21 Sep 2023

Hadef in the Courts: Union Supreme Court Strikes Down Arbitration Agreement for Ambiguity

Authored by: Mohammed Abbas

In Brief

A recent decision, secured by Hadef & Partners from the highest federal court in the UAE, the Union Supreme Court, further illustrates the requirement for arbitration agreements to be clear and unambiguous to reduce the risk of being struck down.


The case concerned an arbitration agreement stating that if the parties were unable to reach any settlement, any dispute would be settled under the conciliation and arbitration rules of the Fujairah Chamber of Commerce. It is worth noting that, although Fujairah Resolution No.3 of 1997 sets out rules called “the rules of conciliation and commercial arbitration in the Fujairah Chamber of Commerce, Industry and Agriculture”, at the time the claim was filed before the Onshore Court, the arbitral institution envisioned in those rules had not been established.

Initially, the Court of First Instance upheld the arbitration agreement and dismissed the claim that was brought in the Fujairah Courts on the basis that it should be referred to arbitration. This decision was reached even though the client had tried unsuccessfully to commence arbitration through the Fujairah Chamber of Commerce.


The Court of Appeal, and subsequently the Union Supreme Court, overturned the decision of the Court of First Instance and held that the arbitration agreement was unenforceable. In its reasoning, the Union Supreme Court determined that the arbitration agreement was ambiguous and therefore not binding on the parties. The Court of Appeal had taken the view that it would be impossible to enforce the arbitration agreement since the Fujairah Chamber of Commerce is not an arbitration authority.


The key takeaway from this decision is that parties wishing to agree to arbitration should expressly specify the arbitral body that shall conduct the arbitration and not simply rely on applicable procedural rules to fill the gaps. Furthermore, parties in the UAE are recommended to select recognized arbitral institutions to administer the arbitration in order to reduce the risk of their arbitration agreements being held to be unenforceable.

One potential inadvertent consequence of the decision is that parties may be dissuaded from pursuing ad-hoc arbitrations in the UAE administered by institutions other than the main recognized arbitral centers. It should be noted, however, that this case featured a situation where the parties had tried and failed to commence an arbitration through the body most closely connected to the arbitration agreement and yet the arbitration agreement proved, in effect, impossible to enforce.   

Ultimately, the ambiguity of the arbitration agreement led to jurisdictional challenges that resulted in prolonged litigation and increased costs. Accordingly, it is critical to ensure that arbitration agreements are carefully drafted and expressly address all necessary elements.

In the event you require advice on arbitration agreements, proceedings or awards, please contact Walid Azzam, Partner, Dispute Resolution or Mohammed Abbas, Associate, Dispute Resolution.


This article, together with any commentary, does not constitute legal advice. It is provided solely for information purposes on a complimentary basis, without consideration of any specific objectives, circumstances or facts. It reflects then current views of the writer which may modify in time and based on differing objectives, circumstances or facts. A writer's view may differ from views of colleagues and/or the firm. You should seek legal advice on each specific matter. Access to this article does not form an attorney-client relationship.