An Arbitration Clause Is Not Waived Merely by Filing a Lawsuit — Waiver Requires a Meeting of Minds

Dubai Court of Cassation

Commercial Appeal No. 1452 of 2025

Judgment dated 23 December 2025

The Issue

Does filing a lawsuit before the ordinary courts under a contract containing an arbitration clause automatically amount to a waiver of that clause?

The Dubai Court of Cassation addressed this important question in Commercial Appeal No. 1452 of 2025.

The Court’s reasoning draws an important distinction between merely commencing court proceedings and conduct demonstrating that both parties have accepted litigation and abandoned arbitration.

Background of the Dispute

The dispute arose under a contract containing an arbitration agreement.

One of the companies had previously filed Commercial Case No. 305 of 2021 before the Dubai Courts, seeking payment of amounts allegedly due under the same contract.

The matter, however, involved more than the mere filing of proceedings.

Both parties appeared before the Court and requested time to pursue settlement discussions. The judicial proceedings continued without an early objection based on the arbitration clause. Eventually, the case was allowed to be struck off with the other party’s consent.

The company that had initially commenced court proceedings subsequently returned to arbitration.

The arbitral tribunal issued a preliminary decision confirming its jurisdiction.

The Dubai Court of Appeal, however, set aside that decision, concluding that the parties had implicitly waived the arbitration agreement.

The matter ultimately reached the Dubai Court of Cassation through an appeal brought by the Public Prosecutor in the interest of the law.

The Court of Cassation’s Approach

The Court of Cassation rejected the appeal.

It reaffirmed a fundamental principle of arbitration law: arbitration is a consensual form of dispute resolution.

An arbitration agreement is not a matter of public order. Accordingly, parties may waive it either expressly or implicitly.

Importantly, however, the Court did not hold that the mere filing of a court action is, by itself, sufficient to extinguish an arbitration agreement.

The decisive question is whether the conduct of the parties demonstrates, clearly and unequivocally, a mutual intention to abandon arbitration and submit their dispute to the courts.

When Conduct May Amount to Waiver

In this case, the Court considered several elements together:

• both parties appeared before the ordinary courts;

• they jointly sought additional time to negotiate a settlement;

• the defendant did not invoke the arbitration agreement at the appropriate procedural stage;

• the judicial proceedings continued without reservation based on the arbitration clause; and

• the claim was subsequently struck off with the defendant’s consent.

Taken together, these circumstances were regarded as evidence that the parties’ intentions had converged on accepting judicial proceedings instead of arbitration.

The issue was therefore not simply that one party had filed a lawsuit.

It was the combined procedural conduct of both parties that demonstrated their mutual abandonment of the arbitration mechanism.

Filing a Lawsuit Is Not Necessarily the End of Arbitration

The judgment highlights an important distinction.

A claimant’s decision to file proceedings before the courts does not necessarily prevent the opposing party from insisting on arbitration.

If the defendant promptly invokes the arbitration agreement, the arbitration clause may continue to operate.

The position may be different, however, where both parties actively participate in the court proceedings in a manner that objectively demonstrates their acceptance of judicial jurisdiction.

In such circumstances, the arbitration agreement may be regarded as having been waived by mutual conduct.

Practical Implications

The judgment carries an important procedural lesson for parties, counsel and arbitration practitioners.

A party wishing to preserve its right to arbitrate should raise the arbitration agreement promptly, expressly and without procedural ambiguity.

Participation in court proceedings without reservation may have significant consequences.

Silence, delay, participation in procedural applications, or conduct demonstrating acceptance of the court process may collectively support a finding that the right to arbitrate has been waived.

The existence of a carefully drafted arbitration clause alone is therefore not enough.

Its effectiveness must also be protected through the parties’ procedural conduct after a dispute arises.

Conclusion

An arbitration clause does not disappear merely because litigation has been commenced.

What matters is whether the conduct of the parties demonstrates a clear meeting of minds to abandon arbitration and proceed before the courts.

The broader lesson is straightforward:

Arbitration must be treated as a genuine dispute-resolution choice, not as a fallback option after litigation has already been tested.

A party that wishes to rely on arbitration should preserve that right from the earliest procedural stage. Otherwise, its own conduct may extinguish a contractual right that the wording of the arbitration clause would otherwise have preserved.