Coronavirus Impact on Arbitration Agreements

In a recent article, our legal consultants have discussed the aspect of whether impact of corona virus is a force majeure event within the parameters of UAE Civil Transactions Law. Accordingly, we are of the opinion that the Pandemic fulfills the principal state of a force majeure (for example it isn’t predictable) as long as the parties have gone into the agreement prior to the time when World Health Organization declared COVID-19 as a pandemic. In any case, so as to effectively drop one’s commitments under an agreement by conjuring ‘force majeure’ a party must likewise demonstrate the commitments of an agreement are ‘difficult’ to act in this period of the Pandemic; to do so a party must fulfill the second condition that is the effect of the situation was unavoidable and has rendered the particular commitment or the agreement’s commitments difficult to perform. This, in our view, will basically depend on the prudent steps taken by the experts in reacting to the Pandemic and whether such measures would render the presentation of the obligation(s) outlandish; and to what degree.

The Agreements to enter into arbitration for dispute resolution, like any other agreements, are dependent upon the force majeure rule and might be ended by the activity of law should a force majeure occasion makes the performance of the contract or agreement impossible to perform.  In such manner, Article 8.1 of the UAE Federal Law no. 6 of 2018 on Arbitration (‘UAE Arbitration Law’) which allows the court authorities to reject a case (which shall be subject to arbitration as per the agreement) or application filed by a defendant, unless the agreement for arbitration is void or impossible to perform.

It shows up from the wording of Article 8.1 of the UAE Arbitration Law that arbitration agreement won’t just be ended by operation of law if there should be an occurrence of a force majeure occasion (which is unforeseeable and brings about outright difficulty) yet in addition if there should be any occasion which renders the exhibition of the arbitration proceedings outlandish whether such occasion is unforeseeable or not.

In such regards, we can mention that arbitration agreement, in contrast to different understandings, can be terminated by the provision of law in the event of an occasion that makes its exhibition incomprehensible regardless of whether such an occasion qualifies as force majeure (for example unforeseeable) or not. The explanation, in our view, for a difference can be credited to the idea of the arbitration agreements which offers equal rights to both parties for adequate justice. Along these lines, the gatherings may not be kept from approaching equity in light of the fact that the accidental occasion, which settles on the exhibition of an arbitration agreement incomprehensible, yet unanticipated.