The controversy regarding the legal capacity of the individual entering into an arbitration agreement has lately caught excessive attention due to additional authorization required for arbitration.. Recently, a jurisdictional challenge due to lack of authority to sign for such agreement is being commonly used in UAE.

Corporate Lawyers of Dubai believes that for any contractual obligations to be adhered by the parties shall be signed by any representative having the legal capacity to enter into a contract and possess the authority to bind the company. Accordingly, only an authorized signatory or an apparent representative holds the authority to enter into contracts on behalf of the company. Having said that, the question which needs to be considered is regarding the necessity of having an explicit authority to sign the arbitration agreement as well.

In accordance with UAE Law, several provisions affirm that in order for an arbitration agreement to be valid and binding it shall be signed by the authority possessing the legal capacity to do so. For instance, According to Article 203 of UAE Civil Procedure Law which has been recently repealed by Article 4 of the new Arbitra

tion Law (Federal Law No.6 of 2018) provides that “An agreement for arbitration shall be considered invalid unless it is made by any individual bearing the legal capacity to make an inclination over the subject matter of the dispute.”

In addition to the foregoing, the Commercial Companies Law of UAE under Article 154 clarifies that “the board of directors of an entity shall possess all powers mentioned in Articles of Association apart from what is reserved in the law. However, the board of directors are explicit prohibited from entering into agreements for loan exceeding three years grace period, sell the property of the company, or put the property for mortgage or agree for arbitration unless such acts are specifically authorized under Articles of Association or within the object of the company or issued by way of special resolution through general assembly.”

Recent Case Laws

Who has the authority to sign? Was answered by Dubai Court of Cassation under Case number 164 of 2008, wherein the court confirmed that except if explicitly abstained from doing as such in the Company’s Articles, the Director of a limited liability company has authority to sign an arbitration agreement.

Secondly, in 2003 the Dubai Court of Cassation elucidated the rationale behind the requirement for explicit authority to arbitrate under Case number 577 of 2003, wherein the court opined that an arbitration agreement confers a waiver to address the matter before the civil courts with its guarantees providing to litigants, hence, it necessitates a special power of attorney and a general power of attorney would not be sufficient. However, the foregoing view was altered in Case number 273 of 2006 where the court held that the authority given to an attorney could be implied, expressed or apparent.

The Dubai Court of Cassation, while evaluating whether an organization’s representative has the explicit authority to consent to an arbitration arrangement, does not rely on the statutory principles to a large extent, however, may believe that any authority to arbitrate can be explicit, implied or apparent. These recent interpretations by UAE courts have inculcated a trust in the authority signing the contract has the legal capacity and believes that the contract would mean exactly as what is written.