Abu Dhabi Investment Company & Ors v H Clarkson & Company Ltd. & Ors

Under UAE law, an arbitration clause can exclude the ordinary jurisdiction of the courts only if it falls within the statutory authorisation for arbitration. Article 203(1) of the UAE Code is an exception to the general rule and is construed narrowly. A clause covering disputes arising from an agreement and related matters may be wide enough as a matter of contractual construction to include misrepresentations inducing the agreement, but it does not necessarily satisfy the statutory requirement where the alleged disputes arose before the agreement was made. General words such as “matters related thereto” may therefore be insufficiently precise to confer an enforceable arbitral jurisdiction. The court must distinguish the contractual meaning of the clause from the statutory question whether it can oust the court’s jurisdiction.

The claimants, three UAE companies, alleged that they had been induced by fraudulent or negligent misrepresentations to invest in a shipping joint venture. They brought claims in contract and tort against the defendants, including Norasia and two individuals involved in its management.

Norasia and the individuals applied for a stay under the arbitration clauses in the joint venture memorandum and shareholders agreement. Those clauses provided for arbitration of disputes arising from the agreements or matters related to them. The clauses were governed by UAE law as applied by the courts of Abu Dhabi.

The central issue was whether the clauses covered misrepresentations allegedly made before the agreements were formed and, under UAE law, were sufficiently effective to remove the court’s jurisdiction.

1. The stay application was refused. The proceedings were not stayed against Norasia, Mr Steiger or Mr Menzel. The court therefore retained jurisdiction over the claims and related Part 20 claims.
2. UAE law was code-based and did not recognise a doctrine of stare decisis. The decisive question was the interpretation and effect of the statutory arbitration provisions, rather than the application of English contractual principles alone.
3. Article 203(1) of the UAE Code of Civil Procedure authorised arbitration as an exception to the ordinary rule that the courts had jurisdiction. It was permissive only in the sense that it allowed parties to choose arbitration. The parties could not formulate an arbitration clause outside the limits imposed by the Code. An agreement falling outside those limits could not oust the court’s jurisdiction.
4. Article 203(1) was understood to concern disputes arising from the performance or execution of a contract. An arbitration clause purporting to cover disputes arising before the contract was made might therefore fall outside the provision. The words “matters related thereto” did not define the relevant disputes with sufficient precision to remove the court’s jurisdiction.
5. The court accepted that, as a matter of contractual construction, the words used could encompass misrepresentations which induced the making of the contract. That did not answer the separate statutory question whether the clause fell within Article 203(1). The exception had to be construed narrowly, consistently with Article 30 of the UAE Code of Civil Procedure.
6. The court also considered the practical consequences. The claims involved allegations against parties who were not all subject to the arbitration clauses, and the Part 20 claims raised overlapping issues. A stay against Norasia would have created a substantial risk of delay and inconsistent decisions. A stay would not in any event have been granted for the two individual defendants.

First instance decision. The judgment does not state any prior appellate or lower-court decision in the same proceedings.