Dubai Court of Cassation Reinforces an Important Procedural Principle in Arbitration-Related Litigation
Dubai Court of Cassation – Commercial Appeal No. 305 of 2026 – Judgment dated 20 May 2026
The Dubai Court of Cassation has reinforced an important procedural principle concerning the interaction between arbitration agreements and the right of parties to have their dispute heard at two levels of jurisdiction.
The judgment arose from a complex commercial and engineering dispute involving the potential liability of a consultant, a main contractor, subcontractors, and other parties in connection with alleged structural defects in a residential development.
At the heart of the case was an important procedural question:
Where a Court of First Instance dismisses a claim on the basis of an arbitration agreement without examining the merits, may the Court of Appeal, after overturning that dismissal, proceed to determine the merits itself?
The Dubai Court of Cassation answered that question in the negative.
Background of the Dispute
A real estate company commenced proceedings seeking substantial damages and other remedies following the discovery of concrete defects and cracking in a number of residential buildings.
The claims involved significant amounts, exceeding AED 82 million in certain heads of relief, and were brought against several parties, including the project consultant, the main contractor, partners, and subcontractors.
The claimant sought, among other remedies, compensation for the alleged defects, the costs of remedial works, and interest.
At first instance, the court declined to hear the claim against the consulting office on the basis that the relevant contractual relationship contained an arbitration clause.
The Court of First Instance therefore did not examine the substantive liability of the consultant.
The court proceeded, however, to determine the claims involving other defendants and ultimately ordered the judicial liquidator of the main contractor to pay approximately AED 27.6 million.
Following subsequent appellate and cassation proceedings, the matter returned to the Court of Appeal.
The Court of Appeal’s Approach
The Court of Appeal overturned the first-instance ruling that had declined jurisdiction over the claim against the consultant because of the arbitration agreement.
However, rather than remitting that part of the dispute to the Court of First Instance for determination on the merits, the Court of Appeal proceeded to examine the substantive issues itself.
It ultimately ordered the consulting office and other parties to pay compensation.
This approach became a central issue before the Dubai Court of Cassation.
The Dubai Court of Cassation’s Decision
The Court of Cassation held that the Court of Appeal had erred by proceeding directly to determine the merits of the claim.
The key consideration was that the Court of First Instance, having accepted the arbitration-related objection, had never examined or determined the merits of the consultant’s alleged liability.
Accordingly, the first-instance court had not exhausted its jurisdiction in relation to that part of the dispute.
Once the Court of Appeal overturned the procedural ruling based on the arbitration agreement, the proper course was therefore to remit the case to the Court of First Instance so that the merits could be considered there in the first instance.
The Court of Appeal was not entitled to determine those substantive issues for the first time.
The Procedural Principle
The judgment reinforces the following principle:
Where a Court of First Instance dismisses or declines to entertain a claim because of an arbitration agreement, or because of another procedural objection preventing consideration of the merits, and the appellate court subsequently overturns that ruling, the case should ordinarily be returned to the Court of First Instance if that court has not previously examined the merits.
The appellate court should not determine the substantive dispute for the first time.
The rationale is the protection of the fundamental principle of two-tier litigation, ensuring that parties are not deprived of the opportunity to have the merits of their dispute examined at both the first-instance and appellate levels.
The Court treated this principle as one connected with public order and the proper administration of justice.
Why the Decision Matters for Arbitration Cases
The significance of the judgment extends beyond ordinary civil procedure.
Arbitration agreements frequently give rise to preliminary jurisdictional objections before national courts. A court may initially decline to hear a dispute because it considers the parties bound by an arbitration agreement.
If that conclusion is later overturned on appeal, an important question arises as to what should happen next.
This judgment makes clear that overturning an arbitration-related inadmissibility ruling does not automatically empower the appellate court to determine the underlying substantive dispute.
The decisive question is whether the Court of First Instance has already examined and determined the merits.
If it has not, the parties should not lose a level of judicial review merely because the case initially turned on an arbitration-related procedural objection.
The Court’s Disposition
The Dubai Court of Cassation ultimately set aside the challenged judgment and directed that the dispute be returned to the Court of First Instance for full consideration of the merits.
As a consequence, the legal effects dependent upon the overturned appellate judgment—including the orders for compensation, interest, and related relief—also fell away.
Practical Takeaway
The judgment highlights an important distinction between two separate procedural questions:
Whether the dispute should be heard by the courts or referred to arbitration; and
Which level of court should determine the merits once the arbitration-related procedural issue has been resolved.
The reversal of a ruling based on an arbitration clause does not necessarily mean that the Court of Appeal may immediately decide the substantive dispute.
Where the Court of First Instance has not addressed the merits, the case must be dealt with in a manner that preserves the parties’ right to litigation at two levels.
The wider lesson is particularly relevant for parties, counsel, and arbitration practitioners handling disputes that move between judicial proceedings and arbitration.
Procedural justice is not concerned solely with reaching the correct substantive outcome. It also requires that the proper procedural route to that outcome be respected.
Case reference: Dubai Court of Cassation, Commercial Appeal No. 305 of 2026, judgment dated 20 May 2026.
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