What happens if my UAE contract has no governing law or jurisdiction clause?
A surprising number of the contracts Fahm reads say nothing about governing law or forum, or name a court in one clause and arbitration in another. The default rules are short, and the arbitration formalities are strict.
Which law applies when the contract is silent
Article 19 of the Civil Transactions Law says contractual obligations, in form and substance, are governed by the law the parties expressly agreed. Failing that, the law of the country of the parties' common domicile applies; if their domiciles differ, the law of the country where the main obligation is to be performed, unless the circumstances show another law was intended. Contracts concerning immovable property are governed by the law of the place where the property is.
When UAE courts hear the case
Under Article 19 of the Civil Procedure Law the courts have jurisdiction over proceedings against UAE nationals and against foreigners with a residence or domicile in the State, except actions in rem over real property abroad. Article 20 extends that to a foreigner with no residence here in listed cases, including an elected domicile in the State, a contract performed or required to be performed in the State, or an incident that took place here. Article 21 lets the courts rule on preliminary and interlocutory matters tied to a case before them, and on summary and precautionary measures to be enforced in the State even without jurisdiction over the main case.
Arbitration clauses
Article 7 of the Arbitration Law requires the arbitration agreement to be in writing, failing which it is null. Writing includes a signed instrument, letters or emails, a clear reference in a written contract to a document containing an arbitration clause, an agreement reached before a court, or an exchange of submissions in the arbitration. Article 4 adds that only a natural person with capacity, or the authorised representative of a legal person, may enter into it; otherwise it is null, and arbitration may not cover matters where conciliation is not allowed.
A dispute clause that sends the parties to an undefined committee, or to arbitration without a written agreement signed by someone with authority, is the clause these articles catch.
Questions
- Which law governs a contract with no governing-law clause?
- The law of the parties' common domicile; failing that, the law of the place where the main obligation is performed, unless another law was clearly intended (Article 19, Civil Transactions Law).
- Can a UAE court hear a claim against a foreign company with no office here?
- In the cases listed in Article 20 of the Civil Procedure Law, including a contract performed or required to be performed in the State.
- Does an arbitration clause have to be signed?
- It must be in writing in one of the forms Article 7 of the Arbitration Law lists, and made by a person with capacity or authority (Article 4), or it is null.
Articles on this page
- Article 19Civil Transactions LawCited in Fahm reportsThis article says which country's law governs a contract's obligations, both its form and its substance.
- Article 19Civil Procedure LawCited in Fahm reportsThis article says when the courts have jurisdiction over a case against a person.
- Article 20Civil Procedure LawCited in Fahm reportsThis article lists when the courts have jurisdiction over a foreigner who has no place of residence or domicile in the State.
- Article 21Civil Procedure LawCited in Fahm reportsThis article extends the courts' jurisdiction beyond the main case.
- Article 4Arbitration LawCited in Fahm reportsThis article sets out who can make an arbitration agreement and on what.
- Article 7Arbitration LawCited in Fahm reportsThis article requires an arbitration agreement to be in writing, otherwise it is null and void.