In an action initially filed before Dubai Courts, the Court of
Appeal cancelled the decision handed down by the Court of First
Instance and dismissed the defendant's claim due to the
existence of an arbitration clause. The action was then referred
back to the Court of First Instance in respect of the merits of the
claim.
Claim
A commercial action was filed by a PJSC company in Dubai
("the Claimant") against a local Bank ("the
Defendant"). The Claimant requested the Court to order the
Defendant to pay US$250,000,000 (equivalent to AED917,500,000) plus
interest and legal costs. The Claimant contended that on 28 and 29
August 2008 he transferred the above amount to the Defendant via
two swift transfers (the first swift amounting to US$150,000,000
and the second swift amounting to US$100,000,000) through New York
Bank. The Claimant repeatedly requested that the Defendant return
back the money but the Defendant refrained from doing so, without
any legal basis.
Court of first instance
The Court of First Instance dismissed the action on the ground
that the parties had agreed to refer any and all disputes to
arbitration.
Court of appeal
The Claimant appealed this decision to the Court of
Appeal. The Claimant argued that the Court of First Instance had
erred in its decision, and requested the Court of Appeal transfer
the case back to the Court of First Instance to decide on the
merits of the case. The Claimant's (referred to as the
Appellant in the Court of Appeal proceedings) defense was based on
the following:
- The bailment contract and the Memorandum of Understanding ("MOU") relevant to the proceedings was not within the ambit of the arbitration clause
- The Court of First Instance was wrong in its decision to reject the case and to decide that the MOU was not part of the negotiation phase;
- The arbitration clause should be considered null as it did not emanate from a person who was authorized to agree/decide on the arbitration on behalf of the Claimant; and
- The MOU should be considered as a non binding contract as it
included specific conditions to be carried out within a specified
time. After that, the Claimant can decide to sign agreement or to
decline from doing so.
The Claimant submitted a docket list that included the power of attorney granted to the person who signed the MOU.
The Defendant requested the Court of Appeal to either dismiss
the appeal outright, or, to dismiss the appeal and not to accept
the action because it was filed against a party who had no capacity
in the action. The Defendant also requested an order that the
Claimant pay all legal costs associated with the action.
The Court of Appeal accepted the appeal on its form. As to the
subject, the Court decided that it enjoyed the jurisdiction to
determine the true meaning of any power of attorney and the extent
of its authority depending on the facts and evidence provided by
the parties in the action.
Accordingly, the Court concluded that it was a settled principle
that specific provision is required to empower a person to be able
to bind an organisation to arbitration and to exclude the dispute
from the judicial system. If a power of attorney grants an
individual the power to deal with general matters, or some specific
matter such as settlement, this does not normally include the power
to agree to refer the dispute to arbitration (as reflected by
Article 58 of the Civil Procedure Law). Based on the evidence
provided, the Court decided that it was not evident from the power
of attorney that the power to submit to arbitration had been
granted. The Court of Appeal overruled the judgment and referred
the matter back to the Court of First Instance to decide the matter
according to the guidelines set out in the judgment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
