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In the construction industry, the parties mainly include provisions in the construction contract to have disputes between them resolved through another alternative than the court i.e. arbitration. The parties to such contracts are mostly represented by a representative, authorised by way of either general or special (in the event it is restricted to a specific matter) power of attorney.

Authority to enter into a arbitration agreements

In this case, the parties were represented by representatives authorised by way of a general power of attorney (duly notarised and attested by the court) and the parties concluded a contract for the construction of residential buildings. An arbitration agreement formed part of the conditions of the construction contract dealing with dispute resolution, more particularly the conditions set out in the provisions of sub-clause 20.6 of the standard FIDIC 1999 conditions of contract as revised by the particular conditions provided for an arbitration to be conducted by the Abu Dhabi Commercial Conciliation & Arbitration Centre (ADCCAC) .

During the course of the project, major disputes arose between the parties which resulted in the termination of the contract. The claimant commenced the dispute resolution proceedings and referred the disputes to arbitration. The arbitration was conducted over a 2 year period and an award was finally issued by the arbitrators.

Following the issuance of the award, an application was launched for the ratification of the arbitration award. However, this application was vehemently opposed on, among others, the ground that the party’s representative was not duly authorised to enter into an arbitration agreement. The point was raised that in terms of article 924 of the Federal Law of 1985 No. 5 of 1985 issuing the law on civil transactions for the United Arab Emirates (hereinafter “Civil Transactions Law”), a power of attorney was required whereby the representative was duly authorised to carry out a permissible act – as in this case enter into an arbitration agreement – on behalf of the company.

If a power of attorney was made in general terms – without stipulating a specific purpose – as was the case here, then article 928 of the Civil Transactions Law stipulates that such power of attorney only authorise the person to handle the affairs of administration and safekeeping of the company.

In terms of article 203(3) of the Civil Procedures Law an arbitration agreement is specific by its nature and does not fall under the scope of the affairs of administration and safekeeping of the company. Accordingly, as provided for in article 929 of the Civil Transactions Law, the representative required a special power of attorney specifically stating the authority of the representative to enter into an arbitration agreement and the acts required to participate in the arbitration proceedings.

The representative accordingly lacked the proper authorisation to enter into the arbitration agreement and the representative had no authority from the outset to either participate in the arbitration or to appoint attorneys, consultants and expert witnesses. Furthermore, the representative was also not authorised to have delegated any powers relating to the arbitration to a third party including his legal representatives and any such delegations were invalid.

The parties were embroiled in litigation before the Court of First Instance, Court of Appeal and the Court of Cassation, who finally ruled that the arbitrator’s award was nullified.

Compliance checks

Where an establishment intends to enter into an arbitration agreement (albeit a separate contract or part of the main contract) with another establishment it should verify the following to ensure that the representative has the necessary authorisation:

• The representative of the company is the holder of the company’s trading licence and is mentioned as such on the trade license;
• The representative is the company’s director or the manager and named in the company’s articles of association as the person with the authority to bind the company to arbitration agreements and proceedings;
• If the representative is authorised by way of a power of attorney issued in the United Arab Emirates then the power of attorney was issued by an authorised person, signed and attested by the notary public of the UAE and that it specifically authorise the representative to bind the establishment to arbitration agreements and if needed to conduct such proceedings.
• If the representative is authorised by way of a power of attorney issued outside UAE ( as is the case with most branch offices of overseas establishments) the power of attorney was issued by an authorised person, notarised in the country of issue and at the UAE embassy in that country and legalised at the Ministry of Foreign Affairs along with a certified translation into Arabic and that such power of attorney specifically authorise the representative to bind the establishment to arbitration agreements and if needed to conduct such proceedings.
• In addition to the authorisation by way of power of attorney to enter into the arbitration agreements, an establishment would be well advised to ensure that its representative also has the specific authorisation to settle disputes on its behalf through other alternative means (i.e. negotiation, adjudication, mediation, conciliation) and that the representative has the specific authorisation to enter into settlement agreements.

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