Arbitration Clauses in Engineering Contracts

Unilateral arbitration clauses will not be upheld by the onshore courts of the UAE. In an important judgment issued on 29 October 2024 in Commercial Appeal No. 735 of 2024, the Dubai Court of Cassation held that a unilateral arbitration clause does not constitute a valid arbitration agreement under the laws of the UAE. The clause in question provided as follows: “In the event of a dispute arising from the interpretation or execution of any of the provisions of this agreement, this dispute shall be settled by mutual agreement between the parties. In the absence of such agreement, the dispute shall be referred to either (a) arbitration in the Dubai Chamber of Commerce or (b) the local court in the UAE, at the discretion of the Contractor." In finding that this does not constitute a valid arbitration clause, the Dubai Court of Cassation stated the following: 1. According to the UAE’s Federal Arbitration Law, an agreement to arbitrate is an explicit agreement in writing by the parties that arbitration, not the courts, shall have jurisdiction to settle disputes that may arise or have arisen between them. 2. Consent is an essential element of an arbitration agreement. If one party expresses an offer to resolve the dispute via arbitration, the other party’s acceptance must be “definitive to establish mutual consent beyond any doubt or controversy”. 3. Judicial systems worldwide vary in their treatment of unilateral clauses. Some support them, citing the principle of autonomy of will, while others oppose them as they may be considered oppressive or a violation of equality between parties or as not reflecting a mutual intent to resolve disputes through arbitration alone. 4. Under UAE law, an arbitration clause that provides a choice between arbitration and courts, and lacks an unequivocal commitment to arbitration alone, is not binding. A valid arbitration clause must clearly indicate an intent to exclude ordinary courts and designate arbitration as the exclusive forum. 5. The unilateral arbitration clause in question effectively prevents the respondent from initially seeking redress independently and requires her to await and abide by the appellant’s choice. This does not create a valid arbitration agreement under UAE law. #arbitration #UAElaw #DubaiCourts

Here’s a dirty little secret about arbitration that no one talks about. If the other side refuses to pay their share of the arbitration fees, guess what happens? Your case stalls. Or worse, the AAA can just dismiss it entirely. Now you're back at square one. After all the time, effort, and money you’ve spent preparing, you’re left with two bad options: pay the other side’s fees out of pocket, or walk away from your claim. And even if you pay, there’s no guarantee you’ll recover that money. How is that justice? This is why the language in your arbitration clause matters. If you’re going to agree to private dispute resolution, you need to protect yourself. The solution? Put it in the contract that failure to pay arbitration fees results in a default judgment. Because the system only works when both sides show up and participate. If one party refuses to play, there should be consequences. #ConstructionLaw #Arbitration #AAA #Contractors #LegalStrategy #RiskManagement #ContractsMatter #DisputeResolution

Stunning Verdict: Delhi High Court declares clause limiting Contractor's damage claims contrary to fundamental Indian Law, sending shockwaves through Government Organizations ⚖️ "Contractors will be entitled to only reasonable extension of time ⏲ and no monetary claims, whatsoever shall be paid or entertained on this account📜" Many of us might have seen above or similar clause being included for years in Government or Private construction contracts restricting Contractor's rights to claim legitimate damages. ❌ It is a common practice employed as a safeguard against potential financial claims arising from the delays attributed to Project owners which in my opinion is totally unreasonable and unfair. In its recent judgment in case of MBL Infrastructure Limited vs DMRC🚉 , the Delhi High Court declared any clause that curtails the aggrieved party’s right to claim damages as against the fundamental policy of Indian Law under Section 23 of the Indian Contract Act. The court clarified that the arbitral tribunal can grant damages 💵 for delay even if the contract only allows for an extension of time as the remedy for the contractor. Once the tribunal establishes the employer’s responsibility for delays, it must award damages, regardless of any contractual prohibition or absence of a provision for damages. In such cases, the arbitral tribunal has the authority to go beyond the contract’s boundaries to grant the relief that the party is legally entitled to. ☑ This landmark judgment has significant implications, particularly for Government organizations and public sector companies, as it restricts their ability to unfairly constrain contractors from seeking legitimate damages for delays attributable to them. ⏩ #contractmanagement #claims #legalinsights

Landmark judgments related to arbitration clauses in India These landmark judgments have played a significant role in shaping #arbitration law and practice in India, providing clarity on the enforceability, autonomy, and interpretation of arbitration clauses in various contexts. They serve as authoritative precedents for #courts and parties involved in arbitration proceedings, promoting the efficacy and credibility of arbitration as a preferred method of dispute resolution in #India. Here are some notable cases: 1. Bharat Aluminium Co. v. Kaiser Aluminium Technical Service (2012): Commonly known as the "BALCO case," this landmark judgment by the Supreme Court of India affirmed the principle of party autonomy in arbitration agreements. The court held that only the parties to an arbitration agreement can appoint arbitrators, excluding judicial intervention in the appointment process. This #judgment reinforced the importance of upholding the autonomy of arbitration clauses in India. 2. Enercon (India) Ltd. v. Enercon GMBH (2014): In this case, the Supreme Court clarified the legal framework for jurisdictional challenges to arbitration agreements. The court held that the seat of arbitration determines the jurisdiction of courts for challenges to arbitration awards. This judgment provided clarity on the law governing arbitration agreements and reinforced the significance of the seat of arbitration in determining jurisdictional issues. 3. Sundaram Finance Ltd. v. NEPC India Ltd. (1999): In this landmark judgment, the Supreme Court emphasized the importance of enforcing arbitration agreements and staying court proceedings in favor of arbitration. The court held that where parties have agreed to resolve disputes through arbitration, courts should enforce arbitration agreements and refer parties to arbitration, except in cases where the arbitration agreement is null and void, inoperative, or incapable of being performed. 4. Ssangyong #Engineering & Construction Co. Ltd. v. National Highways Authority of India (2009): This case dealt with the interpretation of arbitration clauses in construction contracts and their enforceability. The Delhi High Court upheld the validity of arbitration clauses in construction contracts and emphasized the importance of adherence to contractual dispute resolution mechanisms. The judgment underscored the enforceability of arbitration agreements in construction contracts and their role in resolving disputes efficiently. Hindustan Construction Co. Ltd. v. State of Bihar (2000): In this case, the Supreme Court affirmed the principle of separability of arbitration clauses from the underlying contract. The court held that an arbitration clause is an independent #agreement that survives even if the main contract is terminated or held to be void. This judgment reinforced the autonomy and enforceability of arbitration clauses in India.

FIDIC Arbitration: Putting the Seat in its Place* * Warning: this post contains minor gripes about arbitration clauses In a judgment from Wednesday this week, the Singapore courts granted an anti-suit injunction to an Italian contractor to stop a Nepalese employer from bringing proceedings in the courts of Nepal: https://lnkd.in/e2AwPeFz. The construction contract was for a water project (see photo below), which seemed to be a FIDIC form. The contract included a clause providing for disputes to be resolved by SIAC arbitration, where the “place of arbitration” was stated to be Singapore. Not surprising, therefore, that the ASI was granted. There are two aspects of this case which draw attention to how arbitration clauses are drafted. The first arises from the (bad) argument that the employer ran that the “seat” of the arbitration was in fact Nepal, so the Singapore court should keep its nose out of the dispute. The argument was that the reference to the “place of arbitration” in the contract indicated the place where arbitration hearings were to take place, and not the juridical “seat” of the arbitration. The Singapore court batted this argument away, holding that “if the word ‘seat’ is not used in the arbitration agreement, a reference by the parties to a chosen ‘place’ or ‘venue’ for arbitration will usually be construed as a choice of the seat”.   People can understandably become confused about the terminology.  A “place” of arbitration may sound like the place where the arbitration hearing occurs – i.e. the physical “place”. But when we refer to the “place” of arbitration we are really referring to the arbitral “seat”. Drafting techniques can be used to avoid misunderstanding, and also to preclude parties from (unmeritoriously) arguing that a “place” of arbitration is different from the arbitral “seat”. I think the LCIA have got it right with their arbitration clause, which says that “The seat, or legal place, of arbitration shall be [City and/or Country]”. The second aspect concerns the FIDIC arbitration clause itself. It says nothing about the “place” or “seat” of the arbitration, and the Contract Data doesn’t even include a space for the parties to identify an arbitral seat.  It might be said that specifying a seat isn’t necessary, because if ICC arbitration is agreed, the ICC will designate the place of arbitration. That’s true, but what it means is that parties will enter into FIDIC contracts without knowing what the seat of any arbitration will be (a rather important matter…), unless (as here) they expressly agree on the seat, even though the FIDIC form doesn’t prompt them to do so. In aviation terms, it could mean the difference between choosing a window seat towards the front of the plane, or letting the computer allocate you mid-row at the very back.

Today we turn to #India and the High Court of Delhi to consider how Rekha Palli J. dealt with a Petition inspired by an unusual #arbitration clause. The effect of the parties' arbitration agreement? One party was granted a significantly greater say over the identity of the members of an arbitral tribunal than the other. The Petitioner, Taleda Square Private Limited, brought a petition under Section 11 of the Indian Arbitration and Conciliation Act seeking appointment of an independent, impartial tribunal to arbitrate disputes arising between the parties pursuant to a lease agreement. The relevant arbitration agreement required the Petitioner to appoint an arbitrator from a list of more than three (in this case, five) potential arbitrators identified by the Respondent, Rail Land Development Authority, and sent to the Petitioner. Thereafter, the Petitioner was entitled to select at least two individuals from the Respondent's list, with the Petitioner's arbitrator to be appointed by the Respondent's Vice Chairperson from its selection. Basically, the Petitioner's pool of arbitrators was contractually limited to a small number of individuals of the Respondent's choice. What about the other two arbitrators, you may ask? Well, the arbitration agreement provided that the Respondent's Vice Chairperson was entitled to select them too, and to select which of the chosen arbitrators would serve as Presiding Arbitrator. Should the parties have been obliged to adhere strictly to their arbitration agreement, despite its heavy Respondent bias? Would that have been fair and just? Nope. Here we have a prime example of a situation where the involvement of a state court was necessary to ensure that the resulting arbitral tribunal was appointed using a method that was fair to both parties. Allowing the Petition, the Learned Judge observed that: "... I fail to appreciate as to how this position, where not only does the respondent have the power to unilaterally appoint two out of the three arbitrators and compels the petitioner to choose one of the panel of five arbitrators can be said to be meeting the test of “counter balancing” as laid down in Voestalpine Schienen Gmbh(supra) and Perkins(supra)." Two former Judges were duly appointed by the court as party nominee arbitrators and tasked with concurring to appoint a presiding arbitrator within 30 days of the date of the Court's Order. Those who are interested may wish to read the Order below. Arbitration folks, have you come across a similar arbitration agreement? Would your jurisdiction deal with this situation in the same way? [I find writing therapeutic, as my attachment to LinkedIn probably suggests, so I put the thoughts set out in this preloaded post together during a quiet moment this weekend - I welcome thoughts from friends and colleagues around the world]

I hope that friends and colleagues across the GCC and the wider Arab region are safe and well. For those working in arbitration or construction, a recent UAE court decision may provide a welcome distraction. A judgment of the Abu Dhabi Commercial Court from January 2026 offers a useful reminder of how firmly the UAE courts now protect arbitration agreements. In Case No. 136 of 2025, a subcontractor brought a claim arising from two Abu Dhabi projects against both the main contractor and the project owner, relying in part on letters from the owner acknowledging payment obligations. However, the subcontracts contained arbitration clauses. Both defendants raised the arbitration defence at the first opportunity. The court declined jurisdiction. But what makes the judgment interesting is not simply that arbitration prevailed – that outcome is increasingly predictable in the UAE. The real significance lies in how the court analysed the structure of the claims. The claimant attempted to frame part of the dispute as arising from separate undertaking letters issued by the project owner, arguing that these created independent payment obligations outside the subcontract framework. The court rejected that approach. Instead, it adopted a substance-over-form analysis. Looking beyond how the claim was pleaded, the court concluded that all of the alleged entitlements arose from the subcontract works, and the undertaking letters were either conditional or tied back to that contractual machinery. The court therefore refused to allow the arbitration clause to be bypassed simply by joining a non-signatory party. For practitioners, there are several practical take-aways: • Arbitration defences in the UAE remain powerful, even if the litigation includes a non-party. • Courts will examine the real contractual matrix, not just the pleaded cause of action. • Careful drafting is required if employer undertakings or comfort letters are intended to create standalone liabilities. The case analysis can be found here: https://lnkd.in/dkWH7_BP #InternationalArbitration #UAE

📢 ARBITRATION & CHOICE OF RULES AND PROCEDURES: How does the choice offered in an arbitration clause between institutional and ad hoc arbitration rules influence the outcome and efficiency of the arbitration process? The French Court of Cassation provided insights to this question in a decision dated 6 November 2024. 📡 The dispute arose from a commercial contract between Antrix, an Indian state-owned company attached to the Indian Space Research Organisation, and India-based Devas, granting the latter rights to utilize a specified frequency spectrum for commercial purposes over a span of 24 years. 🔀 After Antrix terminated the contract – which included an arbitration clause with options for either ICC or UNCITRAL arbitration – Devas initiated ICC arbitration. The tribunal ordered Antrix to pay Devas 563M USD plus interest (now totalling 1.5B USD) and, following confirmation of the exequatur order by the Paris Court of Appeal, Antrix escalated the matter to the French Court of Cassation. 🗣️ Antrix’s main argument was that the arbitral tribunal was improperly constituted, thus invalidating the ICC-administered arbitration. Antrix claimed the arbitration clause did not permit the unilateral selection of the arbitration rules by one party, instead, pursuant to this clause, a decision on whether to apply ICC or UNCITRAL rules should have been made by the arbitral tribunal once constituted. 🔍 The Court of Cassation first emphasized that the Paris Court of Appeal had interpreted the arbitration clause “guided by a principle of coherence and utility” and favoured an interpretation “that gives effect to the clause whose purpose is to lead to the effective establishment of arbitration, in order to prevent a party from evading its commitments and challenging its consent to arbitration” (§12). 🎯 The Court then observed that (i) the Paris Court of Appeal’s interpretation of the arbitration clause, by referencing both ICC and UNCITRAL, “indicated the parties’ mutual intention” to allow disputes to be resolved through either institutional or ad hoc arbitration and that (ii) the parties had agreed for the initiating party to select the arbitration method without needing further agreement (§12). 👋 The Court accordingly found that the Paris Court of Appeal rightly had rejected Antrix’s claim, acknowledging that Devas was entitled to opt for ICC arbitration, given the clause’s ambiguity (§13). 📌 Takeaway? This decision underscores the French courts’ commitment to supporting arbitration and reinforcing its flexibility and effectiveness as a dispute resolution mechanism, ensuring that written technicalities do not obstruct the parties’ access to arbitration. It emphasizes the imperative for businesses to consider their dispute resolution strategies carefully, ensuring arbitration clauses are precisely drafted to avoid unnecessary litigation over procedural ambiguities. #internationalarbitration #Frenchcourts

English law says that an arbitration agreement is generally automatically assigned with the rest of the contractual rights without the need for a distinct transfer. It would seem wrong for the assignee to be able to evade the arbitration agreement. Still, holding an assignee bound to an arbitration agreement is not conceptually straightforward. Assignment is supposed to transfer benefits, not burdens. To explain this result, the courts have reached for a "conditional benefit" principle, but that in itself needs further elaboration. One way of making sense of the assignee being bound is to say that the assignee takes its rights "subject to equities". Another is to say that the assignee, in taking the assignment, accepts the burden of the arbitration clause. This theoretical debate is central to MS "V1" GmbH v SY [2026] EWHC 52 (Comm). The defendant shipbuilder agreed in 2006 to sell two ships to a third party who then transferred its rights to the claimants. Those rights included time-limited warranties concerning the ships, and provided that the defendant would not otherwise be liable. The claimants took delivery of the ships. They found issues with the ships and asserted claims under the warranties; those claims were settled. Many years later the claimants discovered asbestos on the ships and sought to bring Chinese tort law claims against the defendant in the Chinese courts. The defendant invoked the exclusion clause and resisted the Chinese proceedings on the ground that the issue should be resolved in arbitration. Oddly, the claimants also commenced arbitration in London, where the tribunal ruled that it had jurisdiction to decide whether the contract barred the claimants' tort claims. On a challenge to the tribunal's jurisdictional ruling, Judge Pelling KC ruled that the tribunal was correct. Two aspects of the decision are worth highlighting. First, the judge did not decide himself whether the tort claims were barred by the contract. Rather, he concluded that the tribunal itself had jurisdiction to decide that issue. Second, the assignee of contractual rights was found to be bound to accept the arbitrators' decision regarding whether it could bring its own independent tort claims. These claims were not themselves assigned to the claimants. This result seems intuitively correct to me, but it is not readily explained by the idea that the assignee takes "subject to equities". The judge applied the conditional benefit idea: in this case, the claimants had actually invoked the guarantees and received payment under them. Would the result be different had the claimants not previously taken advantage of the guarantee clause?

‎In arbitration practice, one of the most common and underestimated drafting pitfalls lies in the use of permissive arbitration clause; those that employ language such as "may submit to arbitration” (option) instead of "shall” (mandate). ‎ ‎At first glance, such wording may appear harmless or even flexible, but in reality, it can open the door to costly jurisdictional disputes, procedural delays, and even the risk of unenforceable agreements. When parties fail to state clearly whether arbitration is a right, an option, or a binding obligation, they leave room for competing interpretations that can derail what was intended to be an efficient dispute resolution process. Such ambiguity can also be strategically exploited by a party, often the stronger or more tactical one, to delay or frustrate proceedings, serving as a form of guerilla tactic. ‎ ‎Courts, when faced with such ambiguity, must determine whether the parties truly intended arbitration to be mandatory or merely optional. This exercise often turns on subtle nuances in language, cross-references within the contract, and the overall commercial context. ‎ ‎This issue was central in Perle Tech. Inc. v. United Apollo Intl. Inc., a recent decision of the Supreme Court of Kings County. The dispute arose from a contract for the sale of nitrile gloves, in which the buyer paid a deposit that was never fully refunded after the goods were not delivered. When the buyer sued in court for the balance, the seller argued that the case should instead go to arbitration under the contract’s “Governing Law and Dispute Resolution” clause. Although the clause stated that a party “may submit” a dispute to the AAA, other provisions in the contract stated that arbitration would be “final and binding” and that court actions were limited to seeking injunctive relief in Florida. ‎ ‎The court however held that, despite the use of “may,” arbitration was mandatory, not optional. Applying New York’s principles of contract interpretation, the court reasoned as follows: ‎ ‎1.  Although the arbitration clause used “may,” the court stressed that intent must be derived from the agreement as a whole, not from an isolated word. ‎ ‎2. Other sections of the contract revealed the parties’ actual intent. Section 13.3 expressly provided that “arbitration shall be final and binding on the parties,” while Section 13.4 confined any court proceedings solely to actions for injunctive relief in Florida. These provisions, when read together, established arbitration as the default and binding dispute resolution mechanism. ‎ ‎3. Applying the rule that contracts should be read to give effect to all provisions, the court reconciled the permissive language of “may” with the binding arbitration clause. It concluded that “may” referred merely to procedural discretion, that is, the right to initiate arbitration, and not a substantive choice between arbitration and litigation. ‎ (concludes in the comment box) #adrnuggets