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Dubai Court of Cassation Extends Arbitration Agreement Across Subsequent Contracts

In a recent judgment the Dubai Court of Cassation has established the principle that if parties agree to arbitrate then, unless they subsequently agree an alternative form of dispute resolution, the arbitration agreement will extend to subsequent agreements provided there is a sufficiently close factual connection between them.

In Cassation Decision no. 828 of 2023 (dated 19 October 2023), the Appellant challenged the decisions of the Court of First Instance and Court of Appeal which dismissed its claims for AED 1 million sought for work done on a construction project. The Appellant contended that the purchase orders for the work had each formed new contracts following offers and acceptance between them, and that each purchase order differed in reason and subject to an initial works contract between the parties which contained an arbitration clause. The purchase orders contained no arbitration agreement and so the Appellant said its claims under them were subject to the jurisdiction of the Dubai Courts. 

The Court of Cassation disagreed, and explained that “Pursuant to the “accessory follows the principal” principle, and based on the implicit will of the parties deduced from all previous elements, all disputes regarding subsequent contracts are subject to the arbitration clause”.  It commented that this was so “especially taking into account the technical nature of the construction industry, which makes it unlikely that the parties intended to limit arbitration to specific matters and resort to state courts in other matters, which may be technically related to the matters subject to arbitration given the single nature of the subject matter of those contracts”.

The Court then analysed the documentary evidence and concluded that the initial contract and the purchase orders were “all contracts connected personally and in terms of the subject matter in the same manner as the accessory is connected to its principal. According to the foregoing, the arbitration clause contained in the first contract applies to subsequent contracts (purchase orders), which were concluded between the same two parties, and all of which were implemented in the same project, in a successive and timely manner, especially since the purchase orders did not include an agreement on the jurisdiction of the State’s courts to consider any dispute arising from their implementation”.

The Court of Cassation has effectively created a rebuttable presumption in favour of arbitration covering all aspects of the commercial relationship in respect to a particular project, which will have particular relevance to the construction industry. The approach is sensible and will reduce the risk of competing arbitration and court proceedings arising from the same facts. Nonetheless, contracting parties in the UAE should take care that if they wish certain aspects of the relationship to be kept outside of the arbitration clause, they should expressly submit to another form of dispute resolution in later agreements. 

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