<p>However, if either party decided to proceed in court despite the  presence of the arbitration clause and the other party does not object  at the first hearing, the action may be heard, and the arbitration  clause shall be deemed inoperative. The UAE Legislator applied certain  restrictions on the parties&rsquo; freedom to agree to arbitrate when entering  into Commercial Agency Agreements.</p>
<p>We will address this exception below in light of a judgment rendered  by Dubai Court of Cassation; the highest court in the Emirate of Dubai,  whose judgments interprets the application of the law to lower courts.</p>
<p><strong>SUMMARY OF FACTS:</strong></p>
<p>The Claimant (a commercial agent registered with the UAE commercial  agents register) entered into an agency agreement with the Respondent.  The parties agreed that the Claimant will market, distribute and sell  the Respondent&rsquo;s products within the UAE.&nbsp;</p>
<p>The agreement was duly registered in the commercial agencies  register, according to their agreement the parties agreed to refer any  disputes arising thereof to arbitration.</p>
<p>The Claimant commenced performing its obligations set forth in the  agreement; however the Respondent abstained from providing the required  documents and further unilaterally affected deletion of the commercial  agency agreement from the commercial register.</p>
<p>The Claimant therefore requested appointing an arbitrator who issued  his arbitral award obligating the Respondent to pay a sum of AED 328,850  with damages and arbitration costs. Consequently, the Claimant filed a  commercial action against the Respondent before the Dubai Court of First  Instance requesting the court to ratify and authenticate the arbitral  award.&nbsp;</p>
<p><strong>PROCEDURAL HISTORY:</strong></p>
<p>The First Instance Court rendered its judgment ratifying the arbitral  award; the Respondent appealed the judgment before the Court of Appeals  which in turn upheld the judgment. The Respondent challenged the  Appeals Court Judgment before the Court of Cassation.&nbsp;</p>
<p><strong>COURT OF CASSATION:</strong></p>
<p>The Respondent argued that the lower court&rsquo;s decision contradicted provisions of Article 6 of the Commercial Agency Law.&nbsp;</p>
<p>Article 6 provides that in Commercial Agency Agreements the State&rsquo;s  Courts shall rule in any disputes which may arise between the  Principaland the Agentdue to its implementation. Any agreement to the  contrary shall be void.&nbsp;</p>
<p>Application of Article 6 to the case before hand renders the  arbitration agreement void and consequently the court&rsquo;s judgment issued  ratifying the arbitral award is in contradiction with the law.&nbsp;</p>
<p>The Court held that the Respondent&rsquo;s argument was with grounds,  according to Article 6 &ldquo;The Commercial Agency agreement shall be deemed  to be for the joint interest of the contracting parties and the State&rsquo;s  Courts shall rule in any disputes which may arise between the Principal  and the Agent due to its implementation. Any agreement to the contrary  shall be void.&rdquo; Article 3 of the same law provides that &ldquo;Trade agency  activities are not permitted to be practiced inside the state except by  such commercial agents registered in the Specified register maintained  for this purpose by the ministry (the Ministry of Economy and Commerce).  Any trade agency not registered in the above register shall not be  considered, nor legal cases there for shall be heard&rdquo;.&nbsp;&nbsp;</p>
<p>It is construed from the above two articles that the legislator held  the jurisdiction for the UAE Courts to hear disputes arising from the  performance of commercial agency agreements between the agent and the  principle and to vitiate any agreement otherwise. This includes the  parties&rsquo; agreement to arbitrate so long as the commercial agency  agreement is registered in the commercial agencies register.</p>
<p>Whereas the appealed judgment construed that the Commercial Agency  Law no. 18 permitted the parties to the agreement to agree to arbitrate,  which contradicts with provisions of Article 6 of the same law and the  court therefore erred in its reasoning of that article.</p>
<p>The court further held that the commercial agency was registered in  the commercial agencies register and the fact that the Claimant  unilaterally deleted/canceled the agreement does not impact the former  legal existence and registry of the agreement in the Commercial Agencies  Register. Moreover the Claimant in his action requested appointing the  requisite number of arbitrators to hear its claim to continue existence  of the commercial agency between the parties thereto and to demand the  principal for the commission and damages suffered from striking the  commercial agency unilaterally by the Respondent. Thus, Article 6 of the  aforementioned law is applicable and the appealed judgment therefore  contradicted the law and therefore the court overturned the lower  court&rsquo;s judgment.&nbsp;</p>
<p><em><strong>Practice Note:</strong></em>&nbsp;</p>
<p>Based on the above, it is crucial for the contracting parties in a  commercial agency relationship to be aware that they may not resolve  their dispute through arbitration. Due to the sensitivity of the  commercial agencies contracts and their effect on the economy and the  trade, the legislator reserved the jurisdiction solely to the national  courts.</p>