Two Dubai trading companies (the "Claimants") filed a commercial action against another local company (the "Defendant"). The Claimants requested the Court to order the Defendant to pay them a specified amount as compensation for breaching an employment contract which they had executed.
Due to the fact the contract contained an arbitration clause, the Defendant requested the Court to dismiss the case for lack of jurisdiction.
Facts of the case
The Claimants argued that they had concluded an employment/labor contract with the Defendant to prepare and carry out interior design works, and to develop the Claimant's private hotels. The Claimant further submitted that the Defendant had failed to adhere to its obligations as stipulated in the contract, delivered the assigned work late and delivered a defective work product which was below the standards recognized by the hotel industry. As a consequence the Claimants terminated the contract.
Court of First Instance
The Court of First Instance ruled in favor of the Defendant and dismissed the case for lack of jurisdiction. The Claimants subsequently appealed the decision.
Court of Appeal
The Court of Appeal upheld the lower's court decision. The Claimants appealed to the Court of Cassation.
Court of Cassation
The Claimants argued that the Court of Appeal had erred in its decision to uphold the lower's court decision in that reliance had been placed on Article 13 of the employment contract (the arbitration clause) instead of Article 14 of it. The Claimants' submitted that Article 14 gave Dubai Court the jurisdiction to oversee any dispute arising out of that contract.
The Court of Cassation interpreted Article 203 (1) and 203 (5) of the Civil Procedure Law (CPL) to mean that if parties agreed to arbitrate a dispute it shall not be possible to initiate an action before the Court. If, notwithstanding the arbitration clause, one party did file an action in Court and the other party did not object at the first hearing, then the Court would consider the arbitration clause as void and take jurisdiction of the case. However, if the other party did raise an objection at the first hearing the Court should dismiss the case for lack of jurisdiction.
The Court held also that arbitration is a final and binding form of dispute resolution which is conducted outside the usual forum (i.e. the local courts). The Court clarified, however, that what the parties intend should be meant by "dispute" should be clearly specified in the arbitration deed.
Finally the Court referred to reasoning handed down by the Lower Court. The Lower Court had found that Article 14 of the contract dealing with the arbitration clause was written in a very detailed manner, where as Article 13, which dealt with the Dubai Court's jurisdiction was very short.
The Court found that the recourse to the Dubai Court as stated in Article 13 could be sought only to explain the contract and have a binding decision in relation to this explanation, whereas the adjudication of disputes arising out of the contract should be dealt with by arbitration as per Article 14.
The Court of Cassation held that any explanation to the contrary would result in conflict between the two Articles. However, the Court held that the clearer clause and the more detailed clause should be applied rather than the ambiguous clause as it did not need any explanation or clarification from the Court.
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