Off-plan property sales are a prevalent transaction in the property market and major contributor to the economy of the Emirate. Arbitration is an equally prevalent means of dispute resolution in the Emirate, but can the two be married?
The admissibility of claims under arbitration remains a contentious issue, particularly within the framework of UAE law where only matters permissible for conciliation are eligible for arbitration. Pursuant to Article 4/2 of Federal Law No. 6 of 2018 on Arbitration (as amended), it is stated that “Arbitration is not allowed where matters cannot be submitted to conciliation.”
It is firmly established that matters falling outside the scope of conciliation are those pertaining to public order. The concept of “public order” raises pertinent questions: What constitutes public order, and what are the implications when a dispute arises concerning such matters?
Notion of “Public Order”
Public order, as defined by the General Assembly of the Dubai Court of Cassation in Resolution No. 1 of 2022, is described as follows:
“The legal principles considered part of public order are rules intended to achieve a political, social, or economic public interest related to the system of the higher society, and take precedence over the interests of individuals. Therefore, it is incumbent upon all individuals to consider and achieve this interest, and they are not allowed to oppose it through agreements among themselves, even if these agreements serve their individual interests. This is because individual interest does not stand against public interest, whether it is sanctioned by law or not.”
Consequently, disputes touching upon public order matters are ineligible for arbitration, as conciliation is not permissible for such issues. Given that arbitration is disallowed for matters outside the scope of conciliation, disputes concerning public order are explicitly excluded from arbitration proceedings. This principle has been reaffirmed by the Dubai Cassation Court, emphasizing that conciliation is not permissible in matters related to public order. As per the second paragraph of Article 4 of Federal Arbitration Law No. 6 of 2018, it is not permissible to arbitrate in matters where conciliation is not allowed. [cassation 141/2022 real estate] .
The Arbitrability of Off-Plan Sales Disputes in Dubai
The connection between arbitration and off-plan sales in the Emirate of Dubai hinges on the imperative nature of statutes governing such transactions.
The legislator, under Law No. (13) of 2008 Regulating the Interim Property Register in the Emirate of Dubai and its subsequent amendments, has deemed certain rules to possess an imperative nature, placing them under the umbrella of public order.
This is exemplified by the law’s stipulation regarding the nullity of off-plan Sales and Purchase Agreements (SPAs) in cases of non-registration in the Interim Property Register, along with the procedures governing the cancellation of interim registrations under Article 11 of the same law.
Understanding this, the Court of Cassation has regarded the imperative rules outlined in Law No. (13) of 2008 as matters of public order, thereby precluding their resolution through arbitration. The Court has explicitly stated that “the actions taken against the units Off plan sold, without adhering to what the legislator has decided by a legally imparative rules Can not be subject to arbitration since it is related to the public order. If the parties agree to arbitrate the dispute, and the dispute includes matters where conciliation is not allowed and other matters where conciliation is allowed, then jurisdiction to hear the dispute remains with the courts as the competent authority. Therefore, the arbitrator, upon the request of the parties or on their own initiative, is not allowed to address an issue related to public order that cannot be settled and cannot be the subject of arbitration. If this is brought up, then their decision is considered void”. [cassation 141/2022 real estate]
In conclusion, the intricate interplay between the admissibility of arbitration under UAE law and its impact on off-plan sales in Dubai underscores the necessity for a nuanced understanding of both legal frameworks. The delineation of public order and its implications on arbitration proceedings serve as crucial pillars in navigating the legal landscape of real estate transactions within the emirate.
Special care has to be taken when a question of nullity of the off-plan sale for nonregistration of the transaction is raised for resolution by arbitration.