Introduction
In the field of international arbitration, the drafting of clear and precise arbitration clauses is essential for ensuring the effectiveness and efficiency of dispute resolution. However, the reality of many arbitration agreements, especially those crafted without sufficient legal expertise, often results in so-called pathological clauses—provisions that are unclear, contradictory, or incomplete. These clauses can lead to disputes regarding the interpretation of the agreement, delays in the proceedings, and even the annulment of arbitral awards.
This paper seeks to examine the issue of pathological clauses in arbitration from the perspective of a lawyer practicing in the UAE, comparing the legal treatment of such clauses in the UAE, Egypt, and Jordan.
1. Understanding Pathological Clauses in Arbitration
A pathological clause in an arbitration agreement can arise from several factors:
- Ambiguity: Vague language that leads to uncertainty about the scope of arbitration.
- Contradictions: Provisions that are in conflict with each other, such as conflicting procedures or contradictory choice of laws.
- Incompleteness: Omission of critical elements like the seat of arbitration, the number of arbitrators, or the procedure for appointing them.
Pathological clauses undermine the objective of arbitration—efficient, clear, and enforceable dispute resolution. In practice, arbitrators or courts may be forced to intervene to interpret or modify such clauses, but the absence of clear guidelines often creates additional complexity.
2. Pathological Clauses in the UAE Arbitration Framework
2.1. UAE Arbitration Law (Federal Law No. 6 of 2018)
The UAE’s approach to arbitration is governed by the Federal Arbitration Law (FAL), which is based on the UNCITRAL Model Law. Pathological clauses are not explicitly addressed in the law, but there are mechanisms in place to manage situations where arbitration agreements are unclear.
- Article 7 of the FAL requires that an arbitration agreement be in writing, whether in the form of a clause in a contract or a separate agreement. If the arbitration agreement is ambiguous or incomplete, the law allows the tribunal to interpret or supplement the clause to give effect to the parties’ intention.
- Article 23 of the FAL grants the tribunal the authority to rule on its jurisdiction according to the principal of competence-competence, including the validity of the arbitration agreement, and may proceed to resolve disputes over the validity of pathological clauses.
Case Law: There have been cases in the UAE where courts or arbitral tribunals have been tasked with interpreting vague or incomplete arbitration clauses. For example, the UAE courts have upheld the principle that even in cases of unclear clauses, the intent of the parties should be given primary consideration. Accordingly, the Dubai Court of Cassation Judgments:
- “It is established that if the contracting parties fail to specify the identity of the arbitrator in the arbitration agreement, they may, after drafting the arbitration clause, expressly or implicitly agree on the appointment of the arbitrator, or resort to the courts to appoint one if a dispute arises between them regarding the appointment.”[1] [Emphases added]
2.2. Judicial Interpretation of Pathological Clauses in the UAE
UAE courts, when faced with an ambiguous arbitration clause, often attempt to resolve the matter by:
- Examining the underlying contract for context.
- Referring to standard international arbitration practices.
- Considering the commercial intention of the parties.
However, where the clause is irreconcilably ambiguous, the courts may rule that no valid arbitration agreement exists, thus denying enforcement of the arbitration clause. As stated according to the Dubai Court of Cassation Judgment:
“Arbitration is an agreed-upon judiciary process in which the arbitrator derives their authority from an arbitration clause that must be clear and unambiguous, expressed in terms that leave no room for doubt or confusion. It cannot be assumed or inferred implicitly, nor can its effects extend to parties other than those explicitly mentioned. Moreover, a third party cannot be compelled to submit to arbitration without their consent, and merely appearing before the arbitrator does not prevent them from seeking to annul the arbitration award, as their appearance occurs before the issuance of the award. If the arbitrator exceeds the scope of the arbitration agreement by ruling on a person who was not a party to the arbitration clause or agreement, the arbitration award will be voided in its entirety. As a result, the purpose of the arbitration agreement will be deemed null, which means that the same dispute cannot be re-submitted to the same or another arbitrator unless a new agreement is made between the parties involved. If no agreement is reached, any of the parties have the right to resort to the courts to resolve the dispute, as the reason preventing the courts from hearing the case has been removed.”[2] [Emphases added]
3. Pathological Clauses in Egyptian Arbitration
3.1. Egyptian Arbitration Law (Law No. 27 of 1994, Amended by Law No. 9 of 2012)
Egypt follows a civil law system, and its arbitration framework is outlined in Law No. 27 of 1994 (which was amended by Law No. 9 of 2012). While not directly addressing pathological clauses, the law reflects a nuanced approach to dealing with ambiguous arbitration agreements.
- Article 10 of the Egyptian Arbitration Law states that an arbitration agreement must be in writing. If the agreement is ambiguous or incomplete, the arbitral tribunal is empowered to rule on its validity.
- Egyptian law acknowledges the importance of party autonomy, but in cases of unclear clauses, the tribunal is encouraged to interpret the clause in line with the parties’ true intentions, relying on general principles of contract interpretation.
3.2. Judicial Interpretation in Egypt
Egyptian courts have dealt with pathological clauses by focusing on the parties’ intent and the general principles of justice and fairness. Courts tend to uphold the validity of arbitration clauses where possible, but if the clause is fundamentally flawed or incomplete, the court may refuse to enforce arbitration or may direct the parties to rectify the clause.
4. Pathological Clauses in Jordanian Arbitration
4.1. Jordanian Arbitration Law (Law No. 31 of 2001)
Jordan’s arbitration law follows a similar approach to arbitration as the UAE and Egypt, with a focus on party autonomy and the enforceability of arbitration agreements. Under Article 8 of the Jordanian Arbitration Law, an arbitration agreement must be in writing. If a clause is unclear, the tribunal has the authority to address its interpretation.
- Article 17 of the Jordanian Arbitration Law provides that the arbitral tribunal has the power to determine the validity of the arbitration agreement, particularly if it contains ambiguities or contradictions.
4.2. Judicial Interpretation in Jordan
Jordanian courts generally adopt a pro-arbitration stance, often upholding the validity of arbitration clauses even if they are pathological, as long as the clause does not contravene public policy or mandatory rules of law.
5. Conclusion
The issue of pathological clauses in arbitration remains a significant challenge across legal systems, including those of the UAE, Egypt, and Jordan. While all three jurisdictions empower arbitrators to interpret and correct ambiguous or incomplete clauses, the extent of judicial intervention varies. Lawyers drafting arbitration agreements in these jurisdictions must be mindful of the risks posed by vague, contradictory, or incomplete clauses, as well as the potential legal complications these may invite.
Legal professionals pertaining to in-house lawyers or outside councils ought to ensure clarity in drafting and consider potential challenges to the validity and enforcement of arbitration clauses, particularly when operating across borders. In practice, a well-drafted, unambiguous arbitration clause can mitigate risks and ensure smoother dispute resolution, regardless of jurisdiction.
[1] Dubai Court of Cassation Judgment no. 59 of 2014 JY dated 14/08/2014 Civil Cassation.
[2] Dubai Court of Cassation Judgment no. 372 of 2012 JY dated 28/04/2013 Real-estate Cassation.
