Disputes of Public Policy

The Cassation Court issued its judgment number (150) of 2014. The Court asserted that the provisions laid down in the UAE Companies Law in articles numbers (218, 222, and 322) are mandatory rules related to the public policy. These articles provide that (i) the company has an independent artificial capacity and owns all its shares and money (ii) the partners’ liability in limited liability companies is limited to their shares in the company unless there is evidence of a grave error or fraud. 

The Cassation Court pointed out that the claimant’s claim was not addressed to the partners in their capacity, as the claim was directed to the Company, nevertheless, the claimant did not involve the Company. The Cassation Court further highlighted that the partners’ liability was limited to their shares in the Company unless they committed fraud or grave error, and these are mandatory rules connected to the public policy, and thus these provisions could not be the subject of an amicable settlement nor arbitrated. 

Consequently, the Cassation Court decided to overturn the Appeal judgment and accordingly decided to nullify the arbitration award, as the arbitrators did not have the jurisdiction to review and decide on the dispute as it was governed by mandatory rules related to public policy.