Unilateral Arbitration Clause

The Dubai Court of Cassation issued today an important principle regarding a controversial issue discussed in comparative jurisprudence and judiciary, which is the “Unilateral Arbitration Clause” and its validity in preventing the jurisdiction of the court that considers the dispute.

The meaning of the unilateral arbitration clause is an agreement between the parties to grant one of them—without the other—the authority to choose between state jurisdiction and arbitration to settle any disputes arising between them. After the court considered the two opinions regarding the legitimacy of this clause, it concluded that this clause is not valid to prevent the state courts from considering the dispute, as it is a discretionary clause. This is based on the idea that any arbitration clause that exists in conjunction with the jurisdiction of state courts or offers a choice between them, without clearly deciding on arbitration alone and establishing its binding force, is not binding.

The court further elaborated—providing another support for its ruling—that such a clause prevents the other party from resorting to a dispute resolution body and forces them to wait for the option chosen by the party who benefits from the unilateral clause, which suggests the court’s inclination towards opposing such a clause.

It is worth noting that there have been several rulings from the higher courts in the United Arab Emirates, including the Abu Dhabi Court of Cassation, the Dubai Court of Cassation, and the Ras Al Khaimah Court of Cassation, which have accepted the discretionary arbitration clause in court by rejecting the lawsuit due to the existence of an arbitration clause. This may be attributed to what some comparative jurisprudence mentions, that the provision in the arbitration clause regarding the jurisdiction of the court to settle the dispute—alongside arbitration—is an assumed matter and does not require a provision, as it is considered to have general authority. This does not affect the binding force of the arbitration clause. However, this justification was not disclosed by the higher courts in their rulings, and they merely relied on stating the general principles of arbitration.