whether his name is associated with its name or added to it, and this will affect the rights and obligations of the company.”

  • That person is specifically designated as the legal representative of the body corporate in the preamble of the contract but the signature placed under the contract is illegible (see DCC Case No. 236/2019, Real Estate, 11 December 2019; DCC Case No. 293/2019, Commercial, 30 June 2019; DCC Case No. 581/2019, Commercial, 15 September 2019; DCC Case No. 51/2020, Real Estate, 14 May 2020; and DCC Case No. 276/2020, Commercial, 20 May 2020):

“If the name of the legal person is mentioned in the preamble of the contract only and not associated with the name and description of the legal representative and the end of the contract is signed with an illegible signature and the contract includes the arbitration clause, in this case there is a conclusive legal presumption that the signature is attributed to the legal representative of the person possessing the capacity to act and the capacity to agree to arbitration and it is not accepted from him in this case to challenge this signature in accordance with the principle of good faith.”

Conversely, where a person is specifically designated as the legal representative of the body corporate in the preamble to the contract that contains the arbitration agreement, yet the signature under the contract is legible and as such identifiable or identified as that of another person, the legal presumption in favour of binding authority is displaced (see DCC Case No. 236/2019 – Real Estate, 11 December 2019; DCC Case No. 293/2019 – Commercial, 30 June 2019; DCC Case No. 581/2019 – Commercial, 15 September 2019; DCC Case No. 51/2020 – Real Estate, 14 May 2020; and DCC Case No. 276/2020 – Commercial, 20 May 2020); for the avoidance of doubt, a legible signature at the end of a contract in the absence of any (contradictory) designation of the legal representative in the preamble to the contract will not displace the legal presumption in favour of binding authority (see DCC Case No. 581/2019 – Commercial, 15 September 2019):

“If the name of the legal person is mentioned in the preamble of the contract coupled with the name and description of the legal representative and the end of the contract is signed with a legible signature of another person and the contract includes the arbitration clause, then in that case the legal person may claim the nullity of the arbitration clause for its signature by a person other than the legal representative who has the capacity to agree to arbitration.”

Importantly, the UAE courts also appear to have recognised that the placement of a company seal on the arbitration agreement (bar proof of fraudulent interference by the original rightsholder) binds the company to arbitration and as such serves as conclusive evidence of the proper execution of the arbitration obligation by a legal person in its own right (irrespective of any other signature requirements) (see DCC Case No. 685/2019 – Commercial, 10 November 2019; and DCC Case No. 51/2020 – Real Estate, 14 May 2020, in which the court emphasised the appellant party’s approval of the company seal it had placed on the underlying arbitration agreement).

In finding in favour of the application of apparent authority, the UAE courts have relied upon an overarching obligation of good faith (see Case No. 276/2020 – Commercial, ruling of the Dubai Court of Cassation of 20 May 2020) in the terms set out at article 70 of the UAE Civil Transactions Code (see DCC Case No. 236/2019 – Real Estate, ruling of the Dubai Court of Cassation of 11 December 2019; DCC Case No. 293/2019 – Commercial, 30 June 2019; Case No. 581/2019 – Commercial, 15 September 2019; DCC Case No. 681/2019 – Commercial, 10 November 2019; DCC Case No. 51/2020 – Real Estate, 14 May 2020; and DCC Case No. 276/2020 – Commercial, 20 May 2020):

“[I]n accordance with the principle established by article 70 of the Federal Civil Transactions Law No. 5/1085, whoever is seeking to set aside what he has concluded on this part will be rejected, and the defendant may not take from his own actions/ grounds to validate/constitute his claim against [a] third party, which is an application of the general principle that is based on moral and social considerations to combat such behaviour and not to deviate from the seriousness of the principle of good faith that must be complied with in all actions and procedures.”

On occasion, the courts have also found support in article 14(2) CPC (see DCC Case No. 51/2020 – Real Estate, 14 May 2020):

“It is not permissible – according to article 14(2) of the Civil Procedure Law – to claim nullity that is not related to public order from the party who caused it, whether it was caused intentionally or by negligence or the one who caused it was the same person or someone working for them. It is established that a party to the arbitration may not claim before the court a defense that leads to the nullity of the arbitration award due to defects related to the arbitration agreement or to the arbitration procedures resulting from its own actions.”

Conclusion

Given the more recent developments of UAE case law precedent under the FAL, it would seem safe to assume that the application of the doctrine of apparent authority now forms an integral part of the acquis of the UAE courts in the construction of article 4(1) FAL. This is a welcome development, which confirms the arbitration-friendly approach that the FAL has sought to promote since its adoption in 2018.

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